OSWAL WOOLLEN MILLS LIMITED - [PDF Document] (2024)

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DRAFT RED HERRING PROSPECTUS Please read Section 60B of the Companies Act, 1956

Dated December 27, 2006 100% Book Built Issue

(the Draft Red Herring Prospectus will be updated at the time of filing the Prospectus)

OSWAL WOOLLEN MILLS LIMITED

(Incorporated on June 23, 1949 under the Indian Companies Act, 1913. For details relating to change in registered office of our Company, see the section titled “History and Certain Corporate Matters”, beginning on page [●] of this Draft Red Herring Prospectus. Registered and Corporate Office: G.T. Road, Sherpur, Ludhiana 141 003, India. Tel: +91 161 2542 501-07 Fax: +91 161 2542 509. Contact Person: Mr. Nitin Sharma, Company Secretary. Tel: +91 161 2542 501-07. E-mail: [emailprotected]; Website: www.owmnahar.com. PUBLIC ISSUE OF UP TO 8,320,000 EQUITY SHARES OF RS. 10 EACH ("EQUITY SHARES") FOR CASH AT A PRICE OF RS. [•] PER EQUITY SHARE AGGREGATING RS. [•] MILLION (THE "ISSUE"), BY OSWAL WOOLLEN MILLS LIMITED, ("THE COMPANY" OR "THE ISSUER"). THE ISSUE COMPRISES A NET ISSUE TO THE PUBLIC OF UP TO 8,305,000 EQUITY SHARES ("THE NET ISSUE") AND A RESERVATION OF UP TO 15,000 EQUITY SHARES FOR SUBSCRIPTION BY EMPLOYEES (AS DEFINED HEREIN) (THE "EMPLOYEE RESERVATION PORTION"), AT THE ISSUE PRICE. THE NET ISSUE WILL CONSTITUTE 25% OF THE FULLY DILUTED POST-ISSUE CAPITAL OF THE COMPANY.

PRICE BAND: RS. [•] TO RS. [•] PER EQUITY SHARE OF FACE VALUE RS. 10 THE FACE VALUE OF EQUITY SHARES IS RS. 10 AND THE FLOOR PRICE IS [•] TIMES OF THE FACE VALUE AND THE CAP

PRICE IS [•] TIMES OF THE FACE VALUE

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after revision of the Price Band subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to Bombay Stock Exchange Limited ("BSE") and National Stock Exchange of India Limited ("NSE"), by issuing a press release, and also by indicating the change on the website of the Book Running Lead Managers and at the terminals of the Syndicate. The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Net Issue to the public shall be allocated on a proportionate basis to Qualified Institutional Buyers of which 5% shall be available for allocation to Mutual Funds only and the remaining QIB Portion shall be available for allocation to the QIB Bidders including Mutual Funds. Further, not less the 15% of the Net Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35 % of the Net Issue to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Up to 15,000 Equity Shares shall be available for allocation on a proportionate basis to the Employees, subject to valid Bids being received at or above the Issue Price and the maximum Bid in this portion is limited to Rs. [•] million.

RISK IN RELATION TO FIRST ISSUE This being the first public issue of the Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the Equity Shares is Rs. 10 and the Issue Price is [•] times of the face value. The Issue Price (as determined by the Company in consultation with the Book Running Lead Managers, on the basis of assessment of market demand for the Equity Shares offered by way of Book Building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing. The Company has not opted for the grading of this Issue by a SEBI registered credit rating agency.

GENERAL RISKS Investments 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 Company and the Issue including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled “Risk Factors” beginning on page [●] of this Draft Red Herring Prospectus.

ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus 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 offered through this Draft Red Herring Prospectus are proposed to be listed on the NSE and the BSE. We have received in-principle approval from the NSE and the BSE for the listing of our Equity Shares pursuant to letters dated [●] and [●] respectively. The NSE shall be the Designated Stock Exchange.

BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE UTI BANK LIMITED Central Office: 111, Maker Towers ‘F’, Cuffe Parade, Colaba, Mumbai 400 005, India Tel: + 91 22 67074407 (Extn-1312) Fax: + 91 22 22162467 Email: [emailprotected] Website : www.utibank.com Contact Person : Mr. Manish Jain

MOTILAL OSWAL INVESTMENT ADVISORS PRIVATE LIMITED 81/82, Bajaj Bhawan, 8th Floor, Nariman Point, Mumbai 400 021, India. Tel: +91 22 3980 4380 Fax: +91 22 3980 4315 Email: [emailprotected] Website: www.motilaloswal.com Contact Person: Mr. Ajai Achuthan

INTIME SPECTRUM REGISTRY LIMITED C-13, Pannalal Silk Mills Compound LBS Road, Bhandup (West) Mumbai 400 078, India. Tel: +91 22 2596 0320 Fax: +91 22 2596 0329 E-mail: [emailprotected] Website: www.intimespectrum.com Contact Person: Mr. Salim Shaikh

BID/ISSUE OPENS ON [●] BID/ISSUE CLOSES ON [●]

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TABLE OF CONTENTS

Particulars Page No.

SECTION I – GENERAL ............................................................................................................................. DEFINITIONS AND ABBREVIATIONS........................................................................................ i PRESENTATION OF FINANCIAL AND MARKET DATA......................................................... vii FORWARD-LOOKING STATEMENTS......................................................................................... viii

SECTION II – RISK FACTORS .................................................................................................................. ix SECTION III – INTRODUCTION ..............................................................................................................

SUMMARY OF OUR BUSINESS .................................................................................................. 1 SUMMARY FINANCIAL INFORMATION................................................................................... 5 THE ISSUE ........................................................................................................................................ 8 GENERAL INFORMATION............................................................................................................ 9 CAPITAL STRUCTURE .................................................................................................................. 15 OBJECTS OF THE ISSUE................................................................................................................ 22 TERMS OF THE ISSUE ................................................................................................................... 33 BASIS FOR ISSUE PRICE ............................................................................................................... 35 STATEMENT OF TAX BENEFITS................................................................................................. 37

SECTION IV – ABOUT US .......................................................................................................................... INDUSTRY OVERVIEW ................................................................................................................. 41 OUR BUSINESS................................................................................................................................ 50 FINANCIAL INDEBTEDNESS ....................................................................................................... 64 REGULATIONS AND POLICIES ................................................................................................... 66 HISTORY AND CERTAIN CORPORATE MATTERS ................................................................. 69 OUR MANAGEMENT ..................................................................................................................... 72 OUR PROMOTERS AND PROMOTER GROUP........................................................................... 81 DIVIDEND POLICY......................................................................................................................... 116

SECTION V – FINANCIAL INFORMATION .......................................................................................... FINANCIAL STATEMENTS........................................................................................................... 117 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP……………………………………………………………………………………

152

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..........................................................................................................

155

SECTION VI – LEGAL AND OTHER INFORMATION ........................................................................ OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS...................................... 166 GOVERNMENT AND OTHER APPROVALS............................................................................... 190

SECTION VII – OTHER REGULATORY AND STATUTORY DISCLOSURES............................... 195 SECTION VIII – ISSUE RELATED INFORMATION ............................................................................

ISSUE STRUCTURE ........................................................................................................................ 200 ISSUE PROCEDURE........................................................................................................................ 203

SECTION IX – MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF OUR COMPANY.. 230 SECTION X – OTHER INFORMATION...................................................................................................

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ........................................ 254 DECLARATION ............................................................................................................................... 255

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DEFINITIONS AND ABBREVIATIONS

General Terms

Term Description

"Oswal Woollen Mills Limited" or "OWM" or "the Company" or "our Company" or "Oswal" or "we" or "us" or "our"

Oswal Woollen Mills Limited, a public limited company incorporated under the Indian Companies Act, 1913.

Issue Related Terms

Term Description Allotment Unless the context otherwise requires, the allotment of Equity Shares

pursuant to the Issue. Allottee A successful Bidder to whom the Equity Shares are offered Articles/Articles of Association Articles of Association of our Company. Auditors M/s Gupta Vigg & Company, Chartered Accountants. Banker(s) to the Issue [●]. Bid An indication to make an offer during the Bidding Period by a

Bidder to subscribe to Equity Shares at a price within the Price Band, including all revisions and modifications thereto.

Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of a Bid in the Issue.

Bid cum Application Form The form in terms of which the Bidders shall make an indication to make an offer to subscribe to the Equity Shares and which will be considered as the application for the issue of the Equity Shares pursuant to the terms of the Red Herring Prospectus.

Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid cum Application Form.

Bidding/ Issue Period The period between the Bid/ Issue Opening Date and the Bid/ Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids, including any revisions thereof.

Bid/Issue Closing Date The date after which the Syndicate shall not accept any Bids for the Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper, with wide circulation.

Bid/ Issue Opening Date The date on which the Syndicate shall start accepting Bids for the Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper, and a Punjabi newspaper with wide circulation.

Board of Directors/Board The board of directors of our Company or a committee constituted thereof.

Book Building Process Book building route as provided in Chapter XI of the SEBI Guidelines, in terms of which this Issue is being made.

BRLMs/ Book Running Lead Managers

Book Running Lead Managers to the Issue, in this case being UTI Bank Limited and Motilal Oswal Investment Advisors Private Limited.

BSE Bombay Stock Exchange Limited earlier known as The Stock Exchange, Mumbai.

CAN/ Confirmation of Allocation Note

Means the note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, including any revisions thereof.

Cap Price The higher end of the Price Band, above which the Issue Price will not be finalized and above which no Bids will be accepted.

Companies Act The Companies Act, 1956, as amended from time to time.

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Term Description Cut-off Price Any price within the Price Band finalised by us in consultation with

the BRLMs. A Bid submitted at Cut-off Price is a valid Bid at all price levels within the Price Band.

Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time.

Depositories Act The Depositories Act, 1996, as amended from time to time. Depository Participant A depository participant as defined under the Depositories Act. Designated Date The date on which the Escrow Collection Banks transfer the funds

from the Escrow Account to the Issue Account, which in no event shall be earlier than the date on which the Prospectus is filed with the RoC.

Designated Stock Exchange National Stock Exchange of India Limited, Mumbai. Director(s) Director(s) of our Company, unless otherwise specified. Draft Red Herring Prospectus This Draft Red Herring Prospectus dated December 27, 2006 issued

in accordance with Section 60B of the Companies Act and SEBI Guidelines, which does not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue. Upon filing with RoC at least three days before the Bid/Issue Opening Date it will become the Red Herring Prospectus. It will become a Prospectus upon filing with RoC after the determination of Issue Price.

Eligible NRI’s An NRI resident in a jurisdiction outside India where it is not unlawful to make an offer or invitation under the Issue and in relation to whom this Red Herring Prospectus constitutes an invitation to subscribe for the Equity Shares.

Employee All or any of the following: (a) a permanent employee of our Company as of [●], 2006 and based, working and present in India as on the date of submission of the Bid cum Application Form. (b) a Director of our Company, whether a whole time Director, part time Director or otherwise, except any Promoters or members of the Promoter Group, as of the date of the Red Herring Prospectus and based and present in India as on the date of submission of the Bid cum Application Form.

Employee Reservation Portion The portion of the Issue being up to 15,000 Equity Shares available for allocation to Employees.

Equity Shares Equity shares of our Company of face value of Rs. 10 each. Escrow Account Accounts opened with the Escrow Collection Bank(s) and in whose

favour the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid.

Escrow Agreement Agreement dated [●] to be entered into among the Company, the Registrar, the Escrow Collection Bank(s), the BRLMs and the Syndicate Members for collection of the Bid Amounts and for remitting refunds, if any, of the amounts collected, to the Bidders.

Escrow Collection Bank(s) The banks, which are clearing members and registered with SEBI as Banker to the Issue at which the Escrow Account will be opened.

FEMA The Foreign Exchange Management Act, 1999, as amended from time to time, and the regulations framed there under.

FII Foreign Institutional Investor (as defined under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India.

FVCI Foreign Venture Capital Investors (as defined under the Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000) registered with SEBI under applicable laws in India.

First Bidder The Bidder whose name appears first in the Bid cum Application Form or Revision Form.

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Term Description Floor Price The lower end of the Price Band, below which the Issue Price will

not be finalised and below which no Bids will be accepted. Indian GAAP Generally accepted accounting principles in India. Issue Public issue of up to 8,320,000 Equity Shares at a price of Rs. [●]

each for cash aggregating up to Rs. [●] million by our Company. The Issue comprises a Net Issue to the public of up to 8,305,000 Equity Shares and the Employees Reservation Portion of up to 15,000 Equity Shares. The Net Issue will constitute 25% of the fully diluted post-issue capital of our Company.

Issue Price The final price at which Equity Shares will be Allotted in terms of the Red Herring Prospectus, as determined by our Company in consultation with the BRLMs, on the Pricing Date.

Issue Account Account opened with the Banker(s) to the Issue to receive monies from the Escrow Accounts for the Issue on the Designated Date.

Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid, being 10% to 100% of the Bid Amount.

Memorandum/Memorandum of Association

The memorandum of association of our Company.

Mutual Fund A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.

NSE National Stock Exchange of India Limited. Net Issue/Net Issue to the public The Issue less the Employees Reservation Portion. Non-Institutional Bidders Bidders that are neither Qualified Institutional Buyers nor Retail

Individual Bidders and who have Bid for an amount more than Rs. 100,000.

Non-Institutional Portion The portion of the Net Issue being not less than 1,245,750 Equity Shares available for allocation to Non-Institutional Bidders.

Non Residents A person resident outside India, as defined under FEMA. NRI/ Non Resident Indian A person resident outside India, who is a citizen of India or a person

of Indian origin and shall have the same meaning as ascribed to such term in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.

OCB/ Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.

Pay-in Date Bid/Issue Closing Date or the last date specified in the CAN sent to the Bidders, as applicable.

Pay-in-Period (i) With respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid/Issue Opening Date and extending until the Bid/Issue Closing Date; and (ii) with respect to Bidders who’s Margin Amount is less than 100% of the Bid Amount, the period commencing on the Bid/Issue Opening Date and extending until the closure of the Pay-in Date.

Price Band The price band with a minimum price (Floor Price) of Rs. [●] and the maximum price (Cap Price) of Rs. [●], including any revisions thereof.

Pricing Date The date on which our Company in consultation with the BRLMs finalises the Issue Price.

Promoters The natural persons who are promoters are: a. Mr. Jawahar Lal Oswal; b. Mr. Kamal Oswal; and c. Mr. Dinesh Oswal.

The corporate entities which are our promoters are:

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Term Description a. Nahar Spinning Mills Limited; b. Atam Vallabh Financers Limited; c. Abhilash Growth Fund Private Limited; d. Girnar Investment Limited; e. Kulu Investment and Trading Private Limited; f. Ludhiana Holdings Limited; g. Nagdevi Trading and Investment Company Limited; h. Neha Credit and Investment Private Limited; i. Ogden Trading and Investment Company Private Limited; j. Vanaik Investors Limited; and k. Vardhman Investments Limited.

Promoter Group The natural persons who are a part of our promoter group (due to

their relationship with our Promoters), other than the Promoters, are as follows:

a. Ms. Abhilash Oswal; b. Ms. Monica Oswal; c. Ms. Ruchika Oswal; d. Ms. Manisha Oswal; e. Ms. Ritu Oswal; f. Ms. Neha Oswal; g. Mr. Abhinav Oswal; h. Mr. Rishab Oswal; i. Mr. Sambhav Oswal; and j. Ms. Tanvi Oswal.

The companies which are a part of the promoter group, other than the Promoters, are as follows:

a. Nahar Industrial Enterprises Limited; b. Nahar Exports Limited; c. Kovalam Investment and Trading Company Limited; d. Nahar Financial and Investment Limited; e. Oswal Leasing Limited; f. Sankheshwar Holding Company Limited; g. Bermuda Insurance Brokers Private Limited; h. Cabot Trading and Investment company Private Limited; i. J.L. Growth Fund Limited; j. Monica Growth Fund Private Limited; k. Nahar Growth Fund Private Limited; l. Nahar Capital and Financial Services Limited; m. Nahar Industrial Infrastructure Corporation Limited; n. Nahar Retail Limited; o. Palam Motels Limited; p. Ruchika Growth Fund Private Limited; q. Shri Atam Fabrics Limited; r. Vigil Investment Private Limited; s. Vanaik Spinning Mills Limited; and t. White Tiger Breweries and Distilleries Limited.

The HUF which form a part of our promoter group are as follows: a. Jawahar Lal & Sons

Prospectus The prospectus, to be filed with the RoC after pricing containing,

among other things, the Issue Price that is determined at the end of the Book Building Process, the size of the Issue and certain other information including the final private placement memorandum and any addendum or corrigendum thereof.

Qualified Institutional Buyers or QIBs

Public financial institutions as specified in Section 4A of the Companies Act, FIIs, scheduled commercial banks, mutual funds

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Term Description registered with SEBI, venture capital funds registered with SEBI, state industrial development corporations, insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs. 250 million and pension funds with minimum corpus of Rs. 250 million.

QIB Portion The portion of the Net Issue being up to 4,152,500 Equity Shares available for allocation to QIBs.

Refund Account The account opened with (an) Escrow Collection Bank(s) from which refunds if any of the whole or part of the Bid Amount shall be made.

Registered Office G.T. Road, Sherpur, Ludhiana 141 003, Punjab, India. Registrar/ Registrar to the Issue Registrar to the Issue, in this case being Intime Spectrum Registry

Limited. Retail Individual Bidders Individual Bidders (including HUFs applying through their karta)

who have Bid for Equity Shares for an amount less than or equal to Rs. 100,000 in any of the bidding options in the Issue.

Retail Portion The portion of the Net Issue being not less than 2,906,750 Equity Shares available for allocation to Retail Individual Bidder(s).

Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the Bid Price in their Bid cum Application Forms or any previous Revision Form(s).

RHP or Red Herring Prospectus The Red Herring Prospectus dated [●] to be issued in accordance with Section 60B of the Companies Act, which will not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue including the preliminary private placement memorandum and any addendum or corrigendum thereof. The Red Herring Prospectus will be filed with the RoC at least three days before the Bid/Issue Opening Date and will become a Prospectus after filing with the RoC after determination of the Issue Price.

RoC or Registrar of Companies Unless otherwise specified, the Registrar of Companies, Punjab, Chandigarh and Himachal Pradesh and Chandigarh located at Kothi No. 286, Defence Colony, Jallandhar 144 001, Punjab, India.

SEBI The Securities and Exchange Board of India constituted under the SEBI Act.

SEBI Act The Securities and Exchange Board of India Act, 1992, as amended from time to time.

SEBI Guidelines The SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by SEBI, as amended, including instructions and clarifications issued by SEBI from time to time.

Stock Exchanges NSE and BSE. Syndicate or members of the Syndicate

The BRLMs and the Syndicate Members.

Syndicate Agreement The agreement dated [●] to be entered into among our Company and the members of the Syndicate, in relation to the collection of Bids in this Issue.

Syndicate Members Motilal Oswal Securities Limited and [●] TRS/ Transaction Registration Slip The slip or document issued by any of the members of the Syndicate

to a Bidder as proof of registration of the Bid. Underwriters The BRLMs and the Syndicate Members. Underwriting Agreement The agreement among the members of the Syndicate and our

Company to be entered into on or after the Pricing Date. Industry Related Terms & Abbreviations

Term Description CAD Computer aided design

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Term Description DGCI&S, Kolkata Directorate General of Commercial Intelligence and Statistics,

Kolkata OGL open general license TFO Two for one machine VM Vegetable matter YCP Yarn conditioning plant

Abbreviations Abbreviation Full Form AS Accounting Standards as issued by the Institute of Chartered

Accountants of India ACS Associate Company Secretary BPRL Bank prime lending rate CAGR Compounded Annual Growth Rate CC Cash credit CEO Chief Executive Officer CENVAT Central Excise Value Added Tax ECS Electronic Clearing Services EGM Extraordinary General Meeting EPS Earnings per share FIPB Foreign Investment Promotion Board FY/ Fiscal Financial year/ Fiscal year Financial year /Fiscal Year Period of twelve months ended March 31 of that particular year,

unless otherwise stated GoI Government of India HUF Hindu Undivided Family ICAI Institute of Chartered Accountants of India I.T. Act The Income Tax Act, 1961, as amended from time to time LTPR Long term prime lending rate MTPLR Medium term prime lending rate Motilal Oswal Motilal Oswal Investment Advisors Private Limited NBFC Non banking financial institution NEFT National Electronic Fund Transfer NAV Net Asset Value NSDL National Securities Depository Limited OWM Oswal Woollen Mills Limited p.a. per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PLR Prime Lending Rate RBI The Reserve Bank of India RoNW Return on Net Worth RTGS Real Time Gross Settlement WCDL Working capital demand loan U.S. GAAP Generally accepted accounting principles in the United States of

America UTI Bank UTI Bank Limited TUFS Technology Upgradation Fund Scheme

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PRESENTATION OF FINANCIAL AND MARKET DATA Financial Data Unless indicated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated financial statements prepared in accordance with Indian GAAP and included in this Draft Red Herring Prospectus. Our Fiscal year commences on April 1 and ends on March 31, so all references to a particular Fiscal year are to the twelve-month period ended March 31 of that year. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. There are significant differences between Indian GAAP and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements (consolidated or unconsolidated) included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practices, Indian GAAP, the Companies Act and SEBI Guidelines. Any reliance by persons not familiar with Indian accounting practices, Indian GAAP, the Companies Act and SEBI Guidelines on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited. Our Company has not attempted to quantify those differences or their impact on the financial data included herein, and our Company urges you to consult your own advisors regarding such differences and their impact on our financial data. For more information on these differences, see the section titled “Summary of Significant Differences between Indian GAAP and U.S. GAAP”, beginning on page [●] of this Draft Red Herring Prospectus. Currency of Presentation All references to "Rupees" or "Rs." are to Indian Rupees, the official currency of the Republic of India. All references to "US$", "U.S. Dollar" or "USD" are to United States Dollars, the official currency of the United States of America. All References to “EUR” are to the EURO, the official currency of Europe. Solely for the convenience of the reader, this Draft Red Herring Prospectus contains translations of certain US$ and EUR amounts into Rupees. No representation is made that the EUR or USD amount represent Rupees or have been, could have been or could be converted into Rupees at such rates or any other rates. Market Data Unless stated otherwise, industry data used throughout this Draft Red Herring Prospectus has been obtained from industry publications. All industry sources, obtained from websites have been relied upon as on the date of filing this Draft Red Herring Prospectus. We Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe industry data used in this Draft Red Herring Prospectus is reliable, it has not been verified by any independent sources. The extent to which the management estimates or market and industry data used in this Draft Red Herring Prospectus is meaningful depends on the reader’s familiarity with and understanding of methodologies used in compiling such data. There are no standard data gathering methodologies in the textile industry in India and methodologies and assumptions may vary widely among different industry sources.

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FORWARD-LOOKING STATEMENTS

We have included statements in this Draft Red Herring Prospectus which contain words or phrases such as "will", "aim", "will likely result", "believe", "expect", "will continue", "anticipate", "estimate", "intend", "plan", "contemplate", "seek to", "future", "objective", "goal", "project", "should", "will pursue" and similar expressions or variations of such expressions, that are "forward-looking statements".

Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, regulatory changes pertaining to the industries in India in which our Company has its businesses and our ability to respond to them, our ability to successfully implement our strategy, our growth and expansion, our dependence on key managerial employees, extent to which our projects qualify for completion under the percentage of completion method of accounting, technological changes, our exposure to market risks, general economic and political conditions in India and which may have an impact on our business activities or investments, impairment of our title to land, action of third parties, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, raw material prices, equity prices or other rates or prices, the continued availability of applicable tax benefits, conflict of interests with Promoter Group companies and companies in which we have a substantial investment, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in our industry.

For further discussion of factors that could cause our actual results to differ, see the section titled "Risk Factors" beginning on page [●] of this Draft Red Herring Prospectus. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company, nor the members of the Syndicate, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circ*mstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company and the BRLMs will ensure that investors in India are informed of material developments until such time as the grant of trading permission by the Stock Exchanges for the Equity Shares allotted pursuant to the Issue.

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RISK FACTORS An investment in equity shares involves a degree of financial risk. You should carefully consider all information in this Draft Red Herring Prospectus, including the risks described below, before making an investment in our Equity Shares. This section addresses general risks associated with the industry in which we operate and specific risks associated with our business. Any of the following risks, as well as the other risks and uncertainties discussed in this Draft Red Herring Prospectus, could have a material adverse effect on our business, financial condition and results of operations and could cause the trading price of our Equity Shares to decline. In addition, the risks set out in this Draft Red Herring Prospectus may not be exhaustive and additional risks and uncertainties, not presently known to us, or which we currently deem immaterial, may arise or become material in the future. Internal Risk Factors 1. Brand recognition is important to the success of our business and the success of our products, sales and

profitability could be harmed if we are unable to maintain our brand image. The strength of our brands such as ‘Monte Carlo’, ‘Canterbury’ and ‘OWM’ has significantly contributed to the success of our business. We believe that our success depends on our ability to anticipate, identify and respond to changing fashion trends in a timely manner. If we are unable to respond in a timely and appropriate manner to changing consumer demand our brand name and brand image may be impaired and may result in a significant decrease in net sales or leave us with a substantial amount of unsold inventory. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. We may not be able to continue to develop appealing styles or successfully meet constantly changing consumer demands in the future. In addition, any new products or brands that we introduce may not be successfully received by retailers and consumers. Although we have expanded, and expect to continue to spend a significant amount of resources, financial and otherwise, on establishing and maintaining our brands, no assurance can be given that our brands will be effective in attracting and growing user and client base for our businesses or that such effort will be cost-effective. Any failure to maintain our brand may negatively affect our business, financial condition and results of operations.

2. We are dependent upon foreign producers for greasy wool. Any interruption in the supply of quality

greasy wool will have a material adverse effect on our operations. We import all our wool requirements, mainly from producers in Australia and New Zealand. In addition we also import wool from producers in South Africa and a minor portion from United States of America. Scarcity of production of greasy wool in these countries, failure of these producers to ship products to us in a timely manner or to meet required quality standards could cause us to miss the delivery schedules to our customers. Further factors affecting the economies and production of wool in these countries could have an adverse effect on our operations. For example, a lack of late winter and early spring rain across eastern Australia combined with the prospect of below average rainfall till the end of December, has resulted in a significant downward revision to Australian greasy raw wool production in 2006/07 season. The forecast for Australian shorn wool production in the 2006/07 season is 434 million kilograms, 6% or 27 million kilograms greasy lower on the previous season. The new forecast is also 22 million kilograms greasy lower than the previous forecast in July 2006. The current forecast for the 2006/07 season reflects that for many of the major wool producing areas across Australia, current seasonal conditions are significantly worse than for the same time last year. In particular, a lack of rainfall in August and September 2006 in the eastern states has compounded the already late start to the 2006 pasture-growing season. According to the Australian Bureau of Meteorology, August 2006 was the driest month for average rainfall across Australia as per the historical record from 1900. Also, the supply and price of greasy wool is vulnerable to animal diseases as well as natural disasters that can affect the supply and price of wool. For example, in the past, the outbreak of mad-cow and foot-and-mouth disease in Europe, and its after effects, adversely affected the supply of leather. Any occurrence of such or other diseases in sheep could adversely affect our operations.

The failure to make timely deliveries could cause customers to cancel orders, refuse to accept delivery of products or demand reduced prices, any of which could have a material adverse effect on our business. We

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do not have long-term written agreements with any of the producers. As a result, any of these producers may unilaterally terminate its relationship with us at any time.

3. We depend on third parties for significant elements of our sales and distribution efforts. If these third

parties do not continue to assist us in our sales and distribution, our revenue could decrease, which would have an adverse impact on our business. We limit our marketing efforts to product advertisem*nts during winters, advertisem*nt support to our dealers and franchisees etc. We depend substantially upon third parties for several critical elements of our business including, among other things, sales and distribution activities. There can be no assurance that we or these third parties will be able to establish or maintain adequate sales and distribution capabilities, that we will be able to enter into agreements or relationships with third parties, in the areas we currently operate in or in areas we intend to expand, on financially acceptable terms or that any third parties with whom we enter into such arrangements will be successful in selling or distributing our products. In the absence of these, our business could be negatively impacted. Additionally, most of our existing relationships with our dealers and sales agents are based on long-term relationships and not on any formal contracts or exclusive basis. If we are unable to maintain our relationships with these sales agents and distributors or if these sales agents and distributors begin selling our competitors products, then our ability to generate revenues through the sale of our products could be negatively impacted.

4. If our competitors misappropriate our proprietary trademarks, it could have a material adverse affect on

our business.

We depend heavily on the value of our trademarks and the design expertise. Our success depends to a significant extent on our ability to protect and preserve our intellectual property, including copyrights, trademarks and similar intellectual property. The loss of or inability to enforce our trademark ‘Monte Carlo’, ‘OWM’ and other proprietary know-how and trade secrets could adversely affect our business.

If any of our competitors’ copy or otherwise gains access to our design database, we would not be able to compete effectively. Further, the laws of foreign countries may not provide adequate protection of such intellectual property rights. We may need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources.

5. We are expanding our ‘Monte Carlo’ product range to make it an ‘All Season Brand’. Any inability in

repositioning the brand may adversely affect our business. We introduced the brand ‘Monte Carlo’ in 1985 for our woollen hosiery products, which has since then become a reputed brand in the Indian woollen hosiery market. However, the sales in this segment are mainly made during the winter season.

Starting Fiscal 2002, in our endeavor to make ‘Monte Carlo’ an all season brand and to increase its presence in the country we started the cotton segment of Monte Carlo products mainly comprising of trousers, shirts and knitted T-shirts. The success of this diversification will depend upon our ability to reposition the brand ‘Monte Carlo’ such that market starts recognizing it from a winter product to an all season product. Our inability or delay in repositioning the ‘Monte Carlo’ brand from winter to all season brand or expand our market in new geographical areas may adversely affect business operations and overall profitability of our Company.

6. We might not be able to successfully implement our business strategies.

In order to achieve our goal of being a company with presence across the country with efforts to capture additional market share, we are constantly evaluating the possibilities of expanding our business by introducing new products and expanding our presence across India. Our key strategic initiatives, which include our expansion plans, are: Establishing ‘Monte Carlo’ as an all season pan India brand; Further strengthening our retail presence; Increasing our product range; Cost reduction; and Enhancing manufacturing capacities.

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Implementation of our expansion plans and introduction of new products may pose significant challenges to

our administrative, financial and operational resources and additional risks, including some of which we may not be specifically aware of. If we are unable to successfully implement some or all of our key strategic initiatives in an effective and timely manner, we may face an adverse effect on our business prospects, competitiveness, market position, brand name, financial condition and results of operations.

7. The success of our business is substantially dependent on retaining the services of our key management

personnel and attracting talented professionals. The loss of the services of any of these persons may adversely affect our business and results of operations. We have built a strong team of talented senior professionals, several of whom have been with our Company since its inception, to oversee the operations and growth of our business. Our success is substantially dependent upon the expertise and services of these members of the management team. Furthermore, we do not have any key man insurance policies covering our key management personnel. The loss of the services of any of these persons or our inability to attract suitable replacements could have an adverse effect on our business, results of operations and financial condition. In addition, attracting and retaining talented professionals is key to our business growth. Any inability on attract talented professionals personnel may adversely affect our business and results of operations.

8. We may face strikes, lockouts and other labour unrests which could adversely affect our operations.

Our performance as a manufacturing company is largely dependent on the efforts and abilities of the labourers engaged by us. Whilst we have not faced any strikes or lock out by our workmen in the past, any strikes, lockouts or other form of labour unrest, any strikes or other form of labour unrest could adversely affect our business, financial position, results of operations and cash flows. If we are unable to negotiate with the workmen or the contractors, it could result in work stoppages or increased operating costs as a result of higher than anticipated wages or benefits.

9. Our business and future results of operations could be adversely affected if ‘Monte Carlo’ is not

recognized as a ‘Superbrand’. ‘Monte Carlo’ has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by International Society for Superbrands. The ‘Superbrand’ recognition has contributed to the growth of ‘Monte Carlo’. The increase in our sales volume and profitability for our Monte Carlo products will continue to be affected by the ‘Superbrand’ recognition. There can be assurance that in future we will be successful in securing ‘Superbrand’ for our Monte Carlo products. Any failure to obtain such recognition in future could have an adverse effect on our sales and operations.

10. We operate in a highly competitive and fragmented industry and our failure to successfully compete

could result in a loss of one or more significant customers. The textile industry is highly competitive and fragmented. Our competitors include numerous apparel designers, manufacturers, and other established companies. We believe that the principal competitive factors in the apparel industry are: brand name and brand identity; timeliness, reliability and quality of products delivered; price; and the ability to anticipate customer and consumer demands and maintain appeal of products to

customers.

If we do not maintain our brand names and identities and continue to provide high quality and reliable products on a timely basis at competitive prices, or if our competitors are able to compete more effectively, we may not be able to continue to compete in our industry. If we are unable to compete successfully, we could lose one or more of our significant customers, which, if not replaced, could negatively impact our sales and financial performance.

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11. If the number of multi brand outlets and national chain stores continue to increase or consolidate, our business could be negatively affected

Whilst we sell a significant portion of our woollen hosiery products in exclusive retail outlets, we also sell our products to multi brand outlets and national chain stores. Continued consolidation in the retail industry could negatively impact our business. With increased consolidation in the retail industry, we are increasingly dependent on retailers whose bargaining strength may increase and whose share of our business may grow. As a result, we may face greater pressure from these customers to provide more favorable terms. If purchasing decisions become more centralized, the risks from consolidation, such as competition increases. Customers may also concentrate purchases among a narrowing group of vendors which could adversely affect our business.

12. Risk associated with use of Issue proceeds for setting up exclusive retail outlets owned by our Company.

Out of total net proceeds of the Issue, Rs. 400 million, amounting to 15.82 % of the total project cost has

been earmarked for setting up ‘Monte Carlo Exclusive Brand Outlets’ (“Exclusive Outlets”) owned by our Company. All of these Exclusive Outlets are to be set up in identified metros or other big cities for the promotion of our brands. For further details kindly refer to the section titled “Objects of the Issue” beginning on page [●] of this Draft Red Herring Prospectus. However, we may not generate significant direct revenues from these Exclusive Outlets and further may not achieve the expected brand recognition.

We had opened the first ‘Monte Carlo Exclusive Retail Outlet’ in Fiscal 2005. Our business model of

retailing ‘Monte Carlo’ products through ‘Monte Carlo Exclusive Retail Outlets’ is not very old and so far we are operating only with 23 outlets, whether owned by our Company or on a franchisee basis. From the present level of 23 outlets, we are contemplating opening a total of 150 ‘Monte Carlo Exclusive Retail Outlets’ by the end of Fiscal 2009. Any delay or failure in generating revenues commensurate with growth of such outlets may adversely affect business operations and the overall profitability of our Company.

13. Expansion of products portfolio and expansion of capacity involve significant costs and uncertainty and

could adversely affect our results of operations. An important part of our strategy is to ramp up our existing manufacturing capacities and expand the range of products we offer. For example, in March 2006, we had introduced denim fabric to our product portfolio. We are proposing to double our capacities of denim fabric from 10 million to 20 million meters per annum. We are also proposing to add spinning capacities as a backward integration for our denim fabric manufacturing plant. Further, we intend to continue to add additional product lines in the future. As is typical while introducing any new product, the demand and market acceptance for new products introduced are subject to uncertainty. Further, we have limited experience in designing, producing and marketing denim products and the same will require substantial expenditures.

14. There could be changes in the implementation schedule of our expansion and diversification programme

which may result in delay of our projects and make them incur significant cost overruns. Our estimated fund requirements are based on our current business plan and strategy. However, we operate in a highly competitive and dynamic industry and we may have to revise our business and capital outlay plans from time to time. Our current and future projects may be significantly delayed by failure to receive regulatory approvals or renewal of approvals, technical difficulties due to human resource, technological or other resource constraints or other unforeseen events or circ*mstances. As a result, these projects may incur significant cost overruns and may not be completed in time, or at all. Accordingly, investors in this Issue will need to rely upon the judgment of our management with respect to the use of proceeds.

15. The objects of the Issue for which funds are being raised have not been not appraised by any bank,

financial institution or an independent organisation. As such our estimates for the projects may exceed fair market value or the value that would have been determined by third party appraisals.

The requirement of funds as stated in the section titled ‘Objects of the Issue’ beginning on page [●] of this Draft Red Herring Prospectus is based on the internal management estimates and has not been appraised independently by any bank, financial institution or any independent organisation. The deployment of funds is entirely at the discretion of our Board of Directors.

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16. We have not entered into definitive and binding agreements for deploying a significant portion of the proceeds of the Issue. The net proceeds of the Issue are proposed to part fund the expansion project as detailed in the section titled ‘Objects of the Issue’ beginning on page [●] of this Draft Red Herring Prospectus. We have not yet entered into binding and definitive agreements for the planned expansion of ‘Monte Carlo Exclusive Retail Outlets’, which we currently propose to fund from the net proceeds of the Issue. Non-availability or delay in availability of these retail spaces at the desired place/ location or increase in prices of the proposed retail spaces, for which definitive agreements have not been entered, may adversely affect our estimates of project cost. There can be no assurance that we will be able to enter into such agreements on terms and conditions favorable to us. Accordingly, prospective investors in the Issue will need to rely upon the judgment of our management with respect to the use of proceeds in this respect. Also, we have not placed orders and have not firmed up contracts for majority of the plant and machinery. Further, we intend to import certain second hand plant and machinery from the net proceeds of this Issue. Any delay or failure to enter into such agreements will have a material adverse affect on our operations.

17. We face risks relating to the price volatility in the import of wool.

Exchange rates and commodity prices, including prices for wool, are volatile. Risk management tools, such as futures and their derivatives and forward contracting, allow participants to manage the risk. However, the presence of liquid futures market or significant forward contracting will not reduce the volatility in prices in the spot market, but enables industry participants to manage the price volatility to stabilise their incomes. For the wool segment these risk management tools are sparsely used as compared to cotton and other commodities. Approximately 85% of Australia’s wool is sold at auction, with only a small proportion of this hedged by a futures contract.

The lack of extensive use of sophisticated risk management tools in the wool industry exposes all involved, including wool producers and processors, to significant risk and volatility of income.

18. We face risks in relation to outsourcing of cotton segment of the Monte Carlo Products.

As opposed to the woollen products of our Company where our operations are completely integrated right

from the manufacture of wool top from greasy raw wool to retailing of branded products, in the cotton segment we get all our requirements outsourced. Accordingly, we are subject to all the risks such as, timely availability of products, quality of products, etc. which are generally associated with outsourcing of garments.

Also, because of outsourcing we may not be able to compete effectively with readymade garment

manufacturers having integrated operations. 19. We outsource our requirements of cotton. Any shortage or interruption in the supply of cotton could

adversely effect our operations. Cotton is the main raw material for our denim plant and will constitute a significant percentage of our total manufacturing expenses. We will be purchasing cotton from the domestic market.

Domestic cotton prices have been lower than world prices in the recent past but there can be no assurance that the price levels of cotton will continue to remain favorable. Any increase in cotton prices would have a material adverse effect on our business. The use of domestic hedging techniques against the risks associated with fluctuation in cotton prices is a new development in India and the concept has not yet picked up.

Further, cotton is an agricultural product, and its supply and quality are subject to forces of nature. Any material shortage or interruption in the domestic supply or decrease in the quality of cotton due to natural causes or other factors could result in increased production costs that we may not successfully be able to pass on to customers, which in turn would have a material adverse effect on our business.

20. We have recently introduced denim fabric to our product portfolio and have limited experience of

manufacturing and marketing denim products.

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We are in the early stages of our business relating to denim, which makes it difficult for us to predict the nature and extent of competition and consumer demand therein. We have limited prior experience of designing, manufacturing and marketing denim products. No assurance can be given that we will be able to replicate our leading position in the woollen hosiery segment in this segment as well.

Further, denim is considered to be a commodity and is cyclical in nature. Denim prices had seen downward

price volatility in the recent past. Any unfavorable trends in the denim industry may adversely effect our denim operations.

21. Our business could be harmed if we fail to maintain adequate inventory levels.

We place orders for our raw materials in the case of wool or for other products prior to the time we receive all of our customers’ orders. We do this to minimize purchasing costs, the time required to fulfill customer orders and the risk of non-delivery. We also maintain an inventory of certain products that we anticipate will be in greater demand. However, we may be unable to sell the products that we have ordered in advance from the producers of raw materials or manufacturers of other products or that we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have a material adverse effect on our operating results and financial condition. Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply the quality products that we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay our delivery schedules to customers, negatively impact retailer and distributor relationships, and diminish brand loyalty.

22. Our operations are subject to a variety of environmental laws and regulations including those covering hazardous materials.

Our operations are subject to numerous environmental protection laws and regulations, which are complex and stringent. Significant fines and penalties may be imposed for non-compliance with environmental laws and regulations. Certain environmental laws provide for joint and several strict liabilities for remediation of releases of hazardous substances, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. In addition to potential liabilities that may be incurred in satisfying these requirements, we may be subject to claims alleging personal injury or property damage as a result of our operations.

We may be exposed to liability arising out of the conduct of operations or conditions caused by others or

for our own acts including those, which were in compliance with all applicable laws at the time such acts were performed. Failure to comply with these laws, rules and regulations, may include administrative, civil and criminal penalties, revocation of permits and corrective action orders. These factors, if applicable to us may adversely affect our operations.

23. An inability to renew or maintain the statutory and regulatory permits and approvals required to operate

our business may have a material adverse effect on our business. We require certain statutory and regulatory permits, licenses and approvals to operate our business. We have made renewal applications for the same, but are yet to receive, certain approvals that have expired, or that are required for our business. For details of the same, see section tilted “Government and Other Approvals”, beginning on page [●] of this Draft Red Herring Prospectus. Addtionally, we are yet to apply for registration under Bombay Shops and Establishments Act, 1948 for our branch office which have recently opened at Mumbai. Any failure to obtain the same, or obtain the other approvals which we have applied for but not received, may adversely affect our business.

24. If we fail to obtain trademark registrations for our brand names, our brand building efforts may be

hampered and our business could be adversely affected.

In order to protect our brand names, we have applied for registration of a number of trademarks and of our logos. Some of these applications, which relate to ‘Monte Carlo’s Canterbury’, ‘Blue- cult’, ‘Indigo- cult’, ‘Yaguchi’ and ‘Bellerina’ are currently pending. However, we cannot guarantee that any of our pending applications will be approved by the appropriate regulatory authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge these or other registrations. If our applications for such registration are not approved, our brand-building efforts could suffer and our business

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may be adversely affected. For further details of our trademark registrations, see the section titled “Government and Other Approvals” beginning on page [●] of this Draft Red Herring Prospectus.

25. All our manufacturing facilities are located in and around Ludhiana.

All our manufacturing facilities are located in and around Ludhiana. Our proposed expansion plan shall also

be based in our existing manufacturing locations. Ludhiana has traditionally been a hub for knitting and hosiery industry. Punjab had in past seen unrest due to terrorist activities. Any political or other unrest may severely affect our business operations.

Also, knitting and hosiery is a labour intensive industry. Our inability to continuously source and maintain

skilled and unskilled labour at competitive rates may have an adverse impact on our business. 26. We have in the past faced losses in the past due to a break out of fire.

Due to outbreak out of fire in November 7, 1973 at our office located at Miller Ganj, Ludhiana, we faced significant losses of immovable and movable properties, including our records. Whilst we believe that have installed adequate fire safety arrangements along with insurance policies, any similar outbreak of fire in the future, could have a material adverse effect on our business.

27. Changes in technology may impact our business by making our plants less competitive.

Advancement in technology may require us to make additional capital expenditure for upgrading our manufacturing facilities or may make our competitors plants more competitive. If we are not able to respond to such technological advancement well in time or at all, we may lose our competitiveness.

28. Some of our Promoter Group companies have failed to meet certain projections made in their last offer

document. Nahar Spinning Mills Limited, one of our Promoter Group companies and Nahar Industrial Enterprises Limited one of our Promoter Group companies, have failed to meet projections made in their last offer documents. For further details, see the section titled “Our Promoters and Promoter Group” beginning on page [●] of this Draft Red Herring Prospectus.

29. Equity shares of some of our listed Promoter and Promoter Group companies are infrequently traded on

the stock exchanges. The equity shares of some of our listed Promoter Group companies, namely Kovalam Investment and Trading Company Limited, Nahar Financial and Investment Limited, Oswal Leasing Limited and Sankheshwar Holding Company Limited have not been frequently traded on the stock exchanges on which they are listed. For further details see section titled “Our Promoters and Promoter Group” beginning on page [●] of this Draft Red Herring Prospectus.

30. One of our Promoter Group companies are not in compliance with continued listing requirements.

One of our Promoter Group companies, namely Kovalam Investment and Trading Company Limited is not in compliance with the requirement for continued listing relating to minimum public shareholding requirement of 10% on the stock exchange on which it is listed, i.e. the BSE. However, it has made an application for delisting of its equity shares from the BSE.

31. Our existing indebtedness and the conditions and restrictions imposed by our financing agreements

could adversely affect our ability to conduct business and operations.

As of September 30, 2006, we have availed of term loans and other facilities of Rs. 875.54 million. In addition, we may incur additional indebtedness in the future. Our indebtedness could have several important consequences, including but not limited to the following:

• A portion of our cash flow may be used towards repayment of our existing debt, which will reduce the availability of our cash flow to fund working capital, capital expenditure, acquisitions other general corporate requirements and pay dividends.

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• Our ability to obtain additional financing in the future at reasonable terms may be restricted; • There could be a material adverse effect on our business, financial condition and results of

operations if we are unable to service our existing indebtedness or otherwise comply with financial and other covenants specified in the financing agreements; and

Our financing agreements are secured by a pari passu charge on our Company’s entire present and future movable and immovable assets including equitable mortgage of factory land held in the name of our Company. Specifically under certain circ*mstances, we require and may be unable to obtain lender consents to, change our capital structure, effect any scheme of amalgamation or reconstitution, implement a new scheme of expansion or take up allied line of business or manufacture amongst others. For details of the same see the section titled “Financial Indebtedness” beginning on page [●] of this Draft Red Herring Prospectus. There can be no assurance that our lenders will grant us required consents on time or at all. Any failure to comply with the requirement to obtain consents, or other condition or covenant under our financing agreements that is not waived by our lenders or otherwise cured by us, could lead to a termination of our credit facilities, and could adversely affect our ability to conduct our business and operations or implement our business plans.

32. One of our Promoter Group companies has incurred losses.

Shri Atam Fabrics Limited, one of our Promoter Group companies, has incurred losses in the Fiscals 2006 and 2005. For further details see the section titled “Our Promoters and Promoter Group” beginning on page [●] of this Draft Red Herring Prospectus.

33. We have high working capital requirements. If we experience insufficient cash flows to meet required

payments of our debt and working capital obligations, our results of operations could be adversely affected. Our business is capital intensive and significant amount of working capital is required to finance the purchase of raw materials, maintain our manufacturing facilities and equipments and carry own our operations in a smooth manner. Moreover, we may need to incur additional indebtedness in the future to satisfy our working capital needs. Our working capital requirements are also affected by the credit lines that we extend to our customers, in line with industry practice. All of these factors have resulted, or may result, in increase in the amount of our receivables and short-term borrowings. There can be no assurance that we will continue to be successful in arranging adequate working capital for our existing or expanded operations on acceptable terms or at all, which could adversely affect our financial condition and results of operations.

34. Failure to comply with the conditions of the Technology Upgradation Fund Scheme shall make us

ineligible for interest or capital subsidy. Out of total project cost of Rs. 2,529.87 million excluding issue expenses for the expansion project, the rupee term loan component is of Rs. 749 million being raised under Technology Upgradation Fund Scheme (TUFS). All of these loans are eligible for an interest rate subsidy subject to conditions provided therein. We are also entitled to a one time capital subsidy for investments in specified processing machinery. If we fail to comply with conditions stipulated under TUFS, the interest or capital subsidy may be denied to us making our operations less cost effective.

35. We are subject to risks arising from interest rate fluctuations, which could adversely affect our business,

financial condition and results of operations.

Changes in interest rates could significantly affect our financial condition and results of operations. As of September 30, 2006, Rs. 875.54 million of our borrowings were at floating rates of interest. If the interest rates for our existing or future borrowings increase significantly, our cost of servicing such debt will increase. This could adversely impact our results of operations, planned capital expenditures and cash flows. Although we may in the future enter into hedging arrangements against interest rate risks, there can be no assurance that these arrangements will successfully protect us from losses due to fluctuations in interest rates.

36. There has been almost no growth in our total revenues during last five years.

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Our top-line has been almost stagnant during last five years. For the Fiscal 2002 and Fiscal 2006, our gross operational incomes were at Rs. 2,031.61 million and at Rs. 2,381.02 million respectively. Though, restated profits after taxes for the same period have increased at a CAGR of 21.41% from Rs. 68.34 million during Fiscal 2002 and Rs. 148.48 million during Fiscal 2006 due to change in product mix and our focus on more value added products. If we are not able to generate additional operational income and continue to show the improved profitability as in the past, our operational results may be adversely affected.

36. We are dependent on sales of our woollen hosiery products during winters.

The woollen hosiery products of our Company are mainly sold during winters. Any difficulties, which we may encounter during this season as a result of weather or disruption of manufacturing or transportation of our products, will have a magnified effect on our net sales and net income for the year. Revenues from our woolen hosiery products during winters are expected to continue to provide a disproportionate amount of our net sales and net income for the foreseeable future.

37. Our ability to pay dividends in the future will depend upon our future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors. So far our Company has not paid any dividend. The amount of our future dividend payments, if any, will depend upon our future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors.

38. We had contingent liabilities amounting to Rs. 129.25 million as on September 30, 2006.

As on September 30, 2006, we had contingent liabilities aggregating to Rs. 129.25 million, consisting of outstanding central excise demand of Rs. 40.33 million, liability of arbitral award of Rs. 6.47 million etc. For complete details of contingent liabilities, see the section titled ‘Financial Statements’ beginning on page [●] of this Draft Red Herring Prospectus.

39. We are deriving significant revenues from our landed properties in Gurgaon and Chennai, which have

been leased out. The lessees may vacate these properties by serving a prior notice of six months.

We have landed properties in Gurgaon and Chennai, which have been leased out. The lease rentals are contributing significantly to the overall revenues and profitability of our Company. The lease agreements that we have entered into, in respect of these properties provides for termination of the lease agreement by either parties upon serving a six months notice after a lock in period of two years. Such termination may affect profitability of our Company temporarily till such time this property is put to an alternative use.

40. Your holdings may be diluted by additional issuances of Equity Shares or sales of Equity Shares by our Promoters, which may also adversely affect the market price of our Equity Share. Any future issuance of our Equity Shares by us, including pursuant to the exercise of stock options under any future employee stock option scheme or any other similar scheme in the future, may dilute the positions of investors in our Equity Shares, which could adversely affect the market price of our Equity Shares. We may issue Equity Shares in the future in order to help fund expansion plans, as well as improvements to our facilities and other business activities. Any such future issuance of Equity Shares, or the possibility of such sales, could negatively impact the market price of our Equity Shares. Such Equity Shares also may be issued at prices below the then-current market price.

Sale our Equity Shares by our Promoters, or the possibility of such sale, also could adversely affect the market price of our Equity Shares. Upon completion of the Issue, all Equity Shares that are outstanding prior to the Issue, will be subject to selling restrictions for a period of one year from the date of allotment of Equity Shares in the Issue. In addition, approximately, 20% of our post-Issue paid-up capital held by certain of our Promoters will be subject to such selling restrictions for a period of three years. For further information relating to such selling restrictions, see the section titled “Capital Structure” beginning on page [●] of this Draft Red Herring Prospectus.

41. Some of our lease documents are in adequately stamped or registered, which could adversely affect us.

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We have leased some of our properties to third parties for providing storage facilities to other entities. Some of these agreements may not be adequately stamped or registered. As such, these agreements may not be enforceable.

42. No title search/land search has been conducted on the properties possessed/ leased by our Company.

We have not conducted a title search on the lands owned by us and consequently cannot assure you that these lands are validly held under law.

43. There may occur a conflict of interest in the business of our Company and that of our Promoter Group companies. Some of our Promoter Group companies have main objects and business similar to our Company. At present the product range of each of these companies and their respective business models are different and do not compete with each other, e.g., Nahar Spinning Limited, a Promoter Group company, is in the business of manufacture and exports of cotton based knitted ready made garments for foreign brands. Similarly, Nahar Industrial Enterprises Limited, another Promoter Group company, is in the business of manufacture and sale of cotton based ready-made garments for middle and lower middle class consumers. However, we cannot assure you that these Promoter Group companies will not compete with each other or with us in future.

44. Our Promoters will hold a majority of our Equity Shares after the Issue and can therefore determine the

outcome of any shareholder voting After completion of this Issue, our Promoters will hold approximately 70.31% of our paid up share capital. So long as our Promoters own a majority of our Equity Shares, they will be able to elect our entire Board of Directors and control most of the matters affecting us, including appointment and removal of our officers, our business strategy and policies, any decision with respect to mergers, amalgamations, acquisitions or disposal of assets, our dividend policy and our capital structure and financing. The interests of our Promoters may conflict with interests of our other investors, and you may not agree with the manner in which they exercise their powers of management or voting rights. Further, the extent of the Promoters’ shareholding in our Company may result in the delay or prevention of a change of management or control of our Company, even if such a transaction may be beneficial to our other shareholders.

45. There are a number of legal proceedings against us, our directors, our Promoters and certain Promoter

Group companies.

There are outstanding legal proceedings against us, our Directors, our Promoters and Promoter Group companies. These proceedings are pending at different levels of adjudication before various courts, tribunals, enquiry officers and appellate tribunals. There are nine excise cases, nine income tax cases, 12 sales tax cases, three civil cases and three notices from various statutory authorities pending against us before various courts and authorities in India. The aggregate liability claimed against us, as on the date of institution of these case is approximately Rs. 105.02 million. In addition there is one labour case pending against our Company. For further details see the section “Outstanding Litigation and Material Developments” beginning on page [●] of this Draft Red Herring Prospectus. In addition there are various cases pending against our Directors, Promoters and Promoter Group. For details relating to them see the section “Outstanding Litigation and Material Developments” beginning on page [●] of this Draft Red Herring Prospectus. Should any new developments arise in respect of any of these proceedings, such as a change in Indian law or rulings against us by appellate courts or tribunals, we may need to make provisions in our financial statements, which could adversely impact our business and results of operations.

External Risks Factors 1. Any changes in regulations or applicable government incentives would materially adversely affect our

operations and growth prospects.

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We currently receive benefits, under various incentives provided by the Government of India for the textile sector, including:

a) Textile Upgradation Fund Scheme (“TUFS”): In order to encourage the textile industry the

Government of India has announced the TUFS under which eligible units investing in particular technology, plant and machinery along with other specified assets are eligible for grant of interest subsidy of 5% subject to compliance with certain conditions. The TUFS is valid until March 31, 2007;

b) Capital Subsidy: In order to encourage investment in processing industries the Government of India has announced a scheme whereby units investing in specified processing equipment during the period from April 20, 2005 to March 31, 2007 are eligible for a capital subsidy of 10%;

c) Duty Entitlement Pass Book (“DEPB”) credit: The DEPB scheme is an export incentive in the form of customs duty credit which can be set off against customs duty payable on imported products and applied towards exports of certain products at specified rates as notified in EXIM Policy; and

d) Excise Duty Benefits: Textile producers have the option (which we have exercised) to adopt a zero-excise duty structure with effect from July 2004. Accordingly, at present, we do not pay excise duty on fabric, garments or yarn.

These incentives could be modified or removed at any time, which could adversely affect our business and profitability. Relevant authorities in India may also introduce additional or new regulations applicable to our business, which could adversely affect our business and profitability.

We are also subject to various regulations and textile policies. For details see the section titled “Regulations and Policies” beginning on page [●] of the Draft Red Herring Prospectus. Our business and prospects could be materially adversely affected by changes in any of these regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. There can be no assurance that we will succeed in obtaining all requisite regulatory approvals in the future for our operations or that compliance issues will not be raised in respect of our operations, either of which would have a material adverse affect on our business, financial condition and results of operations.

2. Purchases of the merchandise we sell are generally discretionary and are therefore particularly

susceptible to economic slowdowns. Consumers are generally more willing to make discretionary purchases, including purchases of fashion products and high-end textile products, during periods in which favorable economic conditions prevail. Uncertainties regarding future economic prospects could affect consumer-spending habits and have an adverse effect on our results of operations. Uncertainty with respect to consumer spending as a result of weak economic conditions has in the past caused our customers to delay the placing of initial orders and to slow the pace of reorders during the seasonal peak of our business. Weak economic conditions have had a material adverse effect on our results of operations at times in the past and could have a material adverse effect on our results of operations in the future as well.

3. Our performance is linked to the stability of policies and the political situation in India.

The role of the Indian central and state governments in the Indian economy has remained significant over

the years. Since 1991, the Government has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. There can be no assurance that these liberalization policies will continue in the future. The rate of economic liberalization could change, and specific laws and policies affecting textile and apparel companies, foreign investment, currency exchange rates and other matters affecting investments in Indian companies could change as well. A significant change in India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India, thus affecting our business.

The current Government is a coalition of several parties. The withdrawal of one or more of these parties

could result in political instability. Any political instability could delay the reform of the Indian economy, which could materially adversely impact our business.

4. Any acts of war or conflicts involving India or other countries could adversely affect business sentiment

and the financial markets and adversely affect our business.

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India has from time to time experienced hostilities with neighbouring countries. Such events could create a

perception that investments in Indian companies involve a higher degree of risk. This, in turn could have an adverse effect on the market for securities of Indian companies, including our Equity Shares. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

5. Terrorist attacks or war or conflicts involving countries in which we operate or where our customers are

located could adversely affect the financial markets and adversely affect our business.

Terrorist attacks and other acts of violence, war or conflicts, particularly those involving India, as well as the U.S. and the EU may adversely affect Indian and worldwide financial markets. Such acts may negatively impact business sentiment, which could adversely affect our business and profitability. India has from time to time experienced, and continues to experience, social and civil unrest, terrorist attacks and hostilities with neighboring countries. Most recently, Mumbai, India’s financial capital experienced a series of train bombings. Also, some of India’s neighboring countries have experienced, or are currently experiencing internal unrest. Such social or civil unrest or hostilities could disrupt communications and adversely affect the economy of such countries. Such events could also create a perception that investments in companies such as ours involve a higher degree of risk than investments in companies in other countries. This, in turn, could have a material adverse effect on the market for securities of such companies, including our Equity Shares. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

6. Natural calamities could have a negative impact on the Indian economy and harm our Company’s

business. India has experienced natural calamities such as earthquakes, floods, droughts and a tsunami in recent years. The extent and severity of these natural disasters and pandemics determines their impact on these economies. Prolonged spells of abnormal rainfall and other natural calamities could have an adverse impact on the economies in which we have operations, which could adversely affect our business and the price of our Equity Shares.

7. We will need final listing and trading approvals from the BSE and the NSE before trading commences.

An active market for the Equity Shares may not develop, which may cause the price of the Equity Shares to fall and may limit your ability to sell the Equity Shares. The present Issue is of fresh issue of Equity Shares for which there is currently no trading market. Our Company will apply to the BSE and NSE for final listing and trading approvals after the allotment of the Equity Shares in the Issue. There can be no assurance that we will receive such approvals on time or at all.

Also, no assurance can be given that an active trading market for the Equity Shares will develop or as to the

liquidity or sustainability of any such market, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which shareholders will be able to sell their Equity Shares. If an active market for the Equity Shares fails to develop or be sustained, the trading price of the Equity Shares could fall. If an active trading market were to develop, the Equity Shares could trade at prices that may be lower than their initial offering price.

8. Fluctuations in operating results and other factors may result in decrease in our Equity Share price.

Stock markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market volatility and fluctuations may adversely affect the trading price of our Equity Shares. There may be significant volatility in the market price of our Equity Shares. If we are unable to operate profitably or as profitably as we have in the past, investors could sell our Equity Shares when it becomes apparent that the expectations of the market may not be realized, resulting in a decrease in the market price of our Equity Shares.

The SENSEX is trading at its historic peak level and most of the stocks are trading at an all-time high price.

The current prices may not be reflective of the intrinsic value of the respective companies. Therefore, in future, the sustainability of such valuation seems to be difficult.

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In addition to our operating results, the operating results of other apparel companies, changes in financial estimates or recommendations by analysts, governmental investigations and litigation, speculation in the press or investment community, the possible effects of a war, terrorist and other hostilities, adverse weather conditions, changes in general conditions in the economy or the financial markets, or other developments affecting the apparel industry, could cause the market price of our Equity Shares to be issued to fluctuate substantially.

9. You will not be able to sell immediately on an Indian Stock Exchange any of the Equity Shares you

purchase in the Issue. Under the SEBI Guidelines, we are permitted to allot equity shares within 15 days of the closure of the public issue. Consequently, the Equity Shares you purchase in this Issue may not be credited to your demat account, with the Depository Participants until approximately 15 days after the Bid/Issue Closing Date. You can start trading in the Equity Shares only after they have been credited to your demat account and final listing and trading approvals are received from the Stock Exchanges. Further, there can be no assurance that the Equity Shares allocated to you will be credited to your demat account, or that trading in the Equity Shares will commence, within the specified time periods or at all.

Notes to Risk Factors: 1. Public Issue of up to 8,320,000 Equity Shares at a price of Rs. [●] each for cash aggregating up to Rs. [●]

million by our Company. The Issue comprises a Net Issue to the public of up to 8,305,000 Equity Shares and the Employees Reservation Portion of up to 15,000 Equity Shares. The Net Issue will constitute 25% of the fully diluted post-Issue capital of our Company.

2. The net worth of our Company as of March 31, 2006 and as of September 30, 2006 was Rs. 794.66 million

and Rs. 896.23 million respectively based on the financial statements of our Company. The book value per Equity Share as of March 31, 2006 and as of September 30, 2006 was Rs. 31.91 and Rs. 35.99 respectively based on the financial statements of our Company. For details, please see the section titled “Financial Statements” beginning on page [●] of this Draft Red Herring Prospectus;

3. Presently, our Promoters hold 93.80% of the paid up capital of our Company. The average cost of

acquisition of Equity Shares by our Promoters is as follows:

Promoters Cost Per Share

Mr.Jawahar Lal Oswal 32.22 Mr. Kamal Oswal 31.95 Mr. Dinesh Oswal 31.24 Nahar Spinning Mills Limited 3.33 Atam Vallabh Financiers Limited 3.33 Abhilash Growth Fund Private Limited 3.33 Girnar Investment Limited 3.34 Kulu Investment and Trading Private Limited 3.33 Ludhiana Holdings Limited 3.33 Nagdevi Trading and Investment Company Limited 3.33 Neha Credit and Investment Private Limited 8.38 Ogden Trading and Investment Company Private Limited 3.33 Vanaik Investors Limited 3.33 Vardhaman Investments Limited 3.33

4. Except as disclosed in the sections titled “Our Management” and “Our Promoters and Promoter Group”

beginning on pages [●] and [●], respectively, of this Draft Red Herring Prospectus, none of our Promoters, Directors or key managerial personnel have any interest, other than reimbursem*nt of expenses incurred or normal remuneration or benefits.

5. Some of our Promoter Group companies have main objects and business similar to our Company. At

present the product range of each of these companies and their respective business models are different and

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do not compete with each other, e.g., Nahar Spinning Limited, a Promoter Group company, is in the business of manufacture and exports of cotton based knitted ready made garments for foreign brands. Similarly, Nahar Industrial Enterprises Limited, another Promoter Group company, is in the business of manufacture and sale of cotton based ready-made garments for middle and lower middle class consumers. However, we cannot assure you that these Promoter Group companies will not compete with each other or with us in future.

6. We had entered into certain related party transactions. For details, see the section titled “Financial

Statements - Related Party Transactions” beginning on page [●] of this Draft Red Herring Prospectus. 7. Except, as disclosed in the section titled “Financial Statements” beginning on page [●] of this Draft Red

Herring Prospectus, there are no subsisting loans or advances that have been extended by our Company to any persons, firms or companies in which our Directors are interested.

8. Any clarification or information relating to the Issue shall be made available by the BRLMs and the

Company to the investors at large and no selective or additional information will be available for a section of investors in any manner whatsoever. For any clarification or information relating to the Issue, investors may contact the BRLMs, who will be obliged to provide such clarification or information to the investors.

Investors may contact the BRLMs, Syndicate Members or the compliance officer for any complaints, information or clarifications pertaining to the Issue. For contact details of the BRLMs, Syndicate Members and the compliance officer see the section titled ‘General Information’ beginning on page [●] of this Draft Red Herring Prospectus.

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SUMMARY OF OUR BUSINESS Business Overview Our Company, Oswal Woollen Mills Limited (OWM), is the flagship company of the Nahar Group of Companies (the Nahar Group). The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab with group turnover in excess of Rs. 19,000 million for Fiscal 2006. The Nahar Group is one of the oldest and well recognized business houses in India. Our Company was incorporated in 1949 by Late Mr. Vidya Sagar Oswal, father of Mr. Jawahar Lal Oswal, our present Chairman and Managing Director. Our Company is one of the pioneers of the organized Indian woollen hosiery industry. We made a modest beginning as a manufacturer of hosiery items, which was followed by setting up a worsted woollen spinning plant of 800 spindles in 1954 to serve as a backward integration of the then existing manufacturing activities. We believe that this worsted woollen spinning plant is one of the first worsted woollen spinning plants in the Northern India. Marching ahead in the journey and keeping pace with overall industrial development in India, our Company is now a vertically integrated woollen textile company, having presence in diverse market, with wide range of products including woollen hosiery and cotton garments. In our woollen hosiery segment, we start our operations with import of raw greasy wool mostly from Australia and our products include various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. We subsequently added cotton garments to our existing product portfolio during Fiscal 2002, which we outsource as per our requirements and sell under our own brand name. Since March 2006, we have started manufacture of indigo dyed specialty denim fabric, which has added to our existing vast range of product portfolios. Our manufacturing facilities are spread across various locations in and around Ludhiana in Punjab fully backed by the facilities for product development, design studio and efficient sampling infrastructure to provide quality products to our customers. Currently, we are employing over 4,000 persons and our present manufacturing facilities include 26,248 spindles to manufacture worsted woollen yarn besides machines for weaving, knitting, dyeing and finishing. Presently, our manufacturing facilities are producing approximately 2.5 million lbs of wool tops per annum, 750,000 pieces of readymade knitted garments per annum and 10 million meters of denim fabric per annum. We are the registered owners of well-known trade name ‘Monte Carlo’ for selling our woollen hosiery and cotton garments. ‘Monte Carlo’ has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by International Society for Superbrands. Our distribution channel comprises of a mix of ‘Monte Carlo Exclusive Brand Outlets’, network of national chain stores and multi brand outlets. Our products in woollen hosiery segment are also sold under the brand names of ‘Canterbury’, for premium quality woollen hosiery garments and ‘OWM’, for our specialty worsted woollen yarn etc. including the hand knitting yarn. We also have landed properties admeasuring approximately 5.01 acres in Gurgaon and 12.70 acres in Chennai which have been leased out and are contributing significantly to the overall revenues and profitability of our Company. These properties are apart from the landed properties that we own in and around Ludhiana in which our manufacturing facilities are based. Our restated total income and restated profit after taxes in Fiscal 2006 were at Rs. 2,532.85 million and 148.48 million respectively. For the six months ended September 30, 2006, our restated total income and restated profit after taxes were at Rs. 1427.93 million and Rs. 101.57 million respectively. Our Business Philosophy Our business, which started with a modest beginning of 800 spindles for worsted spinning to become a large woollen textile player believes in the philosophy ‘success is tradition and growth is imperative’. Since beginning our focus has been achieving economies in scale of production, rationalize cost, integration of operations thereby increase the revenue from year to year. Our view on costs has never refrained from rewarding the work force of our Company. Until date we have enjoyed cordial relations with our work force at all levels, keeping in mind our philosophy and to meet out any contingency we have always developed second line of key managerial personnel. Our human resource development policy are designed to motivate them achieve goal and excellence in management. We have always

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remained conscious about prevalent fashion and designs and quality translated into high level of consumer’s satisfaction. We have also kept fully abreast with latest trend prevailing in domestic as well as international markets. Our philosophy is not only to earn profit but prosperity of other stakeholders. Our Competitive Strengths Extensive Experience of our Promoters Our Promoters are well known industrialists who have a long standing in the Indian textile industry since 1949 and we benefit immensely from their expertise. Our Promoters are one of the pioneers of the organized Indian woollen hosiery industry. Our worsted woollen spinning plant of 800 spindles, which was set up in 1954 is said to be one of the first worsted woollen spinning plants in the Northern India. The long and rich experience of our Promoters, in almost all the spheres of the textile industry, is one of our main competitive strengths. We also have a strong second line of management and an experienced pool of key managerial personnel, who have been associated with our Company for a very long period. Owners of well known and established brands of ‘Monte Carlo’ and ‘OWM’ Our Company had introduced the brand ‘Monte Carlo’ for its woollen hosiery products in the year 1985. Since then there has been no looking back for ‘Monte Carlo’ and we believe that ‘Monte Carlo’ is one of the reputed brands in woollen hosiery garments segment in India. ‘Monte Carlo’ has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by the International Society for Superbrands. Besides we are also the owners of the brands ‘OWM’ and ‘Canterbury’, under which we sell our wide range of yarns etc. including the hand knitting yarn and high-end premium woollen hosiery garments respectively. The Landed Properties in Gurgaon and Chennai In addition to our landed properties in which our manufacturing or other facilities including offices are situated, we also own landed properties in Gurgaon admeasuring approximately 5.01 acres and in Chennai admeasuring approximately 12.7 acres. Both these properties have been leased out and are contributing significantly to the overall revenues and profitability of our Company. We believe that, these properties together with other properties where our commercial operations are based, which are in and around Ludhiana, have significant commercial values. Our landed property based in Gurgaon has been leased to 'Genpact India' for running their call center on a five-year lease which terminates in Fiscal 2010. Similarly, the landed properties based in Chennai have also been leased. For details of the terms and conditions of these lease agreements see the section titled “Our Business- Properties” beginning on page [●] of this Draft Red Herring Prospectus. After termination of these lease agreements, on completion of their tenure or otherwise, our Company will take a decision to renew the lease or to otherwise use the lands for some other commercial purposes. Presently, we do not have any intention of selling or otherwise developing any of these properties. As of date, our Board of Directors has not made any decision to enter into the real estate or construction business. Fully Integrated Woollen Operations In the woollen segment, we start our operations with import of greasy wool mostly from Australia and our products include various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. All our activities till the manufacture of knitted and hosiery garments, which we sell under our own brand name, are completely integrated. This integration gives us an edge in terms of quality of product, turnaround time, and flexibility in deploying manufacturing lines and reduces our dependence on job workers. Wide and Varied range of Products We manufacture and sell a wide variety and range of textile products, such as, specialty yarns, e.g., worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. We had added cotton woven garments segment to our existing product portfolio during Fiscal 2002. During Fiscal 2006, we have started the manufacture of indigo dyed specialty denim fabric, which has added to our existing range of rich product portfolios. From 2007 autumn and

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winter season, we also intend to start production and marketing of fine micron pure merino blended knitted products for children between one to eight years for the Indian domestic market. We have already entered into a contract with Australian Wool Innovation Limited for helping us in designing, product development and related activities. Our wide range of product range gives us an edge over our competitors and enables us to reach diverse market. Our Designing Capabilities Designing is one of the most critical element in the high-end fashion driven ready made garments industry. Development of innovative designs is one of our core strengths and unique selling proposition of our products. We believe that we are one of the few Indian manufacturers in our segment having in-house designing facilities with a design team that constantly tries to predict new trends in fashion. We constantly engage foreign designers to give our design team an edge over its peers. In a season, the team works on over 500 designs, out of which a few are selected for the new season collection. Our designing facilities and product development centers are located at our manufacturing facilities. Our design team is supported by our marketing and sourcing team to develop the design requirements as per the on going trend. Quality Standards We have established a quality management system (QMS) and have implemented it throughout our Company. A system has also been developed to ensure continual improvement in the effectiveness of the QMS. A committee has been constituted to review the QMS, quality policy and objectives. The committee reviews the system at least once in six months for ensuring its continuing suitability, adequacy and effectiveness. QMS of our Company has been certified to conform to the QMS Standard: ISO 9001:2000 by DNV Certification B.V., Netherlands for the manufacture and supply of dyed and grey tops and yarn in worsted wool, pure wool, lamb wool, acrylic wool blends and polyester wool blends and angola, berthia and serge fabrics. Our Key Strategies Establishing Monte Carlo as an All Seasons Pan India Brand Since introduction of ‘Monte Carlo’ brand in 1985, ‘Monte Carlo’ has become almost synonymous with premium woollen hosiery garments in India. This brand is well known and established in the Northern, Eastern and part of Central India and is one of the most famous brands in its segment. As a long-term business strategy, for increasing the geographical reach of our ‘Monte Carlo’ products and make it an ‘All Seasons Brand’, we had introduced cotton garments under the ‘Monte Carlo’ brand during Fiscal 2002. We intend to leverage the strength of our brand ‘Monte Carlo’ to sell these all season products to all parts of India. Introduction of these new products will also add to our brand recall value. We intend to expand our reach by opening more ‘Monte Carlo Exclusive Brand Outlets’ across the country to reposition the brand ‘Monte Carlo’ as an ‘All Seasons Pan Indian Brand’. Further strengthening our retail presence We are presently operating with 23 ‘Monte Carlo Exclusive Brand Outlets’, which retail our ‘Monte Carlo’ range of products. We also sell the ‘Monte Carlo’ products through our existing distributors and dealers network. We are augmenting our existing reach of ‘Monte Carlo Exclusive Brand Outlets’ by opening additional 127 outlets by Fiscal 2009. All these outlets would be opened in towns and cities, where there are more potential middle and upper middle class population with increasing disposable income. Opening up of additional exclusive outlets will not only enlarge the reach of our ‘Monte Carlo’ products and generate additional revenues but also help us generate improved margins. Increasing our Product Range We have diversified into manufacture of denim fabric with a capacity of 10 million meters per annum at present to be enhanced to 20 million meters per annum within a year. However, we intend to manufacture only value added denim fabric, which fetch better price realizations as compared to basic denim fabric. In future, we intend to be judicious in expanding our capacities in this area so as to maintain ourselves as producer of only value added denim fabric. Further presently, we are contemplating selling our denim fabrics to ready-made denim

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garments manufactures in domestic and international market. In future, we intend to add ready made denim garments in our product portfolio. Foraying into Kids Wear From 2007 autumn and winter season, we are starting production and marketing of fine micron pure merino blended knitted products for children between one to eight years for the Indian domestic market. Australian Wool Innovation Limited (AWI) is helping us in designing and product development of kids’ wear range. We have already entered into AWI Research, Development and Innovation Contract (RDI Contract) for the purpose at a total contract price of AU$30,000. AWI has the objective of increasing the demand for fine Australian merino by introducing it in the children’s wear of the Indian domestic market, which is presently dominated by cotton and synthetic fibres. AWI is working in conjunction with our Company for the manufacture and commercialization of these products. AWI encompasses the entire supply chain and will provide all manufacturing and commercial aspects of this project. Cost Reduction Power and fuel expenses are one of the major head of direct expenses. In the Fiscal 2006, we had commissioned a co-generation power plant with multi fuel capabilities with an installed capacity of 3.5 MW to meet the entire power requirements of integrated yarn textile manufacturing plant. Post commissioning of this co-generation power plant in addition to cost reduction of power, we would benefit from uninterrupted availability of power resulting in better quality of yarn and reduction in manufacturing wastage. Under the current expansion plan, we propose to set up a co-generation power plant with installed capacity of 7.5 MW, which is expected to meet the full requirements of power for our integrated denim operations post expansion. Enhancing Manufacturing Capacities Under our current expansion project, we propose to increase our capacities to manufacture additional 125,000 pieces of wool based knitted and hosiery garments together with additional 4,784 spindles for worsted woollen yarn. We are also increasing our weaving capacity for manufacture of denim fabric to 20 million meters per annum from the present level of 10 million meters per annum. As a backward integration for the weaving facility of denim, we are setting up a cotton spinning plant with a capacity of 14,400 spindles and 2,160 rotors. All these upcoming capacities will help us to scale up our operations and add to the revenues and margins of our Company.

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SUMMARY FINANCIAL INFORMATION The following summary of financial data has been prepared in accordance with Indian GAAP and is the extracts of our audited restated financial statements. The summary financial information should be read in conjunction with our restated audited financial statements provided in the section titled “Financial Information” and “Management’s Discussion And Analysis of Financial Condition and Results of Operations” beginning on pages [●] and [●] respectively of this Draft Red Herring Prospectus. Statement of Profits and Loss, as restated

(Rs. in million) Particulars Six months

ended September

2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Income: Operational Income (Gross) 1371.92 2411.36 2320.90 2500.37 2170.03 2172.58Less: Excise Duty 11.45 30.34 66.08 202.65 122.44 140.97Operational Income (Net) 1360.47 2381.02 2254.82 2297.72 2047.59 2031.61Other Income 67.46 151.83 126.04 165.91 144.23 188.06Increase / (Decrease) in Stocks 245.39 87.57 (104.03) 104.94 51.98 13.56Total 1673.32 2620.42 2276.83 2568.57 2243.80 2233.23Expenditure: Raw Material Consumed 881.31 1258.95 1171.21 1424.51 1321.58 1222.67Manufacturing Expenses 295.32 452.65 396.34 384.57 316.28 283.10Employees' Remuneration & Benefits 122.26 191.03 176.15 168.09 157.28 156.74Administrative and Other Expenses 47.86 80.17 77.67 76.04 56.41 61.66Interest and Financial Charges 50.15 80.45 84.00 102.35 102.35 126.70Selling & Distribution Expenses 61.21 170.77 150.38 123.29 110.38 143.57Miscellaneous Expenditure written off - - 0.05 0.34 0.34 0.34Total 1458.11 2234.02 2055.80 2279.19 2064.62 1994.78Profit before Depreciation and Tax 215.21 386.40 221.03 289.38 179.18 238.45Depreciation 84.42 118.41 118.13 131.03 134.10 135.22Profit before Taxation 130.80 267.99 102.90 158.35 45.08 103.23Provision for Taxation: - Current Tax (net) 25.26 54.04 37.02 44.31 1.80 16.36- Deferred Tax 7.05 54.78 (8.35) 14.92 12.02 18.17-Fringe Benefit Tax 1.00 2.00 - - - -Profit After Tax as per Audited Financial statements (A)

97.48 157.17 74.23 99.12 31.26 68.70

Adjustments: - Less/ (Add): Previous Year Adjustments (I) (6.16) 13.10 (21.90) 3.47 4.88 (0.25)- Less/ (Add): Stock Adjustments (II) - - - (2.65) - -- Less: Provision for diminution of investment (III)

- - - - 0.20 0.51

Total Adjustments (B = I+II+III) (6.16) 13.10 (21.90) 0.82 5.08 0.26Tax Impacts on Adjustments: - Current Tax (y) 2.07 (4.98) 7.22 3.54 (1.74) 0.10- Deferred Tax (z) - 0.57 0.99 (3.84) 0.00 -Total Tax Impact (C=y+z) 2.07 (4.41) 8.21 (0.30) (1.74) 0.10Total Adjustments net of Tax Effects (D=B+C)

(4.09) 8.69 (13.69) 0.52 3.34 0.36

Restated Profits (E=A-D) 101.57 148.48 87.92 98.60 27.92 68.34Profit available for appropriations 101.57 148.48 87.92 98.60 27.92 68.34Add: General Reserves brought from previous year

545.66 397.18 475.26 376.66 345.74 309.01

Add: Debenture redemption reserve written back

- - - - 3.00 3.50

Less: Capitalization for Issue of Bonus Shares - - 166.00 - - 0.00Less: Deferred Tax Liability as on April 2002 - - - - - 35.11General Reserves Carried over to Balance Sheet

647.23 545.66 397.18 475.26 376.66 345.74

Notes: 1. None of the Fixed Assets have been revalued during any of the period under reporting

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Statement of Assets & Liabilities, as restated

(Rs. in million) Particulars Six months

ended September

2006

Fiscal 2006 Fiscal 2005 Fiscal 2004 Fiscal 2003 Fiscal 2002

Fixed Assets(A) : Gross Block 2617.10 2543.70 1848.87 1770.38 1711.92 1559.06Less: Accumulated Depreciation

1421.25 1341.32 1235.25 1120.59 995.33 864.83

Net Block 1195.85 1202.38 613.62 649.79 716.59 694.23Capital Work in Progress 131.71 28.70 101.35 8.57 19.09 18.75Total (A) 1327.56 1231.08 714.97 658.36 735.68 712.98Investments (B) 131.22 134.70 131.70 273.63 129.92 130.13Current Assets, Loans & Advances (C):

Inventories 1179.18 945.10 846.25 870.92 887.19 678.02Sundry Debtors 624.41 410.85 362.81 443.61 350.68 397.68Cash and Bank Balances 77.73 10.16 351.23 187.50 13.76 141.08Loans and Advances 203.08 208.09 132.55 143.56 268.91 129.40Total (C) 2084.40 1574.20 1692.84 1645.59 1520.55 1346.18Liabilities and Provisions (D):

Secured Loans 1634.27 1152.93 1027.63 1049.82 918.75 861.84Unsecured Loans 187.76 206.49 309.24 339.45 405.67 432.42Deferred Tax Liability (Net) 131.40 124.35 69.00 76.36 65.29 53.28Current Liabilities & Provisions

693.52 661.55 487.45 553.75 537.16 410.74

Total (D) 2646.95 2145.32 1893.33 2019.38 1926.87 1758.28Net Worth (A+B+C-D) = E 896.23 794.66 646.18 558.21 459.28 431.01Represented by: 1 Share Capital 249.00 249.00 249.00 83.00 83.00 83.002 Reserves & Surplus 647.23 545.66 397.18 475.26 376.66 348.74Total 896.23 794.66 646.18 558.26 459.66 431.74Less: Miscellaneous Expenditure not written off

- - - 0.05 0.39 0.73

Net Worth 896.23 794.66 646.18 558.21 459.27 431.01 Notes: 1. None of the Fixed Assets have been revalued during any of the period under reporting.

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Summary Statement of Restated Cash Flows from Operations

(Rs. in million) Particulars Six months

ended September

2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Cash Flows from Operating Activities (A) Restated Net Profit before Taxes

136.96 254.89 124.80 157.53 40.00 102.97 Adjustments for Non Cash Items: Depreciation 84.42 118.41 118.13 131.03 134.10 135.22Interest Paid 45.96 76.11 76.13 94.64 88.56 123.10Miscellaneous Expenditure written off - - 0.05 0.34 0.34 0.34Assets Written Off / Written Back - 0.04 0.38 - - -Loss / (Profit) on Sale of Fixed Assets (1.35) (4.44) (0.29) (35.43) (2.87) (59.31)Loss / (Profit) on Sale of Investments (0.15) (2.45) (1.32) 7.26 - -Dividend Income (0.32) (0.44) (1.65) (0.06) (0.02) (0.13) Operating Profit before Working Capital 265.52 442.12 316.23 355.31 260.11 302.19 Changes : Trade and other Receivables (208.55) (123.59) 91.82 32.42 (92.51) (72.96)Inventories (234.08) (98.85) 24.67 16.27 (209.17) 28.59Trade Payables 31.98 174.10 (66.30) 16.59 126.42 8.40 Cash Generation from Operations (145.13) 393.79 366.42 420.59 84.84 266.22Interest Paid (33.43) (60.83) (51.28) (71.18) (55.46) (94.92)Direct Taxes Paid (28.33) (51.06) (44.24) (47.85) (0.06) (16.46) Net Cash Flows from Operating Activities (206.89) 281.90 270.90 301.56 29.33 154.84

Summary Statement of Accounting Ratios

(Rs. in million) Particulars Six

months ended

September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Basic/ Diluted Earnings Per Share (Rs.)

8.16* 5.96 3.53 11.88 3.36 8.23

Net Asset Value Per Share (Rs.)

35.99 31.91 25.95 67.25 55.33 51.93

Return on Net Worth 22.66* 18.68 13.61 17.66 6.08 15.86 Face Value Per Share (Rs.) 10 10 10 10 10 10

*Annualised

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THE ISSUE

Public Issue of Equity Shares by our Company:

Which comprises : Issue: Up to 8,320,000 Equity Shares. Of which: Employee Reservation Portion: Up to 15,000 Equity Shares. Net Issue: Up to 8,305,000 Equity Shares. Of which: Qualified Institutional Buyers Portion: Not more than 4,152,500 Equity Shares (allocation on

proportionate basis) out of which 5% of the QIB Portion or 207,625 Equity Shares (assuming the QIB Portion is 50% of the Net Issue) shall be available for allocation on a proportionate basis to Mutual Funds only (Mutual Funds Portion), and 3,944,875 Equity Shares (assuming the QIB Portion is 50% of the Net Issue) shall be available for allocation to all QIBs, including Mutual Funds.

Non-Institutional Portion: Not less than 1,245,750 Equity Shares (allocation on proportionate basis).

Retail Portion: Not less than 2,906,750 Equity Shares (allocation on proportionate basis).

Equity Shares outstanding prior to the Issue: 24,900,000 Equity Shares. Equity Shares outstanding post the Issue 33,220,000 Equity Shares Objects of the Issue: See the section titled “Objects of the Issue” beginning on

page [●] of this Draft Red Herring Prospectus.

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GENERAL INFORMATION Registered Office of our Company Oswal Woollen Mills Limited G.T. Road, Sherpur, Ludhiana 141 003, Punjab India. Tel: +91 161 2542 501 Fax: +91 161 2542 509 Website: www.owmnahar.com Address of the Registrar of Companies Registrar of Companies Punjab, Himachal Pradesh and Chandigarh Kothi No. 286, Defence Colony, Jallandhar 144 001, Punjab, India. Our Company's registration number is No. 41 of 1949-1950. The CIN number is L17117PB1949PLC001522. Board of Directors The following persons constitute our Board of Directors: (a) Mr. Jawahar Lal Oswal, Chairman and Managing Director; (b) Mr. Kamal Oswal, Director; (c) Mr. Dinesh Oswal, Director; (d) Mr. Sandeep Jain, Executive Director; (e) Mr. Dinesh Gogna, Executive Director Corporate Finance and Taxation; (f) Dr. O. P. Sahni, Independent Additional Director; (g) Mr. Amarjeet Singh, Independent Director; (h) Dr. Ms. H. K. Bal, Independent Additional Director; (i) Mr. K. S. Maini, Independent Additional Director; and (j) Dr. Suresh Kumar Singla, Independent Additional Director. For further details of our Chairman, Managing Director and other Directors, see the section titled "Our Management" beginning on page [●] of this Draft Red Herring Prospectus. Company Secretary and Compliance Officer

Mr. Nitin Sharma G.T. Road, Sherpur, Ludhiana 141 003, India. Tel: +91 161 2542 501-07 Fax: +91 161 2542 509 E-mail: [emailprotected]

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.

Legal Advisors to the Issue Amarchand & Mangaldas & Suresh A. Shroff & Company Amarchand Towers, 216, Okhla Industrial Estate, Phase - III, New Delhi 110 020, India. Tel : +91 11 2692 0500 Fax: +91 11 2692 4900 Bankers to the Company

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Allahabad Bank International cum Industrial Finance Branch, 165, Industrial Area ‘A’, Near Cheema Chowk, Ludhiana 141 003, Punjab, India. Tel: 0161 2221 158 Fax: 0161 2227 117 Email: [emailprotected]

State Bank of Patiala Commercial Branch, Aarti Complex, Miller Ganj, Ludhiana 141 003, Punjab, India. Tel: 0161 254 7852 Fax: 0161 2547858 Email: [emailprotected]

Punjab and Sind Bank Industrial Finance Branch, G.T. Road, Dholewal Chowk, Ludhiana 141 003, Punjab, India. Tel: 0161 2530858 Fax: 0161 2531659 Email: [emailprotected]

Book Running Lead Managers UTI Bank Limited Central Office: 111, Maker Towers ‘F’, Cuffe Parade, Colaba, Mumbai 400 005, India. Tel: + 91 22 67074407 (Extn: 1312) Fax: + 91 22 22162467 Email: [emailprotected] Website : www.utibank.com Contact Person : Mr. Manish Jain Motilal Oswal Investment Advisors Private Limited 81/82, Bajaj Bhawan, 8th Floor, Nariman Point, Mumbai 400 021, India. Tel: +91 22 3980 4380 Fax: +91 22 3980 4315 Email: [emailprotected] Website: www.motilaloswal.com Contact Person : Mr. Ajai Achuthan Syndicate Members Motilal Oswal Securities Limited 81/82, Bajaj Bhawan, 8th Floor, Nariman Point, Mumbai 400 021, India. Tel: +91 22 3980 4200 Fax: +91 22 2288 3821 Email: [emailprotected] Website: www.motilaloswal.com Contact Person : Mr. Sanket Padhye [•] Registrar to the Issue Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound LBS Road, Bhandup (West) Mumbai 400 078, India. Tel: +91 22 2596 0320 Fax: +91 22 2596 0329 E-mail: [emailprotected]

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Website: www.intimespectrum.com Bankers to the Issue [●] Auditors M/s Gupta Vigg & Company, Chartered Accountants, K-101, Kismat Complex, Ludhiana 141 003, India. Tel: +91 161 253 2297 Fax: +91 161 253 5156 Email: [emailprotected]

Statement of Inter se Allocation of Responsibilities for the Issue

The following table sets forth the distribution of responsibility and coordination for various activities among the BRLMs:

Particulars Responsibility Coordinator

1. Capital structuring with the relative components and formalities such as type of instruments etc.

UTI Bank, Motilal Oswal

UTI Bank

2. Due diligence of the Company’s operations/ management/ business plans/ legal etc.

UTI Bank, Motilal Oswal

UTI Bank

3. Drafting and design of the Red Herring Prospectus and of statutory advertisem*nt including memorandum containing salient features of the Prospectus. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization of Prospectus and RoC filing of the same.

UTI Bank, Motilal Oswal

UTI Bank

4. Drafting and approval of all publicity material other than statutory advertisem*nt as mentioned in (2) above including corporate advertisem*nt, brochure, road show presentations, FAQs, corporate films etc.

Preparation of publicity budget; Finalise Media & PR strategy

UTI Bank, Motilal Oswal

UTI Bank

5. Appointment of intermediaries viz. Legal Counsel to the Issue, Printers and Advertising Agency

UTI Bank, Motilal Oswal

UTI Bank

6. Appointment of other intermediaries viz. Registrar and Bankers to the Issue.

UTI Bank, Motilal Oswal

Motilal Oswal

7. Institutional Marketing of the Issue, which will cover, inter alia, Finalize the institutional marketing strategy , Finalize the list and division of investors for one to one meetings; and Finalize road show presentation and schedule and investor meeting schedules

UTI Bank, Motilal Oswal

UTI Bank

8. Non-Institutional and Retail Marketing of the Issue, which will cover, inter alia, Formulating marketing strategies, Finalise centres for holding conferences for brokers etc.; Finalise collection centres; and Follow-up on distribution of publicity and issue material including form, prospectus and deciding on the quantum of the Issue material. Finalize collection orders

UTI Bank, Motilal Oswal

Motilal Oswal

9. Deciding pricing in consultation with the Company UTI Bank, Motilal Oswal

UTI Bank

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Particulars Responsibility Coordinator

10. The post bidding activities including management of book, co-ordination with the Stock Exchanges, management of escrow accounts, coordinate allocation, intimation of allocation and dispatch of refunds to Bidders etc. The post issue activities will involve essential follow up steps, which include the finalisation of listing of instruments and dispatch of certificates and demat delivery of shares, with the various agencies connected with the work such as the Registrar to the Issue and Bankers to the Issue and the bank handling refund business. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company.

UTI Bank, Motilal Oswal

Motilal Oswal

Credit Rating As the Issue is of equity shares, credit rating is not required. Grading We have not opted for the grading of this Issue. Trustees As the Issue is of equity shares, the appointment of trustees is not required. Book Building Process Book Building Process refers to the process of collection of Bids, on the basis of the Red Herring Prospectus within the Price Band. The Issue Price is fixed after the Bid/ Issue Closing Date. The principal parties involved in the Book Building Process are: (1) The Company; (2) Book Running Lead Managers; (3) Syndicate Member who is an intermediary registered with SEBI or registered as brokers with

BSE/NSE and eligible to act as underwriters. The Syndicate Member is appointed by the BRLMs; (4) Registrar to the Issue; and (5) Escrow Collection Banks(s). The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Net Issue to the public shall be allocated on a proportionate basis to Qualified Institutional Buyers. Further, not less than 15% of the Net Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Issue to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. QIBs are not allowed to withdraw their Bid(s) after the Bid/Issue Closing Date. For further details see the section titled "Terms of the Issue" beginning on page [●] of this Draft Red Herring Prospectus. Our Company shall comply with guidelines issued by SEBI for this Issue. In this regard, our Company has appointed UTI Bank Limited and Motilal Oswal Investments Advisors Private Limited as the BRLMs to manage the Issue and to procure subscription to the Issue. Illustration of Book Building and Price Discovery Process (Investors may note that this illustration is solely for the purpose of easy understanding and is not specific to the Issue) Bidders can bid at any price within the price band. For instance, assuming a price band of Rs. 40 to Rs. 48 per share, issue size of 6,000 equity shares and receipt of nine bids from bidders, details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the website of the BSE (www.bseindia.com) and NSE (www.nseindia.com). The illustrative book as shown below shows the demand for the shares of the company at various prices and is collated from bids from various investors.

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Number of equity shares bid

for Bid price (Rs.) Cumulative equity shares

bid Subscription (%)

500 48 500 8.33 700 47 1,200 20.00

1,000 46 2,200 36.67 400 45 2,600 43.33 500 44 3,100 51.67 200 43 3,300 55.00

2,800 42 6,100 101.67 800 41 6,900 115.00

1,200 40 8,100 135.00 The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off i.e. Rs. 42 in the above example. The issuer, in consultation with the BRLMs will finalise the issue price at or below such cut off price i.e. at or below Rs. 42. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in respective category. Steps to be taken for bidding: 1. Check eligibility for making a Bid (see the section titled "Issue Procedure - Who Can Bid?" beginning

on page [●] of this Draft Red Herring Prospectus); 2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid

cum Application Form. 3. If your Bid is for Rs. 50,000 or more, ensure that you have mentioned your PAN and attached copies of

your PAN cards or PAN allotment letter to the Bid cum Application Form (see the section titled "Issue Procedure — Permanent Account Number" beginning on page [●] of this Draft Red Herring Prospectus).

4. Ensure that the Bid cum Application Form is duly completed as per instructions given in the Draft Red Herring Prospectus and in the Bid cum Application Form.

Bidding Period/Issue Period

BID ISSUE OPENS ON [●] BID ISSUE CLOSES ON [●]

Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form except that on the Bid/Issue Closing Date Bids shall be accepted only between 10.00 am and 1.00 pm (Indian Standard Time) and uploaded until such time as permitted by the BSE and the NSE. Bids will only be accepted on working days i.e., Monday to Friday (excluding any public holiday). Our Company reserves the right to revise the Price Band during the Bidding Period in accordance with SEBI Guidelines. The cap on the Price Band should not be more than 20% of the Floor Price. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the Floor Price in the Red Herring Prospectus and the Cap Price will not be more than 20% of such floor price. In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after revision of the Price Band subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release, and also by indicating the change on the websites of the BRLMs and at the terminals of the Syndicate. Underwriting Agreement After the determination of the Issue Price and allocation of our Equity Shares but prior to filing of the Prospectus with RoC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that

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the Syndicate Members do not fulfill their underwriting obligations. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are subject to certain conditions to closing, as specified therein. The Underwriters have indicated their intention to underwrite the following number of Equity Shares:

(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with RoC)

(Rs. in million) Name and Address of the Underwriters Indicative Number of Equity

Shares to be Underwritten Amount Underwritten

UTI Bank Limited Central Office: 111, Maker Towers ‘F’, Cuffe Parade, Colaba, Mumbai 400 005, India.

[•] [•]

Motilal Oswal Investment Advisors Private Limited 81/82, Bajaj Bhawan, 8th Floor, Nariman Point, Mumbai 400 021, India.

[•] [•]

Motilal Oswal Securities Limited 81/82, Bajaj Bhawan, 8th Floor, Nariman Point, Mumbai 400 021, India.

[•] [•]

[•] [•] [•] The above mentioned amount is indicative and this would be finalized after determination of Issue Price and actual allocation of the Equity Shares. The Underwriting Agreement is dated [●]. In the opinion of the Board of Directors (based on a certificates dated [●] given to them by BRLMs and the Syndicate Members, the resources of the Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act or registered as brokers with the stock exchanges. The above Underwriting Agreement has been accepted by the Board of Directors and our Company has issued letters of acceptance to the Underwriters. Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with respect to the Equity Shares allocated to investors procured by them. In the event of any default, the respective Underwriter in addition to other obligations to be defined in the Underwriting Agreement, will also is required to procure/ subscribe to the extent of the defaulted amount.

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CAPITAL STRUCTURE Our share capital as at the date of this Draft Red Herring Prospectus is set forth below:

(Rs. in million)

Aggregate nominal value

Aggregate Value at Issue Price

A. Authorised Share Capital(1) 50,000,000 Equity Shares of Rs. 10 each 500

B. Issued, Subscribed and Paid-Up Share Capital before the Issue

24,900,000 Equity Shares of Rs. 10 each 249 C. Present Issue in terms of this Draft Red Herring Prospectus

8,320,000 Equity Shares of Rs. 10 each 83.20 [●] Of which: 15,000 Equity Shares are reserved for Employees 0.15 [●] 8,305,000 Equity Shares are available for allocation to the public as the Net Issue

83.05 [●]

D. Share Capital after the Issue 33,220,000 Equity Shares of Rs.10 each

E. Securities Premium Account Before the Issue Nil After the Issue [●]

(1) The authorized share capital was increased from Rs. 3 million (divided into 120,000 equity shares of Rs. 25 each) to Rs. 10 million (divided into 1,000,000 Equity Shares) through a special resolution passed by the shareholders of our Company at a general meeting on July 30, 1974. # Further, the authorised share capital of our Company was increased from Rs. 10 million (divided into 1,000,000 Equity Shares) to Rs. 25 million (divided into 2,500,000 Equity Shares) through a special resolution passed by the shareholders of our Company at a general meeting on August 18, 1978. Subsequently, the authorised share-capital was re-classified as Rs. 25 million (divided into 2,000,000 Equity Shares, 200,000 12% irredeemable non-cumulative preference shares of Rs. 10 each, 300,000 unclassified shares of Rs. 10 each) through a special resolution passed by the shareholders of our Company at a general meeting on July 25, 1979. Subsequently, the authorised capital of our Company was increased from Rs. 25 million to Rs. 500 million (divided into 50,000,000 Equity Shares) through a special resolution passed by the shareholders of our Company at a general meeting on March 31, 1994.

# Information on the increase in authorised capital, from the time of incorporation until 1970, is not available due to loss of records, in a fire at our office at Miller Ganj, Ludhiana on November 18, 1981.

Notes to the Capital Structure

1. Share Capital History of our Company The following is the history of the equity share capital of our Company:

Date of Allotment

Number of Equity

Shares

Issue Price/Amount called up per Equity Share

(Rs.)

Face value per Equity

Share (Rs.)

Consideration (cash, bonus, consideration

other than cash)

Nature of allotment

Cumulative Share Capital

(Rs.)

1949-1970*

94,933 12.50# 25 Cash Preferential allotment

1,186,662.50

September 30, 1970

18,070 12.50# 25 Cash Preferential allotment

1,412,537.50

October 6, 1972

6,997 12.50# 25 Cash Preferential allotment

1,500,000

October 1, 1973

120,000 12.50** 25 Cash Preferential allotment

3,000,000

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Date of Allotment

Number of Equity

Shares

Issue Price/Amount called up per Equity Share

(Rs.)

Face value per Equity

Share (Rs.)

Consideration (cash, bonus, consideration

other than cash)

Nature of allotment

Cumulative Share Capital

(Rs.)

July 30, 1974

120,000 Split of 120,000 equity shares of Rs. 25 each to 300,000 Equity Shares of Rs. 10 Each (1)

3,000,000

May 18, 1994

8,000,000 10 10 Cash Preferential allotment.

83,000,000

March 8, 2005

16,600,000 10 10 Bonus (2:1) Bonus

249,000,000

* Information on the increase in paid up capital, from the time of incorporation until 1970, is not available due to loss of records, in a fire at our office at Miller Ganj, Ludhiana on November 18, 1981. # Rs. 12.50 per equity share of Rs. 25 each was called up towards application money. ** The balance amount of Rs. 12.50 per equity share, for all equity shares of Rs. 25 each issued, was called in two calls pursuant to Board resolution dated November 7, 1973, of Rs. 6.25 each on November 30, 1973 and December 31, 1973, respectively. (1) Pursuant to a resolution passed by the shareholders of our Company on July 30, 1974, the Board issued fractional coupons to the shareholders who were entitled to fractional equity shares. All, except 14 coupon holders, having found another coupon holder, submitted the coupons to our Company for consolidation into one share. The remaining 14 fractional coupons have been transferred to a trust pursuant to Board resolution dated November 23, 2006. 2. Promoters' Contribution and Lock-in

(a) Share Capital Locked-In for Three Years:

Set forth below are the details of the build up of the shareholding of Girnar Investment Limited and lock in:

Date of Allotment

Nature of Allotment

No. of Equity Shares

locked-in

Face Value

(in Rs.)

Issue Price

(in Rs.)

Consideration (cash, bonus, consideration other than cash)

% of Post-Issue paid-up capital

October 6, 1972*

Preferential allotment

988 25 25 Cash

September 8, 1973*

Purchase of 4,300 equity shares of Rs. 25 each ( Rs. 12.50 per equity share being paid up) from Mr. Kulbhushan Oswal

Cash

November 10, 1973*

Purchase of 1,848 equity shares of Rs. 25 each (Rs. 12.50 per equity share being paid up) from Mr. Lala Lachman Das Oswal and Ms. Mohan Dai Oswal.

Cash

Not applicable as the equity shares of Rs. 25 each were split into Equity Shares of Rs. 10 each

July 30, 1974

Split of 7,136 equity shares of Rs. 25 each into 17,840 Equity shares of Rs. 10 each.

0.05

March 29, 1975

Gift of 1,500 Equity Shares from Mr. Neelam Kumar Oswal

- 0.00

October 31, 1975

Purchase of 4,000 Equity Shares from Ms. Abhilash Oswal at Rs. 10 each

Cash 0.01

May 20, 1994

Preferential Allotment

1,100,000 10 10 Cash 3.31

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Date of Allotment

Nature of Allotment

No. of Equity Shares

locked-in

Face Value

(in Rs.)

Issue Price

(in Rs.)

Consideration (cash, bonus, consideration other than cash)

% of Post-Issue paid-up capital

December 28, 1999

Purchase of 750,000 Equity Shares from Nahar Industrial Enterprises Limited at Rs. 10 each

Cash 2.26

August 26, 2000

Purchase of 617,000 Equity Shares from Vanaik Investors Limited at Rs. 10 each

Cash 1.86

March 8, 2005

Bonus (2:1) 4,980,680 10 Nil Consideration other than Cash

15.00

Total 7,471,020 22.48

* Rs. 12.50 was paid at the time of allotment of the equity shares of Rs. 25 each. On November 30, 1973, Rs. 6.25 was paid towards first call in respect of 7,136 equity shares of Rs. 25 each and on December 27, 1973 balance Rs. 6.25 was paid towards second call in respect of 7,136 equity shares of Rs. 25 each. 6,644,000 Equity Shares held by Girnar Investment Limited will be locked in for three years from the date of Allotment. All Equity Shares, which are being locked-in are not ineligible for computation of promoters' contribution and lock-in under Clause 4.6 of the SEBI Guidelines. The Promoters contribution in to the extent of not less than the specified minimum lot and from the persons defined as Promoters under the SEBI Guidelines. (b) Details of share capital locked-in for one year: In addition to the lock-in of the Promoters' contribution specified above, the entire pre-Issue issued Equity Share capital of our Company will be locked-in for a period of one year from the date of Allotment. The total number of Equity Shares, which are locked-in for one year (including the Equity Shares held by Girnar Investment Limited which are locked in for one year), are 18,256,000 Equity Shares. In terms of Clause 4.15 of the SEBI Guidelines, the locked-in Equity Shares held by the Promoters can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of loan. In terms of Clause 4.16.1 (a) of the SEBI Guidelines, the Equity Shares held by persons other than Promoters, prior to the Issue may be transferred to any other person holding the Equity Shares which are locked-in as per Clause 4.14 of the SEBI Guidelines, subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable. Further, in terms of Clause 4.16.1 (b) of the SEBI Guidelines, the Equity Shares held by the Promoters may be transferred to and amongst the Promoter Group or to new promoter or persons in control of our Company subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable. 3. Shareholding Pattern of our Company The table below represents the shareholding pattern of our Company before the proposed Issue and adjusted for this Issue.

Pre- Issue Post- Issue

Number of Equity Shares

% of Equity Share capital

Number of Equity Shares

% of Equity Share capital

Promoters Girnar Investment Limited 7,471,020 30.00 7,471,020 22.49 Nagdevi Trading and Investment Company Limited 4,500,000 18.07 4,500,000

13.55

Ogden Trading and Investment Company Private Limited 2,523,294 10.13 2,523,294

7.60

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Pre- Issue Post- Issue Number of

Equity Shares % of Equity Share capital

Number of Equity Shares

% of Equity Share capital

Nahar Spinning Mills Limited 2,250,000 9.04 2,250,000 6.77 Kulu Investment and Trading Company Private Limited 1,821,510 7.32 1,821,510

5.48

Abhilash Growth Fund Private Limited 1,681,669 6.75 1,681,669

5.06

Ludhiana Holdings Limited 1,300,815 5.22 1,300,815 3.92 Vanaik Investors Limited 1,234,320 4.96 1,234,320 3.72 Mr. Jawahar Lal Oswal 302,865 1.22 302,865 0.91 Atam Vallabh Financiers Limited 95,865 0.39 95,865 0.29 Vardhaman Investments Limited 71,025 0.29 71,025 0.21 Mr.Dinesh Oswal 52,250 0.21 52,250 0.16 Mr.Kamal Oswal 50,966 0.20 50,966 0.15 Neha Credit and Investment Private Limited 60 0.00 60

0.00

Sub-Total Promoter Holding 23,355,659 93.80 23,355,659 70.31 Promoter Group (other than Promoters)

Ms.Abilash Oswal 307,380 1.23 307,380 0.93 Mr. Sambhav Oswal 250,000 1.00 250,000 0.75 Ms. Tanvi Oswal 250,000 1.00 250,000 0.75 Mr.Abhinav Oswal 200,000 0.80 200,000 0.60 Mr. Rishab Oswal 200,000 0.80 200,000 0.60 Ms. Neha Oswal 100,000 0.40 100,000 0.30 Ms. Manisha Oswal 50,000 0.20 50,000 0.15 Ms. Ritu Oswal 50,000 0.20 50,000 0.15 Ms.Ruchika Oswal 1,500 0.00 1,500 0.00 Ms. Monica Oswal 1,500 0.00 1,500 0.00 Sub-Total Promoter Group (other than Promoters) 1,410,380 5.66 1,410,380 4.25 Sub Total Promoter Group Holding

24,766,039 99.46 24,766,039 74.55

Others 133,961 0.54 133,961 0.40 Total 24,900,000 100.00 24,900,000 74.95*

*Remaining 25.05% of our post Issue paid up capital to be held by the public. 4. In addition to the 24,766,039 Equity Shares held by our Promoter Group in our Company as detailed

above, following are details of the Equity Shares held by directors of the Promoters in our Company as on December 7, 2006 is as below:

Directors of the Promoters Number of Equity Shares

% of pre Issue share capital

Mr. Shri Paul Jain 375 0.00 Mr.Sat Paul Nijhawan 60 0.00 Mr.Amarjeet Singh 60 0.00 Mr.Komal Jain 60 0.00

5. Our Company, our Directors and the BRLMs have not entered into any buy-back and/or standby

arrangements for purchase of Equity Shares from any person.

6. In the case of over-subscription in all categories, not more than 50% of the Net Issue shall be Allotted on a proportionate basis to Qualified Institutional Buyers, not less than 15% of the Net Issue shall be available for allocation on a proportionate basis to Non- Institutional Bidders and not less than 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Under subscription, if any, in the Non- Institutional Portion and Retail Individual Portion would be met with spill over from other categories at the sole discretion of our Company in consultation with the BRLMs. Under subscription, if any, in the Employees Reservation Portion would be added to the Net Issue. In the event of under subscription in the Net Issue, spill over to the extent of under subscription shall be permitted from the Employee

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Reservation Portion, if any.

7. A total of up to 0.18%of the Issue size i.e. up to 15,000 Equity Shares has been reserved for allocation to the Employees on a proportionate basis, subject to valid Bids being received at or above the Issue Price. Only Employees would be eligible to apply in this Issue under Employees Reservation Portion. Employees may Bid in the 'Net Issue' portion as well and such Bids shall not be treated as multiple Bids. Any under subscription in the Equity Shares under the Employee Reservation Portion would be treated as part of the Net Issue.

8. Over subscription to the extent of 10% of the Net Issue can be retained for the purpose of rounding off

to the nearest integer. 9. The list of top 10 shareholders of our Company and the number of Equity Shares held by them is as

under: (a) As on the date of filing of this Draft Red Herring Prospectus and 10 days prior to filing of this

Draft Red Herring Prospectus:

Sr. No. Name of Shareholders Number of Equity Shares

Percentage of Shareholding

1. Girnar Investment Limited 7,471,020 30.00 2. Nagdevi Trading and Investment

Company Limited 4,500,000 18.07 3. Ogden Trading and Investment Company

Private Limited 2,523,294 10.13 4. Nahar Spinning Mills Limited 2,250,000 9.04 5. Kulu Investment and Trading Company

Private Limited 1,821,510 7.32 6. Abhilash Growth Fund Private Limited 1,681,669 6.75 7. Ludhiana Holdings Limited 1,300,815 5.22 8. Vanaik Investors Limited 1,234,320 4.96 9. Ms.Abilash Oswal 307,380 1.23 10. Mr.Jawahar Lal Oswal 302,865 1.22

(b) As on two years before the date of filing this Draft Red Herring Prospectus:

Sr. No. Name of Shareholders Number of Equity Shares

Percentage of Shareholding

1. Girnar Investment Limited 2,490,340 30.00 2. Nagdevi Trading and Investment Company

Limited 1,500,000 18.07 3. Ogden Trading and Investment Company

Private Limited 841,098 10.13 4. Abhilash Growth Fund Private Limited 750,000 9.04 5. Nahar Spinning Mills Limited 750,000 9.04 6. Kulu Investment and Trading Company

Private Limited 607,170 7.32 7. Ludhiana Holdings Limited. 433,605 5.22 8. Vanaik Investors Limited 411,440 4.96 9. Kovalam Investment and Trading Company

Limited 381,142

4.59 10. Atam Vallabh Financiers Limited 31,955 0.39

9. Following are details of certain sales and purchases of our Equity Shares amongst certain members of

our Promoter Group on November 18, 2006.

Transferor Transferee Number of Equity Shares

Price per Equity Share

Mr. Sambhav Oswal 250,000 32.50 Mr. Rishab Oswal 200,000 32.50

Kovalam Investment and Trading Company Limited

Mr. Abhinav Oswal 200,000 32.50

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Transferor Transferee Number of Equity Shares

Price per Equity Share

Mr. Tanvi Oswal 193,427 32.50 Ms. Neha Oswal 100,000 32.50 Mr. Dinesh Oswal 50,000 32.50 Ms. Ritu Oswal 50,000 32.50 Mr. Kamal Oswal 50,000 32.50

Ms. Manisha Oswal 50,000 32.50 Tanvi Oswal 56,573 32.50 Sankheshwar Holding Company

Limited Ms. Abhilash Oswal 31,660 32.50 Ms. Abhilash Oswal 300,000 32.50 Abhilash Growth Fund Private

Limited

Mr. Jawahar Lal Oswal 268,331 32.50

Except as above our Promoter Group and directors of our Promoter companies have not acquired, purchased or sold any Equity Shares, during a period of six months preceding the date on which this Draft Red Herring Prospectus was filed with SEBI.

10. Our Company has not granted any options or issued any Equity Shares under any employees’ stock

option or employees stock purchase scheme. 11. An investor cannot make a Bid for more than the number of Equity Shares offered through the Issue,

Subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor.

12. Except as disclosed in the section titled "Our Management" beginning on page [●] of this Draft Red

Herring Prospectus, none of our Directors and key managerial employees hold any Equity Shares. 13. There would be no further issue of capital whether by way of issue of bonus shares, preferential

allotment, rights issue or in any other manner during the period commencing from the submission of the Draft Red Herring Prospectus with SEBI until the Equity Shares to be issued pursuant to the Issue have been listed.

14. We presently do not intend or propose to alter our capital structure for a period of six months from the

date of filing of the Draft Red Herring Prospectus, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise except.

15. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law. We

shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.

16. As on the date of filing of this Draft Red Herring Prospectus the total number of holders of Equity

Shares is 108. 17. We have not raised any bridge loans against the proceeds of the Issue. 18. Except as disclosed in the sections titled "Capital Structure - Notes to the Capital Structure" and "Other

Regulatory and Statutory Disclosures" on pages [●] and [●], respectively, of this Draft Red Herring Prospectus, we have not issued any Equity Shares out of revaluation reserves or for consideration other than cash.

19. There are no outstanding warrants, options or rights to convert debentures, loans or other instruments

into our Equity Shares. 20. Our Promoters and members of the Promoter Group will not participate in this Issue. 21. There are certain restrictive covenants in the agreements that our Company has entered into with banks

and financial institutions for short-term loans and long term borrowings. For further details of the terms of these agreements, please refer to the section entitled "Financial Indebtedness" beginning on page [●] of this Draft Red Herring Prospectus.

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22. The Equity Shares held by our Promoters are not subject to pledge. 23. Our Employees would be eligible to apply in the Issue under the Employee Reservation Portion. The number

of Employees of our Company as on [●] is [●].

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OBJECTS OF THE ISSUE

The objects of the Issue are to meet fund requirement for expansion of distribution network of our ‘Monte Carlo’ products by setting up more ‘Monte Carlo Exclusive Brand Outlets’, both owned by our Company as well as based on franchisee model, ramping up our manufacturing capacities for woollen hosiery garments and of our worsted woollen spinning unit and setting a spinning plant as backward integration for our denim fabric manufacturing facilities together with a co-generation captive power plant (collectively “Expansion Project”). We also believe that Issue and consequent listing of our Equity Shares will enhance our visibility and brand image. The main objects clause and objects incidental or ancillary to the main objects of the Memorandum of Association of our Company enables us to undertake existing activities as well as the activities for which the funds are being raised through the Issue. Requirement of Funds and Means of Financing

The net proceeds of the Issue after deducting Issue expenses are estimated at Rs. 1,780.87 million. The fund requirements described below are based on management estimates and our current business plan and have not been appraised by any bank or financial institution. In view of the dynamic nature of the textile industry and on account of new projects that we may pursue, including expansion of existing capacities or introduction of new products, we may have to revise our capital expenditure requirements as a result of variations in the cost structure, changes in estimates, exchange rate fluctuations and external factors, which may not be within the control of the management of our Company. This may entail rescheduling or revising the planned capital expenditure and increasing or decreasing the capital expenditure for a particular purpose from its planned expenditure at the discretion of our Company’s management. We estimate the total requirement of funds and means of financing under:

(Rs. in million) S. No. Particulars Issue

Proceeds/ Internal Accruals

Loan under TUFS

Total

Expansion of ‘Monte Carlo Exclusive Brand Outlets’:

a) Setting up company owned ‘Monte Carlo Exclusive Brand Outlets’;

400.00 - 400.00

b) Meeting working capital requirement for additional ‘Monte Carlo Exclusive Brand Outlets’ based owned and on franchisee model; and

48.43 - 48.43

I.

c) Setting up design studios 31.50 73.50 105.00II. Expansion of woollen hosiery garments and meeting increased

working capital requirements for hosiery and cotton garment operations

75.46 240.50 315.96

III. Expansion of worsted woollen spinning unit 324.29 - 324.29Backward integration for denim fabric manufacturing:

a) Setting up of cotton spinning unit 580.39 435.00 1,015.39IV.

b) Setting up of 7.5 MW co-generation captive power plant

320.80 - 320.80

V. Issue expenses [•] [•] Total [•] 749.00 [•]

The entire rupee term loan component of Rs. 749 million in relation to the above projects has been tied up with a loan availed under the Technology Upgradation Fund Scheme (TUFS) subject to conditions specified therein. For details of the terms and conditions of the term loans availed under the TUFS, see the section titled “Financial Indebtedness” beginning on page [●] of this Draft Red Herring Prospectus. The equity component (including internal accruals) of the proposed projects excluding Issue expenses is estimated at Rs. 1,780.87 million. Any amount raised in excess of the equity contribution for the proposed projects and the Issue expenses will be utilized for general corporate purposes including but not limited to repayment of term loans and meeting working capital requirements. Shortfalls, if any or cost overruns of the expansion plan shall be met from internal accruals of our Company.

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Summary of our Expansion Project

The cost of the Expansion Project has been estimated to be Rs. 2,529.87 million. The project cost includes capital expenditure to be incurred on land and building, acquisition cost of plant and machinery, margin money for working capital requirement and provision for contingencies. Detailed below is a summary of the cost components of the Expansion Project:

(Rs. in million) S.

No. Particulars Building

(including furniture &

fixtures)

Plant & Machinery

Margin for

working capital

Conting- encies

Total

I Expansion of Monte Carlo exclusive brand outlets:

a) Setting up ‘Monte Carlo Exclusive Brand Outlets’ owned by our Company

400.00 - - - 400.00

b) Meeting working capital requirement for additional ‘Monte Carlo Exclusive Brand Outlets’ based on franchisee model

- - 48.43 - 48.43

c) Setting up of design studios 102.50 2.50 - - 105.00 II Expansion of woollen hosiery

garments and meeting increased working capital requirements for hosiery and cotton garment operations

4.88 275.12 35.96 - 315.96

III Expansion of worsted woollen spinning unit

50.30 219.65 54.34 - 324.29

IV Backward integration for denim fabric manufacturing:

a) Setting up of cotton spinning unit 73.33 708.83 155.02 78.21 1,015.39

b) Setting up of 7.5 MW co-generation captive power plant

- 320.80 - - 320.80

Total 631.01 1,526.90 293.75 78.21 2,529.87 Reach of ‘Monte Carlo’ Network

Activity Existing Addition Post expansion ‘Monte Carlo Exclusive Brand Outlets’ owned by our Company

2 outlets 4 outlets 6 outlets

‘Monte Carlo Exclusive Brand Outlets’ based on franchisee model

21 outlets 123 outlets 144 outlets

Design studios 1 studio 2 studios 3 studios Capacities post completion of our Expansion Project

Our present manufacturing facilities include manufacturing of worsted woollen yarn besides capacities for weaving, knitting, dyeing and finishing. Our capacities after completion of the Expansion Project are estimated to be as follows:

Activity Existing Capacity Capacity Addition Capacity post expansion

Worsted woollen spinning 26, 248 spindles 4,784 Spindles 31, 032 Spindles Woollen hosiery garments 7, 50,000 Pieces 1, 25,000 Pieces 8, 75,000 Pieces Cotton spinning Nil 14,400 Spindles

2,160 Rotors 14,400 Spindles

2,160 Rotors Captive cogeneration power capacity 3.5 MW 7.5 MW 11 MW

I. Expansion of our ‘Monte Carlo Exclusive Brand Outlets’:

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We are expanding our distribution network of our ‘Monte Carlo’ products by setting up additional ‘Monte Carlo Exclusive Brand Outlets’, both owned by our Company and based on franchisee model and design studios Detailed below are our fund requirements in relation to the same. A. Setting up company owned ‘Monte Carlo Exclusive Brand Outlets’

We propose to set up additional ‘Monte Carlo Exclusive Brand Outlets’ owned by our Company to increase the number of outlets from two to six, by setting up four outlets among the cities of Delhi, Mumbai, Kolkata, Bangalore and Chennai.

The planned covered area for these outlets will be in the range of 1,500 to 2,000 square feet per outlet at a total cost of approximately Rs. 400.00 million. The cost of these outlets will include cost of building, expenditure on furniture and fixtures and interiors. We are in the process of evaluating proposals for acquisition of retail space for these outlets and have not, as on the date of this Draft Red Herring Prospectus, identified any property and/or associated infrastructure to be acquired, or entered into any agreement in this regard. B. Meeting working capital requirement for additional ‘Monte Carlo Exclusive Brand Outlets’ based on

franchisee model

In addition to setting up ‘Monte Carlo Exclusive Brand Outlets’ owned by our Company, as described above, we propose to expand the existing distribution network of our ‘Monte Carlo’ products by setting up such outlets based on the franchisee model. We intend to increase the total number of such franchisee outlets from the existing number of 21 to 144 outlets, in next two Fiscals. We intend to utilize Rs. 48.43 from the net proceeds of this Issue to meet the working capital requirement for setting up additional ‘Monte Carlo Exclusive Brand Outlets’, based on the and franchisee model.

(Rs. in million) Particulars No. of days

RequirementsFiscal 2007 Fiscal 2008 Fiscal 2009

No. of outlets (including owned outlets ) - 25 100 150 Stock of finished goods 120 35.00 140.00 210.00 Monthly expenses 30 3.75 15.00 22.50 Total - 38.75 155.00 232.50 Bank finance (75%) - 29.06 116.25 174.38 Margin (25%) - 9.69 38.75 58.12 Incremental margin money for working capitalunder expansion project. Rs. 48.43 million. (Rs. 58.12 million less Rs.9.69 million)

C. Setting up Design Studios

We propose to set up two design studios admeasuring approximately 5,000 square feet, each, equipped with modern accessories, computer intarsia design systems, projectors and complete interiors. Total capital expenditure to be incurred in these studios is estimated to be approximately Rs. 105.00 million including the cost of projectors, furniture and fixtures etc. We intend to buy suitable space in New Delhi, Mumbai, Bangalore or Ludhiana for this purpose. We are in the process of evaluating proposals for acquisition of retail space for these outlets and have not, as on the date of this Draft Red Herring Prospectus, identified any property and/or associated infrastructure to be acquired, or entered into any agreement in this regard. II. Expansion of woollen hosiery garments and meeting increased working capital requirements for

hosiery and cotton garment operations

In order to cater to our expended network of exclusive outlets of ‘Monte Carlo’, we plan to increase our woollen hosiery garment manufacturing capacity from 0.75 million pieces per annum to 0.88 million pieces per annum, by increasing our knitting capacity at our existing plants through the purchase of additional plant and machinery. Additional requirement of worsted wool is proposed to be catered from our porposed expansion of worsted woollen spinning plant detailed below. The total cost of the project is estaimated to be Rs. 315.96 million. Details of the project cost of our proposed hosiery and cotton garment:

(Rs. in million) S.

No. Particulars Amount

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S. No.

Particulars Amount

1 Plant and machinery 275.12 2 Factory building 4.88 3 Margin for working capital 35.96 Total 315.96

1. Plant and Machinery

Detailed below are quotations and proforma invoices, received by our Company, from certain machinery suppliers:

(Rs. in million) Description of the Machine No. Cost Supplier/ Date of

Quotation Status

Imported Machinery Second hand fully reconditioned fully fashion knitting machines

3 6.39 Larsen Italiana, Italy, May 10, 2006

Completed

One first pressing uncurling machine for panels, two high speed washer extractors and two tumble dryers.

5 5.64 G. Mentasti, Italy, May 29, 2006:

Completed

Sub Total 8 12.03 Indigenous Machinery Water cooled ductable air conditioner 4 0.76 Blue Star Limited,

Dadra February 27, 2006

Under Execution

500KVA Silent D.G. Set 1 2.67 Sudhir Gensets Limited, Jammu, February 14, 2006

Under Execution

Sub Total 5 3.43 Total 13 15.46

In addition we intend to import and purchase from domestic suppliers knitting machines, unraveling machines, uncurling machine, both second hand and first hand, amongst others, for an amount aggregating to Rs. 259.66 million. 2. Factory Building We propose to construct three factory sheds, at our existing facilities in Ludhiana, as production halls with a total area admeasuring 12,200 square feet with estimated cost of Rs. 400 per square feet. The total cost estimated for constructing factory sheds is estimated at Rs. 4.88 million. We are in the process of identifying a contractor for the construction of the factory sheds and have not, as on the date of this Draft Red Herring Prospectus, identified any contractor or entered into any agreement with any contractor in this regard. 3. Margin for Working Capital Requirement We estimate that the incremental working capital requirement arising due to enhanced capacity of woollen hosiery garments and increased cotton garment operations will be approximately Rs. 35.96 million. The details of the same are as follows: (a) Woollen Hosiery Garment Segment

(Rs. in million)

Particulars No. of days requirements

Fiscal 2007 Fiscal 2008

Raw Materials 120 30.93 33.92 Stores and spares 60 0.50 1.51 Monthly expenses 30 0.70 0.62 Stock of finished goods 45 5.57 18.92 Stock of goods in process 30 9.77 14.53 Debtors 45 7.15 24.26 Total Current Assets - 54.62 93.76

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Less: Creditors 75 1.76 5.30 Net Current Assets - 52.86 88.46 Bank Finance 75% - 39.21 65.03 Margin (25%) - 13.65 23.43 Incremental margin money for working capital is Rs. 9.78 million (Rs. 23.43 million less Rs. 13.65 million)

(b) Cotton Garment Segment

(Rs. in million) Particulars No. of Days

RequirementsFiscal 2007 Fiscal 2008 Fiscal 2009

Raw Materials 70 8.19 20.41 29.54 Finished Goods 45 11.67 29.82 43.66 Stores & Spares 90 1.70 4.35 6.26 Debtors 45 16.16 39.76 57.53 Monthly Expenses 30 2.10 5.22 7.57 Total Current Assets - 39.82 99.56 144.56 Less: Creditors 90 2.86 18.15 29.57 Net Current Assets - 36.96 81.41 114.99 Bank Finance 75% - 27.00 56.52 78.85 Margin (25%) - 9.96 24.89 36.14 Incremental margin money for working capital Rs. 26.18 million (Rs. 36.14 million less Rs. 9.96 million)

III. Expansion of Worsted Woollen Spinning unit

We plan to increase our worsted woollen spinning capacity to cater to our proposed increased manufacturing capacities of woollen hosiery garments detailed above and for sales of worsted wool to third parties. We plan to increase our worsted woollen spinning capacities from the present level of 26,248 spindles to 31,032 spindles and installation of balancing equipments to increase the productivity and quality of the final products. The entire project is proposed to be financed through the net proceeds of this Issue. The break-up of project cost is as under:

(Rs. in million) Sl. No. Particulars Amount

1 Plant and machinery 219.65 2 Factory building and godown 50.30 3 Margin for working capital 54.34

Total 324.29 1. Plant and Machinery The total landed cost of the plant and machinery (including custom duties, transportation and erection charges) has been estimated at Rs. 219.65 million, of which Rs. 120.89 million is expected to constituted second hand plant and machinery we intend to import. The management of our Company estimates that the residual life of the second hand imported plant and machinery is not less than 10 years. Further, we have and intend to rely either on a Chartered Engineer certificate or on the opinion of our Company’s experts about the worthiness of these machineries. a. Detailed below are certain quotations/pro forma invoices received from various vendors of equipment:

(Rs. in million)

Estimated Cost Description of the Machine No. (in million) (Rs. in

million)

Supplier/ Date of Quotation

Second hand machineries we intend to import*

Spinning Section: Zinser-Spinning Frame (model

6

EUR 0.66*

38.94

co*ker/Ashland Equipment,

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Estimated Cost Description of the Machine No. (in million) (Rs. in

million)

Supplier/ Date of Quotation

1997/98) Continuous bulking machine (model 1998)

2

EUR 0.07*

4.01

USA, September 19, 2006 Unitex SRL, Italy Make: Savio, September 6, 2006

Tow to Top Section: Continous sliver relaxer

2

EUR 0.45*

26.55

Greenbank Textile Machinery Salses Limited, August 3, 2006

Semi -Worsted Plant One gill auto leveler feeding creel (model 1987), one gill feeding creel, (model 1987), two "Gaudino" semi worsted ring spinning (model 1988 and 1990), two ‘Murata’ automatic winder coner (model 1998 and 1999), one ‘Hirschburger’ assembling machine (model 1985) and one ‘Volkman’ two for one twister head pitch (model 1978, 80)

8 EUR 0.20* 11.80 Heathbarn Textiles, UK, August 1, 2006

Other machineries we intend to import* Spinning Section: Ring spinning frame with core spun system Automatic cone winder

1

1

EUR 0.04*

EUR 0.08*

2.33

4.95

Meyer Textile Engineering, France, May 29, 2006 Itema (Asia) Limited, Hongkong, June 14, 2006

Dyeing Section: Spindle hank to cone winding machines Two hank dyeing machine axial flow (cotton), and one hank dryer machine capacity

4

2

USD 0.04*

USD 0.16*

1.79

7.52

Makisan Makine Imalat Sanayi, Turkey, August 19, 2006 Cedit Machinery, Electronics, Turkey, August 24, 2006

Indigenous Machinery Spinning Section: Two for one twisting machines

5 - 9.48 Vijay Lakhsmi Engineering Works Limited, Coimbatore, September 26, 2006

Dyeing Section: Twin leg fibre stamping machine

2 - 1.77 ATE Marketing Private Limited, New Delhi July 26 2006

Three compartment continuous conveyor dryer machine

1 - 0.91 Astha Drying and Heating Equipments Private Limited, Ahmedabad, July 7, 2006

*Translations from US$ and EUR amounts into Rupees are based on the following rates of conversion: 1 USD= Rs. 47 1 EUR= Rs. 59 b. Detailed below are contracts pursuant to which machinery has been delivered to our Company:

(Rs. in million)

Description of the Second Hand Imported Machine*

No. Cost Supplier/ Date of Quotation

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Description of the Second Hand Imported Machine*

No. Cost Supplier/ Date of Quotation

Preparatory Section: One high speed intersecting gill box feeding ball and two high speed intersecting gill box feeding can creel (model 1994).

3 6.70 Cogliandra S.A., France Make: NSC Schlumberger, May 12, 2006

*In relation to imported machinery our Company will be liable to pay additional amounts towards, customs, clearing forwarding and other incidental expenses. In addition, we intend to import certain second hand machinery for the dyeing and combing section aggregating to Rs. 39.59 million. Further we intend to import and purchase from domestic suppliers, plant and machinery, for the combing section, spinning section, lab quality testing and dyeing section amongst others. 2. Factory Building and Godown The total cost for construction of factory shed and godown building at our existing facilities including civil work is estimated at Rs. 50.30 million. We have vide contract dated August 10, 2006, awarded the construction of factory shed and godowns to M/s. ACE Building Technologies, Gurgoan. The contract has been awarded on cost plus basis. We have begun the construction of the factory shed and godown building in September 2006. The total cost estimated for buildings and godowns is estimated as under:

(Rs. in million) Description Area

(In square feet) Cost per square feet (Rs.) Total Cost

Factory shed (87' x 450') 39,150 550.00 21.50 Three godowns (80' x 300)'

72,000 400.00 28.80

Total 50.30 3. Margin for Working Capital Requirement We estimate that the working capital requirement for the expanded worsted woollen spinning unit would be approximately Rs.54.34 million. Following are the details of the same:

(Rs. in million) Particulars No. of days

requirements Fiscal 2007 Fiscal 2008

Raw Materials 150 115.00 115.00 Work in Progress 30 22.99 22.99 Finished Goods 30 0.00 25.28 Debtors 60 0.00 50.56 Stores and Spares 90 2.06 2.06 Monthly Expenses 30 1.45 1.45 Total Current Assets - 141.50 217.34 Less: Creditors 90 71.66 71.66 Net Current Assets - 69.84 145.68 Bank Finance (75%) - 34.47 91.35 Margin (25%) - 35.37 54.34 Margin Money for Working Capital Rs. 54.34 million

-

IV. Backward Integration for Denim Fabric Manufacturing We are expanding our denim fabric manufacturing capacity from the present level of 10 million meters to 20 million meters per annum to meet our requirements of yarn for the denim fabric, we plan to install a spinning unit as a backward integration. Also, since power is a major component in the manufacturing cost, we also plan to commission a co-generation captive power plant with capacity of 7.5 MW to meet total requirement of power for our integrated denim plant post expansion. We believe that this would substantially reduce the power costs to our Company. The objective of backward integration is to have in house facility to manufacture cotton yarn required for manufacture of denim fabric of different varieties including the premium quality of fabric. Also, the quantity of

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cotton/blended yarn in excess of the quantity required for captive consumption in denim fabric plant would be sold in the open market. A) Setting up of Cotton Spinning Plant The cotton spinning plant is proposed to be set-up at an estimated cost of Rs 1,015.39 million having a capacity of 14,400 spindles and 2,160 rotors. The spinning plant is expected to have 12 Nos. of ZINSER making spinning ring frames with 1,200 spindles each, six schlafhorst make open ends with 360 rotors each machine, two lines of blow rooms, 28 cards, complete preparatory and post spinning machinery.

The following is the break up of our total cost:

(Rs. in million) S.

No. Particulars Amount

1 Plant and machinery 708.83 2 Building and civil work 73.33 3 Provisions for contingencies 78.21 4 Margin for working capital 155.02 Total 1,015.39

1. Plant and Machinery

We plan to set up a spinning plant with a capacity of 14,400 spindles and 2,160 rotors for manufacturing of yarn. Of the total, we have already placed firm orders for 9,600 spindles with suppliers of main equipment required to set up the spinning plant. Details of the purchase orders placed and invoices received from vendors of plant and machinery are as follows:

Estimated Cost Description of the Machine No.

(EURO in million)#

(Rs. in million)

Supplier/ Date of Quotation

Imported Machinery* Automatic package winders 4 0.72 42.47 Schlafhorst

Zweigniederlassung, Germany September 1, 2006

Automatic rotor spinning machines 2 0.98 57.98 Schlafhorst Zweigniederlassung, Germany, September 1, 2006

One installation for processing of cotton, two high production cards, one high performance draw frame.

4 1.43 84.47 Trutzschler GMBG and Co. KG, Germany, September 13, 2006

Eight ring spinning machines, one roving bobbin transport system

9 1.31 77.35 Zinser Zweigniederlassung Der, Germany, September 18, 2006

Indigenous Machinery

Humidification plant along with dust and waste removal plant

1 - 16.69 Luwa India Private Limited, Bangalore, July 4, 2006

Total 20 278.96

*In relation to imported machinery our Company will be liable to pay additional amounts towards, customs, clearing forwarding and other incidental expenses. # Translations from EUR amounts into Rupees is based on the following rates of conversion: 1 EUR= Rs. 59 2. Building and Civil Work

Total cost for construction of building including civil work is estimated at Rs. 73.33 million. We have awarded contract for the construction of factory building and shed including work for colony to M/s. Adarsh Builders & Engineers, Ludhiana and M/s Midha Engineering, Panchkula pursuant to contracts dated August 1, 2006 and September 1, 2006 respectively. These contracts have been awarded on cost plus basis. The details of the building and civil work is as under:

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(Rs. in million)

Particulars Square Meters Covering Area Per Square Meters

Value

Main Shed 140 MT X 66 MT 9,240 9,240 4,500.00 41.58Utility 8 MT X 140 MT 1,120 1,120 4,800.00 5.38Utility 6 MT X 90 MT 540 540 4,800.00 2.59Utility 9.5 MT X 50 MT 475 475 4,800.00 2.28Raw Material Godown 40 MT X 20 MT

4,000 4,000 3,500.00 14.00

Colony 150 Houses 150 22,500 333.00 7.49

Total 15,525 37,875 73.32 2. Provisions for Contingencies

We have estimated contingencies of 10 % on cost of plant and machinery and factory building and civil works amounting to Rs 78.21 million. 3. Margin Money for Working Capital

Working capital margin of Rs. 155.02 million has been provided for the project based on the working capital margin requirements for the Fiscal 2008. The working capital requirement has been worked out on the basis of holding requirement of days as shown in table below for Fiscal 2007and Fiscal 2008:

(Rs. in million)

Particulars Margin (%)

No. of Days Requirements

Fiscal 2007 Fiscal 2008

Raw Materials (Raw Cotton) 25 150 136.58 422.19 Finished Goods 25 15 7.11 32.63 Stores & Spares 25 90 1.31 3.98 Debtors 40 30 0.47 66.45 Monthly Expenses 25 30 7.17 12.74 Work in progress 25 15 13.66 42.22 Total Current Assets - - 166.30 580.21 Creditors - 60 1.06 3.63 Net Current Assets - - 165.24 576.58 Bank Finance - - 123.59 421.56 Margin 41.65 155.02 Margin Money for Working Capital Rs. 155.02 million

B) Setting up 7.5 MW Co-generation Captive Power Plant Project

We propose to set up 7.5 MW co-generation captive power plant at an estimated cost of Rs. 320.80 million. cater to the whole requirements of integrated denim fabric manufacturing capacity post expansion. The input required for generating power will be rice husk that is available in the agrarian state of Punjab. Alternately, pet co*ke/ coal/ lignite can also be used as fuel for generating power. Following are the details of the estimated cost of the project:

(Rs. in million) S. No. Particulars Amount

1 Plant and machinery 233.30 2 Civil cost 87.50

Total 320.80 We intend to place orders for plant and machinery, including steam generator and auxiliaries, boilers, turbo generator, electronic precipitator, fuel handling systems, water treatment plants amongst others. As on the date of filing of this Draft Red Herring Prospectus, we have not placed any orders for supply of any of the equipments and the estimates above are based upon our past experience for installation of similar kind of equipment

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Issue Related Expenses

Issue related expenses includes underwriting and Issue management fees, selling commission, distribution expenses, legal fees, fees to advisors, printing and stationery costs, advertising expenses, SEBI filing fees and listing fees payable to the Stock Exchanges etc. The total expenses for the Issue are estimated at Rs. [•] million, which is [•] % of the Issue size. All the Issue related expenses shall be met out of the proceeds of the Issue and the break-up of the same is as follows:

(Rs. in million) Particulars

Expenses*

As a % of the

Issue size* Management fees, underwriting commission and brokerage [•] [•] Marketing and advertisem*nt expenses [•] [•] Stationary, printing and registrar expenses [•] [•] Legal fees, listing fees, SEBI filing fees book building charges, auditors fees

[•] [•]

Miscellaneous [•] [•] Total [•] [•]

* will be updated at the time of filing of Prospectus with RoC Schedule of Implementation and deployment of funds

Our Company proposes to deploy the net proceeds of the Issue in the expansion plan in the next two Fiscals. The total amount to be deployed in Fiscal 2007, 2008 and 2009 are Rs. 517.98 million, Rs. 1,877.90 million, Rs. 30.62 million respectively. The following are the details of the estimated schedule of deployment of funds and the schedule of implementation of the projects:

(Rs. in million)

Schedule of Deployment of funds

S. No.

Object Expenditure incurred as on October 31, 2006*

Fiscal 2007

Fiscal 2008

Fiscal 2009

Estimated time of completion

I. Expansion of ‘Monte Carlo Exclusive Brand Outlets’

a) Setting up ‘Monte Carlo Exclusive Brand Outlets’ owned by our Company

Nil Nil 400.00 Nil September 30, 2007

b) Meeting working capital requirements for additional ‘Monte Carlo Exclusive Brand Outlets’ based on franchisee model

Nil Nil 29.06 19.37 March 31, 2009

c) Setting up of Design Studios Nil Nil 105.00 Nil September 30, 2007

II Expansion of woollen hosiery garments and meeting increased working capital requirements for cotton garment operations

22.92 16.33 265.46 11.25# June 30, 2007

III Expansion of worsted woollen spinning unit

42.84 183.48 97.97 Nil February 28, 2008

IV Backward integration for denim fabric manufacturing

a) Setting up of cotton spinning unit

37.61 318.17 659.61 Nil January 1, 2008

b) Setting up 7.5 MW co-generation captive power plant

Nil Nil 320.80 Nil December 31, 2007

Total 103.37 517.98 1,877.90 30.62 * Based on the certificate dated December 15, 2006 provided by our Auditors # Proposed expenditure for margin money requirements in the cotton segment. Utilities Requirement for the Expansion Project

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Raw Material

Apart from other consumables the main input for raw material in the Expansion Project will be raw wool, acrylic, raw cotton and rice husk. For expansion of woollen worsted spinning the main input raw wool would be sourced through imports through our existing channels the total requirement shall be approximately 0.5 million kilograms per annum whereas acrylic will be sourced indigenously or through imports, total requirement will be approximately 4.9 million kilograms per annum. In case of increased knitting capacity utilization the additional requirement of woollen yarn will be to the extent of 0.13 million kilogram per annum. For cotton spinning unit the raw material input raw cotton would be sourced from the states of Punjab, Haryana and Rajasthan the expected quantity required would be approximately 21.98 million kilograms per annum. For generation of power for captive consumption the main input rice husk is readily available in the state of Punjab. The total requirement will be approximately 89.29 million kilograms per annum. Power

After the completion of the 7.5 MW captive power plant at village Lalru, Punjab our entire power requirement for the denim plant will be met through our own sources but during the intervening period, we intend to place reliance on power supply from Punjab State Electricity Board (PSEB). For expansion of our woollen worsted spinning capacity our current power supply from 3.5 MW Captive Power Unit along with load from arrangement from PSEB would be sufficient. Additionally we have stand-by generators. The total requirement of power for the worsted plant will be approximately 12,000 units per day. For increased knitting capacity the additional requirement of power will be 4200 units per day, which will be sourced from PSEB. Water

The availability of water will be met through the existing bore well in the main textile unit of our Company at Ludhiana. Water requirements for the expansion of the spinning unit and setting up of a captive power plant would be met by the construction of two industrial bore wells forming part of the project costs. Manpower State of Punjab being one of the industrially developed states of the country, sufficient supply of both skilled and unskilled manpower is available in nearby areas. The management estimates that our proven leadership and standing in the textile industry will help us in hiring and retaining quality personnel. Regulatory Approvals We require certain regulatory clearances for the in Expansion Project. For details of the regulatory approvals required and obtained for our Expansion Project see the section titled “Governmental Approvals and Licensing Arrangement” beginning on page [●] of this Draft Red Herring Prospectus. Monitoring of Utilisation of Funds The Board or a committee of the Board will monitor the utilisation of the proceeds of the Issue. We will disclose the utilisation of the proceeds of the Issue under a separate head in out balance sheet for Fiscal 2007 clearly specifying the purpose for which such proceeds have been utilized. We will also, in out balance sheet for fiscal 2007, provide details, if any in relation to all such proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue. We will not pay any part of the issue proceeds as consideration to the Promoters, the Directors, our key managerial personnel or Promoter Group except in the usual course of business. Interim use of funds Pending utilization for the purposes described above, we intend to temporarily invest the funds in high quality interest/dividend bearing liquid instruments including money market mutual funds, deposit with banks for necessary duration, gilt edged securities and other rated interest bearing securities as may be approved the Board of Directors or a Committee thereof. Such transactions would be at the prevailing commercial rates at the time of investment. We also intend to apply part of the proceeds of the Issue, pending utilisation for the purposes described above, to temporarily reduce our working capital borrowings from banks and financial institutions.

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TERMS OF THE ISSUE

The Equity Shares being issued are subject to the provisions of the Companies Act, our Memorandum and Articles of Association, the terms of this Draft Red Herring Prospectus, Red Herring Prospectus, Prospectus, Bid cum Application Form, the Revision Form, the Confirmation of Allocation Note and other terms and conditions as may be incorporated in the allotment advices and other documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, the Government of India, the Stock Exchanges, the RBI, RoC and/or other authorities, as in force on the date of the Issue and to the extent applicable. Ranking of Equity Shares The Equity Shares being issued shall be subject to the provisions of our Memorandum and Articles of Association and shall rank pari passu in all respects with the existing Equity Shares including rights in respect of dividend. The Allottees will be entitled to dividend or any other corporate benefits, if any, declared by our Company after the date of Allotment. Mode of Payment of Dividend We shall declare and pay dividends to our shareholders as per the provisions of the Companies Act. Face Value and Issue Price The Equity Shares with a face value of Rs. 10 each are being issued in terms of this Draft Red Herring Prospectus at a total price of Rs. [●] per Equity Share. At any given point of time there shall be only one denomination for the Equity Shares. Rights of the Equity Shareholder Subject to applicable laws, the equity shareholders shall have the following rights: • Right to receive dividend, if declared; • Right to attend general meetings and exercise voting powers, unless prohibited by law; • Right to vote on a poll either in person or by proxy; • Right to receive offers for rights shares and be allotted bonus shares, if announced; • Right to receive surplus on liquidation; • Right of free transferability of shares; and • Such other rights, as may be available to a shareholder of a listed public company under the Companies Act

and our Memorandum and Articles of Association. For a detailed description of the main provisions of our Articles of Association dealing with voting rights, dividend, forfeiture and lien, transfer and transmission and/or consolidation/splitting, see the section titled "Main Provisions of Articles of Association of the Company" beginning on page [●] of this Draft Red Herring Prospectus. Market Lot and Trading Lot In terms of existing SEBI Guidelines, the trading in the Equity Shares shall only be in dematerialised form for all investors. Since trading of our Equity Shares is in dematerialised mode, the tradable lot is one Equity Share. In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialised form. Allotment through this Issue will be done only in electronic form in multiples of one Equity Share subject to a minimum Allotment of [●] Equity Shares. Nomination Facility to the Investor In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidder(s), may nominate any one person in whom, in the event of death of sole Bidder or in case of joint Bidders, death of all the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to

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Equity Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale/transfer/alienation of Equity Share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the registered office of our Company or at the registrar and transfer agent of our Company. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by our Board, elect either: a. to register himself or herself as the holder of the Equity Shares; or b. to make such transfer of the Equity Shares, as the deceased holder could have made. Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with, within a period of 90 days, our Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice have been complied with. Since the Allotment of Equity Shares in the Issue will be made only in dematerialised mode, there is no need to make a separate nomination with us. Nominations registered with the respective Depository Participant of the applicant would prevail. If the investors require changing the nomination, they are requested to inform their respective Depository Participant. Minimum Subscription If we do not receive the minimum subscription of 90% of the Net Issue, i.e., the Issue less the Employee Reservation Portion, including devolvement of the members of the Syndicate, if any, within 60 days from the Bid/ Issue Closing Date, we shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after we become liable to pay the amount, we shall pay interest as per Section 73 of the Companies Act. Further, in accordance with Clause 2.2.2A of the SEBI Guidelines, we shall ensure that the number of Allottees, i.e. persons to whom the Equity Shares will be Allotted under the Issue shall be not less than 1,000. Otherwise, the entire application money shall be refunded forthwith. Jurisdiction The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended from time to time (the “Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares will be offered and sold only outside the United States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur. The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction. Arrangement for Disposal of Odd Lots There are no arrangements for disposal of odd lots. Restriction on Transfer of Equity Shares There are no restrictions on transfers and transmission of Equity Shares and on their consolidation / splitting except as provided in our Articles of Association, for further details see the section titled “Main Provisions of Articles of Association of our Company” beginning on page [●] of this Draft Red Herring Prospectus.

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BASIS FOR ISSUE PRICE The Issue Price will be determined by our Company in consultation with the BRLMs on the basis of assessment of market demand and on the basis of the following quantitative and qualitative factors for the Equity Shares offered by way of the Book Building Process. The face value of the Equity Shares is Rs. 10 and the Issue Price is [●] times the face value at the lower end of the Price Band and [●] times the face value at the higher end of the Price Band. Investors should also refer to the sections titled “Risk Factors” and “Financial Statements” beginning on pages [●] and [●], respectively, of this Draft Red Herring Prospectus to get a more informed view before making the investment. Qualitative Factors

• We are a diversified multi-product textile company having presence in all value-added segments from woollen/worsted yarn manufacturing, denim fabrics manufacturing to manufacture of knitted woollen and cotton garments.

• We are owners of brands “Monte-Carlo” “Canterbury” and “OWM”. • Our knitted woollen and cotton garment brand “Monte-Carlo” has been recognized as a Super-Brand

since Fiscal 2003. • We are a registered licensee of ‘Woolmark’ for the Monte Carlo and Canterbury range of woollen

products. Woolmark is the certification trademark for products made from pure new wool, which meets quality standards laid down by the Woolmark Company

• Our distribution channel comprises of a mix of 23 ‘Monte Carlo Exclusive Brand Outlets’, selective departmental / retail stores and a network of national chain stores and multi brand outlets.

• We also own landed properties in Gurgaon admeasuring approximately 5.01 acres and in Chennai admeasuring approximately 12.7 acres. Both these properties have been leased out and are contributing significantly to the overall revenues and profitability of our Company.

• Our Promoters and management have vast experience and expertise in textile sector. • We undertake continuous research and development activities with an objective to reduce operational

costs and improve the efficiency of our plants. We have an in-house team of experienced designers in fabric, knitting and garmenting.

Quantitative Factors The information presented in this section is derived from our Company’s audited restated financials statements for the Fiscals 2004, 2005, 2006 and for the half-year ended September 30, 2006. 1. Restated diluted Earning per Equity Share (EPS) of face value of Rs.10

Year EPS (Rs.) Weight For Fiscal 2004 3.96 1 For Fiscal 2005 3.53 2 For Fiscal 2006 5.96 3 Weighted Average 4.82

EPS (non annualized) for the half-year ended September 30, 2006 is Rs. 4.08. The weighted average EPS for Equity Share considered with face value of Rs.10 is Rs. 4.82. 2. Price/Earning Ratio (P/E)* in relation to Issue Price of Rs. [•]

a. Based on Fiscal 2006 EPS of Rs 5.96 - [•] x b. Based on weighted average EPS of Rs. 4.82 - [•] x

* would be calculated after discovery of the Issue Price through Book-Building Process. 3. Return on Net-worth (RONW)

Year RONW (%) Weight Fiscal 2004 17.66 1 Fiscal 2005 13.61 2 Fiscal 2006 18.68 3 Weighted Average 16.82

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The RONW for the half-year ended September 30, 2006 is 11.33% (non annualized). 4. The average return on net worth has been computed on the basis of the restated profits and losses of the

respective years. 5. Minimum return on total net worth after the Issue required to maintain pre-Issue EPS of is [•] %. 6. Net Asset Value (NAV) per share, pre-Issue, post-Issue and comparison with the Issue Price:

a. As at September 30, 2006: Rs35.99 b. As at March 31, 2006: Rs 31.91 c. Issue Price*: Rs. [•] d. NAV after the Issue: Rs. [•]

Year NAV (Rs.) Fiscal 2004 22.42 Fiscal 2005 25.95 Fiscal 2006 31.91

* would be determined after discovery of the Issue Price through Book Building Process. 7. Comparison with Industry Peers There are no listed companies whose business is strictly comparable with that of our Company. However we have chosen the companies, which we believe, are our peers in respect of various segments of textile industry in which we are operating.

Company RONW (%) EPS P/E Raymonds Limited 8.63 22.08 20.30 Provouge (India) Limited 15.66 8.71 48.40 Zodiac Limited 9.93 13.33 20.30 Aarvee Denims Export Limited 32.86 12.25 5.25

Source: Capita Markets ( Vol XX, 21/20, December 4-17, 2006) The face value of Equity Shares of our Company is Rs. 10 and the Issue Price is [●] times the face value. The Issue Price of Rs. [●] has been determined by our Company in consultation with the BRLMs, on the basis of assessment of market demand for the Equity Shares by way of the Book Building Process. The BRLMs believe that the Issue Price of Rs [●] is justified in view of the qualitative and quantitative parameters.

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STATEMENT OF TAX BENEFITS The Board of Directors, Oswal Woollen Mills Limited, Ludhiana Dear Sir,

Re: Opinion on Tax Benefits We hereby report that the enclosed annexure states the possible tax benefits available to Oswal Woollen Mills Limited (the “Company”) and its shareholders under the current tax laws presently in force in India, subject to fulfillment of prescribed conditions. 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 below are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be 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 their 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:

• 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 this annexure 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 GUPTA VIGG & Co L.C.GUPTA PARTNER Membership No: 11652 PLACE: LUDHIANA Dated: November 27, 2006

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As per the present provisions of Income Tax Act, 1961 (hereinafter referred to as “the Act”) and other laws as applicable for the time being in force in India, the following tax benefits are available to the company and to the shareholders of the Company, subject to fulfillment of prescribed conditions. To the Company

1. Under Section 32 of the Act, the company is entitled to claim depreciation at the prescribed rates on the specified tangible and intangible assets acquired and put to use for its business.

2. Under Section 10(34) of the Act, dividend income (whether interim or final) received by the company

from any other domestic company (in which the company has invested) is exempted from tax in the hands of the company.

3. The income received by the company from distribution made by any mutual fund specified under

Section 10(23D) of the Act in respect of which tax is paid by such mutual fund under Section 115R of the Act or from the Administrator of the specified undertaking or from the specified companies referred to in section 10(35) of the Act is exempt from tax in the hands of the company.

4. Under Section 10(38) of the Act, the long term capital gains arising on transfer of securities, which are

chargeable to Securities Transaction Tax, are exempt from tax in the hands of the company,.

5. As per the provisions of Section 112(I) (b) of the Act, other long-term capital gains arising to the company are subject to tax at the rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to the said section, the long term capital gains resulting from transfer of listed securities or units [not covered by section 10(36) and 10(38) of the Act], are subject to tax a the rate of 20% (plus applicable surcharge and education cess), on long-term capital gains worked out after considering indexation benefit, which would be restricted to 10% (plus applicable surcharge and education cess) of long-term capital gains worked out without considering indexation benefit.

6. As per the provisions of Section 111A of the Act, short-term capital gains arising to the company from

transfer of equity shares in any other company through a recognized stock exchange or from sale of units of any equity oriented mutual fund are subject to tax @10% (plus applicable surcharge and education cess), if such a transaction is subject to Securities Transaction Tax.

7. In accordance with and subject to the conditions specified in Section 54EC and Section 54ED of the

Act, the company would be entitled to exempt from tax on long- term capital gains ([not covered by section 10(36) and section 10(38) of the Act] if such capital gain is invested in any of the long term specified assets (hereinafter referred to as the “new asset” to the extent and in the manner prescribed in the said sections. If the new asset is transferred or converted into money at any time within a period of three years from the date of its acquisition, the amount of capital gains for which exemption is availed earlier would become chargeable to tax as long term capital gains in the year in which such new asset is transferred or converted into money.

To the Shareholders of the company 1. Resident Shareholders

1. Under Section 10(34) of the Act, dividend (whether interim or final) received from a domestic

company is exempt from tax in the hands of the resident shareholders of the company.

2. Under Section 10(38) of the Act, the long –term capital gain arising on transfer of securities, which are chargeable to Securities Transaction tax, are exempt from tax in the ands of the resident shareholders.

3. As per the provisions of Section 112(I) (a) of the Act, other long-term capital gains arising to the

resident shareholders are subject to tax at the rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to the said section, the long term capital gains resulting from transfer of listed securities or units [not covered by section 10(36) and 10(38) of the Act], are subject to tax at the rate of 20% (plus applicable surcharge and education cess), on long term capital gains after considering the indexation benefits which would be restricted to 10% (plus applicable surcharge and education cess), of long term capital gains without considering the indexation benefit.

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4. As per the provisions of section 111A of the Act, short-term capital gains arising to the resident shareholders from the transfer of equity shares in a company through a recognized stock exchange are subject to tax @10% (plus applicable surcharge and education cess) if such a transaction is subjected to Securities Transaction Tax.

5. As per the provisions of Section 88E of the Act, where the business income of an assessee includes

profits and gains from sale of securities liable to Securities Transaction Tax, a rebate is allowable from the amount of income tax, to the extent of Securities Transaction Tax paid on such transactions.

6. In accordance with and subject to the conditions specified in Section 54EC and 54ED of the Act, the

resident shareholders would be entitled to exemption from tax on long term capital gains [not covered by section 10(36) and Section 10(38) of the Act], if such capital gains are invested in any of the long- term specified assets (hereinafter referred to as the “new asset”) to the extent and in the manner prescribed in the said sections. If the new asset is transferred or converted into money at any time within a period of three years from the date of its acquisition, the amount of capital gains for which exemption is availed earlier would become chargeable to tax as long term capital gains in the year in which such new asset is transferred or converted into money.

7. In case of shareholder being an individual or a Hindu undivided family, in accordance with and subject

to the conditions and to the extent provided in Section 54f of the Act, the shareholder is entitled to exemption from long-term capital gains arising from the sale of shares in the company [not covered by section 10(36) and 10(38) of the Act], if the net consideration is invested for purchase or construction of a residential house within the prescribed period. If part of the net consideration is invested within the prescribed period in the purchase or construction of a residential house, such gains would not be chargeable to tax on a proportionate basis. If, however, such new residential house in which the investment has been made is transferred within a period of three years from the date of its purchase or construction, the amount of capital gains for which the exemption was availed earlier would be taxed as long- term capital gains of the year in which such residential house is transferred.

2. Mutual Funds

In case of a shareholder being a Mutual fund, as per the provisions of Section 10(23) of the Act any income of Mutual Funds registered under the Securities and Exchange Board of Indian Act, 1992 or Regulations made there under, Mutual Fund set up by public section banks or public financial institutions and Mutual Funds authorized by the Reserve Bank of India are exempt from income tax, subject to the specified conditions.

3. Venture Capital Companies/Funds

In case of a shareholder being a Venture Capital Company/Fund, any income of Venture Capital Company/Fund registered with the Securities and Exchange Board of India, is exempt from income tax, subject to the conditions specified in Section 10(23FB) of the Act.

4. Additional Benefits available to Foreign Institutional Investors (FII).

Under Section 115AD of the Act, income (other than income by way of dividends referred to in section 115-O) received by Foreign Institutional Investor in respect of securities (other than unit referred to in Section 115AB of the Act) shall be taxed @20%. Income by way of long term capital gains arising from the transfer of such securities shall be taxed @10% with effect from A.Y.2005-06.

5. Additional Benefits Available to Non-resident Indians

Where shares have been subscribed to in convertible foreign exchange, the taxation thereon is governed by the provisions of Chapter XII-A of the Act and is explained as under:

Non-Resident Indians [as defined in section 115C(e) of the Act] being shareholders of an Indian company, have the option of being governed by the provisions of Chapter XII-A of the Act, which inter alia entitles them to the following benefits in respect of income from shares of an Indian company acquired, purchased or subscribed to in convertible foreign exchange.

(i) As per the provisions of Section 115D read with Section 115E of the Act, and subject to the

conditions specified therein, long-term capital gains arising on transfer of an Indian company’s

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share will be subject to tax at the rate of 10% (plus applicable surcharge and education cess) without indexation benefit.

(ii) As per the provisions of Section 115F of the Act and subject to the conditions specified therein,

gains arising on transfer of a long term capital asset being shares in an Indian company shall not be chargeable to tax if the entire net consideration received on such transfer is invested within the period of six months in any specified asset or savings certificates referred to in section 10(4B) of the Act. If part of such net consideration invested within the prescribed period of six months in any specified asset or savings certificates referred to in Section 10(4B) of the Act then such gains would not be chargeable to tax on a proportionate basis. For this purpose, net consideration means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer

(iii) Further, if the specified asset or savings certificates in which the investment have been made is

transferred within a period of three years from the date of investment amount of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such specified assets or saving certificates are transferred.

(iv) Under Section 115G of the Act, it shall not be necessary for the Non-resident Indians to furnish

their return of Income, under section 139(1) of the Act, if their source of income is only investment income or income by way of long term capital gains or both, provided income tax deductible at source under the provisions of chapter XVII B of the Act has been deducted from such income.

(v) The benefit conferred on a Non-resident Indian assessee will be available even after the assessee

becomes a resident if declaration in writing is filed along with the return of income under section 139(1) of the Act, to the effect that the provisions of Chapter XII A shall continue to apply to him in respect of investment income derived from a foreign exchange asset vide Section 115H of the Act, until the transfer or conversion (otherwise than by transfer) into money of such assets.

(vi) Under Section 115I of the Act, a Non-resident Indian, if he elects by so declaring in the return of

income for that assessment year, that he should not be governed by the above mentioned special provisions of chapter XII-A, then he will be entitled to tax benefits available to residents individuals.

(vii) Shareholders who are tax residents of countries with which Indian has entered into Double Tax

Avoidance Agreement (“DTAA”) may choose to pay tax in accordance with such applicable DTAA, instead of the tax provisions discussed above, if the same is considered beneficial by them.

Benefits available 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. Hence, the investment in shares is not liable to Wealth Tax. Benefits available under the Gift Act, 1958 Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of shares will not attract gift tax. Notes:

1. All the above benefit share as per the current tax law as amended by the Finance (No.2) Act, 2006 and will be available only to the sole first named holder in case the shares are held by joint holders.

2. In view of the nature of tax consequences, being based on all the facts, in totality, of the investors, each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of his/her participation in the proposed issue.

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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 publications and websites, including that of, Australian Wool Innovation Limited, the Australian Wool Exchange Limited, the Woolmark Company and from publications and company estimates. Industry websites and publications generally state that the information contained 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 we believe industry, market and government data used in this Draft Red Herring Prospectus is reliable; these have not been independently verified by the BRLMs or the Company.

The Global Wool Industry Global wool production is approximately 1.30 million tonnes per annum. Australia, China and New Zealand are leading commercial producers of wool. Australia’s Merino wool is considered to be the best quality wool. Uses of Wool Wool can be woven into fibre for suits and dresses. It can also be rolled into balls and sold for hand knitting. In addition to clothing, wool can be used for making blankets, carpeting, felt, insulation and upholstery. Two common terms when describing wool are:

• Combed Wool: Wool used in the worsted (long wool, >50mm) trade usually includes fleece, pieces and bellies.

• Carded Wool: Wool used in the woollen (short wool, <50mm) trade usually includes lambs, locks and

crutchings.

Wool manufacturing

The two main types of woven cloth are woollen and worsted. The yarn for woollen cloth is usually made from short-fibred wool and during processing the individual fibres is thoroughly intermingled. In the worsted process, which uses the longer-fibred wools, the individual fibres are separated and laid approximately parallel to each other.

Weaving is not involved in all types of wool fabrics. Knitted fabrics are made with a single, continuous yarn (instead of two-warp and weft-as in woven cloth) and the threads are interlooped. Felt-probably the first-ever wool fabric-is made by intermingling the wool fibres and compressing them into a sheet. Because of the different purposes for which it is suited, raw wool must first be graded and sorted-long wools for the worsted trade, short wools mainly for the woollen trade, the tough springy wools for carpets and so on. Sources of Raw Material The following tables provide details regarding the top wool producer countries:

(Source: www.awex.com.au)

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The Australian Wool Industry Australian wool is a premium priced textile fibre with very unique natural aesthetic characteristics and functional fibre properties such as fineness, softness, elasticity, fluidity, strength and resilience, breathability and thermal insulation. Australian wool is used mostly in high retail value textile applications, such as quality woven apparel and knitwear, and in premium bedding and other interior textile products to a much lesser extent. The Woolmark Company estimates that around 90-95 per cent of Australian wool is used to make quality knitting/hosiery textiles and up to 3-5 per cent is used in upholstery, bedding and the carpet sector. The remaining proportion is used in high value niche markets outside these two sectors such as medical care, industrial filters, as well as in domestic roof insulation for lower value wools. Most Australian wool comes from the merino breed. There are estimated to be 35,000 woolgrowers in Australia. Total wool production for the 2005/06 selling season was forecasted to be approximately 465 million kilograms (about 2.6 million bales) shorn from 105 million sheep. Wool production is influenced by environmental (e.g. drought) and economic factors. 80 to 90% of shorn wool is offered by woolgrowers through the auction system via a selling broker. Between 10 and 20% of wool is purchased privately from the farm, through wool brokers selling privately or through treaty (private merchant sales). The Australian Wool Fibre Greasy wool is a complex and highly variable fibre. Most wool in Australia is shorn from Merino sheep (88.8%, 2002/03 season), which typically ranges in fibre diameter from 15 to 34 micron (an icron is a millionth of a metre (10-6 m) and results are reported in 0.10 increments). Crossbred sheep grow wool typically between 25 and 32 micron. Carpet wool, which is not usually sold through auction in Australia, is generally 32 micron and broader. Australia’s wool industry consists of a number of participants, all of whom contribute to the successful movement of wool along the path from the producer to the end consumer as shown in the diagram below:

Wool Export Summary Wool is generally traded and exported from Australia either raw or processed to differing degrees. The pie chart shows different percentage of wool exports from Australia in the following broad types:

• Greasy wool (the raw material shorn from sheep)

• Semi processed • Scoured wool (washed to remove grease

and dust) • Carbonised wool (washed with vegetable

matter removed chemically)

Greasy75%

Others includ ing No ils

& Waste1%

To p s8 %

Sco ured10 %

Carbo nised6 %

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• Tops (washed, carded and combed)

Wool Export Summary By Class 20002/03 (% of Mass Kg) (Source: www.awex.com.au)

Forecasts for the Australian Woollen Industry The attached table provides actual production details and a five-year forecast for the Australian wool industry:

Price of Wool The price of wool varies according to the wool characteristics: category, fibre diameter (micron), length, strength, amount of vegetable etc. matter are some prime price variables. In simple terms fleece wool can vary between 12 and 45 micron. The finer the micron the higher the price.

Quality of Wool Cost Per Bale 19.00 micron fleece wool = A$ 1300 per bale 21.00 micron = A$ 980 per bale 23.00 micron = A$ 880 per bale 25.00 micron = A$ 820 per bale

Risks associated with the buying and selling of Wool The risks associated with the buying and selling of wool largely fall into the following categories:

1. Technical risk as a result of incomplete, inadequate, or not meeting, required technical wool specification;

2. Price risk associated with market movements; 3. Political and currency risks (when trading internationally); 4. Other risks (e.g. late or short delivery) in not meeting contract requirements.

The exchange rates and commodity prices, including prices for wool, are volatile. Risk management tools, such as futures and their derivatives and forward contracting, allow participants to manage the risk. However, the presence of a liquid futures market or significant forward contracting will not reduce the volatility in prices in the spot market, but enables industry participants to manage the price volatility to stabilise their incomes. For wool these risk management tools are used much less than in cotton and other commodities. Around 85% of Australia’s wool is sold at auction, with only a small proportion of this hedged by a futures contract The Australian Wool Exchange Limited The Australian Wool Exchange Limited (AWEX) was founded in 1994 and provides the major industry framework for the exchange of ownership of wool in Australia. The membership of AWEX represents 95% of first-hand wool traded in Australia each year and includes wool brokers, exporters, private treaty merchants, processors, wool producers and associates. AWEX works to maintain industry standards and compliance with regard to clip preparation and presentation for sale, thereby enhancing the quality and integrity of the Australian wool clip. The Indian Wool Industry

(Based on forecasts from the Woolmark Company)

(Source: The Woolmark Company)

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The woollen industry in the India is small in size and is widely scattered and is largely dominated by unorganized sector. It is primarily located in Punjab, Haryana, Rajasthan, Uttar Pradesh, Maharashtra and Gujarat, with 40% of units located in Punjab, 27% in Haryana, 10% in Rajasthan, while the rest of the States account for the remaining 23% of the units. The industry provides employment to approximately 1.20 million workforce and contributes significantly to industrial production. The woollen industry in India broadly falls under two sectors – i) Organized Sector

The organized sector mainly comprises of composite mills, combing units, worsted and non-worsted spinning units, machine made carpet-manufacturing units

ii) Decentralized Sector

The decentralized sector comprises of hosiery and knitting units, powerlooms, hand-knotted carpets, druggets and namdahs, independent dyeing and processing houses.

As per the Ministry of Textiles, Government of India (Source: www.texmin.nic.in/sector.htm, the website of the ministry of textiles, Government of India) there are 714 units in the organised wool sector. In the decentralized hosiery and shawl sector, Ludhiana alone accounts for 225-240 units, ranking as number one in India. The following table provides details of installed capacities of different facilities in the Indian wool industry:

Facilities Capacities Wool Combing 29.28 million kilogram Synthetic Fibre Combing 3.57 million kilogram Worsted Spindles 0.59 million numbers Non-worsted Spindles 0.42 million numbers Powerloom (including decentralized sector) 7,228 numbers (approximately) Machine made carpet sector 0.81 million square meter

2.27 million kilogram Import of Wool The indigenous production of fine quality wool required by the organized mills and the decentralized hosiery sector is very limited, the country depends largely on import, Australia being the major supplier. The New-Zealand wool, rich in lustre is being imported mainly for carpet sector for blending it with indigenous wool. Similarly, for the shoddy sector, import of premutilated woollen/synthetic rags is also allowed under OGL

As per DGCI&S, Kolkata, for the period from April 2005 to October 2005, India imported total 48.35 million kilograms of wool. The following table provides figures of import of wool during the last three years:

Fiscal Quantity (In million kilogram)

Value (Rs. in

million) 2003 73.92 8018.20 2004 84.61 8706.00 2005 82.47 8259.50

Exports During Fiscal 2004-05, the export of woollen items was Rs.45,228.20 million, which showed a growth of 7% over corresponding period last year. The export figures for woollen items for the last three years are given in the following table:

(Rs. In million) Items Fiscal 2003 Fiscal 2004 Fiscal 2005 Woollen Yarn, Fabrics, Madeups 2,464.30 2,716.70 2,985.20 Readymade Garments 10,570.90 13,746.50 16,674.30 Carpet (Excluding Silk) Handmade 19,407.60 25,711.00 25,568.70 Total 32,442.80 42,174.20 45,228.20

(DGCI&S, Kolkata) Government Initiatives for Indian Wool Industry

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The following is a summary of initiatives taken by Government of India to boost the Indian wool industry:

The import duties for apparel grade raw wool has been fixed at 5%, which is substantially lower than the rate prevailing until few years back;

The woven segment of readymade garments has been de-reserved from the SSI sector to encourage FDI inflow;

In the Exim Policy 2002-07, the threshold limit for obtaining “Export House” status has been lowered to Rs. 50 million for the small scale sector which will encourage further development of centers of economic and export excellence such as Tirupur for hosiery and Ludhiana for woollen knitwear;

Keeping in view the shifting marketing trends, the Ministry of Textiles is also promoting of blending products by encouraging research and development activities for the blends of wool with other natural fibres and also the specialty woollen fibres i.e. Pashmina and Angora;

The Government is implementing the Integrated Wool Improvement Programme for the growth and development of the wool and woollen industry in the country through its two components, (i) improvement in wool fibre, and (ii) quality processing of wool with a budget of Rs. 350 million. The programme is being implemented by the Central Wool Development Board, Jodhpur, and would run from Fiscal 2003-04 to Fiscal 2006-07.

The Indian Apparel Industry The apparel industry is one of the fastest growing industries in India. This industry is structurally a labour intensive, low wage industry with some variations across its market segments. The apparel industry is fragmented and largely consists of small players with average unit size of about 100 machines. There are very few large players reflecting the past fiscal and policy regime that protected small-scale industries and provided them fiscal incentives. The competitive advantage of companies in this market segment is related to their ability to create designs that capture tastes and preferences, and even better influence such tastes and preferences in addition to cost effectiveness. According to Images Yearbook Volume I No. II dated December 31, 2005 the total apparel market in India is estimated at around Rs. 781,000 million in Fiscal 2004 showing the growth of 12.5% over Fiscal 2003. India’s Apparel Market Size 2003 & 2004

2003 2004 Apparel Type Volume

(million units) Value

(Rs. million) Volume

(million units) Value

(Rs. million) Men’s apparel 1557 292,000 1613 326,000 Women’s apparel 1430 233,000 1504 264,000 Kid’s apparel 1223 114,000 1267 125,000 Uniforms 397 55,000 423 65,000 Total 4608 694,000 4807 781,000 The above market size comprises of all forms of clothing including school uniforms and is largely traditional wear with made-up garments produced by local tailors from fabric bought by the consumer. The apparel market comprising of mens’ wear, womens’ wear and childrens’ wear can be classified into following two categories: The ready-to-stitch (RTS) segment, where local tailors prepare garments from fabrics supplied by their

consumers; The ready-to-wear (RTW) segment, where the consumer purchases a readymade garments.

India’s Branded Ready-To-Wear apparel market The concept of readymade garments is relatively new for the Indians. Traditionally, most Indians preferred dresses stitched by local tailors, who had tailoring units in townships or cities and catered exclusively to local demand. The growing fashion consciousness during the 1980s and the convenience offered by ready-to-wear garments were largely responsible for the development of the branded apparel industry in India. Other factors, which contributed to its growth were: greater purchasing power in the hands of the youth,

f hi d id h d h

Category Readymade (%)

Tailor Made (%)

Men 63 37 Women 79 21 Kids 88 12 Total 73 27

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access to fashion trends outside the country, and the superior quality of fabrics.

(Source: Images Yearbook Volume I No. II dated December 31, 2005)

Proportion of Branded vs. Unbranded RTW apparel in India The RTW market is still undergoing development in India and over the years we have witnessed a gradual shift from tailor made garments to ready-made garments. Proportion of branded and unbranded goods in the readymade segments is as follows:

Category Share of Branded (%) Share of Unbranded (%)

Men 33 67 Women 22 78 Kids 10 90

(Source: Images Yearbook Volume I No. II dated December 31, 2005)

Within this total RTW segment, branded RTW apparel in India has been witnessing a higher growth compared to unbranded RTW segment, driven by increasing brand consciousness especially among urban consumers, growing levels of disposable income among the middle class and the expansion of organized retail infrastructure. Factors leading to growth of the Indian Apparel Industry The Indian consumer is going through a process of change. Having crossed the threshold of basic necessities, the new 'feel good' and 'look good' factors are emerging especially among the youth. The attitude of many of today's youth is to spend for today, then save for tomorrow. Today, India is one of the youngest nations in the world (54 per cent Indians being under 25 years of age) having the right profile of consumers with the right attitude towards purchase behaviour. Rising expendable income synchronised with change in retail formats provides a great opportunity for branded apparel industry. In sync with the look good and feel good factors, the wardrobe of the urban household is becoming more lifestyle oriented. People are looking at possessing different garments for different occasions. Today, winter wear and summer wear is differentiated in fabric, cut, style, design, as well as colours. Consumers prefer multiplicity of choices with different clothing for work wear, eveningwear, leisurewear, and weekend wear. In addition, the practice of special occasion wear still continues. More variety and larger wardrobe sizes are contributing to the growth in this sector. Some of the major factors leading to growth of Indian apparel industry are as follows: 1. Ready to Stitch (RTS) to Ready to Wear (RTW)

From the readymade apparel manufacturer’s perspective, the Indian market has been very inert towards shifting from RTS to RTW. Currently, nearly 25-30% of all clothing retailed is still tailor made. A major shift towards RTW was visible at the start of the 1990’s.

2. Increased brand consciousness

A consumer generally perceives wearing brands as a fashion statement and a recognition. One of the major reasons for the increased brands consciousness is the young population of India.

3. Changing Consumer Lifestyle & Preferences

Demographic changes: According to KSA Technopak, India has the largest young population in the world with over 867 million people below 45 years of age. This means a higher current consumption spend vs. savings as a younger population has both, the ability and willingness to spend. A younger population tends to have higher aspirations, and will spend more as it enters the earning phase. Higher consumption is a direct booster for the retailing industry. Further, increase in consumer spends would be driven by nuclearisation of families, increasing population of working women and new job opportunities in emerging service sectors such as IT enabled services, retail and food services, entertainment, and financial services.

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A larger number of households in urban India are getting added to the consuming class with growth in income levels. The number of households with income of over Rs 45,000 per annum is expected to grow from 17.4 million in the 1999-2000 season to 44.8 million by the 2005-06 season (Source: The Marketing Whitebook 2003-04, brought out by Businessworld).

Changing lifestyles: The traditional large, joint-family set up in India, is slowly giving way to a nuclear family set up. This is more pronounced in urban India. This has resulted in a larger number of households, pushing up demand for consumer goods. With rising education levels, especially among women, there is an increase in the number of employed women, thus further increasing the consumer class and adding to disposable incomes of families. These have a direct impact on the overall consumption patterns and fuels further growth of organized retail.

Design and Quality: Design and quality are acquiring a lot of significance. There is a paradigm shift from the earlier trend where price was the overwhelming consideration.

4. Mall development/Increased Retail Space

Increase in organized retailing in India has led to increase in brand awareness among consumers. Around a decade ago there were no malls in India. The latter half of 1990s saw the arrival of new modern malls. At the end of 2004 there were 40 operational malls in the country. KSA Technopak expects 200 large malls to be operational by 2006. This rapid growth in quality retail space is facilitating organized retailing and thus further driving the growth in the apparel segment. Apparel retailing is the largest segment of organized retailing in India making up for almost 39 percent of the total organized retailing business. (Source: India Retail Report 2005 - An Images - KSA Technopak Study)

Key Strengths required for success in the apparel business

Ability to predict fashion trends: This is one of the most important attributes to be successful. This ability helps the manufacturer to plan his designs accordingly, which helps in better inventory control. Hence understanding of the dynamic consumer tastes and preferences is important.

Creating brands: Creating a connection with the consumer for the brand through consistent leadership

in fashion and quality is essential with a plethora of domestic brands and imminent entry of a larger number of international brands.

Distribution Network: A manufacturer uses different distribution channels to reach the consumer. A

strong distribution network therefore is very important so as to penetrate across geographies. Key challenges As discussed earlier there is potential for growth of this sector. However there are certain issues that may impede this growth.

Availability of Raw Material: Availability of various raw materials like cotton, wool etc. remains a concern. Though India is one of the major producers of cotton, still cotton farming and production depends on monsoon. Further wool has to be imported from countries like Australia etc. and is subject to volatile fluctuations in prices.

Availability of skilled manpower: The non-availability of trained manpower, especially at the

management level, poses a key risk. Further, as the apparel sector grows rapidly, there will be pressure on existing players s new entrants look for trained manpower at various levels.

Supply chain issues: Supply Chain Management (SCM) efficiencies are essential to apparel

manufacturers to maintain and improve margins. SCM includes vendor management and logistics management. Vendor selection is an important outcome of the sourcing process and a key to most efficient sourcing. Logistics management aims to get the goods from the vendor to the store in the shortest possible time thereby avoiding unnecessary stocking of goods. In India, both vendor management and logistics management are still underdeveloped. However, with growing size of operations, supply chain efficiencies will become a key differentiator of profitability.

Entry of international brands: International brands are looking at India as a large opportunity. With

possible easing of FDI norms in retail, one would expect a larger number of international brands to enter India to retail their products. However, this is also an opportunity for players in India as this will

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not only expand the market, but also with entry of international brands in the super premium category, upgrade consumers across the value chain.

Upgradation of Industry as a whole: Upgradation of industry as a whole is necessary to provide better

products to consumers at affordable prices. Government Initiatives The Government of India has taken many initiatives for the growth of the woollen sector, some of which are summarized as under:

The production of ready-made garment is no longer reserved for small-scale industry; Foreign equity participation up to 100% in the sector through automatic route; The excise duty on RTW garments has been abolished; Value added tax, which is being implemented by various states, will simplify the tax structure and

reduce the tax burden on branded garment manufacturer; Overview of Indian Denim Industry Basic denim fabric refers to a cotton will fabric featuring a warp faced weave, traditionally made with indigo-dyed yarn for the warp and natural yarn for the weft with a standard weight of 14.5 ounces per square yard. For a number of years, the majority of jeans were made out of this fabric. However, with the entry of more denim manufacturers and increased market competition, denim has undergone many changes in almost every aspect from material selection to final finish. The denim apparel range has also expanded to cover clothing items beyond jeans including tops and accessories. The Indian denim and denim products market amounted to US$ 430.00 million during Fiscal 2004. The CAGR of jeans sales between Fiscal 2004 and Fiscal 2012 for the Indian sub continent has been estimated to grow @ 9.20% as compared to a CAGR of 0.90% for global jeans sales for the same period. (Source: just-style.com) The growth in the Indian denim industry is expected to result from the shift by Indian denim makers from manufacturing basic value products to manufacturing value-added products, including garments; the increase in capacity with impending quota removals; and the movement of production capacity to Asia. Indian denim capacities have been built up primarily over the last 10 years and a majority of the capacity is distributed among large textile producers. The following table illustrates the business presence of certain large Indian denim fabric producers: Name Business Presence Raymond Leading worsted wool fabric manufacturer with additional presence in denim,

garmenting and apparel retailing Arvind Mills Large denim manufacturer with additional presence in knitted fabrics,

garmenting and apparel retailing Aarvee, K G Denim & Malwa Denim manufacturer with presence in garments Suryalakshmi Yarn and denim manufacturer Rainbow Denim manufacturer Suryalakshmi Yarn and denim manufacturer OWM Specialty denim manufacturer and going for backward integration Only a small number of denim producers in India possess a combination of competitive cost structures, strong management skills, modern equipment, efficient manufacturing processes, transparent corporate practices and financial resources necessary to leverage the margin potential of the denim fabric and garment business and to position themselves as integrated suppliers to global brands. Most Indian denim plants utilise a combination of new and second hand machinery though the quality of second hand machinery varies substantially. There are only a few denim producers in India with strong design capabilities, integrated textile production activities and inherent quality standards. Indian denim plants have both open-end and ring denim capabilities, although a majority of the capacities are open-end, which historically cater to mass-market denim products. However, open-end plants are also able to manufacture specialty denim fabric with changes to their processes. Ring spun denim is of a higher quality and commands higher prices in the denim fabric market.

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Rope-dyeing skills that provide a uniform dye to denim fabric when compared to the slasher-dyeing process are scarce in India, with only a few denim producers having mastered this process. The benefits of increasing rope-dyeing skills have become increasingly evident and large producers now are investing heavily in developing these skills. Overview of Global Denim Fabrics Industry The size of the global denim fabrics industry in the Fiscal 2004 was estimated broadly at around 2,730 million meters annually, valued at an estimated US$ 8 billion (Source: just-style.com). A combination of technology advancements, product shifts and growing demand for denim products indicates healthy medium term growth for the denim and denim jeans industry in the future. Typically, customers having high-quality product requirements evaluate potential suppliers using an 18-month accreditation period, after which they tend to remain stable clients for several years. In India, this is demonstrated by the fact that many of the world’s leading apparel brands and retailers have long-term sourcing relationships with Indian denim makers, apart from having India-based buying houses. Denim fabric manufacturers obtain relatively better returns in developing countries and denim retailers obtain relatively better returns in developed countries, a dynamic which is expected to continue to spur the shift of denim production to developing lower cost countries, given that lower cost countries now are able to export finished products to developed countries in the absence of quotas.

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OUR BUSINESS Business Overview Our Company, Oswal Woollen Mills Limited (OWM), is the flagship company of the Nahar Group of Companies (the Nahar Group). The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab with group turnover in excess of Rs. 19,000 million for Fiscal 2006. The Nahar Group is one of the oldest and well-recognized business houses in India. Our Company was incorporated in 1949 by Late Mr. Vidya Sagar Oswal, father of Mr. Jawahar Lal Oswal, our present Chairman and Managing Director. Our Company is one of the pioneers of the organized Indian woollen hosiery industry. We made a modest beginning as a manufacturer of hosiery items, which was followed by setting up a worsted woollen spinning plant of 800 spindles in 1954 to serve as a backward integration of the then existing manufacturing activities. We believe that this worsted woollen spinning plant is one of the first worsted woollen spinning plants in the Northern India. Marching ahead in the journey and keeping pace with overall industrial development in India, our Company is now a vertically integrated woollen textile company, having presence in diverse market, with wide range of products including woollen hosiery and cotton garments. In our woollen hosiery segment, we start our operations with import of raw greasy wool mostly from Australia and our products include various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. We subsequently added cotton garments to our existing product portfolio during Fiscal 2002, which we outsource as per our requirements and sell under our own brand name. Since March 2006, we have started manufacturing indigo dyed specialty denim fabric, which has added to our existing vast range of product portfolios. Our manufacturing facilities are spread across various locations in and around Ludhiana in Punjab fully backed by the facilities for product development, design studio and efficient sampling infrastructure to provide quality products to our customers. Currently, we are employing over 4,000 persons and our present manufacturing facilities include 26,248 spindles to manufacture worsted woollen yarn besides machines for weaving, knitting, dyeing and finishing. Presently, our manufacturing facilities are producing approximately 2.5 million lbs of wool tops per annum, 750,000 pieces of readymade knitted garments per annum and 10 million meters of denim fabric per annum. We are the registered owners of well-known trade name ‘Monte Carlo’ for selling our woollen hosiery and cotton garments. ‘Monte Carlo’ has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by the International Society for Superbrands. Our distribution channel comprises of a mix of ‘Monte Carlo Exclusive Brand Outlets’, network of national chain stores and multi brand outlets. Our products in woollen hosiery segment are also sold under the brand names of ‘Canterbury’, for premium quality woollen hosiery garments and ‘OWM’, for our specialty worsted woollen yarn etc. including the hand knitting yarn. We also have landed properties admeasuring approximately 5.01 acres in Gurgaon and 12.70 acres in Chennai, which have been leased out and are contributing significantly to the overall revenues and profitability of our Company. These properties are in addition to the landed properties that we own in and around Ludhiana in which our manufacturing facilities are based. Our restated total income and restated profit after taxes in Fiscal 2006 were at Rs. 2,532.85 million and 148.48 million respectively. For the six months ended September 30, 2006, our total income and profit after taxes was at Rs. 1427.93 million and Rs. 101.57 million respectively. Our Business Philosophy Our business, which started with a modest beginning of 800 spindles for worsted spinning, to become a large woollen textile player believes in the philosophy ‘Success is Tradition and Growth is Imperative’. Since beginning our focus has been achieving economies in scale of production, rationalize cost, integration of operations thereby increase the revenue from year to year. Our view on costs has never refrained from rewarding the work force of our Company. We have enjoyed cordial relations with our work force at all levels, keeping in mind our philosophy and to meet out any contingency we have always developed second line of key managerial personnel. Our human resource development policy are designed to motivate them achieve goal and excellence in management.

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We have always remained conscious about the prevalent fashion and designs and quality translated into high level of consumer’s satisfaction. We have also kept fully abreast with latest trend prevailing in domestic as well as international markets. Our philosophy is not only to earn profit but prosperity of other stakeholders. Our Competitive Strengths Extensive Experience of our Promoters Our Promoters are well known industrialists who have a long standing in the Indian textile industry since 1949 and we benefit immensely from their expertise. Our Promoters are one of the pioneers of the organized Indian woollen hosiery industry. Our worsted woollen spinning plant of 800 spindles, which was set up in 1954 is said to be one of the first worsted woollen spinning plants in the Northern India. The long and rich experience of our Promoters, in almost all the spheres of the textile industry, is one of our main competitive strengths. We also have a strong second line of management and an experienced pool of key managerial personnel, who have been associated with our Company for a long time. Owners of well known and established brands of ‘Monte Carlo’, ‘Canterbury’ and ‘OWM’ Our Company had introduced the brand ‘Monte Carlo’ for its woollen hosiery products in the year 1985. Since then there has been no looking back for ‘Monte Carlo’ and we believe that ‘Monte Carlo’ is one of the reputed brands in woollen hosiery garments segment in India. ‘Monte Carlo’ has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by the International Society for Superbrands. Besides we are also the owners of brands ‘OWM’ and ‘Canterbury’, under which we sell for our wide range of yarns etc. including the hand knitting yarn and high-end premium woollen hosiery garments respectively. The Landed Properties in Gurgaon and Chennai In addition to our landed properties in which our manufacturing or other facilities including offices are situated, we also own landed properties in Gurgaon admeasuring approximately 5.01 acres and in Chennai admeasuring approximately 12.7 acres. Both these properties have been leased out and are contributing significantly to the overall revenues and profitability of our Company. We believe that these properties together with other properties where our commercial operations are based, which are in and around Ludhiana, have significant commercial values. Our landed property based in Gurgaon has been leased to 'Genpact' for running their call center on a five-year lease which terminates in July 2011. Similarly, the landed properties based in Chennai have also been leased to third parties. For details of the terms and conditions of these lease agreements see the section on 'Our Business-Properties' beginning on page [●] of this Draft Red Herring Prospectus. After termination of these lease agreements, on completion of their tenure or otherwise, our Company will take a decision to renew the lease or to otherwise use the lands for some other commercial purposes. Presently, we do not have any intention of selling or otherwise developing any of these properties. Further, as of the date of filing this Draft Red Herring Prospectus, our Board does intend to enter into the real estate or construction business. Fully Integrated Woollen Operations In the woollen segment, we start our operations with import of greasy wool mostly from Australia and our products include various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. All our activities till the manufacture of knitted and hosiery garments, which we sell under our own brand name, are completely integrated. This integration gives us an edge in terms of quality of product, turnaround time, and flexibility in deploying manufacturing lines and reduces our dependence on job workers. Wide and Varied range of Products We manufacture and sell a wide variety and range of textile products, such as, specialty yarns, e.g., worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. We had added cotton woven garments segment to our existing product portfolio during Fiscal 2001-2002. During Fiscal 2006, we have started the manufacture of indigo dyed specialty denim fabric, which has added to our existing range of rich product portfolios. From 2007 autumn and winter season, we also intend to start production and marketing of fine micron pure merino blended knitted products for children between one to eight years for the Indian domestic market. We

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have already entered into a contract with Australian Wool Innovation Limited for helping us in designing, product development and related activities. Our wide range of product range gives us an edge over our competitors and enables us to reach diverse market. Our Designing Capabilities Designing is one of the most critical element in the high-end fashion driven ready made garments industry. Development of innovative designs is one of our core strengths and unique selling proposition of our products. We believe that we are one of the few Indian manufacturers in our segment having in-house designing facilities with a design team that constantly tries to predict new trends in fashion. We constantly engage foreign designers to give our design team an edge over its peers. In a season, the team works on over 500 designs, out of which a few are selected for the new season collection. Our designing facilities and product development centers are located at our manufacturing facilities. Our design team is supported by our marketing and sourcing team to develop the design requirements as per the on going trend. Quality Standards

We have established a quality management system (QMS) and have implemented it throughout our Company. A system has also been developed to ensure continual improvement in the effectiveness of the QMS. A committee has been constituted to review the QMS, quality policy and objectives. The committee reviews the system at least once in six months for ensuring its continuing suitability, adequacy and effectiveness. QMS of our Company has been certified to conform to the QMS Standard: ISO 9001:2000 by DNV Certification B.V., Netherlands for the manufacture and supply of dyed and grey tops and yarn in worsted wool, pure wool, lamb wool, acrylic wool blends and polyester wool blends and angola, berthia and serge fabrics. Our Key Strategies Establishing Monte Carlo as an All Seasons Pan India Brand Since introduction of ‘Monte Carlo’ brand in 1985, ‘Monte Carlo’ has become almost synonymous with premium woollen hosiery garments in India. This brand is well known and established in the Northern, Eastern and part of Central India and is one of the most famous brands in its segment. As a long-term business strategy, for increasing the geographical reach of our ‘Monte Carlo’ products and make it an ‘All Seasons Brand’, we had introduced cotton garments under the ‘Monte Carlo’ brand during Fiscal 2002. We intend to leverage the strength of our brand ‘Monte Carlo’ to sell these all season products to all parts of India. Introduction of these new products will also add to our brand recall value. We intend to expand our reach by opening more ‘Monte Carlo Exclusive Brand Outlets’ across the country to reposition the brand ‘Monte Carlo’ as an ‘All Seasons Pan Indian Brand’. Further strengthening our retail presence We are presently operating with 23 ‘Monte Carlo Exclusive Brand Outlets’, which retail our ‘Monte Carlo’ range of products. We also sell the ‘Monte Carlo’ products through our existing distributors and dealers network. We are augmenting our existing reach of ‘Monte Carlo Exclusive Brand Outlets’ by opening additional 127 outlets by Fiscal 2009. All these outlets would be opened in towns and cities, where there are more potential middle and upper middle class population with increasing disposable income. Opening up of additional exclusive outlets will not only enlarge the reach of our ‘Monte Carlo’ products and generate additional revenues but also help us generate improved margins. Increasing our Product Range We have diversified into manufacture of denim fabric, with a capacity of 10 million meters per annum at present to be enhanced to 20 million meters per annum within a year. However, we intend to manufacture only value added denim fabric, which fetch better price realizations as compared to basic denim fabric. In future, we intend to be judicious in expanding our capacities in this area so as to maintain ourselves as producer of only value added denim fabric. Further presently, we are contemplating selling our denim fabrics to ready-made denim garments manufactures in domestic and international market. In future, we intend to add ready made denim garments in our product portfolio. Foraying into Kids Wear

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From 2007 autumn and winter season, we are starting production and marketing of fine micron pure merino blended knitted products for children between one to eight years for the Indian domestic market. Australian Wool Innovation Limited (AWI) is helping us in designing and product development of kids’ wear range. We have already entered into AWI Research, Development and Innovation Contract (RDI Contract) for the purpose at a total contract price of AU$30,000. AWI has the objective of increasing the demand for fine Australian merino by introducing it in the children’s wear of the Indian domestic market, which is presently dominated by cotton and synthetic fibres. AWI is working in conjunction with our Company for the manufacture and commercialization of these products. AWI encompasses the entire supply chain and will provide all manufacturing and commercial aspects of this project. Cost Reduction Power and fuel expenses are one of the major head of direct expenses. In the Fiscal 2006, we had commissioned a co-generation power plant with multi fuel capabilities with an installed capacity of 3.5 MW to meet the entire power requirements of integrated yarn textile manufacturing plant. Post commissioning of this co-generation power plant in addition to cost reduction of power, we benefit from uninterrupted availability of power resulting in better quality of yarn and reduction in manufacturing wastage. Under the current expansion plan, we propose to set up a co-generation power plant with installed capacity of 7.5 MW, which is expected to meet the full requirements of power for our integrated denim operations post expansion. Enhancing Manufacturing Capacities Under our current expansion project, we propose to increase our capacities to manufacture additional 125,000 pieces of wool based knitted and hosiery garments together with additional 4,784 spindles for worsted woollen yarn. We are also increasing our weaving capacity for manufacture of denim fabric to 20 million meters per annum from the present level of 10 million meters per annum. As a backward integration for the weaving facility of denim, we are setting up a cotton spinning plant with a capacity of 14,400 spindles and 2,160 rotors. All these upcoming capacities will help us to scale up our operations and add to the revenues and margins of our Company. Our Product Range We manufacture and sell a wide variety and range of textile products, such as, specialty yarns, e.g. various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. We had added cotton garments segment to our existing product portfolio during Fiscal2002. As a matter of strategy, cotton garments are presently outsourced and are sold under our brand name. Since March 2006, we have started the manufacture of indigo dyed specialty denim fabric, which has added to our existing range of rich product portfolios. The details of various existing products of our Company, their end use and turnover are last few years are as under:

(Rs. in million) Products HY-1

2006 HY-1 2005*

Fiscal 2006

Fiscal 2005

Fiscal 2004

End Use of Product

Wool/Blended Tops 40.44 39.62 86.26 133.38 142.96 Input for yarn production

Worsted Yarn 556.73 600.06 988.29 955.99 857.14 Input for fabric production

Lamb Wool Yarn 106.94 84.49 120.12 93.25 49.84 Input for fabric production

Woven Textile Products

33.93 25.71 77.61 253.47 460.51 End Consumers

Woollen Hosiery Garments

93.35 85.53 455.66 414.84 418.88 End Consumers

Cotton Garments 172.66 109.10 283.97 206.86 147.24 End Consumers Denim Fabric 190.35 - - - - Ready made garments

manufacturer for garments production

* Based on un-audited figures subjected to limited review by the Statutory Auditor

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Our Monte Carlo and Canterbury Products We had introduced the brand ‘Monte Carlo’ for selling woollen hosiery products in India in the year 1985. Since then there has been no looking back for ‘Monte Carlo’ and we believe that ‘Monte Carlo’ is one of the most famous brands in woollen hosiery garments segment in India. ‘Monte Carlo’ has been recognised as a ‘Superbrand’ since Fiscal 2003 by the International Society for Superbrands.

(Our Product Logos)

The turnover from our ‘Monte Carlo’ products for the six months ended September 30, 2006 was Rs. 26.59 million as against Rs. 19.46 million for the corresponding period ended Fiscal 2005. The turnover from our ‘Monte Carlo’ products during Fiscal 2006 was Rs. 73.95 million. As a long-term business strategy, for increasing the geographical reach of our ‘Monte Carlo’ products and make it a ‘All Seasons Brand’, we had introduced various other types of woven garments, especially cotton based trousers and T-Shirts, under ‘Monte Carlo’ during Fiscal2002. We intend to leverage the strength of our brand, ‘Monte Carlo’ to sell these all seasons’ new products to all parts of India. Introduction of these new products will also add to brand equity by virtue of having more products under its fold and greater geographical area under its span. The ‘Monte Carlo’ products are sold through a chain of ‘Monte Carlo Exclusive Brand Outlets’, selective departmental/retail stores. Our distribution channel comprises of 23 exclusive ‘Monte Carlo Exclusive Brand Outlets’ in addition to National Chain Stores such as Shoppers’ stop, Pantaloons etc. and other Multi Brand Outlets (MBO) across the country. Besides, we sell our high-end premium woollen hosiery garments range in India under the brand name ‘Canterbury’. We use high quality, low micron specialty imported yarns for our ‘Canterbury’ range of products. Quality Certifications for our Products. Woolmark Certification on our Monte Carlo Products We are a registered licensee of ‘Woolmark’ for ‘Monte Carlo’ and ‘Canterbury’ range of woollen hosiery products. Woolmark is the certification trademark for products made from pure new wool, which meets certain quality standards laid down by the Woolmark Company. Woolmark is the world's best known and most successful textile symbol and has been voted as the seventh greatest brand of all times by the Financial Times. The symbol is now registered in more than 140 countries.

(The Woolmarks)

Woolmark and other trademarks of the Woolmark Company can be used by a company on obtaining a license. The products need to be able to meet the quality standards demanded by the Woolmark programme, such as, maintaining consistent high quality. A licensee’s of Woolmark, is entitled to the following benefits:

• Use the Woolmark on products to show that they meet the strict internationally recognised performance standards that the Woolmark Company has laid down;

• Access to the worldwide sourcing service of the Woolmark Company to help you locate suppliers and business partners;

• Access to valuable technical advice and product information; • Access to regular Woolmark Company forecasts, wool facts and newsletters designed to keep in touch

with latest developments in the wool textile industry.

(Source: www.woolindia.com)

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Business Superbrand Affiliation of Monte Carlo ‘Monte Carlo’ has been recognized as a ‘Superbrand’ in the woollen hosiery garments category since Fiscal 2003 by the International Society for Superbrands. ‘International Society for Superbrands’ is an independent arbiter on branding. It identifies and pays tribute to exceptional brands by recognising, rewarding, and reinforcing leading brands from all over the world. The organisation runs the Superbrands award schemes and promotional programmes, each with a brand-focused publication at its core. Superbrands have launched programmes in over 55 countries including all the key global markets. Superbrand programmes aim to identify those brands that are performing above and beyond others within the market.

(Source: www.superbrands.com) Our Operations We are an integrated composite textile player manufacturing various types of worsted yarns, textile fabrics, woollen hosiery, denim fabric and readymade garments. Our operations basically consist of combing, dyeing, spinning, designing, knitting, weaving, marketing and retailing. We have a modern wool combing plant with a capacity of 2.5 million lbs per annum for manufacture of wool/blended tops from raw wool, acrylic tow and other fibers. Out of our total production of tops, around 80% is consumed internally for manufacture of yarn and balance 20% is sold or delivered after combing on commission basis. We also undertake combing operations on job work basis for external manufacturers of yarn based on our production schedule. Our dyeing section has a capacity of 20 tonnes per day to process tops, loose fibres and yarn. The spinning section is equipped with 26,248 spindles to produce different types of woollen/acrylic/blended/fancy yarn for hosiery, hand knitting and weaving. The hosiery yarn produced by us is consumed internally for our knitting operations as well as sold to external customers. We have weaving capacity consisting of 100 power looms to manufacture blankets, shawls etc. Our modern knitting facilities are capable for manufacture of up to 750,000 pieces per annum with different designs and patterns. We consume yarn produced by us and also source yarn from external market based on specific requirements for our knitting operations. The production of woven garments are outsourced from various garment manufacturers (converters) selected by our Company. The selection of such converters is based on our evaluation of their facilities and our quality parameters. The selection of fabric and other accessories like thread for sewing, buttons etc. is done by our designers either sourced and supplied or intimated to these converters. The design and pattern of the garment to be manufactured is prepared by our designers. We depute our production supervisors at the facilities of each of these converters to supervise the production and ensure the desired quality of garment produced to ensure that brand equity of ‘Monte Carlo’ brand under these garments are marketed does not get diluted. Considering our core competence in the woollen textile sector and to further diversify our activities, we initiated the process of setting of a denim-manufacturing unit with a capacity of 20 million meters per annum at Village Jalalpur, Lalru, Punjab at an estimated cost of Rs. 1,050 million in three phases. The first phase has already been completed with a capacity of 10 million meters per annum. We intend to complete second phase with capacity of 5 million meters per annum by January 2007 and addition of another 5 million meters per annum in third phase by June 2007. We intend to go for modernisation/expansion/balancing of existing production capacities for manufacture of worsted yarn, setting up cotton/blended yarn spinning plant to meet out raw material requirement of denim plant, another captive power plant for our denim fabric plant and building retail chain of 150 stores to sell ready made garments under its brands ‘Monte Carlo’ and ‘Canterbury’. In Fiscal 2006, we have commissioned a co-generation power plant with an installed capacity of 3.5 MW for captive use for our worsted yarn plant. This co-generation power plant meets the full requirement of power for the above-referred unit. Our Existing and Forthcoming Manufacturing Capacities The following table sets forth our existing capacities and proposed capacity in respect of our products:

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Capacities Particulars Unit Existing Post Expansion

Yarn Worsted woollen spindles 26,248 31,032 Textile Power looms 100 100 Wool Top Lbs per annum 2,500,000 2,500,000 Readymade Garments/ knitwears * Pieces per annum 750,000 875,000 Denim Fabric** Meters per annum 10,000,000 20,000,000

Spindles Nil 14,400 Cotton / Blended yarn Rotors Nil 2,160

*Does not include ready-made garments of cotton segment, which are primarily outsourced by our Company ** Capacity expansion to 20 million meters is entirely funded through term loans under TUFS Manufacturing process

a) Wool Top: The main raw material for the preparation of wool top is greasy wool, which is primarily imported from Australia. Greasy wool from different farms is mixed together to obtain a hom*ogenous lot/batch for further processing. The lot/batch is then processed through scouring to remove natural grease, suint and dirt to make scoured wool. Scoured wool is then processed through carding machine to make the fibres parallel and to obtain carded sliver. Carded sliver is then processed through three gilling machine consecutively to further hom*ogenize carded sliver. The hom*ogenized carded sliver is then processed through combing process to remove VM, unwanted short fibres and dirt, such as, noils to make cleaned wool sliver. Combed wool sliver is further hom*ogenized by mixing and drafting in gilling machines to obtain ecru wool top. The ecru top is subjected to dyeing process as per specific requirements and further processed through gilling and combing process to obtained hom*ogeneous dyed re-combed tops. The following is a brief process flow chart of the wool top manufacturing process:

b) Worsted Yarn: The grey tops/dyed tops (100% wool, 100% acrylic, acrylic/wool, polyester/wool,

wool/viscose, wool/nylon or any other blends) is the basic raw material, which is processed on four gill boxes to make the fibres parallel, to even out the sliver weight by means of doublings and drafting, to mix the shades/blends hom*ogenously and to reduce the sliver weight per unit length at different stages according to the count of the yarn to be spun. The out put sliver of the gill boxes is delivered in the cans. The sliver of the fourth gill box (finisher gill box) is fed on rubbing frames/roving machines like FM-7, FM-8, BM-12 or BM-14 to make the roving in the required weight per unit length according to the required spinning count of the yarn. The roving is wound on plastic bobbins for further processing or ring frames for converting the roving into yarn of the desired fineness (count) by drafting and the desired twist is inserted in the yarn by means of ring traveler, which also helps in winding the yarn on spinning cops (bobbins). The spun yarn is run on auto coner machines to remove various objectionable faults (like neps, slubs, thin places and yarn count faults etc., which are developed during back processing), which are not desired in the fabric by passing the yarn through latest electronic yarn clearers and to splice the yarn ends to make knot free and defect free yarn. The auto-coned yarn is wound on plastic/paper cones for further processing. In case the yarn is required in single yarn form then the yarn is processed in yarn conditioning plant or volufil machine. In case of 100% wool, polyester/wool, wool/nylon, wool viscose or any other blends which do not have shrinkable fibres are steamed in yarn conditioning plant to set twist in the yarn so that the yarn do not give any snarling problem due to the twist on further process and the yarn like 100% acrylic, acrylic/wool or any other blends having shrinkable fibres are processed on volufil machine (cone to cone yarn bulking machine) to make the yarn bulky and soft for hosiery , knitting or weaving as per the specific requirement.

Blending & Mixing

Raw Wool-Greasy

Scouring Carding Combing Bump Press

Two Stage Gilling Process

Three Stage Gilling Process

Dyeing & Re-combing

Grey/Dyed Top Packing

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In case of ply yarns, i.e., 2 ply, 3 ply, 4 ply or 5 ply yarns, the auto coned yarn is run on assembly winding machine (cheese winding machine) & the plied yarn is wound on plastic parallel cheeses for further processing.

The assembly wound plastic packages are run on two for one twisting machine for inserting the required twist to the plied yarn. Again, yarn like 100% wool, polyester/wool, wool/viscose, wool/nylon or any other blends, which do not have shrinkage fibres are processed in yarn conditioning plant and the yarn like 100% acrylic, acrylic/wool or any other blends having shrinkable fibres are processed on volufil machine.

Yarn, which are to be dyed in hank dyeing machines, are run on reeling machines for making hanks of the required circumference and weight. The hanks are packed in bundles and then bales and the bales are sent to dye house or godown as per the requirement. Yarn processed in yarn conditioning plant or volufil machine are packed in cartons/bales as per the requirement and transferred to godown for dispatch to the market.

c.) Lamb Wool Yarn: The basic raw material lamb wool is fed into blow room for mixing and blending

with nylon, viscose, acrylic, cotton, angora etc as per requirements. The blend is then conveyed to carding bins where it is converted into sliver. The sliver is then converted into yarn on ring frame machine by drafting and twisting process. The yarn is then further processed on autoconer to obtain finished uniform yarn on cones.

d.) Knitted Garments: The yarn is converted into knitted fabric panels of required design and shape

through computerized flat knitting machine or circular knitting machine. The design of fabric is prepared through CAD system. The fabric is then passed through milling process to control the shrinkage of the panels & to improve the feel of the panels. The fabric is then further processed through panel pressing to remove wrinkles from washed panels. The processed knitted fabric panels is then cut into the required sizes and stitched to prepare the knitted garment.

e.) Denim Fabric Manufacturing Process

Knitted Garment Process Flow Chart

Worsted Yarn Process Flow Chart

Yarn Testing

In house Yarn / External Yarn

Flat Knitting/Circular Knitting Process

Batch Operation- Finishing

Colour and shade testing

Design Input through CAD

Fabric quality check

Ware Housing

Milling & Panel Pressing

Rubbing Frame/ Roving Frame

Grey Tops/ Dyed Tops

Four Stage Gilling Process

Ring Frame

Auto Coner

TFO

Reeling

Assembly Winding

Packing

YCP

Volufil

EB-4 Godown

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Historically, denim was a heavy weight fabric with two basic weaving structures, either as warp twill 3/1 or broken twill 3/1 with indigo colour used to get the ring dyeing effect (surface of the yarn would be dyed with Indigo whereas core would remain white i.e. undyed). However, with the change of time, denim has become a fashion fabric with lot of structural play in yarn and fabric structure combined with various colour effects, viz, indigo, indigo bottoming sulphur topping (IBST), sulphur bottoming indigo topping (SBIT), sulphur of various shades, vats and reactive dyes in combination with indigo. In addition, different wash effects & mechanical and chemical treatment on garments (like sand blasting, chemical blasting etc.) have made the denim garments highly fashionable and lovable products for the people of all ages and across the world.

Accordingly, creativity and innovation in products and process have become the key factor in denim business. There are generally two routes of producing indigo denim fabrics:

Rope Dyeing Route Slasher Dyeing Route

With the latest technological innovation, either of the two routes can produce wide range of denim products required by fashion driven customers. However, the right kind of spinning and post weaving processes are equally critical to deliver a product to customers at a cost perceived to be value of money. Generally, denim-manufacturing process consists of:

Spinning: From Blow room to yarn manufacturing; and Fabric manufacturing and finishing process:

From Warping to Finishing

We have started denim project with the 2nd phase, warping to finishing, first to deliver the product to the customers early. Our denims project has been designed for producing 20 million meters of fabric per year through rope dyeing route. We have already commissioned production with capacity of 10 million meters in March 2006, which is being extended to 15 million meters per year from early 2007 to be further extended to 20 million per annum some time by mid 2007.

Raw material Our primary raw material is merino grade greasy wool with 17.5 to 28 micron thickness and minimum fibre length of 65 mm, which is primarily imported from Australia and New Zealand. The imports are made through agents who deal primarily in wool. Being organic commodity, the production of wool is seasonal but the supply is available all round the year through wool suppliers who store it round the year, however the market rates for the same do keep on fluctuating during the year. The experience gained by us over the last fifty years enable us to anticipate the price movements and procure wool at reasonable rates. Other inputs, such as, acrylic fibre/tow, nylon staple fibre and angora fibre are sourced from Thailand, Japan, Taiwan, China etc., and also from the domestic market. Further we require cotton yarn of count mainly from four to seven for our denim fabric operations. The cotton yarn is primarily sourced from open market from Punjab and our other group companies. Estimated Raw Material and Stores Requirement for existing operations during current year

Particulars Unit Requirement per

Annum Raw Materials Raw Wool Greasy/Scoured Tonnes 2,887.20 Acrylic Fibre/Tow Tonnes 4,159.90 Nylon Staple Fibre/Top Tonnes 416.00

Yarn Store Winding of Rests

Balling Warping

Indigo - Dyeing

Long Chain Bemaing

Sizing Drawing-in

Weaving

Finishing

Shrinking

Inspection

Finished Cloth Store

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Angora Rabbit Hair Tonnes 61.00 Cotton Yarn Tonnes 6,662.60

Marketing and Distribution Networks Wool / blended tops Currently wool top/blended is sold in domestic market in and around Ludhiana to various yarn producers primarily through local agent’s network. We also sell wool top to various yarn producers on direct basis. Wool top being an intermediary base product for manufacture of worsted woollen yarn has ready market in form of various worsted woollen yarn manufacturing companies based at Ludhiana and hence does not require much marketing and logistical support. Worsted Yarn, Lamb Wool Yarn and Hand Knitting Yarn We sell our worsted yarn, lamb wool yarn and hand knitting yarn both in the domestic and international markets. In the domestic market all types of yarn are sold through the network of dealers based in potential geographical market of Northern India, North-West India, North-East India and Central India. Ludhiana being the hub for the woollen hosiery, a substantial part of these yarn is sold in Ludhiana and for that purpose, we have appointed five dealers exclusively engaged in the sale of yarn supplied by our Company. These dealers, apart from promoting the sale of our yarn in the market, also give us a feed-back regarding consumption/demand pattern, i.e., the quality, colour, the base fibers and other features of the products which are in demand in the market. We also sell our yarn to few export intermediaries for ultimate export to fabric manufacturers abroad. In international markets, we sell our yarn on specific order received through the network of international agents on commission basis. Currently we sell around 80% of our production in the domestic market and the balance is exported through international agents. In the domestic market, the main selling season for our yarn spans from April to December. Woollen Hosiery Garments Primarily we sell our woollen hosiery garments in the domestic market under our brands ‘Monte Carlo’ and ‘Canterbury’. The brand ‘Monte Carlo’ was introduced in 1985. Since then it has become a well-known name for woollen hosiery garments in India. Our ‘Monte Carlo’ brand has been recognized as a ‘Superbrand’ since Fiscal 2003. In the Fiscal 1995, we introduced another brand ‘Canterbury’ for selling our premium range of knitted garments. The woollen hosiery garments are distributed to wide network of dealers through respective area agents and also sold directly through the network of exclusive franchisees spanning across major cities in India. Our woollen hosiery garments are produced and sold on the basis of orders received through the network of area agents across various states. The area agents collect the orders from dealers after displaying them various designs and patterns. We derive 80% of our sales through our dealer network and balance 20% sales from our exclusive franchisee/owned store network. Currently we have the network of 23 exclusive franchisee/owned stores across various cities. We also sell woollen hosiery garments directly to few organised retailing chains. The dealers and the franchisees of our Company are backed by appropriate advertising campaign for our brands covering print media, major television channels, hoardings etc by our Company. We also adopt appropriate discount policy to ensure fast movement of our products. Woollen hosiery garments are mainly sold in the months from October to March. However, cotton/cotton blended knitted garments are sold round the year. Cotton Garments We have introduced cotton garments in domestic markets very recently. We sell these garments through our dealer as well as exclusive franchisee network set up by us for our woollen hosiery garments. We have introduced a range of high quality woven garments especially cotton based shirts and trousers under our established brand ‘Monte Carlo’ to capitalize on the goodwill and reach of our well known brand. Monte Carlo Distribution Network

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Under this format, we manage our stores either directly or by entering into franchisee agreements under the name ‘Monte Carlo Exclusive Brand Outlets’. Currently, we have 23 exclusive outlets across various cities in the country including the two stores in Ludhiana and Gurgaon, which is owned by our Company. The sizes of these outlets ranges from approximately 500 square feet to approximately 1,500 square feet with a total retail space of about 25,567 square feet retail area as on October 31, 2006. Under this format the sales are booked on a direct sales basis. The list of our current ‘Monte Carlo Exclusive Brand Outlets’ is as follows:

S. No. City Location Carpet Area (In square feet)

1 Gurgaon DLF City Centre, M.G. Road 1,400 2 Ludhiana G.T. Road, Sherpur 1,750 3 Hyderabad Panjagutta Road 1,450 4 Sri Ganganagar Swami Dayanand Marg 1,200 5 Surat City Mall Shopping Arcade 1,111 6 Patna Fraser Road 506 7 Ahmedabad C.G. Road 1,100 8 Patiala Harbans Cinema Complex, Rajbaha Road 1,320 9 Rohatak Model Town, Delhi Road 850 10 Ranchi Church Complex, Main Road 1,100 11 Panchkula Sector-8 1,100 12 Kaithal Patel Bazar, Main Market 1,000 13 Bhathinda Mall Road 780 14 Panipat Old Court Road, Insar Bazar 1,100 15 Sirsa Rori Bazar, PNB Lane 1,050 16 Jaipur City Plus Mall, Tonk Road 800 17 Nashik Patil Plaza, College Road 950 18 Amritsar The Mall 1,100 19 New Delhi Kalindi Kunj Road, Near Savita Vihar 900 20 Karnal Opposite Head Post Office 900 21 Kolkata Lindsay Street 1,100 22 Banglore Dispansary Road 1,500 23 Raipur Pandri 1,500

National Chain Stores and Multi Brand Outlets These are the various departmental stores such as Shopper’s Stop, Pyramid, Ebony etc. through which we sell our ‘Monte Carlo’ products. These chain stores allocate a specific space in their outlets for a particular brand on a ‘shop-in-shop’ basis. The space allocated and the location within the store depends upon the importance of the brand to the total portfolio of the departmental store. We also have significant presence through Multi Brand Outlets (MBO). These are the various stores, which have a local presence. These stores are popular in the specific cities or towns and such stores have on display a wide variety of brands. Denim Fabric Adding to our wide product range, we have started manufacturing of denim fabric in Fiscal 2006. We sell our fabrics only in domestic market through network of agents directly to dealers or garment manufacturers. We also sell our fabric directly to various reputed branded garment manufacturers or brands like Arvind Brands, Levis, Numero Uno, Shoppers’ Stop. Currently we generate around 75% of our sales through our dealer network and balance 25% from our direct sales to various brands or garment manufacturer. Since this is the first year of operation for our denim fabric division, we are in the process of stabilizing our operations and further increase the reach of our distribution network as well as build direct linkages with various domestic and international brands for selling our denim fabric. Intellectual property

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We own the exclusive right to use the trademark ‘Monte Carlo’, which has been recognized as ‘Superbrand’ by International Society for Superbrands for the woollen hosiery garments since 2003. We also own the trademark for ‘OWM’. We have applied for registration of trademark ‘Canterbury’ with the Trade Mark Registry. Detailed below are the trademarks we own or have applied for:

Our Product Logos Our Corporate Logo

For details relating to our trademarks, see section titled “Government and Other Approvals” beginning on page [●] of this Draft Red Herring Prospectus. Insurance Our operations are subject to hazards inherent in large-scale textile manufacturing, such as risk of equipment failure and work accidents. We also are subject to the effects of natural disasters and acts of terrorism. The hazards we face include those that may cause injury and loss of life, damage to and destruction of property and equipment and environmental damage. We have obtained what we consider to be adequate insurance for our facilities and have also obtained automobile insurance policies and workmen compensation policies as well as hospitalization and group personnel accident policies for our permanent employees as may be required under the various jurisdictions where our facilities are located. Human Resources As of October 1, 2006 we have around 4,182 employees comprising of 740 administrative/managerial staff, 871 skilled workers and 2453 unskilled workers. We have a strong ongoing commitment to the health and safety of our employees and achieving sustainable development in harmony in environments in which we operate. A significant portion of our staff has been working with us for over 20 years. Quality Control We have established a quality management system (QMS) and have implemented the same throughout our Company. A system has also been developed to ensure continual improvements in the effectiveness of the QMS. A management review committee under the chairmanship of Mr. Sandeep Jain, our Executive Director has been constituted for conducting the review of our Company’s quality management system, quality policy and objectives. The committee reviews the system at least once in six months for ensuring its continuing suitability, adequacy and effeteness. Our Quality Policy We are committed to provide total customer satisfaction by meeting all requirements and continual improvement of quality management standards performance. The following are the objectives of our quality management system:

To enhance customer satisfaction Regular review and Upgradation of technology Cost reduction in operations

ISO 9001:2000 Certification The Quality Management System of our Company has been certified to conform to the Quality Management System Standard: ISO 9001:2000 by DNV Certification B.V., the Netherlands for the manufacture and supply of dyed and grey tops and yarn in worsted wool, pure wool, lamb wool, acrylic wool blends and polyester wool blends and Angola, berthia and serge fabrics. The original certificate was valid from June 19, 2001 to June 19, 2004, which has been further extended till June 19, 2007. Awards and Recognitions The following is the list of awards/recognitions won by our Company: Year Awards/Recognitions 1995 to 1999 ‘Best Exhibited Product’ by the Woolmark Company for ‘Monte Carlo’ woollen

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Year Awards/Recognitions hosiery garments

Since 2003 ‘Superbrand’ recognition for ‘Monte Carlo’ woollen hosiery garments by International Society for Superbrands

Industry Affiliations Our Company is a member of some industry associations. These industry associations work towards betterment of the overall industry. A list of our affiliation with major industry associations is in the table below: Name of the Industry Association Objective of the Industry Association Wool and Woollen Export Promotion Council

Membership is essential for export of our woollen products

Synthetic Rayon Textile Export Promotion Council

Membership is essential for export of our acrylic/blended yarns

Competition The textile and apparel industry is highly competitive. No single company dominates the industry. We seek to compete in the domestic and export markets on the basis of the price, range, quality of our products, our delivery times and customer service capacities. In the woollen hosiery garments range, which is sold under our brand ‘Monte Carlo’ we do not have any significant competition and we enjoy brand loyalty from our customers. In respect of our woollen/blended worsted yarn business, we compete primarily with other large organised players based in North India as well as a large segment of small unorganized players based mainly in Punjab. The main competitors of our woollen/blended worsted yarn business are Vardhman Textiles Limited, Jayshree Textiles Limited and Malwa Cotton Mills Limited. As regards our branded woven garments primarily cotton shirts and trousers, we are new entrant in already highly competitive market. We face competition from many established domestic as well as international brands. However, the woven cotton textile industry is highly competitive and no single company dominates the industry. We seek to compete in the domestic market on the basis of the price, range, quality of our products, brand name and our delivery times. In respect of denim fabrics business, we compete primarily with other fabrics manufacturers. The main competitors of our denim fabric business in India are Arvind Mills Limited, Aarvee Denims Limited and Raymond Limited. However, with our focus on value added denim fabric segment and advanced product and process design initiatives, we are well positioned to face competition more efficiently. Health, Safety and Environment We comply with applicable health, safety and environmental legislation and other requirements in our operations in different jurisdictions. To ensure effective implementation of our practices, we seek to identify and evaluate potential hazards and to develop and put in place adequate controls. We also emphasize training in occupational health and safety procedures as an integral part of our operations. Our environmental management policy requires compliance with all local, state and central laws and regulations concerning environmental protection and related matters. Environmental legislation in India includes the Environmental Protection Act, 1986, the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981. Detailed rules and regulations have been prescribed under these acts, including rules governing the management of hazardous waste and the manufacture, storage and import of hazardous chemicals and management of noise pollution. We are in compliance with all applicable health, safety and environment regulations in the jurisdictions where we conduct our operations. We have obtained necessary environmental consents from the Punjab State Pollution Control Board. We are subject to regular inspections for the discharge of water effluents and the emission of gases for all of our plants. We believe that we are in compliance with all applicable environmental laws and regulations. Corporate Social Responsibility

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Corporations do not create a team. It’s a good team, which creates a good corporation. We fully realize this fact and therefore provide our team with the best working and social environment. From a highly creative office atmosphere to an eco-friendly manufacturing infrastructure, our business philosophy is finely guided by protecting the environment and the interest of its people, customers and business associates. From healthcare to international standards of social compliance, we treat every issue as a means to higher efficiency of our social responsibility. Our Offices and Production Facilities We have acquired immovable properties for setting up our offices and production facilities for the purpose of business. These properties are held either on a freehold or a leasehold basis. Our registered office is located in Ludhiana and manufacturing facilities are based in Ludhiana and Lalru in Mohali, Punjab. Set forth below is a brief summary of the significant properties held by our Company:

Office/Facilities Location Area (sq yards)

Nature of Interest

Registered and Corporate Office

G.T Road, Sherpur, Ludhiana 141 003, Punjab Freehold

Unit III: G.T Road, Sherpur, Ludhiana 141 003, Punjab

105,887

Freehold

Unit IV: Plot No. 92, G.T. Road, Daba Road, Ludhiana

7,357 Freehold

Unit V and VI: Industrial Area ‘A’, Ludhiana, 141 003, Punjab

8,975 Freehold

Production Facilities

Denim Plant: Village Lalru, P.O. Dappar, Ambala Chandigarh Road, District Mohali,

224,455 Freehold

Plot No.22, Sector 18, Gurgaon* 24,243 Freehold Branch Office

414, Raheja Chambers, 213, Backbay Reclamation, Nariman Point, Mumbai, 400 021 **

161.77 Freehold

106-107, Cochrane Basin Road, Chennai 58,407.67 Freehold Other Properties Unit I: Kucha Nirakari, Miller Ganj, Ludhiana 6,606 Freehold

* Vide a deed of conveyance dated December 10, 1986, the Haryana Urban Development Authority (“HUDA”) transferred the premise to our Company for a consideration of Rs. 1.30 million on the condition that our Company shall not transfer by way of either sale mortgage or otherwise the site or any title or interest therein (except by way of lease on monthly basis) without the permission of HUDA and until a building has been constructed on the said premise up to a minimum of 10 percent on the land and shall use the land only for industrial purposes. We have subsequently sub-leased the premise admeasuring 255,996 sq. meters to erstwhile G.E Capital International Service (“GECIL”) presently known as Genpact India, engaged in information technology industry for a consideration of an interest free refundable security deposit of Rs. 40.95 million and monthly rent of Rs. 8.00 million. The lease is for a period of 5 years commencing from July 1, 2006 and ending on June 30, 2011. As per the letter dated June 21, 2006 from HUDA, granting permission to our Company, to sub-lease the premise to GECIL, our Company is required to make good any loss that may be incurred by HUDA, due to this sub-lease. Additionally if there arises any litigation in relation to this lease agreement with GECIL, we would be liable to defend HUDA in the same. **Vide sale deed dated December 26, 1977 M/s National Construction Corporation, (“NCC”) transferred the premise to our Company for a consideration of Rs. 0.22 million on the condition that our Company would use the premise only for official purposes and not sub-let, sell transfer assign or part with the premise without the prior written permission of NCC. Additionally our Company has agreed to pay brokerage fee at the rate of 2% on the purchase price.

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FINANCIAL INDEBTEDNESS Set forth below is a brief summary of major borrowings of our Company, as on September 30, 2006, together with a brief description of certain significant terms of the relevant financing agreements.

Lender Facility and Loan Documentation

Interest Rate and Repayment Schedule

ICICI Bank Limited* Term loan of Rs. 120 million pursuant to an agreement dated August 2, 2000.

Interest: 9.25% (i.e. 1% over the LTPR) Repayment: The loan shall be repayable in 24 equal quarterly instalments of Rs. 5 million each plus interest starting from October 15, 2001.

State Bank of Patiala*(1) Term loan of Rs. 135 million pursuant to an agreement dated March 13, 2002 under the TUFS.

Interest: 9.75% (0.50% over LT PLR) Repayment: The principal amount is to be repaid in nine years (including a moratorium of one year) in 32 equal quarterly installments of Rs. 4.22 million starting from March 2003.

Central Bank of India* Term loan of Rs. 100 million (including a one time capital goods F letter of credit of Rs. 500 million) pursuant to an agreement dated March 26, 2002.

Interest: 9.50% (0.5 % below MTLR) Repayment: The loan will be repaid in nine years (including moratorium period of one year) in 32 equated quarterly instalments of Rs. 3.13 million each starting from April 1, 2003.

State Bank of Patiala*(1) Term loan of Rs. 209 million availed pursuant to an agreement dated March 14, 2003.

Interest: 9.75% (i.e. 0.50% over the MT PLR.) Repayment: The loan will be repaid in nine years (including moratorium period of one year) in 32 equated quarterly instalments of Rs. 0.65 million each starting from March 2004.

State Bank of Patiala*(1) Term loan of Rs. 50 million pursuant to an agreement dated July 23, 2004.

Interest: 9.75% (1.50% below BPLR) Repayment: The loan will be repaid in nine years (including moratorium period of one year) in 32 quarterly instalments of Rs. 1.56 million each starting from October 1, 2006.

State Bank of Patiala* (1)

Term loan of Rs. 656 million availed pursuant to an agreement dated July 25, 2005 under the TUFS.

Interest: 8.75% p.a (2.5% below BPLR) Repayment: Rs. 390.4 million of the loan will be repayable in 32 equated quarterly installments of Rs. 12.20 million each starting from March 31, 2008.

Rs. 59.2 million of the loan will be repayable in 32 equated quarterly instalments of Rs. 1.85 million each starting from September 30, 2008.

Rs.206.40 of the loan will be repayable in 32 quarterly instalments of Rs. 6.45 million each starting from December 31, 2009.

State Bank of Patiala*(1) Term loan of Rs. 809 million pursuant to an agreement dated September 4, 2006 under the TUFS

Interest: 9.00% (2% below BPLR) Repayment: The principal is to be repaid in 32 equated quarterly installments of Rs. 25.28 million each starting from December 31, 2008

Allahabad Bank ** Term loan of Rs. 120 million pursuant to an agreement dated September 14, 2006.

Interest: 9.50% (2% below the BPLR) Repayment: The principal amount is to be repaid in 32 quarterly installments of Rs. 3.75 million each, after a two year moratorium starting from December 31, 2008.

Allahabad Bank, State Fund Based Limits of Rs. Interest: PLR on CC and WCDL which is

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Lender Facility and Loan Documentation

Interest Rate and Repayment Schedule

Bank of Patiala, and Punjab and Sind Bank (2)

1280 million vide agreement dated June 22, 2004.

presently 11% with monthly rests. Repayment: Repayable on demand

*The loans are secured by a hypothecation pari passu basis (with other term lenders) on our Company’s existing plant and machinery at Ludhiana and Lalru including equitable mortgage of land and building at Ludhiana and Lalru. Further, the loans are secured by a second charge on current assets of our Company with other term lenders and personal guarantees Mr. Jawahar Lal Oswal, Mr. Kamal Oswal and Mr. Dinesh Oswal. **The loan is secured by an exclusive first charge on the plant and machinery acquired under the project and second joint pari-passu charge over movable assets of our Company subject to prior charges of the banks meeting working capital requirements. (1) Under the terms of the loan agreement, the shareholding of the Directors, principal shareholders and

promoters of our Company, shall not be varied without the previous written consent of the lender. Further, the lender shall have a right to appoint a nominee director on the Board of Directors who shall not be liable to retire by rotation. Further, our Company has undertaken not to do the following without the prior written consent of the lender:

• Change or in any way alter the capital structure of the our Company; • Effect scheme of amalgamation or reconstitution; • Implement a new scheme of expansion or take up allied line of business or manufacture; • Declare a dividend or distribute profits after deduction of taxes in the event of any default under

the terms of the loan agreement; • Enlarge the scope of the other manufacturing/trading activities, if any, undertaken at the time of

the application and notified to the lender as such; • Withdraw or allow to be withdrawn any moneys brought in by the promoters and directors or

relatives and friends of the promoters or directors of our Company. (2) The facility is secured by a pari passu joint hypothecation charges over entire stocks, book debts and all

other current assets of our Company, both present and future, a pari passu second charge on the movable property of our Company and personal guarantees of Mr. Jawaharlal Oswal, Mr. Dinesh Oswal and Mr. Kamal Oswal. Further, under the terms of the facility we have undertaken not to without the prior consent of the lenders in writing: • Declare any dividend on our share capital, if it fails to meet its obligations to pay the interest, or

other moneys payable to the banks. • Effect any change in our capital structure • Implement any scheme of expansion/diversification/modernisation other than incurring routine

capital expenditure. • Formulate any scheme of amalgamation or reconstruction. • Undertake guarantee obligation on behalf of any other company. • Make any corporate investments or investment by way of share capital or debentures or lend

advance funds or place deposits with any other concern except give normal trade credits or place on security deposits in the normal course of the business or make advances to employees; Provided we may make such investments by way of deposits or advances that are required statutorily to be made as per the existing laws or rules or regulations or guidelines issued from time to time by the Authorities concerned.

• Withdraw moneys brought in by the principal shareholders directors/depositors/other associate firm/ group companies for financing the programmes and the working capital needs of our Company.

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REGULATIONS AND POLICIES IN INDIA Our Company is involved in the manufacture of woollen textiles, knitwear and hosiery amongst others. The Government of India has over the years formulated various regulations and polices for the development of the textile sector in India. Following are the significant regulations and policies in India that govern our industry: Dereservation of the Knitwear sector The Central Government had pursuant to its powers under the Industries (Development and Regulations) Act, 1952, reserved knitting segment and the woven garment segment under the small scale industry (“SSI”) which provided certain concessions to industries manufacturing such articles while imposing restrictions on the extent of investment in such an industry. From January 1, 2001 the Government has de-reserved the woven garment segment from SSI. In order to attract large investments, high tech capacity building and to enhance the competitiveness of Indian knitting segment by exploring economies of scale, the Government has vide notification (No.S.O.420(E)) dated March 28, 2005, de-reserved the knitting segment from SSI. FEMA Regulations Foreign investment in India is governed primarily by the provisions of the FEMA which relates to regulation primarily by the RBI and the rules, regulations and notifications there under, and the policy prescribed by the Department of Industrial Policy and Promotion, Government of India which is regulated by the FIPB. The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) to prohibit, restrict or regulate, transfer by or issue security to a person resident outside India. As laid down by the FEMA Regulations, no prior consents and approvals is required from the RBI, for FDI under the “automatic route” within the specified sectoral caps. In respect of all industries not specified as FDI under the automatic route, and in respect of investment in excess of the specified sectoral limits under the automatic route, approval may be required from the FIPB and/or the RBI. FDI Policy 100% FDI is allowed in the textile sector under the automatic route. FDI in sectors to the extent permitted under automatic route does not require any prior approval either by the Government of India or RBI. Removal of Trade Barriers under the WTO regime Global trade in textile and clothing has been subject to various restrictions since the 1930s. The protectionist measures adopted by the major importing nations during the period 1930-1960 were in the form of high tariffs and restraints on imports from Japan. A short-term arrangement in cotton textile trade was reached in 1961 under the General Agreement on Tariffs and Trade, 1947. Subsequently, the Long-Term Arrangement Regarding International Trade in Cotton Textiles was concluded in 1962 by imposing a 5% limit on imports of cotton products from developing countries. In 1974, the Multi-Fibre Arrangement (“MFA”) came into existence whereby industrialized countries, through bilateral agreements with individual trading partners, could establish quotas on textile and clothing imports from competitive developing countries. Initially, the MFA was supposed to remain in force for four years, but was extended time and again till 1994; in 1995, the MFA was integrated into GATT via the Agreement on Textiles and Clothing. Consequently, the quota restrictions on trade in textiles including woollens, knitwear and hosiery have been removed from under the MFA, with the implementation of World Trade Organisation Agreement on Textile and Clothing, from January 1, 2005. National Textile Policy 2000 The Ministry of Textiles has formulated the National Textile Policy, 2000 (“Textile Policy”) with the objective of enabling the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing. The Textile Policy envisages a multi-pronged strategy to achieve these long term goals. It contains sector specific agendas for sectors like cotton and wool/knitwear like it encourages collaborative research projects with the leading wool producing countries of the world, private breeding farms to increase productivity; and promotes private sector linkages for marketing of wool. Among others, it also encourages establishment of pre-loom and post-loom processing facilities and integrated development programme for angora wool. Textile Policy 2006 of State of Punjab

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The Textile Policy of State of Punjab (“Policy”), notified in pursuance to the ‘Industrial Policy 2003’ issued by Central Government, aims to facilitate the textile industry of Punjab to attain and sustain a pre-eminent global standing, to equip the industry to withstand pressure of import penetration and maintain a dominant presence in the domestic market and to facilitate cluster formulation to promote collective efficiency of textile units by improving their business processes and support systems. The Policy aims to strengthen technology up-gradation, enhancement of productivity and integrated human resource development in the textile industry. It promotes quality consciousness strengthening of raw-material base and affords special benefits to textile industry Essential Commodities Act 1955 Woollen textiles are an essential commodity under the Essential Commodities Act 1955 (“ECA”). The ECA authorizes the Central Government, to regulate or prohibit the production, supply, distribution and trade and commerce in the specified commodities under the ECA, inter alia, for maintaining and increasing supplies of any essential commodity and for securing their equitable distribution and availability at fair prices. The Central Government has issued the following orders pursuant to its powers under the ECA:

• Cotton (Control) Order, 1986 (“Cotton Order”). The Cotton Order prescribes the maximum quantity of cotton that may be possessed by a manufacturer, a cotton ginning factory, a cotton pressing factory, a cotton ginning and pressing factory and a person. The Cotton Order further establishes the office of the Textile Commissioner as the regulator there under. Additionally, the Cotton Order specifies the quality standards that have to be met while picking cotton for the purposes of export and domestic consumption as well as the markings that have to be made on the cotton bale before marketing of the same.

• The Textile (Development and Regulation) Order 2001, (“TDRO 2001”), which replaces the Textile

(Development and Regulation) Order 1993, has been issued in the light of the mandate of the National Textile Policy, 2000, to review and progressively reduce regulations and control. The TDRO 2001 mandates the Textile Commissioner, appointed by the Central Government, to ensure that the yarn in hank form is available in adequate quantity at reasonable prices to the handloom industry and for that purpose empowers the Textile Commissioner to make statutory provisions and take necessary action for compliance of the same.

The Technology Mission on Cotton The Technology Mission on Cotton, which is in operation since February, 2000 addresses issues relating to the core fiber of cotton like low productivity, contamination, obsolete ginning and pressing factories, lack of storage facilities and marketing infrastructure The Textile Committee Act, 1963 The Textile Committee has been established under the Textile Committees Act 1963 (“TCA”), with the primary objective of ensuring standard quality both for internal marketing and export purposes and standard type of textile machinery. Its functions include the promotion of textiles and textiles exports, research in technical and economic fields, establishing standards for textiles and textile machinery, setting up of laboratories, data collection etc. Additionally, the Textile Committee regulates the imposition of cess on textile and textile machinery that is manufactured in India under the Textile Committee Act. Ministry of Textiles Order (F. No.8/3/2001-Tpc) dated December 19, 2001 The Ministry of Textiles Order (F.No.8/3/2001-Tpc) dated December 19, 2001 (“Textile Order”) was promulgated in supercession of the Textile (Development and Regulation) Order, 1993. The Textiles Order mandates that every manufacturer of textiles or textile machinery and every person dealing in textiles must keep books of accounts and records relating to his business as required under the Textiles Order and must furnish such returns or information in respect of their business as and when directed by the Textile Commissioner. Further, the Textile Order authorizes the Textiles Commissioner to pass directions with respect to the production and supply of textiles by textile manufacturers if the same is required in public interest or in the interest of national security.

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The Textile Commissioner, under the Textiles Order, is authorized to specify from time to time, certain markings that must be made on textiles by a manufacturer of such textiles. No person, other than a manufacturer, is permitted to have in his possession or under his control textiles without such markings and no person is permitted to offer or store such unmarked textiles for sale. Ministry of Industry, Department of Industrial Policy and Promotion, Press Note No. 17, (1998 series) With a view to encouraging investments towards setting up of integrated units and thus achieving value additions, as well as to address the current difficulties of the cotton yarn export oriented units (“EoU”), the Government promulgated Press Note No. 17 (1998 Series) (“Press Note 17”), which allows EoUs the operational flexibility of exporting cotton yarn without being subject to domestic cotton sourcing restrictions to the extent provided for within the press note. Duty Exemption Passbook Scheme The basic purpose of Duty Entitlement Pass Book (“DEPB”) scheme (“Scheme”) is to neutralise the incidence of various types of duties charged in the input material. The neutralisation is provided by grant of duty credit calculated on the basis of standard input-output norms. The calculation also takes into account the value addition achieved in the export product. The neutralisation of incidence of duty is based on consideration of inputs on deemed imports and the rates of various duties of import chargeable on such inputs namely basic custom duty, surcharge on basic customs duty, additional duty and special additional duty. The rates are specified by the Director General of Foreign Trade. DEPB credit rates have been prescribed for number of textiles and clothing products that include woollen embroidered shawls and wool tops. The scheme will remain into effect till March 2007. Technology Upgradation Fund Technology Up-gradation Fund Scheme (“TUFS”) of Government of India aims at making funds available to the domestic textile industry for technology up-gradation of existing units and for setting up of new units with state-of-the-art technology for enhancing their viability and competitiveness in the domestic and international markets. The TUFS was launched in April, 1999 for making access to capital easy and is implemented through selected nodal agencies /co-opted institutions. The amount allocated for same has been increased from 4,350 million to 5,350 million by budget 2006-07. Technology Mission on Wool or Wool Technology Mission Setting up of a Technology Mission on Wool has been included in the 10th five year plan (2002-2007) in order to increase the wool quality and wool production in the country. It would be set by the Ministry of Textiles in association with the Department of Animal Husbandry. Labour and Industrial Laws A wide variety of labour laws must be complied with. , viz. , Industrial Disputes Act 1947, the Employees’ Provident Funds and Miscellaneous Provisions Act 1952, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, Workmen Compensation Act, 1923, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936 and the Factories Act, 1948. Environmental Laws We are required to comply with various environmental legislations and relevant environmental consents have to be obtained under the Environment (Protection) Act 1985, the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981 and the Hazardous Wastes (Management and Handling) Rules 1989, for the operation of our business.

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HISTORY AND CERTAIN CORPORATE MATTERS Our Company was incorporated on June 23, 1949 under the Companies Act of 1913. Our Company received the certificate of commencement of business on June 23, 1949. Changes in Registered Office: The registered office of our Company was initially situated at Brahmpuri, Ludhiana, 141 008, Punjab India. Pursuant to shareholders resolution dated January 16, 1962 it was shifted to Miller Ganj, Ludhiana 141 003, India. Subsequently, pursuant to a Board resolution dated January 20, 1979 the registered office was shifted to G.T. Road, Sherpur, Ludhiana 141 003, India, which is the current Registered Office. Major Events:

Year Event 1949 Our Company was incorporated as a public limited company with a woollen hosiery knitwear

unit, a worsted spinning plant, barrack blanket weaving and finishing plant at Unit No.I at Miller Ganj, Ludhiana.

1950 First worsted spinning plant at Unit I, G.T Road, Miller Ganj,Ludhiana. 1960 Set up Unit No.III at G.T.Road, Sherpur, Ludhiana for combing spinning dyeing, weaving and

processing. 1968 Commenced export of knitted hosiery. 1969 Set up a vanaspati manufacturing plant at Unit No.III, G.T.Road, Sherpur, Ludhiana. 1972 Set up Unit V at Industrial Area ‘A’, Ludhiana for manufacturing woollen hosiery knitwear. 1973 Set up a new vanaspati plant at Chennai, Tamil Nadu.

1974-85 • Launched our ‘Monte Carlo’ brands.

• Established an OWM Export House. • Received recognition as an Export House under the EXIM Policy. • Recognized as one of the first five “Trading House” under the EXIM Policy 1981-82. • Outbreak of fire at our office at G.T. Road, Miller Ganj, Ludhiana

1993 Set up Unit IV at G.T Road, Ludhiana, a lambs wool plant, to produce high value, fine micron

lambs wool yarn for top class knitwears. 1995 Launched our ‘Canterbury’ brand

1998 Closed our vanaspati and vegetable oil unit at Chennai and Ludhiana. 2002 Extended the application of “Monte Carlo” brand to cotton segment. 2004 Commenced operations for augmentation and up-gradation of spinning and knitting capacities

started at Unit III. 2005 Operationalised the co-generation captive power plant of 3.5 MW capacity at Unit III. 2006 • The first phase of the denim plant at Lalru, Punjab was commissioned.

• Started appointing franchisees’ for retail outlets for marking our own products as well as products imported from abroad/outsourced from the manufacturers of repute.

Our Main Objects Our main objects as contained in our Memorandum of Association are: a. To carry on all or any of the businesses of spinners, weavers, knitters, combers, manufacturers, traders,

merchants, dealers, commission agents, ware-house-men, forwarding agents, exporters and importers in India, Indian states, or elsewhere outside India, in yarn, yarn waste, piece goods, hosiery of all descriptions, cotton, kapas, cotton waste, silk, hemp, jute, wool and any other fibrous material and the cultivation and production thereof, oil seeds, oil and any other seeds and produce and of any goods or merchandise whatsoever and to transact all other manufacturing or treating and preparing processes and mercantile business that may be necessary or expedient and to purchase and vend the raw material and manufactured articles and to carry on or be interested in the business of ginning and pressing factory proprietors and also to carry on or be interested in the business of bleaching, dyeing and manufacture of bleaching and dyeing materials.

b. To carry on the business of drapers, milliners, hosiers, dress makers, cloth manufacturers, furriers

haberdashers, tailors, hatters, clothiers, outfitters, glovers, lace manufacturers and feather dressers.

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c. To carry on the business of a steam, electrical and general laundry and to wash, clean, purify, scour,

bleach, wring, dry, iron, colour, dye, disinfect, renovate, dress, sterlize, press-block, polish, glaze, finish and prepare for use all articles of wearing apparel, house-hold, domestic and other linen and cotton and woollen goods and clothing and fabrics of all kinds including furs, leathers, furcoats, water proofs, felts, velour, panama and straw hats etc. and all sorts of furnishing materials including curtains, covers, carpets, rugs, etc. and to buy, sell, hire, manufacture, repair, let on hire, alter, improve, treat and deal in all apparatus, materials, chemicals and articles of all kinds, which are capable of being used for any such purposes.

d. To buy, sell, manufacture, refine, overhaul, rebuild, manipulate, import, export and deal both wholesale

and retail in commodities, substances, apparatus, machinery articles and things of all kinds capable of being used or which can conveniently be dealt with by the Company in connection with any of its object.

e. To make payment of present, past or future purchases (by Oswal Hosiery Factory) of machinery, raw

materials, finished products or other expenses incurred directly or indirectly by the Oswal Hosiery Factory for the purpose of bringing the Co;, in operation in time.

f. To take on lease such building or buildings as may be deemed necessary for the business of the Co; and

especially to request Oswal Hosiery Factory to give their building on lease on such terms, conditions and rent as may be agreed between the Board of Directors and the Oswal Hosiery Factory.

g. To carry on the business of computer hardware and software, data entry, data processing, data analysis,

business support, information technology, telecommunication (whether via fixed or via satellite or other routes), establishment of call centres out of India or anywhere else in the world, establishment of information technology parks, infrastructure and facilities connected therewith.

Changes in Memorandum of Association The following changes have been made to our Memorandum of Association*: Date of Amendment Amendment June 30, 1970 To re-number clause 59 of the Memorandum of Association of the Company as IV

“Resolved that clause 59 of Memorandum of Association of the Company be numbered as IV” Resolved that the following clause be substituted for clause 60 of the Memorandum of Association of the Company and the clause 60 of the Memorandum be numbered as V. “The Authorised Capital of the company is Rs. 1,00,00,000 divided in to 10,00,000 Equity Shares of Rs. 10/- each with the power to increase and reduce the capital and to divide the shares in capital for the tine being into several classes and to attach thereto respectively any preferential, qualified or special rights, privileges or conditions as may be determined by or in accordance with the regulations of the company and to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be for the time being provided by the regulations of the company”.

August 16, 1978 Resolved that clause V of the Memorandum of Association of the Company be substituted with the following:- “The authorised Share Capital of the Company is Rs. 2,50,00,000.00 divided into 25,00,000 Equity Shares of Rs. 10 each with the powers to increase and reduce the Capital and to divide the Shares in the Capital for the time being into several clauses and to attach thereto respectively any preferential qualified or special rights, privileges on conditions as may be determined by or in accordance with the regulation of the company and to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be for the time being provided by the regulations of the Company”

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July 25, 1979 Resolved that the Memorandum of Association of the Company be altered by

substituting Clause V with the following. “The Authorised Share capital of the company is Rs. 2,50,00,000 divided into 20,00,000 Equity Shares of Rs. 10 each 2,00,000 irredeemable non-cumulative preference shares of Rs. 10 each and 3,00,000 unclassified shares of Rs. 10 each with the power to increase and reduce the capital and to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferential, qualified or special rights, privileges or conditions as may be determined by or in accordance with the regulation. The company and to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be for the time being provided by the regulations of the company”

March 31, 1994 Resolved that the clause V of the Memorandum of Association of the Company be deleted and substituted by the following: “The Authorised Share Capital of the company is Rs. 50,00,00,000 divided into 5,00,00,000 Equity Shares of Rs. 10 each, with the power to increase and reduce the capital and to divide the share in the capital for the time being, into several classes and to attach thereto respectively any preferential, qualified or special rights, privileges or conditions as may be determined by or in accordance with the regulations of the company and to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be, for the time being, provided by the companies Act, 1956 or by the regulations of the company for the time being.”

September 30, 1999 Resolved that Memorandum of Association of the Company be and is hereby altered by adding the following (after sub clause 1.f) in part III there of: “ g) To carry on the business of computer hardware and software, data entry , data processing, data analysis, business support, information technology, telecommunication (whether via fixed or via satellite of other routes), establishment of call centres out of India or anywhere else in the world, establishment of information technology parks, infrastructure and facilities connected therewith”.

*Information on changes in the memorandum of association of our Company from the time of incorporation until 1970, is not available due to loss of records, in a fire at our office at Miller Ganj, Ludhiana on November 18, 1981. Subsidiaries Our Company does not have any subsidiaries. Strategic Partners and Financial Partners Our Company currently does not have any strategic or financial partners or joint ventures.

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OUR MANAGEMENT Board of Directors Under our Articles of Association we cannot have fewer than three directors or more than 12 directors. We currently have 10 Directors on our Board of Directors. The following table sets forth current details regarding our Board of Directors:

Name, Fathers/Husband’s name, Designation and

Occupation

Age (years)

Address Other Directorships

Mr. Jawahar Lal Oswal S/o Late Mr. Vidya Sagar Oswal Designation: Chairman and Managing Director Occupation: Industrialist

63 514/2, College Road, Civil Lines, Ludhiana, 141 001, Punjab India

• Abhilash Growth Fund Private Limited; • Atam Vallabh Financiers Limited; • Girnar Investment Limited; • J. L. Growth Fund Limited; • Ludhiana Holdings Limited; • Monica Growth Fund Private Limited; • Nagdevi Trading and Investment

Company Limited; • Nahar Capital and Financial Services

Limited; • Nahar Exports Limited; • Nahar Growth Fund Private Limited; • Nahar Industrial Enterprises Limited; • Nahar Spinning Mills Limited; • Neha Credit and Investment Private

Limited; • Ogden Trading and Investment

Company Private Limited; • Palam Motels Limited; • Ruchika Growth Fund Private Limited; • Sankheshwar Holding Company

Limited; • Vanaik Investors Limited; and • Vardhman Investments Limited.

Mr. Kamal Oswal S/o Mr. Jawahar Lal Oswal Designation: Director Occupation: Industrialist

44 514/2, College Road, Civil Lines, Ludhiana, 141 001, Punjab India

• Abhilash Growth Fund Private Limited; • Girnar Investment Limited; • J. L. Growth Fund Limited; • Kulu Investment and Trading Private

Limited; • Nagdevi Trading and Investment

Company Limited; • Nahar Capital and Financial Services

Limited; • Nahar Exports Limited; • Nahar Growth Fund Private Limited; • Nahar Industrial Enterprises Limited; • Nahar Industrial Infrastructure

Corporation Limited; • Nahar Spinning Mills Limited; • Neha Credit and Investment Private

Limited; • Ogden Trading and Investment

Company Private Limited; • Oswal Leasing Limited; • Palam Motels Limited; • Sankheshwar Holding Company

Limited; and • Vardhman Investments Limited.

Mr. Dinesh Oswal 41 514/2, College • Abhilash Growth Fund Private Limited;

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Name, Fathers/Husband’s name, Designation and

Occupation

Age (years)

Address Other Directorships

S/o Mr. Jawahar Lal Oswal Designation: Director Occupation: Industrialist

Road, Civil Lines, Ludhiana, 141 001, Punjab India.

• Atam Vallabh Financiers Limited; • J. L. Growth Fund Limited; • Kulu Investment and Trading Private

Limited; • Ludhiana Holdings Limited; • Nahar Capital and Financial Services

Limited. • Nahar Exports Limited; • Nahar Industrial Enterprises Limited; • Nahar Industrial Infrastructure

Corporation Limited; • Nahar Spinning Mills Limited; • Ogden Trading and Investment

Company Private Limited; • Palam Motels Limited; • Sankheshwar Holding Company

Limited; • Vanaik Investors Limited; and • Vardhman Investments Limited.

Mr. Sandeep Jain S/o Dr. Ravinder Jain Designation: Executive Director Occupation: Service

35 Maharani Jhansi Road, Civil Lines, Ludhiana 141 001, Punjab, India.

Nil

Mr. Dinesh Gogna S/o Late Mr. Jagdish Prasad Designation: Executive Director Corporate Finance and Taxation Occupation: Service

53 30-H, B.R.S. Nagar, Ludhiana 141 012, Punjab, India.

• Girnar Investment Limited. • Nahar Exports Limited; • Nahar Industrial Enterprises Limited; • Nahar Spinning Mills Limited; and • Oswal Leasing Limited.

Dr. O. P. Sahni S/o Mr. Jairam Sahni Designation: Independent Addtional Director Occupation: Educationist

65 217 –F, Kitchlu Nagar, Ludhiana, 141 004, Punjab, India.

• LSE Commodities Limited; • Midland International Limited; • Nahar Exports Limited; • Nahar Industrial Enterprises Limited;

and • Nahar Spinning Mills Limited.

Mr. Amarjeet Singh S/o Mr. Gurbax Singh Designation: Independent Director Occupation: Advocate

80 207 B, Model Town Extension Part II, Ludhiana, 141 002, Punjab, India

• Abhilash Growth Fund Private Limited;

• J.L Growth Fund Limited; • Kulu Investment and Trading Private

Limited; • Monica Growth Fund Private Limited; • Nagdevi Trading and Investment;

Company Limited; • Nahar Exports Limited; • Nahar Growth Private Limited; • Nahar Spinning Mills Limited; • Neha Credit and Investment Private

Limited; • Oswal Leasing Limited; • Palam Motels Limited; • Ruchika Growth Fund Private

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Name, Fathers/Husband’s name, Designation and

Occupation

Age (years)

Address Other Directorships

Limited.; and • Vanaik Investors Limited.

Dr. Ms. H. K. Bal W/o Mr. H. S. Bal Designation: Independent Additional Director Occupation: Educationist

67 House No 2322, Phase – XI Mohali 160 065 Punjab, India

• Industrial Organics Limited; • Nahar Exports Limited; • Nahar Industrial Enterprises

Limited; • Nahar Spinning Mills Limited; and • Shreyans Industries Limited.

Mr. K. S. Maini S/o Mr. Tilak Ram Designation: Independent Additional Director Occupation: Educationist

67 House No 20 SF, HIG Flats, Rani Jhansi Road, Civil Lines, Ludhiana. 141 001, Punjab, India

• Nahar Exports Limited; • Nahar Industrial Enterprises Limited;

and • Nahar Spinning Mills Limited.

Dr. Suresh Kumar Singla S/o Mr. Amar Nath Singla Designation: Independent Additional Director Occupation: Educationist

56 House No. 119,Ward No. 26, Kitchlu Nager, Ludhiana.

• Metro Tyres Limited; and • Nahar Exports Limited.

Details of Directors Mr. Jawahar Lal Oswal, 63 years, is the Chairman and Managing Director of our Company and founder of Nahar Group of Industries. He is a graduate from Government College for Boys, Ludhiana. He is an industrialist and has more than 41 years experience in the textile industry. His leadership abilities and expertise have been instrumental in the growth and success of our Company. Mr. Kamal Oswal, 44 years, is a Director in our Company. He is a graduate from Government College for Boys, Ludhiana. He has 22 years of experience in the textile industry. He has also worked in the steel, sugar & retailing business. Mr. Dinesh Oswal, 41 years, is a Director in our Company. He is a graduate from Government College for Boys, Ludhiana. He has 21 years of experience in the textile industry. Mr. Sandeep Jain, 35 years, is an executive Director in our Company. He holds a bachelors degree in Pharmaceuticals from H.L.T College Bangalore. Mr. Jain has worked for over 10 years with our Company. Prior to joining our Company he worked for two years Cipla as Manager Marketing. He is currently looking after the manufacturing operations of our Company. Mr. Dinesh Gogna, 53 years, is an executive Director in our Company, currently in-charge of the Corporate Finance and Taxation department. He holds a B.A., LL.B. He has also completed the United States Money and Capital Market Seminar conducted by New York Institute of Finance. He has 28 years of experience in corporate finance. He joined our Company as a management trainee and was thereafter appointed as Manager Taxation, and subsequently General Manager Corporate Finance and Taxation.

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Dr. O. P. Sahni, 65 years, is an independent Director in our Company. He holds a post graduate degree in science from Punjab University, a degree in post management in agriculture from IIM Ahmedabad and a doctorate degree in business administration from Punjab Agricultural University. He has 30 years of experience as an educationist. He has also worked as the Head of Business Management Department, Punjab Agriculture University, Ludhiana. Mr. Amarjeet Singh, 80 years, is an independent Director in our Company. He holds a bachelors degree in arts from Formen Christian College Lahore and a bachelors degree in law from the Delhi University. He is an advocate and has 60 years of experience in legal affairs. Dr. Ms. H. K. Bal, 67 years, is an independent Director in our Company. She holds a masters degree from the Punjab University, M.Stat degree from the Indian Institute of Statistical Sciences, Kolkata and a PhD degree in Statistics from the Punjab Agricultural University. She has 30 years of experience as an educationist. Mr. K. S. Maini, 67 years, is an independent Director in our Company. He holds a post graduate degree in commerce. He has 31 years of experience in teaching. He has also co-authored books on book keeping and accountancy and business statistics. He is associated with the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India. Dr. Suresh Kumar Singla, 56 years, is an independent Director in our Company. He holds a master’s degree in economics and statistics and a PhD degree in statistics. He is a management expert having 27 years experience as an educationist. Borrowing Powers of the Directors in our Company Pursuant to a resolution dated September 30, 2006 passed by the shareholders of our Company in accordance with provisions of the Companies Act, the Board has been authorized to borrow sums of money for the purpose of our Company upon such terms and conditions as the Board of Directors may think fit, provided that the money or monies to be borrowed together with the monies already borrowed by our Company (apart from the temporary loans obtained from our Company’s bankers in the ordinary course of business) shall not exceed, at any time, a sum of Rs. 5,000 million. Details of Appointment and Compensation of our Directors

Name of Directors

Contract/ Appointment Letter/Resolution Term

Mr. Jawahar Lal Oswal

Reappointment pursuant to resolution of the shareholders of our Company dated September 30, 2003.

April 1, 2004 to March 31, 2009

Mr. Kamal Oswal Reappointment pursuant to resolution of the shareholders of our Company dated September 30, 2005

Liable to retire by rotation.

Mr. Dinesh Oswal

Reappointment pursuant to resolution of the shareholders of our Company dated September 30, 2004

Liable to retire by rotation.

Mr. Sandeep Jain

Resolution of the shareholders of our Company dated September 30, 2002 with effect from January 1, 2003

January 1, 2003 to December 31, 2008

Mr. Dinesh Gogna

Resolution of the shareholders of our Company dated November 16, 2006

October 18, 2006 to October 17, 2011

Dr. O. P. Sahni Board resolution dated November 1, 2006 Until the date of the next AGM*

Mr. Amarjeet Singh

Reappointment pursuant to resolution of the shareholders of our Company dated September 30, 2005

Liable to retire by rotation.

Dr. Ms. H. K. Bal

Board resolution dated November 1, 2006 Until the date of the next AGM*

Mr. K. S. Maini

Board resolution dated November 1, 2006 Until the date of the next AGM*

Dr. S.K Singla

Board resolution dated November 1, 2006 Until the date of the next AGM*

* unless appointed as regular Director. Remuneration of Whole-Time Directors The following table sets forth the details of the current remuneration for the whole-time Directors.

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Name Basic Salary

(Rs.)per month)

Housing and Furnishing (Rs. Per month)

Provident Fund (Rs.)

Other (yearly) (Rs.)

Mr. Jawahar Lal Oswal*#

1,200,000 600,000 144,000 --

Mr. Sandeep Jain# 100,000 30,000 12,000 100,000

Mr. Dinesh Gogna# 50,000 15,000 6,000 50,000 # all of the above Directors are entitled to medical reimbursem*nt of one months salary. *Mr. Jawahar Lal Oswal is entitled to a commission which along with the fixed remuneration will not constitute 5% of the net profit of our Company. Our Company pays its non-whole time Directors sitting fees of Rs. 2,000 for every meeting of its Board, as authorised by Board resolution dated November 1, 2006 Corporate Governance Corporate governance is administered through our Board and the committees of our Board. However, primary responsibility for upholding high standards of corporate governance and providing necessary disclosures within the framework of legal provisions and institutional conventions with commitment to enhance shareholders’ value vests with our Board. In connection with the listing of the Equity Shares, we will be required to enter into listing agreements with the Stock Exchanges. Our Company is in compliance with the applicable provisions of listing agreements pertaining to corporate governance, including appointment of independent Directors and constitution of the following committees of the Board: Committees of the Board of Directors Audit Committee: The audit committee comprises Mr. S. K. Singla, Dr. O. P. Sahni, Mr. K. S. Maini and Mr. Dinesh Gogna. Mr. S.K. Singla is the Chairman of the committee. Mr. Nitin Sharma is the Secretary to the audit committee. The audit committee oversees our Company’s financial reporting process and disclosure of its financial information. The audit committee further reviews the internal control systems with the auditors, half yearly, quarterly and annual financial results, considers and discusses observations of the statutory and internal auditors, investigates any matter referred to it by the Board and reports to the Board on its recommendations on areas for attention. Shareholders Committee The shareholders committee currently comprises Mr. Amarjeet Singh, Mr. S. K. Singla, Mr. Sandeep Jain and Dr. O. P. Sahni. Mr. Amarjeet Singh is the Chairman of the committee. The Shareholders Committee has been constituted to address inter alia, shareholder and investor complaints, issue of duplicate share certificates, non-receipt of declared dividends, non- receipt of annual reports and other shareholder issues. Remuneration Committee The remuneration committee currently comprises Mr. S. K. Singla, Mr. Amarjeet Singh, Dr. Ms. H. K. Bal and Dr. O. P. Sahni. Mr. S. K. Singla is the Chairman of the remuneration committee. The remuneration committee has been constituted to determine our Company’s policy on specific remuneration packages for managerial personnel, including the Managing Directors, Whole Time Directors, and Executive Chairman. The remuneration committee has been constituted in accordance with Schedule XIII of the Companies Act and Clause 49 of the listing agreement. Shareholding of Directors in our Company

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The Articles of Association do not require our Directors to hold any qualification shares. The following table details the shareholding of the Directors, prior to the Issue:

Sr. No.

Name of Shareholders Number of Equity Shares

1. Mr. Jawahar Lal Oswal 302,865 2. Mr. Kamal Oswal 50,966 3. Mr. Dinesh Oswal 52,250 4. Mr. Amarjeet Singh 60

Interest of our Directors Our Directors are interested in the Equity Shares held by them or that may be subscribed by or allotted to company’s, firms, trusts in which they are interested as directors, members, partners, trustees and promoters, pursuant to the Issue. All of our Directors may also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. All the Directors may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a committee thereof, to the extent of reimbursem*nt of expenses payable to them under the Articles of Association as well as to the extent of commission payable to them as detailed in the section titled “Our Management – Details of Appointment and Compensation of our Directors” beginning on page [●] of this Draft Red Herring Prospectus. The Directors do not have any interest in any property acquired by our Company within two years of the date of this Draft Red Herring Prospectus. Changes in our Board of Directors during the last three years The changes in our Board of Directors during the last three years are as follows:

Name Date of Appointment Date of Cessation Reason Ms. Ruchika Oswal October 1, 1999 October 16, 2006 Resignation Ms. Monica Oswal August 1, 2003

October 16, 2006 Resignation

Mr. Shri Paul Jain July 13, 1992 November 1, 2006 Resignation Mr. Bharat Bhushan Gupta August 28, 1991 November 1, 2006 Resignation Mr. Hans Raj Kapoor July 13, 1992 November 1, 2006 Resignation Mr. Dinesh Gogna October 18, 2006 - Appointment Dr. O.P. Sahni November 1, 2006 - Appointment Mr. K. S. Maini November 1, 2006 - Appointment Mr. S. K. Singla November 1, 2006 - Appointment Dr. Ms H.K. Bal November 1, 2006 - Appointment

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Management Organisation Structure: Our management organization structure is set forth below

Operational Management

Mrs. Monika Oswal CEO Retail

Ms. Ruchika Oswal CEO

Hosiery Knitwear

Mr. Satpal Nijhawan President Works

Spinning Division

Mr. R.M. Sood Financial Controller

Mr. Virender SharmaPresident Commercial

Mr. N.D. Jain President Legal

Mr. Navdeep Sharma

V.P. Taxation

Mr. Pritam Singh Legal Advisor

Mr. Nitin Sharma Company Secretary

G.M. Marketing

G.M. Works

Plant ManagerWeaving Section

Senior Manager (F&A)

G.M. Exports

Legal DepartmentIndirect Taxes

Manager Taxation

Sales Tax Department

Secretarial Department

G.M. Purchase

G.M. Marketing

Plant Manager Spinning Section

Finance Manager

Denim Fabric

Manager Marketing Hosiery Yarns

Income Tax Dept.

Plant Manager Combing Section

Manager Central Excise

Manager Marketing Hand

Knitting Yarn

Plant Manager Dyeing Section

Manager EDP

Plant Manager Co-Gen Plant

Manager Accounts

(F&A)

Quality Dept.

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Key Managerial Employees Apart from Mr. Jawahar Lal Oswal, our Chairman and Managing Director, Mr. Sandeep Jain, our Executive Director, Mr. Dinesh Gogna, Executive Director Corporate Finance and Taxation of our Company, the following are our key managerial employees. Ms. Monica Oswal, 34 years, is the Chief Executive Officer, Retail of our Company. She graduated with a commerce degree from Panjab University. Ms. Monica Oswal has five years of work experience in the field of retail and administration. Prior to joining us in 2003 she worked with Nahar Spinning Mills Limited and she currently advises our Company on retail and administration. The gross remuneration paid to her in Fiscal 2006 was Rs. 0.99 million.

Ms. Ruchika Oswal, 34 years, is the Chief Executive Officer, Hosiery Knitwear of our Company. She graduated with a commerce degree from Panjab University. Ms. Ruchika Oswal began her career with our Company in 1999 and has seven years of work experience in the field of manufacturing and administration. Ms. Ruchika Oswal currently advises our Company on manufacturing and administration. The gross remuneration paid to her in Fiscal 2006 was Rs. 1.05 million.

Mr. Narayan Dass Jain, 57 years, is the President of our Legal Department of our Company. He is a qualified Fellow Member of the Institute of Chartered Accountants of India. Mr. Jain has 35 years of work experience in the field of finance and law. Mr. Jain was previously associated with Modi Textile Trading Corporation Limited. Mr. Jain joined our Company in 1973 and he currently advises our Company on legal affairs. The gross remuneration paid to him in Fiscal 2006 was Rs. 0.51 million.

Mr. Sat Paul Nijhawan, 61 years, is the President Works to our Company. He holds a F.A. from Panjab University. Mr. Nijhawan has 45 years of work experience in the field of manufacturing and administration. Mr. Sat Paul Nijhawan began his career with our Company in 1961 and he currently advises our Company on manufacturing and administration. The remuneration paid to him in Fiscal 2006 was Rs. 0.49 million.

Mr. Rukmesh Mohan Sood, 57 years, is the Financial Controller of our Company. He is a qualified Fellow Member of the Institute of Chartered Accountants of India. He has 32 years of work experience in the field of finance and accounts. He began his career with our Company in 1974 and he currently advises our Company on finance and accounts. The gross remuneration paid to him in Fiscal 2006 was Rs. 0.50 million.

Mr. Virender Sharma, 70 years, is President Commercial of our Company. He holds a master’s degree in Arts from Punjab University. Mr. Virender Sharma has 40 years of work experience in the field of commercial affairs. Mr. Virender Sharma was previously associated with. Punjab Wool Combers Limited. Mr. Sharma joined our Company in 1992 and he currently advises our Company on commercial affairs. The gross remuneration paid to him in Fiscal 2006 was Rs. 0.38 million. Mr. Navdeep Sharma, 47 years, is Vice President Taxation of our Company. He holds a bachelor’s degree from Government College Malerkotla and a L.L.B degree from Punjabi University, Patiala. Mr. Navdeep Sharma has 25 years of work experience in the field of taxation. Mr. Navdeep Sharma began his career with our Company in 1981 and he currently advises our Company on taxation affairs. The gross remuneration paid to him in Fiscal 2006 was Rs. 0.44 million.

Mr. Pritam Singh, 75 years, is Legal Advisor of our Company. He holds a degree in B.A., LL.B from Panjab University. Mr. Singh has 49 years of work experience in the field of law. Mr. Singh was previously employed with the Punjab Government. Mr. Singh joined our Company in 1964 and currently advises our Company on legal affairs. The remuneration paid to him in Fiscal 2006 was Rs. 0.41 million. Mr. Nitin Sharma, 28 years, is Company Secretary to our Company. He is an ACS and holds a B.Com (Hons) degree. Mr. Nitin Sharma has three years of work experience in the field of company law and secretarial matters. Mr. Nitin Sharma was previously working with Eastman Industries Limited. Mr. Nitin Sharma has been appointed our Company Secretary from November 2006 and he currently advises on secretarial matters. All our key managerial employees are permanent employees of our Company. Except for Ms. Monica Oswal and Ms. Ruchika who are related to each other, none of our key managerial personnel are related to each other. Shareholding of the Key Managerial Employees

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Except as disclosed below, none of our key managerial personnel hold any Equity Shares of our Company. Sl. No. Name of Key Managerial Personnel Number of Equity Shares

1. Ms. Monica Oswal 1,500 2. Ms. Ruchika Oswal 1,500 3. Mr. Narayan Dass Jain jointly with Ms. Saroj Jain 750 4. Mr. Sat Paul Nijhawan 60 Bonus or Profit Sharing Plan for our Key Managerial Employees Except Mr. Jawahar Lal Oswal who is entitled to a commission which along with the fixed remuneration will constitute 5% of the net profit of our Company, there is no bonus or profit sharing plan for our key managerial employees. Interest of Key Managerial Personnel Except to the extent of Equity Shares held in our Company and the extent of remuneration and reimbursem*nt of expenses none of our key managerial employees have any interest in our Company. Changes in our Key Managerial Employees during the last three years

The changes in our key managerial employees during the last three years are as follows:

Name Designation Date of appointment as Key Managerial Employees

Whether continuing, if not, date of cessation

Reason

Mr. Nitin Sharma

Company Secretary

November 1, 2006 Continuing Appointment

Employees Share Purchase Scheme/Employee Stock Option Scheme We do not have any stock option scheme or stock purchase scheme for the employees of our Company. Payment or benefit to officers of our Company Except statutory benefits upon termination of their employment in our Company or superannuation, no officer of our Company is entitled to any benefit upon termination of his employment in our Company.

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OUR PROMOTERS AND PROMOTER GROUP The Promoters of our Company are Mr. Jawahar Lal Oswal, Mr. Kamal Oswal and Mr. Dinesh Oswal and the following body corporates which are directly under their control: (a) Nahar Spinning Mills Limited; (b) Atam Vallabh Financers Limited; (c) Abhilash Growth Fund Private Limited; (d) Girnar Investment Limited; (e) Kulu Investment and Trading Private Limited; (f) Ludhiana Holdings Limited; (g) Nagdevi Trading and Investment Company Limited; (h) Neha Credit and Investment Private Limited; (i) Ogden Trading and Investment Company Private Limited; (j) Vanaik Investors Limited; and (k) Vardhman Investments Limited.

The details of our Promoters are as follows:

Mr. Jawahar Lal Oswal, 63 years, (Passport Number: Z1294558, Voter ID Number: (not available), Driving License Number: (not available), PAN: AABPO2481J), a resident Indian national is, the Chairman and Managing Director of our Company and founder of Nahar Group of Industries. He is a graduate from Government College for Boys, Ludhiana. He is an industrialist and has more than 41 years experience in the textile industry. His leadership abilities and expertise have been instrumental in the growth and success of our Company.

Mr. Kamal Oswal, 44 years, (Passport Number: F9327367, Voter ID Number: (not available), Driving License Number: (not available), PAN: AACPO9697F), a resident Indian national is our Promoter. He is a graduate from Government College for Boys, Ludhiana. He has 22 years of experience in the textile industry. He has also worked in the steel, sugar and retailing business.

Mr. Dinesh Oswal, 41 years (Passport Number: Z1294601, Voter ID Number: (not available), Driving License Number: (not available), PAN: AABPO2476P), a resident Indian national is our Promoter. He is a graduate from Government College for Boys, Ludhiana. He has 21 years of experience in the textile industry.

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a. Nahar Spinning Mills Limited (“NSML”) NSML was incorporated on December 16, 1980 under the name “Nahar Spinning Mills Private Limited” as a company engaged in the business of spinners, knitter’s weavers, flax manufactures of all cotton, jute, wool and other fibrous materials. Subsequently, on December 9, 1983 the word “Private” was deleted and the name was changed to its present name. Pursuant to the application filed by Nahar Exports Limited (“NEL”) , NSML and Nahar Capital and Financial Services Limited (“NCFSL”) , the High Court for the States of Punjab and Haryana, vide order dated August 26, 2006 directed that the meeting of equity shareholders and creditors (secured and unsecured) of NEL and NSML be held to approve, if considered fit, the composite scheme of demerger of the investment business of NSML to NCFSL and the demerger/transfer of the textile business of NEL to NSML (“Composite Scheme”) . The High Court has dispensed with the holding of the meeting in respect of NCFSL. The shareholders of NEL, NSML have approved the Composite Scheme on October 7, 2006 in the court convened meeting and the report of the Chairman, appointed by the High Court, has been filed. The next date of hearing has been fixed for December 14, 2006. Upon vesting of the investment business of NSML to NCFSL on the effective date, NCFSL shall issue and allot one equity share of Rs. 5 each to all shareholders of NSML on the record date, in respect of every one equity share of Rs. 10 each held by them of NSML. Thus after the demerger, the paid up value of NSML shares will remain Rs. 5 per share and every share holder of NSML shall hold equity shares in both NSML and NCFSL. Upon the coming into effect of the Composite Scheme and vesting of the textile undertaking of NEL in NSML, NSML shall issue and allot 55 equity shares of Rs. 5 each to the shareholders of NEL for every 100 equity shares of Rs. 10 each on the record date. Upon such allotment the paid up value of each equity shares of NEL shall stand reduced from Rs. 10 each to Rs. 3.50 per equity share. There has been no change in the management of NSML. Shareholding Pattern The equity shares of NSML are listed on the BSE and NSE. The shareholding pattern of NSML as of September 30, 2006 is as follows: Sl. No. Name of Shareholder Number of equity

shares of Rs. 10 each

% of Issued Capital (approximated)

Promoters Shareholding 1. Nahar Exports Limited 6,611,332 39.29 2. Nahar Industrial Enterprises Limited 1,364,221 8.10 3. Nagdevi Trading and Investment Company Limited 445,102 2.65 4. Ogden Trading and Investment Company Private

Limited 196,350 1.16

5. Nahar Growth Fund (Private) Limited 182,054 1.08 6. Vanaik Investors Limited 179,314 1.06 7. Sankeshwar Holding Company Limited 152,425 0.90 8. J.L. Growth Fund Limited 107,516 0.64 9. Kovalam Trading and Investment Company Limited 106,990 0.64 10. Vardhman Investments Limited 62,640 0.37 11. Ludhiana Holdings Limited 58,480 0.35 12. Atam Vallabh Financiers Limited 56,590 0.34 13. Neha Credit Investment Private Limited 30,200 0.18 14. Ruchika Growth Fund Private Limited 25,050 0.15 15. Abhilash Growth Fund Private Limited 24,750 0.15 16. Monica Growth Fund Private Limited 24,080 0.14 17. Bermuda Insurance Brokers Private Limited 20,450 0.12 18. Ruchika Oswal 11,555 0.07 19. Monica Oswal 11,520 0.07 20. Abhilash Oswal 16,000 0.09

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Sub-Total 9,686,619 57.55 21. Directors & Relatives 1,979 0.01 22. Institutional Investors 1,848,917 10.99 23. Others 5,289,660 31.44 Total 16,827,175 100.00 Board of Directors The board of directors of NSML currently comprises Mr. Jawahar Lal Oswal, Mr. Dinesh Oswal, Mr. Kamal Oswal, Mr. Dinesh Gogna, Mr. S.K. Sharma, Dr. Ms. H.K. Bal, Mr. Amarjeet Singh, Dr. O.P Sahni and Prof. K.S. Maini. Promise v/s Performance NSML made a rights issue, on December 19, 1995, of 3,422,452 zero interest secured premium convertible bonds of Rs. 250 each for cash at par aggregating to Rs. 855.61 million along with one warrant attached to every bond to the existing shareholders of NSML in the ratio of four bonds for every ten shares held on the record date. The object of the issue was to set up an acrylic fibre plant at village Lalru with a capacity of 18,000 tons per annum, to meet the long term working capital requirements of NSML and to meet the expenses of the issue. The total cost of project was 2,324.30 million to be financed by proceeds of the issue amounting to Rs. 2,087.70 million and Rs. 236.60 million out of internal accruals. The commercial production for the acrylic fibre plant was projected to start with effect from April, 1998, however, because of depressed capital market conditions prevailing in end the year 1996 until February 1997 (the relevant period for determining the conversion price of bond/warrant) NSML raised only Rs. 932.90 million (net) as against 2,087.70 million envisaged thus resulting in a shortfall of Rs. 1,154.80 million in funding the acrylic fibre project. An expert opinion, taken by NSML, clearly indicated non viability of project because of expected heavy interest burden. Accordingly the requisite consent was accorded by special resolution passed in the general meeting of zero interest secured premium convertible bonds held on day of September 29, 1997 to utilize proceeds in expansion of spinning and garment capacity. Accordingly, though projections were made with respect to the acrylic fibre plant, it is not possible to provide actuals in relations to the same. However the following is a comparison of the projections with respect to NSML (Company as a whole) in the prospectus with the actuals:

(Rs. in million) Fiscal 1996 Fiscal 1997 Fiscal 1998 Projections Actuals Projections Actuals Projections Actuals Sales 2269.90 2469.10 2745.70 3139.74 3419.20 3174.89 Other Income 81.80 85.71 166.60 114.96 197.80 100.51 Total Income 2351.70 2554.81 2912.30 3254.70 3617.00 3275.40 Profit before Interest, Depreciation & Tax

576.80 517.94 760.70 541.94 947.50 667.20

Interest 58.00 68.68 76.60 62.18 76.50 107.16 Depreciation 76.60 86.11 116.10 105.67 142.00 142.56 Profit Before Tax 442.8 363.15 568.00 374.09 729.00 417.48 Tax 95.30 64.48 95.30 112.23 113.90 13.92 Profit After Tax 347.50 298.67 472.70 261.86 615.10 403.56 Equity 85.50 85.50 136.70 85.50 136.70 134.29 Reserves 3102.80 3051.51 5108.00 3256.67 5648.00 4206.31 EPS (Rs.) 40.64 34.93 34.55 30.63 44.96 30.05 Book Value per share (Rs.)

372.89 366.92 383.35 390.91 422.82 365.45

Dividend (%) 55 60 55 60 55 60 a. Following are the projections in respect of the acrylic fibre unit:

(Rs. in million) Fiscal 1999 Fiscal 2000 Fiscal 2001 Projections Projections Projections Sales 1,417.50 1,701 1,795.50 Other Income 35.00 69.00 114.30

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Total Income 1,452.50 1,770.00 1,909.80 Profit Before Interest Depreciation and Tax 509.30 643.60 721.70 Interest 82.80 94.20 104.40 Depreciation 181.20 181.20 181.20 Profit Before Tax 245.20 368.20 436.10 Tax 4.30 60.10 119.30 Profit After Tax 240.90 308.10 316.80

Information about Share Price The highest market price of the equity shares of NSML during the six-month period ending October 31, 2006 on the BSE was Rs. 312.75 per share on May 15, 2006 and the lowest was Rs. 170 per share on June 8, 2006. The highest market price of the equity shares of NSML during the six-month period ending October 31, 2006 on the NSE was Rs. 313.50 per share on May 15, 2006 and the lowest was Rs. 170 per share on June 9, 2006. The price of the equity shares of NSML as on December 15, 2006 on the BSE and NSE is Rs. 231.85 and Rs. 232.65, respectively. There has been no change in capital structure of NSML in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by NSML in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by NSML are normally attended and replied to within 14 days of receipt by NSML. There are no complaints currently pending against NSML as of November 30, 2006. Financial Performance The financial results of NSML for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 5,026.60 4,518.25 4,013.47

Profit/(Loss) after tax 282.38 160.37 263.97 Equity Capital* 166.96 166.86 166.81 Reserves and Surplus (excluding revaluation reserves)

5,783.99 5,596 5,530.09

Earnings/(Loss) per share (diluted) (Rs.)

16.78 9.53 15.68

Book Value per share (Rs.) 353.65 342.47 338.55

* Net of allotment money unpaid. The details of NSML’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 4341-1980 Bank Account 001705001050 with ICICI Bank PAN AAACN5710D Address of the RoC with whom the company is registered

Registrar of Companies Punjab, Himachal Pradesh and Chandigarh located at Kothi No. 286, Defence Colony, Jallandhar 144 001, Punjab, India

b. Atam Vallabh Financiers Limited (“Atam”) Atam was incorporated on June 24, 1972, as an investment company under the name “Atam Vallabh Financiers Private Limited”. Subsequently on July 30, 1980 the word “Private” was deleted and the name was changed to

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its present name. Atam is registered (No. B-14.01631) as a NBFC with the RBI. There has been no change in the management of Atam. Shareholding Pattern The equity shares of Atam are not listed on any stock exchange. The current shareholding pattern of Atam is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100

each

% of Issued Capital

1. Nahar Industrial Enterprises Limited 164,000 39.04 2. Vardhman Investments Limited 101,000 24.04 3. J.L. GrowthFund Limited 100,011 23.81 4. Mr. Jawahar Lal Oswal 17,974 4.28 5. Mr. Dinesh Oswal 17,963 4.28 6. Mr. Kamal Oswal 17,963 4.28 7. Ms. Abhilash Oswal 539 0.13 8. Ms. Manisha Oswal 539 0.13 9. Kovalam Investment and Trading Company Limited 11 0.00

Total 420,000 100.00 All the above shareholders are promoters of Atam. Board of Directors The board of directors of Atam comprises Mr. Jawahar Lal Oswal, Mr. Dinesh Oswal, Mr. Shri Paul Jain, Mr. Rukmesh Mohan Sood and Ms. Monica Oswal. Financial Performance The financial results of Atam for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.94 1.03 1.01

Profit/(Loss) after tax 0.77 0.51 0.71 Equity Capital 42.00 42.00 0.50 Reserves and Surplus (excluding revaluation reserves)

210.52 209.75 13.49

Earnings/(Loss) per share (diluted) (Rs.) 1.84 3.46 2,870 Book Value per share (Rs.) 601.25 599.39 2,797.83

The details of Atam’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-6180 of 1972-73 Bank Account CD 200003 with Allahabad Bank, Extension Counter, OWM, G.T. Road,

Sherpur, Ludhiana 141 003. PAN AAACA2847G Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

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c. Abhilash Growth Fund Private Limited (“Abhilash”) Abhilash was incorporated on February 12, 1991 as an investment company. Abhilash is registered (No. 14.01080) as a NBFC with the RBI. There has been no change in the management of Abhilash. Shareholding Pattern The equity shares of Abhilash are not listed on any stock exchange. The current shareholding pattern of Abhilash is as follows: Sl. No. Name of Shareholder Number of equity

shares of Rs. 100 each % of Issued Capital

1. Mr. Jawahar Lal Oswal 2,470 49.38 2. Mr. Kamal Oswal 1,210 24.19 3. Mr. Dinesh Oswal 1,220 24.39 4. Ms. Abhilash Oswal 10 0.20 5. Jawahar Lal & Sons 10 0.20 6. Ms. Manisha Oswal 10 0.20 7. Ms. Ritu Oswal 10 0.20 8. Ms. Monica Oswal 10 0.20 9. Ms. Neha Oswal 10 0.20

10. Mr. Sambhav Oswal 10 0.20 11. Mr. Abhinav Oswal 10 0.20 12. Ms. Tanvi Oswal 10 0.20 13. J.L. Growth Fund Limited 1 0.02 14. Nahar Growth Fund Private Limited 1 0.02

Total 5,002 100.00 Abhilash has also issued 68,000 11% non-cumulative redeemable preference shares of Rs. 100 each. All the shareholders above are promoters of Abhilash. Board of Directors The board of directors of Abhilash currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Ms. Abhilash Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The financial results of Abhilash for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 10.03 13.24 2.09

Profit/(Loss) after tax 0.07 0.46 0.45 Equity Capital 0.50 0.00 0.00 Reserves and Surplus (excluding revaluation reserves)

19.75 19.67 19.09

Earnings/(Loss) per share (diluted) (Rs.) 14.84 230,491.81 226,720.17 Book Value per share (Rs.) 4,048.26 9,837,244.28 9,544,574.47

The details of Abhilash’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-43052 of 1990-91 Bank Account CD 200084 with Allahabad Bank, Extension Counter, OWM, G.T. Road,

Sherpur, Ludhiana 141 003. PAN AAACA2361H

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Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

d. Girnar Investment Limited (“Girnar”) Girnar was incorporated on June 24, 1972 as “Girnar Investment Private Limited” as an investment company. Subsequently on July 30, 1980 the word “Private” was deleted and its name was changed to its present name. Girnar is registered (No. 14.00529) as a NBFC with the RBI. There has been no change in the management of Girnar. Shareholding Pattern The equity shares of Girnar are not listed on any stock exchange. The current shareholding pattern of Girnar is as follows: Sl. No. Name of Shareholder Number of equity

shares of Rs. 100 each

% of Issued Capital

1. Mr. Jawahar Lal Oswal 2,498 49.96 2. Mr. Kamal Oswal 1,249 24.98 3. Mr. Dinesh Oswal 1,249 24.98 4. Ms. Abhilash Oswal 1 0.02 5. Ms. Monica Oswal 1 0.02 6. Ms. Ruchika Oswal 1 0.02 7. J.L. Growth Fund Limited 1 0.02 8. Total 5,000 100.00

All the shareholders named above are promoters of Girnar. Board of Directors The board of directors of Girnar currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Ms. Abhilash Oswal, Mr. Dinesh Gogna, Ms. Monica Oswal, Ms. Ruchika Oswal, Mr. Komal Jain and Mr. Sat Paul Nijhawan. Financial Performance The financial results of Girnar for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.66 0.86 1.03

Profit/(Loss) after tax 0.32 0.31 0.60 Equity Capital 0.50 0.22 0.22 Reserves and Surplus (excluding revaluation reserves) 33.26 32.94 32.66

Earnings/(Loss) per share (diluted) (Rs.) 118.00 130.00 265.00 Book Value per share (Rs.) 6,752.30 15,073.61 14,943.45

The details of Girnar’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-6182 of 1972-73 Bank Account CD 200020 with Allahabad Bank, Extension

Counter, OWM, G.T. Road, Sherpur, Ludhiana 141 003.

PAN AAACG0077A Address of the RoC with whom the company is Registrar of Companies, Delhi and Haryana located

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registered at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

e. Kulu Investment and Trading Private Limited (“Kulu”) Kulu was incorporated on January 31, 1983 as an investment company. There has been no change in the management of Kulu. Shareholding Pattern The equity shares of Kulu are not listed on any stock exchange. The current shareholding pattern of Kulu is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital

1. J.L. Growth Fund Limited 80 33.33 2. Abhilash Growth Fund Private Limited 80 33.33 3. Neha Credit and Investment Private Limited 80 33.33 Total 240 100.00

In addition Kulu has issued 120,500 11% non-cumulative redeemable preference shares of Rs. 100 each All the shareholders named above are promoters of Kulu. Board of Directors The board of directors of Kulu currently comprises Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The financial results of Kulu for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.49 0.51 0.61 Profit/(Loss) after tax 0.31 0.31 0.41 Equity Capital 0.02 0.02 0.02

Reserves and Surplus (excluding revaluation reserves) 8.92 8.60 8.29 Earnings/(Loss) per share (diluted) (Rs.) 1,296.97 1,295.77 1,691.92

Book Value per share (Rs.) 37,246.85 35,949.88 34,654.11 The details of Kulu’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-15104 of 1982-83 Bank Account CD 200029 with Allahabad Bank, Extension Counter,

OWM, G.T. Road, Sherpur, Ludhiana 141 003. PAN AAACK0731D Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

f. Ludhiana Holdings Limited (“LHL”) LHL was incorporated on June 24, 1972 as an investment company under the name “Ludhiana Holdings Private Limited”. Subsequently the word “private” was deleted on August 2, 1980 and the name of the company was

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changed to its present name. LHL is registered (No. 14.03012) as a NBFC with the RBI. There has been no change in the management of LHL. Shareholding Pattern The equity shares of LHL are not listed on any stock exchange. The current shareholding pattern of LHL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital

1. Mr. Jawahar Lal Oswal 2,490 49.80 2. Mr. Kamal Oswal 1,239 24.78 3. Mr. Dinesh Oswal 1,239 24.78 4. Ms. Abhilash Oswal 10 0.20 5. Ms. Manisha Oswal 10 0.20 6. Ms. Ritu Oswal 10 0.20 7. Kovalam Investment and Trading Company Limited 1 0.02 8. J.L. Growth Fund Limited 1 0.02

Total 5,000 100.00 All the shareholders named above are promoters of LHL. Board of Directors The board of directors of LHL currently comprises Mr. Jawahar Lal Oswal, Mr. Dinesh Oswal, Mr. Sat Paul Nijhawan, Mr. Rukmesh Mohan Sood and Mr. Gagnish Kumar Bhalla. Financial Performance The financial results of LHL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004 Sales and Other Income 1.26 1.63 1.72

Profit/(Loss) after tax 0.94 1.26 1.33 Equity Capital 0.50 0.02 0.02 Reserves and Surplus (excluding revaluation reserves)

23.01 22.07 20.84

Earnings/(Loss) per share (diluted) (Rs.) 745.00 6,173.00 6,508.00 Book Value per share (Rs.) 4,702.79 110,458.11 104,283.79

The details of LHL’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-6179 of 1972 -73 Bank Account CD 200031 with Allahabad Bank, Extension Counter, OWM, G.T. Road,

Sherpur, Ludhiana 141 003. PAN AAACL0930H Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

g. Nagdevi Trading and Investment Company Limited (“Nagdevi”) Nagdevi was incorporated on May 13, 1980 under the name Nagdevi Trading and Investment Company Private Limited, as an investment company. Subsequently, on March 13, 1994 the word “Private” was deleted and its name was changed to its present name. Nagdevi is registered (No. N-13.01794) as a NBFC with the RBI. There has been no change in the management of Nagdevi.

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Shareholding Pattern The equity shares of Nagdevi are not listed on any stock exchange. The current shareholding pattern of Nagdevi is as follows: Sl. No. Name of Shareholder Number of equity

shares of Rs. 100 each

% of Issued Capital

1. Mr. Jawahar Lal Oswal 11,150 34.50 2. Mr. Kamal Oswal 8,850 27.38 3. Mr. Dinesh Oswal 7,750 23.98 4. Ms. Abhilash Oswal 4,400 13.61 5. Ms. Manisha Oswal 80 0.25 6. Ms. Ritu Oswal 80 0.25 7. Nahar Industrial Enterprises Limited 10 0.03 Total 32,320 100.00

In addition Nagdevi has issued 369,000, 11% non cumulative redeemable preference shares of Rs. 100 each All the shareholders named above are promoters of Nagdevi. Board of Directors The board of directors of Nagdevi currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Mr. Kamal Oswal, Mr. Kamlesh Prasad Pandey, Mr. Bipin Sheth, Mr. Amarjeet Singh and Mr. Gagnish Bhalla. Financial Performance The financial results of Nagdevi for Fiscal 2004, 2005 and 2006 are set forth below

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 6.96 4.63 9.16 Profit/(Loss) after tax 6.82 4.17 6.99 Equity Capital 3.23 0.10 0.10

Reserves and Surplus (excluding revaluation reserves) 52.79 46.63 42.46 Earnings/(Loss) per share (Rs.) 1,532.21* 131.50** 218.84**

Book Value per share (Rs.) 1,733.40 45,820.40 41,731.48 *(basic) ** (diluted) The details of Nagdevi’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 11-022683 of 1980 Bank Account CD 200040 with Allahabad Bank, Extension Counter, OWM, G.T. Road,

Sherpur, Ludhiana 141 003. PAN AAACN1563A Address of the RoC with whom the company is registered

Registrar of Companies, Maharashtra, located at Hakoba Compound, 2nd Floor, Dataram Lalmarg, Chichpokli, Kalachowki, Mumbai.

h. Neha Credit and Investment Private Limited (“Neha Credit”) Neha Credit was incorporated on April 15, 1991 as an investment company. Neha Credit is registered (No. 14.00662) as a NBFC with the RBI. There has been no change in the management of Neha Credit.

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Shareholding Pattern The equity shares of Neha Credit are not listed on any stock exchange. The current shareholding pattern of Neha Credit is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital

1. J.L. GrowthFund Limited 335 33.50 2. Abhilash Growth Fund Private Limited 335 33.50 3. Nahar Growth Fund Private Limited 330 33.00 Total 1,000 100.00

All the shareholders named above are promoters of Neha Credit. Board of Directors The board of directors of Neha Credit currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Mr. Kamal Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The financial results of Neha Credit for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.30 0.52 0.55 Profit/(Loss) after tax 0.27 0.40 0.43 Equity Capital 0.10 0.10 0.10

Reserves and Surplus (excluding revaluation reserves) 29.98 29.71 29.31 Earnings/(Loss) per share (diluted) (Rs.) 266.96 400.28 427.94

Book Value per share (Rs.) 30,077.80 29,810.84 29,410.56 The details of Neha Credit’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-43957 of 1991 -92 Bank Account CD 200044 with Allahabad Bank, Extension Counter, OWM, G.T. Road,

Sherpur, Ludhiana 141 003. PAN AAACN0764H Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

i. Ogden Trading and Investment Company Private Limited (“Ogden”) Ogden was incorporated on March 5, 1982 as an investment company. The High Court of Bombay, vide order dated October 13, 2003, sanctioned the scheme of amalgamation of Powal Traders Private Limited, Nabisco Investment Private Limited, Michel Investment Limited, Georgian Trading and Investment Company Limited, Cannanore Investment Company Private Limited, Dundee Investment Company Private Limited and Interpace Trading and Investment Company Private Limited (“Transferor Companies”) with Ogden effective from April 1, 2003. Pursuant to the said scheme all the assets, liabilities, properties, rights and claims of the Transferor Companies were transferred to Ogden. Ogden is registered (No. 13.00169) as a NBFC with the RBI. There has been no change in the management of Ogden.

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Shareholding Pattern The equity shares of Ogden are not listed on any stock exchange. The current shareholding pattern of Ogden is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital (approximated)

1. Nagdevi Trading and Investment Company Limited 4,161 26.85 2. Sankheshwar Holding Company Limited 3,350 21.61 3. Nahar Financial and Investment Limited 1,760 11.36 4. Nahar Industrial Enterprises Limited 1,675 10.81 Kovalam Investment and Trading Company

Limited 1,675 10.81

5. J.L. Growth Fund Limited 949 6.12 6. Abhilash Growth Fund Private Limited 949 6.12 7. Nahar Growth Fund Private Limited 949 6.12 8. Mr. Jawahar Lal Oswal 30 0.20

Total 15,498 100.00 All the shareholders named above are promoters of Ogden. Board of Directors The board of directors of Ogden comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal and Mr. Bipin Sheth. Financial Performance The financial results of Ogden for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 2.13 6.33 2.56 Profit/(Loss) after tax 2.03 5.89 2.20 Equity Capital 0.15 0.15 0.15

Reserves and Surplus (excluding revaluation reserves) 54.32 52.29 46.40 Earnings/(Loss) per share (diluted) (Rs.) 130.67 380.19 141.72

Book Value per share (Rs.) 3,514.69 3,384.02 3,003.82 The details of Ogden’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 11-26567 of 1981-82 Bank Account CD 200046 with Allahabad Bank, Extension

Counter, OWM, G.T. Road, Sherpur, Ludhiana 141 003.

PAN AAACO0826H Address of the RoC with whom the company is registered

Registrar of Companies, Maharashtra located at Hakoba Compound, 2nd Floor, Dataram Lalmarg, Chichpokli, Kalachowki, Mumbai.

j. Vanaik Investors Limited (“Vanaik”) Vanaik was incorporated on June 24, 1972 as an investment company under the name “Vanaik Investors Private Limited”. Subsequently, the word “Private” was deleted on August 2, 1980 and the name of the company was changed to its present name.

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Vanaik is registered (No. 14.00525) as a NBFC with the RBI. There has been no change in the management of Vanaik. Shareholding Pattern The equity shares of Vanaik are not listed on any stock exchange. The current shareholding pattern of Vanaik is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100

each

% of Issued Capital

1. Mr. Jawahar Lal Oswal 2,490 49.80 2. Mr. Kamal Oswal 1,239 24.78 3. Mr. Dinesh Oswal 1,239 24.78 4. Ms. Abhilash Oswal 10 0.20 5. Ms. Manisha Oswal 10 0.20 6. Ms. Ritu Oswal 10 0.20 7. J.L. Growth Fund Limited 1 0.02 8. Abhilash Growth Fund Private Limited 1 0.02 Total 5,000 100.00

All the shareholders named above are promoters of Vanaik. Board of Directors The board of directors of Vanaik currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Mr. Dinesh Oswal, Mr. Shri Paul Jain, Mr. Komal Jain and Mr. Amarjeet Singh. Financial Performance The financial results of Vanaik for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 1.14 1.57 1.75 Profit/(Loss) after tax 0.95 1.26 1.50 Equity Capital 0.50 0.02 0.02

Reserves and Surplus (excluding revaluation reserves) 28.37 27.43 26.25 Earnings/(Loss) per share (diluted) (Rs.) 748.00 5,872.00 7,388.00

Book Value per share (Rs.) 5,774.45 137,229.52 131,355.64 The details of Vanaik’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-6178 of 1972-73 Bank Account CD 200067 with Allahabad Bank, Extension Counter,

OWM, G.T. Road, Sherpur, Ludhiana 141 003. PAN AAACV0052E Address of the RoC with whom the company is registered

Registrar of Companies, Delhi and Haryana located at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

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k. Vardhman Investments Limited (“Vardhman”) Vardhman was incorporated on June 24, 1972 under the name “Vardhman Investments Private Limited”, as an investment company. Subsequently, on July 30, 1980 the word “Private” was deleted and the name was changed to its present name. Vanaik is registered (No. 14.00524) as a NBFC with the RBI. There has been no change in the management of Vardhman. Shareholding Pattern The equity shares of Vardhman are not listed on any stock exchange. The current shareholding pattern of Vardhman is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100

each

% of Issued Capital

1. Nahar Industrial Enterprises Limited 250,000 49.50 2. Atam Vallabh Financiers Limited 130,000 25.74 3. J.L. Growth Fund Limited 70,011 13.86 4. Mr. Jawahar Lal Oswal 17,963 3.56 5. Mr. Kamal Oswal 17,974 3.56 6. Mr. Dinesh Oswal 17,963 3.56 7. Ms. Abhilash Oswal 539 0.11 8. Ms. Ritu Oswal 539 0.11 9. Kovalam Investment and Trading Company Limited 11 0.00 Total 505,000 100.00

All the shareholders named above are promoters of Vardhman. Board of Directors The board of directors of Vardhman currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Narayan Dass Jain, Mr. Shri Paul Jain, Mr. Sat Paul Nijhawan and Ms. Monica Oswal Financial Performance The audited financial results of Vardhman for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.87 0.94 0.93 Profit/(Loss) after tax 0.73 0.42 0.66 Equity Capital 50.50 50.50 0.5

Reserves and Surplus (excluding revaluation reserves) 230.67 229.94 14.02 Earnings/(Loss) per share (diluted) (Rs.) 1.44 2.47 2,677.00

Book Value per share (Rs.) 556.77 555.33 2,903.76 The details of Vardhman’s permanent account number, registration number, principal bank account numbers and the address of the RoC where it is registered are as follows: Registration Number 55-6181 of 1972-73 Bank Account CD 200065 with Allahabad Bank, Extension

Counter, OWM, G.T. Road, Sherpur, Ludhiana 141 003.

PAN AAACV1587G Address of the RoC with whom the company is Registrar of Companies, Delhi and Haryana located

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registered at Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi 110 003, India

Interest in promotion of our Company Our Company is promoted by the Promoters mentioned above. The Promoters collectively hold 23,355,659 Equity Shares. Payment of benefits to the Promoters during the last two years Except as stated in the section titled “Financial Statements - Related Party Transactions” beginning on page [•] of this Draft Red Herring Prospectus, there has been no payment of benefits to the Promoters during the last two years from the date of filing of this Draft Red Herring Prospectus. Other Confirmations Our Company confirms that the details of the permanent account numbers, bank account numbers and passport numbers of our Promoters will be submitted to the Stock Exchanges at the time of filing this Draft Red Herring Prospectus with the Stock Exchanges. Further, the Promoters and Promoter Group entities, including relatives of the Promoters, have confirmed that they have not been detained as willful defaulters by the RBI or any other governmental authority and there are no violations of securities laws committed by them in the past or are currently pending against them.

Promoter Group In addition to the Promoters named above, the following natural persons, companies and HUF’s form a part of the Promoter Group. The natural persons who are a part of our Promoter Group (due to their relationship with our Promoters), other than the Promoters named above, are as follows:

a. Ms. Abhilash Oswal; b. Ms. Monica Oswal; c. Ms. Ruchika Oswal; d. Ms. Manisha Oswal; e. Ms. Ritu Oswal; f. Ms. Neha Oswal; g. Mr. Abhinav Oswal; h. Mr. Rishab Oswal; i. Mr. Sambhav Oswal; and j. Ms. Tanvi Oswal.

The companies which are a part of the Promoter Group, other than the Promoters named above, are as follows:

a. Nahar Industrial Enterprises Limited; b. Nahar Exports Limited; c. Kovalam Investment and Trading Company Limited; d. Nahar Financial and Investment Limited; e. Oswal Leasing Limited; f. Sankheshwar Holding Company Limited; g. Bermuda Insurance Brokers Private Limited; h. Cabot Trading and Investment company Private Limited; i. J.L. Growth Fund Limited; j. Monica Growth Fund Private Limited; k. Nahar Capital and Financial Services Limited; l. Nahar Growth Fund Private Limited; m. Nahar Industrial Infrastructure Corporation Limited; n. Nahar Retail Limited; o. Palam Motels Limited; p. Ruchika Growth Fund Private Limited;

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q. Shri Atam Fabrics Limited; r. Vanaik Spinning Mills Limited; s. Vigil Investment Private Limited; and t. White Tiger Breweries and Distilleries Limited.

The HUF which form a part of our Promoter Group are as follows:

a. Jawahar Lal & Sons. a. Nahar Industrial Enterprises Limited (“NIEL”) NIEL was incorporated on September 27, 1983 under the name “Oswal Fats and Oils Limited”. Subsequently, on October 21, 1994 the name was changed to its present name. On June 11, 1996 the registered office was changed from the NCT of Delhi to the State of Punjab. NIEL is engaged in the business of, inter alia, manufacturing of cotton/ blended yarns, dyed yarns, grey and processed fabrics, ready made garment, sugar, steel, besides retailing the ready made cotton woven garments under the brand ‘Cotton County”. Shareholding Pattern The equity shares of NIEL are listed on the BSE and NSE and the current shareholding pattern of NIEL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

(approximated) 1. Nahar Spinning Mills Limited 9,336,745 23.11 2. J.L. Growth Fund Limited 2,925,728 7.24 3. Nahar Exports Limited 2,708,800 6.70 4. Vardhman Investment Limited 2,277,955 5.64 5. Atam Vallabh Financiers Limited 1,691,364 4.19 6. Oswal Woollen Mills Limited 1,207,996 2.99 7. Kulu Investment and Trading Private Limited 1,009,840 2.50 8. Kovalam Investment and Trading Company Limited 636,387 1.58 9. Sankeshwar Holding Company Limited 549,842 1.36 10. Ogden Trading and Investment Company Private

Limited 236,425 0.59

11. Vanaik Investors Limited 287,987 0.71 12. Nahar Growth Fund Private Limited 151,785 0.38 13. Nahar Financial & Investment Limited 150,870 0.37 14. Nagdevi Trading and Investment Company Limited 141,637 0.35 15. Ludhiana Holdings Limited 137,990 0.34 16. Neha Credit and Investment Private Limited 80,654 0.20 17. Abhilash Growth Fund Private Limited 42,675 0.11 18. Mr. Kamal Oswal 1,294 0.00 19. Mr. Dinesh Oswal 30 0.00 20. Others 16,819,861 41.67

Total 40,395,865 100 Board of Directors The board of directors of NIEL currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Dinesh Gogna, Mr. N.D. Jain, Mr. S.P. Nijhawan, Dr. O.P. Sahni, Dr. Ms. H.K. Bal, Prof, K.S, Maini and Mr. R.Krishan Kumar (nominee director of ICICI Bank Limited). Promise v/s Performance NIEL made a simultaneous public issue of 4,750,000 equity shares of Rs. 10 each at a premium of Rs. 110 per equity share and a rights issue of 4,000,000 equity shares of Rs. 10 each at a premium of Rs. 90 per share vide prospectus dated January 1, 1993 and letter of offer dated January 11, 1993 respectively. The object of the issue

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was to set up a unit for the manufacture of writing and printing paper with a capacity of 33,000 MT per annum and vanaspati ghee with a capacity of 33,000 MT per annum. NIEL has put up a unit for manufacture of vanaspati ghee with a capacity of 19,800 MT per annum. However, pursuant to the shareholders resolution dated August 30, 1994 NIEL decided to set up a spinning unit with a capacity of 50,000 spindles instead of setting up a unit for the manufacture of writing and printing paper. Following is a comparison of the projections and the actuals:

(Rs. in million)

Fiscal 1994 Fiscal 1995 Fiscal 1996 Projections Actuals Projections Actuals Projections Actuals Net Sales and other Income

739.2 984.05 1,563.50 909.11 2,487.40 1,274.11

Profit before tax

155.4 103.02 2,496 42.66 402.90 5.41

Profit after tax 127.1 65.02 2,496 26.54 343.60 5.39 EPS (Rs.) 8.86 4.54 17.39 1.68 23.94 0.34 Book Value per share (Rs.)

94.57 97.70 109.44 99.57 130.86 100.62

Dividend 30% - 30% - 30% - Detailed below is a comparison of the projections as per Allahabad Bank, and the actuals:

(Rs. in million) Fiscal 1994 Fiscal 1995 Fiscal 1996 Projections Actuals Projections Actuals Projections Actuals Net Sales and other Income 718.20 984.05 1,353.90 909.11 2,199.30 1,274.11 Profit before tax 134.40 103.02 155.00 42.66 232.50 5.41 Profit after tax 109.80 65.02 155.00 26.54 231.10 5.39 EPS (Rs.) 7.65 4.54 10.80 1.68 16.10 0.34 Book Value per share (Rs.) 93.26 97.70 101.62 99.57 115.26 100.62 Dividend 30% - 30% - 30% - Information about Share Price The highest market price of the equity shares of NIEL during the six-month period ending November 31, 2006 on the BSE was Rs. 209.95 per share in September 11, 2006 and the lowest was Rs. 139.55 per share in June 13, 2006. The highest market price of the equity shares of NIEL during the six-month period ending November 31, 2006 on the NSE was Rs. 208.00 per share on October 18, 2006 and the lowest was Rs. 140.00 per share on June 13 and 14, 2006. The price of the equity shares of NIEL on the BSE and NSE, as on December 15, 2006 is Rs. 170.45 and Rs. 170.45, respectively. There has been no change in capital structure of NEIL in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by NIEL in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by NIEL are normally attended and replied to within 14 days of receipt by NIEL. There are no complaints currently pending against NIEL as of November 30, 2006. Financial Performance The audited financial results of NIEL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 6,991.24 6,183.72 4,020.77

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Fiscal 2006 Fiscal 2005 Fiscal 2004

Profit/(Loss) after tax 804.70 203.26 199.23 Equity Capital* 354.59 184.00 184.00 Reserves and Surplus (excluding revaluation reserves) 3,891.19 3,323.96 1,370.30 Earnings/(Loss) per share (diluted) (Rs.) 24.04 5.24 10.83

Book Value per share (Rs.) 118.53 117.32 82.84 * Net of allotment money unpaid. b. Nahar Exports Limited (“NEL”) NEL was incorporated on November 11, 1988 as a company engaged in the business of exporters and of spinners, knitters, weavers of all cotton, jute, wool and other fibrous materials. For details of the scheme of demerger of the textile business of NEL to NSML, see the section titled “Promoters and Promoter Group- Nahar Spinning Mills Limited” beginning on page [●] of this Draft Red Herring Prospectus. Shareholding Pattern

The equity shares of NEL are listed on the BSE and the NSE. The current shareholding pattern of NEL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

(approximated) 1. Nahar Spinning Mills Limited 15,750,150 44.40 2. Nahar Industrial Enterprises Limited 1,806,744 5.09 3. Abhilash Growth Fund Private Limited 254,322 0.72 4. Kovalam Investment and Trading Company Limited 222,000 0.63 5. Ruchika Growth Fund Private Limited 160,800 0.45 6. Monica Growth Fund Private Limited 160,800 0.45 7. Vanaik Spinning Mills Limited 153,080 0.43 8. Vanaik Investors Limited 129,528 0.37 9. Atam Vallabh Financiers Limited 117,122 0.33

10. Ludhiana Holdings Limited 113,593 0.32 11. Oswal Woollen Mills Limited 105,860 0.30 12. Vardhman Investments Limited 104,600 0.29 13. Nahar Growth Fund Private Limited 67,048 0.19 14. Nagdevi Trading and Investment Company Limited 554,124 1.56 15. Ogden Trading and Investment Company Private

Limited 468,849 1.32

16. J.L. Growth Fund Limited 414,900 1.17 17. Sankheshwar Holding Company Limited 401,120 1.13 18. Kamal Oswal 45,000 0.13 19. Dinesh Oswal 43,211 0.12 20. Neha Credit Investment Private Limited 39,128 0.11 21. Directors and Relatives 9,153 0.03 22. Institutional Investors 1,347,206 3.80 23. Others 13,006,699 36.66

Total 35,475,037 100.00 Board of Directors The board of directors of NEL currently comprises Mr. Jawahar Lal Oswal, Mr. Dinesh Oswal, Mr. Kamal Oswal, Mr. Dinesh Gogna, Mr. Sardari Lal Sehgal, Mr. Komal Jain, Dr. (Ms.) H.K. Bal, Dr. O. P. Sahni, Mr. Amarjeet Singh, Prof. K. S. Maini and Mr. Suresh Kumar Singla.

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Promise v/s Performance NEL made a rights issue of 2,886,380 12% unsecured fully convertible debentures of Rs. 230 each to its shareholders and 97,120 -12% unsecured fully convertible debentures of Rs. 230 each to the holders of Part B-12.5% fully convertible debentures on a rights basis on September 10, 1994. The objects of the issue were to part finance NEL’s requirements for setting up a 25,000 spindle capacity, spinning unit at Jodha, Punjab. No projections were made in the said offer document. Information about Share Price The highest market price of the equity shares of NEL during the six-month period ending October 31, 2006 on the BSE was Rs. 110.90 per share on May 15, 2006 and the lowest was Rs. 55.00 per share on June 9, 2006. The highest market price of the equity shares of NEL during the six-month period ending October 31, 2006 on the NSE was Rs. 111.00 per share on May 15, 2006 and the lowest was Rs. 56.95 per share on June 9, 2006. The price of the equity shares of NEL on the BSE and NSE as on December 15, 2006 is Rs. 80.40 and Rs. 80.25 respectively. There has been no change in capital structure of NEL in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by NEL in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by NEL are normally attended and replied to within 14 days of receipt by NEL. There are no complaints pending against NEL as of November 30, 2006. Financial Performance The audited financial results of NEL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 4,385.88 4,631.12 4,601.77 Profit/(Loss) after tax 345.44 253.53 356.55 Equity Capital* 350.79 350.73 350.52

Reserves and Surplus (excluding revaluation reserves) 3,050.12 2,764.82 2,570.57 Earnings/(Loss) per share (diluted) (Rs.) 9.74 7.15 10.05

Book Value per share (Rs.) 95.87 87.82 82.34 *Net of allotment money unpaid. c. Kovalam Investment and Trading Company Limited (“Kovalam”) Kovalam was incorporated on November 28, 1981, as an investment company in the State of Maharashtra. Its registered office was situated at 414, Raheja Chambers, 213, Nariman Point, Mumbai 400 023, subsequently on November 3, 1999, the registered office of Kovalam was shifted to G. T. Road, Sherpur, Ludhiana 141 003, Punjab. The High Court of Punjab and Haryana, vide order dated July 20, 2000, sanctioned the scheme of amalgamation between Sarita Exports Limited (“SEL”), Memphis Enterprises Limited (“MEL”) and Oswal Finance Company Limited (“OFCL”) with Kovalam with effect from April 1, 2000. Pursuant to the said scheme of amalgamation, the entire undertakings, business, assets, liabilities, rights and claims were transferred to Kovalam. Kovalam allotted 1,461,210 equity shares of Rs. 10 each to the shareholders of SEL, MEL and OFCL in the ratio of 1:3 (i.e. three equity shares of Kovalam for every equity share of SEL), 2:3 (i.e. three equity shares of Kovalam for

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every two equity shares of MEL) and 1:90 (i.e. 90 equity shares of Kovalam for every equity share of OFCL) respectively. Kovalam is registered (No. 06.00576) as a NBFC with the RBI. Shareholding Pattern The equity shares of Kovalam are listed on the BSE. However, Kovalam has vide letter dated September 22, 2001 made an application to the BSE to delist its equity shares from the BSE. The shareholding pattern of Kovalam, as of September 30, 2006 is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

1. Kulu Investment and Trading Private Limited 713,355 41.81 2. Sankheshwar Holding Company Limited 176,400 10.34 3. Girnar Investment Limited 160,035 9.38 4. Ogden Trading and Investment Company Private

Limited 140,925 8.26

5. Vanaik Investors Limited 123,360 7.23 6. J.L. Growth Fund Private Limited 91,130 5.34 7. Ludhiana Holdings Limited 87,000 5.10 8. Abhilash Growth Fund Private Limited 73,850 4.33 9. Nagdevi Trading and Investment Company Limited 55,935 3.28

10. Nahar Growth Fund Private Limited 20,000 1.17 11. Atam Vallabh Financiers Limited 15,000 0.88 12. Vardhman Investments Limited 10,000 0.59 13. Non Institutional Investors 5,500 0.32 14. Others 33,720 1.97

Total 1,706,210 100.00 Board of Directors The board of directors of Kovalam currently comprises Mr. Sat Paul Nijhawan, Mr. Gagnish Kumar Bhalla, Mr. Bipin Sheth and Mr. Navdeep Sharma. Financial Performance The financial results of Kovalam for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 18.36 9.54 3.64

Profit/(Loss) after tax 12.21 6.24 2.54 Equity Capital 17.06 17.06 17.06 Reserves and Surplus (excluding revaluation reserves) 42.59 30.38 24.14

Earnings/(Loss) per share (diluted) (Rs.) 7.16 3.66 1.49 Book Value per share (Rs.) 34.96 27.81 24.15

Information about Share Price There has been no trading in the equity shares of Kovalam during the six-month period ending October 31, 2006. The last traded price was Rs. 3.60 per share on June 6, 2005. There has been no change in capital structure of Kovalam in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years

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There has been no public/rights issue of capital by Kovalam in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by Kovalam are normally attended and replied to within 14 days of receipt by Kovalam. There are no complaints currently pending against Kovalam as of November 30, 2006. d. Nahar Financial and Investment Limited (“NFIL”) NFIL was incorporated on November 14, 1979 under the name “Punjab Processors Private Limited” as a company engaged in the business of manufacturing, processing, refining, buying and selling in wholesale and detain in all kinds of oils, oil seeds, vegetable ghee etc. Subsequently n November 27, 1981 the name was changed to “Punjab Processors Limited”. On December 20, 1994 the name was changed to its present name. Shareholding Pattern The equity shares of NFIL are listed on the DSE. The current shareholding pattern of NFIL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

(approximated) 1. Ogden Trading and Investment Company Private Limited 46,250 23.12 2. Nagdevi Trading and Investment Company Limited 38,900 19.45 3. J.L. Growth Fund Limited 30,000 15.00 4. Nahar Growth Fund Private Limited 29,500 14.75 5. Abhilash Growth Fund Private Limited 16,000 8.00 6. Neha Credit & Investment Private Limited 13,997 7.00 7. Ms. Monica Oswal 11,400 5.70 8. Ms. Ruchika Oswal 7,000 3.50 9. Mr. Dinesh Oswal 1700 0.85

10. Ms. Neha Oswal 1700 0.85 11. Girnar Investment Limited 500 0.25 12. Atam Vallabh Financiers Limited 400 0.20 13. Ludhiana Holdings Limited 400 0.20 14. Vanaik Investors Limited 400 0.20 15. Vardhman Investment Limited 400 0.20 16. General Public 1453 0.73

Total 200,000 100.00 Board of Directors The board of directors of NFIL currently comprises Mr. Narayan Dass Jain, Mr. Harish Pahwa, Mr. Arvind Jain and Mr. Komal Jain. Information about Share Price There has been no trading in the equity shares of NFIL during the six-month period ending October 31, 2006. The last traded price was Rs. 2.50 per share on June 24, 1983. There has been no change in capital structure of NFIL in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by NFIL in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by NFIL are normally attended and replied to within 14 days of receipt by NFIL. There are no complaints currently pending against NFIL as of November 30, 2006.

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Financial Performance The audited financial results of NFIL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.26 7.34 0.37 Profit/(Loss) after tax 0.02 6.52 0.06 Equity Capital 2.00 2.00 2.00

Reserves and Surplus (excluding revaluation reserves) 9.93 9.90 3.38 Earnings/(Loss) per share (diluted) (Rs.) 0.12 32.60 0.32

Book Value per share (Rs.) 59.64 59.52 26.92 e. Oswal Leasing Limited (“OLL”) OLL was incorporated on June 30, 1983 under the name “Oswal Leasing Private Limited” as a company engaged in the business of leasing, hire purchase finance company and to acquire to provide on lease or to provide on hire purchase all types of industrial and office plant and machinery. Subsequently, on August 22, 1983 the name was changed to its present name. Shareholding Pattern The equity shares of OLL are listed on Delhi Stock Exchange. The current shareholding pattern of OLL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each*

% of Issued Capital

(approximated) 1. Sankheshwar Holding Company Limited 60,500 12.10 2. Nagdevi Trading and Investment Company Limited 29,850 5.97 3. Kovalam Investment and Trading Company Limited 14,200 2.84 4. Girnar Investment Limited 12,248 2.45 5. Ogden Trading and Investment Company Private Limited 10,000 2.00 6. Atam Vallabh Financiers Limited 900 0.18 7. General Public 372,302

74.46

Total 500,000 100.00 *An amount of Rs. 16,125 is yet to be paid up in respect of the said equity shares Board of Directors The board of directors of OLL currently comprises Mr. Kamal Oswal, Mr. Dinesh Gogna, Mr. Vijay Gupta, Mr. Amarjeet Singh, Mr. Navdeep Sharma and Mr. Narinder Kumar Tyagi. Promise v/s Performance OLL came out with a public issue of 382,500 equity shares of Rs. 10 each for cash at par on January 30, 1984. The object of the issue was to provide for the working capital requirements of OLL and expenses of the issue. No projections were made in the said issue. Information about Share Price There has been no trading in the equity shares of OLL during the six-month period ending October 31, 2006. The last traded price was Rs. 11.00 on March 11, 1993. There has been no change in capital structure of OLL in the six months preceding the filing of this Draft Red Herring Prospectus.

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Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by OLL in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by OLL are normally attended and replied to within 14 days of receipt by OLL. There are no complaints currently pending against OLL as of November 30, 2006. Financial Performance The audited financial results of OLL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 1.29 1.37 1.42

Profit/(Loss) after tax 0.64 0.65 0.71 Equity Capital 4.98 4.98 4.98 Reserves and Surplus (excluding revaluation reserves) 10.07 9.42 8.77

Earnings/(Loss) per share (diluted) (Rs.) 1.29 1.30 1.42 Book Value per share (Rs.) 30.10 28.81 27.51

f. Sankheshwar Holding Company Limited (“Sankheshwar”) Sankheshwar was incorporated on January 4, 1979 as an investment company. The High Court of Punjab and Haryana, vide order dated May 28, 1999, sanctioned the scheme of amalgamation of Crown Merchants Limited (“CML”), Rare Coin Investment and Commercial Enterprises Limited (“RCICE”) and Daring Investment and Commercial Enterprises Limited (“DICE”) with Sankheshwar with effect from April 1, 1999. Pursuant to the order, the entire undertaking of the transferor companies together with assets, liabilities, rights and obligations vested with Sankheshwar. Sankheshwar allotted 788,954 equity shares to the shareholders of CML, RCICE and DICE in the ratio of 1:1 (i.e. one equity share of Sankheshwar for every equity share of CML), 6:5 (i.e. six equity shares of Sankheshwar for every five equity shares of RCICE) and 1:1 (i.e. one equity share of Sankheshwar for every equity share of DICE) respectively. Sankheshwar is registered (No. 14.00513) as a NBFC with the RBI. Shareholding Pattern The equity shares of Sankheshwar are listed on the Delhi Stock Exchange Association Limited. The shareholding pattern of Sankheshwar, as of September 30, 2006, is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

1. Ogden Trading and Investment Company Private Limited 295,860 29.92 2. Kulu Investment and Trading Private Limited 161,700 16.35 3. Nagdevi Trading and Investment Company Limited 78,700 7.96 4. Nahar Growth Fund Private Limited 76,300 7.72 5. Abhilash Growth Fund Private Limited 74,393 7.52 6. J.L. Growth Fund Limited 73,600 7.44 7. Neha Credit and Investment Private Limited 9,600 0.97 8. Mr. Dinesh Oswal 9,250 0.93 9. Ms. Neha Oswal 6,500 0.66

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Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital

10. Ms. Abhilash Oswal 5,050 0.52 11. Girnar Investment Limited 4,740 0.48 12. Mr. S.P. Jain 500 0.05 13. Non Institutional Investors 1,550 0.06 14. Others 191,211 19.33

Total 988,954 100.00 Board of Directors The board of directors of Sankheshwar currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Sat Paul Nijhawan, Mr. Komal Jain and Mr. Shri Paul Jain. Promise v/s Performance Sankheshwar came out with its initial public offer of 170,000 equity shares of Rs. 10 each for cash at par on March 9, 1979. The object of the issue was to provide finance required for Sankheshwar’s investment business. No projections were made in the said issue. Information about Share Price There has been no trading in the equity shares of Sankheshwar during the six-month period ending October 31, 2006 on the Delhi Stock Exchange Association Limited. The last traded price was Rs. 10 per share on March 22, 1993. There has been no change in capital structure of Sankheshwar in the six months preceding the filing of this Draft Red Herring Prospectus. Details of public issue/rights issue of capital in the last three years There has been no public/rights issue of capital by Sankheshwar in the three years preceding the date of this Draft Red Herring Prospectus. Mechanism for redressal of investor grievance The investor complaints received, if any, by Sankheshwar are normally attended and replied to within 14 days of receipt by Sankheshwar. There are no complaints currently pending against Sankheshwar as of November 30, 2006. Financial Performance The financial results of Sankheshwar for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 1.49 1.78 1.73

Profit/(Loss) after tax 1.41 1.59 1.56 Equity Capital 9.89 9.89 9.89 Reserves and Surplus (excluding revaluation reserves) 29.20 27.78 26.19

Earnings/(Loss) per share (diluted) (Rs.) 1.43 1.61 1.58 Book Value per share (Rs.) 39.52 38.10 36.48

g. Bermuda Insurance Brokers Private Limited (“BIBPL”) BIBPL was incorporated on December 4, 1980 under the name “Bermuda Investment Company Limited”. Subsequently, the word “Private” was deleted on June 26, 1981 and was added on February 18, 2003. On

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February 18, 2003, it changed its name to its present name. BIBPL was engaged in the business of a direct broker in respect of general insurance and life insurance business. Shareholding Pattern The equity shares of BIBPL are not listed on any stock exchange. The current shareholding pattern of BIBPL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

1. J.L. Growth Fund Private Limited 8,800 17.60 2. Nahar Growth Fund Private Limited 8,800 17.60 3. Ludhiana Holdings Limited 8,800 17.60 4. Vanaik Investors Limited 8,800 17.60 5. Vardhman Investments Limited 8,800 17.60 6. Nahar Financial and Investment Limited 4,000 8.00 7. Abhilash Growth Fund Private Limited 2,000 4.00 8. Mr. Bipin Seth 1 0.00 9. Kamlesh Prasad Pandey 1 0.00

Total 50,002 100.00 Board of Directors The board of directors of BIBPL currently comprises Mr. Komal Jain, Mr. Gagnish Kumar Bhalla, Mr. Bipin Seth, Mr. Prem Kishore Vashishth and Mr. Narinder Kumar Tyagi. Financial Performance The audited financial results of BIBPL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.64 0.65 0.66 Profit/(Loss) after tax 0.43 0.43 0.43 Equity Capital 5.00 5.00 5.00

Reserves and Surplus (excluding revaluation reserves) 2.65 2.22 1.80 Earnings/(Loss) per share (diluted) (Rs.) 8.52 8.50 8.67

Book Value per share (Rs.) 152.96 144.44 135.94 h. Cabot Trading and Investment company Private Limited (“Cabot”) Cabot was incorporated on March 5, 1982 as an investment company. Shareholding Pattern The equity shares of Cabot are not listed on any stock exchange. The current shareholding pattern of Cabot is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

1. Ogden Trading and Investment Company Private Limited

530 53.00

2. Vigil Investment Private Limited 268 26.80 3. Shri Atam Fabrics Limited 200 20.00 4. Mr. Jawahar Lal Oswal 2 0.20 Total 1,000 100.00

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Board of Directors The board of directors of Cabot currently comprises Mr.Gagnish Kumar Bhalla, Mr. Rukmesh Mohan Sood, Mr. Ashok Kumar Verma and Mr. Bipin Kumar Sheth Financial Performance The audited financial results of Cabot for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004 Sales and Other Income 0.26 1.20 62.76

Profit/(Loss) after tax 0.05 0.12 0.19 Equity Capital 0.10 0.10 0.10 Reserves and Surplus (excluding revaluation reserves) 3.82 3.77 3.65

Earnings/(Loss) per share (diluted) (Rs.) 50.73 119.18 187.11 Book Value per share (Rs.) 3,920.47 3,869.74 3,750.55

i. J.L. Growth Fund Limited (“JLGFL”) JLGFL was incorporated on February 12, 1991 under the name “J.L. Growth Fund Private Limited” as an investment company. Subsequently on July 13, 2004 the name was changed to its present name. Shareholding Pattern The equity shares of JLGFL are not listed on any stock exchange. The current shareholding pattern of JLGFL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

1. Nahar Industrial Enterprises Limited 180,000 41.10 2. Atam Vallabh Financiers Limited 58,000 13.24 3. Vardhman Investments Limited 55,396 12.65 4. Mr. Jawahar Lal Oswal 48,100 10.98 5. Mr. Kamal Oswal 48,100 10.98 6. Mr. Dinesh Oswal 48,100 10.98 7. Ms. Abhilash Oswal 100 0.02 8. Ms. Manisha Oswal 100 0.02 9. Ms. Ritu Oswal 100 0.02 10. Abhilash Growth Fund Private Limited 2 0.00 11. Nahar Growth Fund Private Limited 2 0.00

Total 438,000 100.00 Board of Directors The board of directors of JLGFL currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The audited financial results of JLGFL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

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Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 5.00 10.08 7.68

Profit/(Loss) after tax 1.41 5.49 2.55 Equity Capital 43.80 43.80 7.23 Reserves and Surplus (excluding revaluation reserves) 278.32 276.91 33.38

Earnings/(Loss) per share (diluted) (Rs.) 3.22 25.98 4,281.70 Book Value per share (Rs.) 735.44 732.22 561.62

j. Monica Growth Fund Private Limited (“MGFPL”) MGFPL was incorporated on September 26, 1990 as an investment company. Shareholding Pattern The equity shares of MGFPL are not listed on any stock exchange. The current shareholding pattern of MGFPL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of

Rs. 10 each

% of Issued Capital

(approximated) 1. Ruchika Growth Fund Private Limited 3,350 33.50 2. Neha Credit and Investment Private Limited 3,320 33.20 3. Nahar Growth Fund Private Limited 3,320 33.20 4. Nagdevi Trading and Investment Company Limited 10 0.10

Total 10,000 100.00 Board of Directors The board of directors of MGFPL currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Ms. Monica Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The audited financial results of MGFPL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004 Sales and Other Income 1.66 1.45 1.35

Profit/(Loss) after tax 1.33 1.14 1.06 Equity Capital 0.10 0.10 0.10 Reserves and Surplus (excluding revaluation reserves) 24.66 23.33 22.19

Earnings/(Loss) per share (diluted) (Rs.) 133.27 114.08 105.50 Book Value per share (Rs.) 2,476.52 2,343.25 2,229.17

k. Nahar Capital and Financial Services Limited (“NCFSL”) NCFSL was incorporated March 31, 2006 as a public limited company, specifically for the purpose of taking over the investment business of NSML, upon its demerger and sanction of the Composite Scheme of demerger and arrangement between NSML, NEL and NCFSL by the High Court of Punjab and Haryana. For details see section titled “Promoters and Promoter Group-Nahar Spinning Mills Limited” beginning on page [●] of this Draft Red Herring Prospectus. NCFSL has not commenced any business as of the date of filing this Draft Red Herring Prospectus. Shareholding Pattern

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The equity shares of NCFSL are not listed on any stock exchange. The current shareholding pattern of NCFSL is as follows:

Sl. No. Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Mr. Kamal Oswal* 49,750 47.50 2. Mr. Dinesh Oswal* 49,750 47.50 3. Mr. Komal Jain* 100 0.50 4. Mr. H. R. Kapoor* 100 0.50 5. Mr. Pavitar Jain* 100 0.50 6. Mr. Arvind Jain* 100 0.50 7. Mr. Brij Sharma* 100 0.50

Total 100,000 100.00 * nominees of Nahar Spinning Mills Limited Board of Directors The board of directors of NCFSL currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal and Mr. Dinesh Oswal. Financial Performance NCFSL was incorporated on March 31, 2006 and has not commenced any business. Consequently the audited financial results of NCFSL for Fiscal 2004, 2005 and 2006 are not available. l. Nahar Growth Fund Private Limited (“NGFPL”)

NGFPL was incorporated on February 12, 1991 as an investment company. Shareholding Pattern The equity shares of NGFPL are not listed on any stock exchange. The current shareholding pattern of NGFPL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

1. J.L. Growth Fund Limited 335 33.50 2. Abhilash Growth Fund Private Limited 335 33.50 3 Neha Credit and Investment Private Limited 330 33.00

Total 1,000 100.00 Board of Directors The board of directors of NGFPL currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Mr. Kamal Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The audited financial results of NGFPL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004 Sales and Other Income 1.27 1.80 1.93

Profit/(Loss) after tax 1.18 1.51 1.60 Equity Capital 0.10 0.10 0.10 Reserves and Surplus (excluding revaluation reserves) 31.71 30.53 29.02

Earnings/(Loss) per share (diluted) (Rs.) 1,178.79 1,505.16 1,598.37

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Book Value per share (Rs.) 31,807.67 30,628.88 29,123.73

m. Nahar Industrial Infrastructure Corporation Limited (“NIICO”) NIICO was incorporated on August 22, 1994, under the name “Nahar Industrial Corporation Limited”. Subsequently on December 1, 1994 the name was changed to its present name. NIICO is engaged in the business of establishing, maintaining, controlling and managing industrial parks and industrial areas such as development of land etc. Shareholding Pattern The equity shares of NIICO are not listed on any stock exchange. The current shareholding pattern of NIICO is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital

1. Mr. Jawahar Lal Oswal 10,000 19.72 2. Mr. Kamal Oswal 10,100 19.92 3. Mr. Dinesh Oswal 10,100 19.92 4. J.L. GrowthFund Limited 10,000 19.72 5. Nagdevi Trading and Investment Company

Limited 10,000 19.72

6. Mr. N D Jain 100 0.20 7. Mr. Amarjeet Singh 100 0.20 8. Mr. Komal Jain 100 0.20 9. Mr. Vipan Jain 100 0.20

10. Mr. Arvind Jain 100 0.20 Total 50,700 100.00

Board of Directors The board of directors of NIICO currently comprises Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. N D Jain and Mr. Yogesh Goel (as a nominee of PSIDC) Financial Performance The financial results of NIICO for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million)

Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.06 0.08 0.04 Profit/(Loss) after tax 0.00 0.00 0.00 Equity Capital 0.51 0.51 0.51

Reserves and Surplus (excluding revaluation reserves) 0.00 0.00 0.00 Earnings/(Loss) per share (diluted) (Rs.) 0.01 0.01 0.02

Book Value per share (Rs.) 10.09 10.08 10.07 n. Nahar Retail Limited (“NRL”)

NRL was originally incorporated as ‘Creative TexTrade Private Limited’ on November 5, 2001 as a company engaged in the business of textiles. Vide order dated May 10, 2006 the word ‘Private’ was struck down. Subsequently, on October 16, 2006 the name was changed to its present name inter alia with the object to carry on the business of import and export all kinds of yarns and textiles, textile goods, hosiery goods of all kinds of cloth, cotton goods and readymade goods of every kind. Shareholding Pattern

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The equity shares of NRL are not listed on any stock exchange. The current shareholding pattern of NRL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Nahar Industrial Enterprises Limited 6,009,994 100.00 2. Mr. Jawaharlal Oswal* 1 0.00 3. Mr. Kamal Oswal* 1 0.00 4. Mr. Dinesh Oswal* 1 0.00 5. Mr. Dinesh Gogna* 1 0.00 6. Mr. B. B. Gupta* 1 0.00 7. Mr. Som Garg* 1 0.00

Total 6,010,000 100.00 *Nominees of Nahar Industrial Enterprises Limited.

Board of Directors The board of directors of NRL currently comprises Mr. Bharat Bhushan Gupta, Mr. Hari Narian Singhal, and Mr. Vipan Kumar Kad. Financial Performance The audited financial results of NRL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004 Sales and Other Income 275.91 185.19 205.12

Profit/(Loss) after tax 4.31 0.90 0.70 Equity Capital 60.10 0.10 0.10 Reserves and Surplus (excluding revaluation reserves) 6.11 1.80 0.85

Earnings/(Loss) per share (diluted) (Rs.) 163.22 90.22 70.18 Book Value per share (Rs.) 11.02 189.90 94.59

o. Palam Motels Limited (“Palam”) Palam was incorporated on July 13, 1979 under the name “Palam Motels Private Limited” as a company engaged in the business of hotels, motels, restaurants, lodging houses, inns, beer and spirit merchants. Subsequently on July 13, 1989 the word “Private” was deleted. Shareholding Pattern The equity shares of Palam are not listed on any stock exchange. The current shareholding pattern of Palam is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

1. J.L. Growth Fund Limited 950 19.00 2. Nagdevi Credit and Investment Private Limited 900 18.00 3. Nahar Exports Limited 655 13.10 4. Nahar Spinning Mills Limited 645 12.90 5. Neha Credit and Investment Private Limited 520 10.40 6. Sankheshwar Holding Company Limited 445 8.90 7. Nahar Growth Fund Private Limited 410 8.20 8. Abhilash Growth Fund Private Limited 400 8.00 9. Kovalam Investment and Trading Company

Limited 75 1.50

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Sl. No.

Name of Shareholder Number of equity shares of Rs. 100 each

% of Issued Capital (approximated)

Total 5,000 100.00 Board of Directors The board of directors of Palam currently comprises Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Mr. Vijay Gupta, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The audited financial results of Palam for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 2.57 0.22 3.43

Profit/(Loss) after tax 1.32 0.03 3.05 Equity Capital 0.50 0.50 0.50 Reserves and Surplus (excluding revaluation reserves) 28.80 27.47 27.44

Earnings/(Loss) per share (diluted) (Rs.) 264.32 5.88 610.84 Book Value per share (Rs.) 5,859.11 5,594.79 5,588.92

p. Ruchika Growth Fund Private Limited (“RGFPL”) RGFPL was incorporated on September 26, 1990 as an investment company. Shareholding Pattern The equity shares of RGFPL are not listed on any stock exchange. The current shareholding pattern of RGFPL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Monica Growth Fund Private Limited 10 50.00 2. Nagdevi Trading and Investment Company Limited 10 50.00

Total 20 100.00 RGFPL has also issued 34,000 11% non cumulative redeemable preference shares of Rs. 100 each. Board of Directors The board of directors of RGFPL currently comprises Mr. Jawahar Lal Oswal, Ms. Abhilash Oswal, Ms. Ruchika Oswal, Mr. Amarjeet Singh and Mr. Gagnish Kumar Bhalla. Financial Performance The audited financial results of RGFPL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 2.31 2.92 3.55

Profit/(Loss) after tax 1.22 1.29 1.38 Equity Capital (Rs.) 200.00 200.00 200.00 Reserves and Surplus (excluding revaluation reserves) 25.94 24.72 23.43

Earnings/(Loss) per share (diluted) (Rs.) 60,866.65 64,541.45 68,815.45 Book Value per share (Rs.) 1,296,848.78 1,235,982.1

3 1,171,440.6

8

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q. Shri Atam Fabrics Limited (“Shri Atam”) Shri Atam was originally incorporated as Shri Atam Spinning Mills Ltd April 2, 1981 as a company engaged in the business of trading of textile products. Subsequently, on December 12, 1993 the name was changed to its present name. Shareholding Pattern The equity shares of Shri Atam are not listed on any stock exchange. The current shareholding pattern of Shri Atam is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Kovalam Investment and Trading Company Limited

7,998 16.00

2. Girnar Investment Limited 7,000 14.00 3. Vardhman Investment Limited 7,000 14.00 4. Sankeshwar Holding Company Limited 7,000 14.00 5. Vanaik Investors Limited 7,000 14.00 6. Ludhiana Holdings Limited 7,000 14.00 7. Atam Vallabh Financiers Limited 7,000 14.00 8. Mr. Vipan Kumar Jain 1 0.00 9. Mr. Arvind Kumar Jain 1 0.00

Total 50,000 100.00 Board of Directors The board of directors of Shri Atam currently comprises Mr. Arvind Kumar Jain, Mr. Vipan Kumar Jain, Mr. Gagnish Kumar Bhalla and Mr. Mohinder Rai Mehta. Financial Performance The audited financial results of Shri Atam for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.00 0.00 67.72

Profit/(Loss) after tax (0.08) (0.13) 0.13 Equity Capital 0.50 0.50 0.50 Reserves and Surplus (excluding revaluation reserves) 3.13 3.21 3.34

Earnings/(Loss) per share (diluted) (Rs.) (1.60) (2.52) 2.63 Book Value per share (Rs.) 72.62 74.22 76.76

r. Vanaik Spinning Mills Limited (“VASML”) VASML was originally incorporated as Vanaik Spinning Mills Private Limited on December 16, 1980. Subsequently, on April 12, 1994 the name was changed to its present name as a company engaged inter alia in the business of spinning and knitting of all kinds of cloth and fabrics Shareholding Pattern

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The equity shares of VASML are not listed on any stock exchange. The current shareholding pattern of VASML is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10

each

% of Issued Capital (approximated)

1. Ruchika Growth Fund Private Limited 132,000 24.00 2. Monica Growth Fund Private Limited 132,000 24.00 3. Ms. Ruchika Oswal 129,250 23.5 4. Ms. Monica Oswal 129,250 23.5 5. Ms. Abhilash Oswal 16,280 2.96 6. Mr. Jawaharlal Oswal 11,000 2.00 7. Mr. Kamal Oswal 110 0.02 8. Mr. Dinesh Oswal 110 0.02

Total 550,000 100.00 Board of Directors The board of directors of VASML currently comprises Mr. Rukmesh Mohan Sood, Mr.Gagnish Kumar Bhalla, Mr. Ashok Kumar Jain and Mr. Neeraj Uppal. Financial Performance The audited financial results of VASML for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 64.77 110.82 178.06

Profit/(Loss) after tax 3.14 2.97 5.92 Equity Capital 5.50 5.50 0.50 Reserves and Surplus (excluding revaluation reserves) 51.77 49.57 52.05

Earnings/(Loss) per share (diluted) (Rs.) 5.71 5.39 10.77 Book Value per share (Rs.) 104.13 100.13 1,050.93

s. Vigil Investment Private Limited (“VIPL”) VIPL was incorporated on October 5, 1993 as an investment company. Shareholding Pattern The equity shares of VIPL are not listed on any stock exchange. The current shareholding pattern of VIPL is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Ogden Trading and Investment Company Private Limited

4,800 48.00

2. Cabot Trading and Investment Company Private Limited

3,198 31.98

3. Shri Atam Fabrics Limited 2,000 20.00 4. B.K. Rastogi 1 0.00 5. N.K. Tyagi 1 0.00

Total 10,000 100.00 Board of Directors

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The board of directors of VIPL currently comprises Mr. Ram Prakash Aggarwal, Mr. Harish Pahwa, Mr. Komal Jain and Mr. Arvind Jain. Financial Performance The audited financial results of VIPL for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 0.03 0.03 0.03

Profit/(Loss) after tax 0.02 0.02 0.02 Equity Capital 0.10 0.10 0.10 Reserves and Surplus (excluding revaluation reserves) 0.23 0.21 0.19

Earnings/(Loss) per share (diluted) (Rs.) 1.60 1.59 1.63 Book Value per share (Rs.) 32.66 31.06 29.47

t. White Tiger Breweries and Distilleries Limited. (“White Tiger”) White Tiger was incorporated on May 6, 1994 as a company engaged in the business of brewers, distillers, rectifiers, methylators and maltsters and manufacturers of and dealers in beer, wines and spirits amongst others. Shareholding Pattern The equity shares of White Tiger are not listed on any stock exchange. The current shareholding pattern of White Tiger is as follows:

Sl. No.

Name of Shareholder Number of equity shares of Rs. 10 each

% of Issued Capital (approximated)

1. Abhilash Growth Fund Private Limited 200,000 28.00 2. Ruchika Growth Fund Private Limited 150,010 21.00 3. J.L. Growth Fund Limited 150,000 21.00 4. Neha Credit and Investment Private Limited 81,010 11.34 5. Sankheshwar Holding Company Limited 68,350 9.60 6. Kovalam Investment and Trading Company

Limited 50,000 7.00

7. Nahar Growth Fund Private Limited 15,000 2.10 Total 714,370 100.00 Board of Directors The board of directors of White Tiger currently comprises Mr. N.K. Tyagi, Mr. Ashok Verma, Mr. Komal Jain, Mr. Gagnish Bhalla and Mr. M.S. Tyagi Financial Performance The audited financial results of White Tiger for Fiscal 2004, 2005 and 2006 are set forth below:

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Sales and Other Income 4.04 - -

Profit/(Loss) after tax 4.04 - - Equity Capital 7.14 7.14 6.50 Reserves and Surplus (excluding revaluation reserves) 4.04 - -

Earnings/(Loss) per share (diluted) (Rs.) 5.66 - - Book Value per share (Rs.) 15.66 10 10

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Common Pursuits Some of our group companies have main objects and business similar to our Company. However, at present the product range of each of these companies and their respective business models are different and do not compete with each other, e.g., Nahar Spinning Limited, a group company, is in the business of manufacture and exports of cotton based knitted ready made garments for foreign brands. Similarly, Nahar Industrial Enterprises Limited, another group company, is in the business of manufacture and sale of cotton based ready-made garments for middle and lower middle class consumers. Group Companies which have applied for the names being struck off the RoC None of our Promoter Group companies have applied for the names being struck off the RoC

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DIVIDEND POLICY

The declaration and payment of dividends on our equity shares will be recommended by our Board of Directors and approved by our shareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits, capital requirements and overall financial condition. We have not paid any dividend in the last five years.

Pursuant to the terms of some of our loan agreements, namely from State Bank of Patiala, we cannot declare or pay any dividend to our shareholders during any financial year unless we have paid all the dues to the respective lenders or paid or have made satisfactory provisions thereof or if we are in default of the terms and conditions of such loan agreements. For details, see section titled "Financial Indebtedness" on page [●] of this Draft Red Herring Prospectus.

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FINANCIAL STATEMENTS To, The Board of Directors, Oswal Woollen Mills Limited G.T.Road, Sherpur, Ludhiana 141 003, Punjab Dear Sirs, A. a) We have examined the annexed financial information of Oswal Woollen Mills Limited for the five

Fiscal ended March 31, 2006 and half-year ended September 30, 2006 being the last date to which the accounts of the Company have been made up and audited by us. The financial statements for the year ended March 31, 2006 and half-year ended September 30, 2006 are approved by the Board of Directors of the Company for the purpose of disclosure in the Draft Red Herring Prospectus being issued by the Company in connection with the Public Issue of Equity Shares in the Company.

b) In accordance with the requirements of

1. Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956; 2. The securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (‘the

SEBI Guidelines’) issued by the Securities and Exchange of Board of India (‘SEBI’) on January 19, 2000 in pursuance to Section 11 of the Securities and Exchange Board of India Act, 1992 and related amendments and

3. Our terms of reference given vide the Company’s letter dated November 16, 2006 requesting us to carry out work in connection with the Issue as aforesaid.

4. The Guidance Note on Reports in Company Prospectuses and Guidance Note on Audit Report/Certificates on Financial information in Draft Red Herring Prospectus issued by the institute of Chartered Accountants of India (ICAI).

We report that the restated assets and liabilities of the Company as at March 31, 2002, 2003, 2004, 2005, 2006 and half-year ended September 30, 2006 are as set out in Annexure II to this report after making such adjustments / restatements and regrouping as in our opinion are appropriate and are subject to the Significant Accounting Policies and notes to account as appearing in Annexure V.

We report that the restated profits of the Company for the Fiscal ended March 31, 2002, 2003, 2004, 2005, 2006 and half-year ended September 30, 2006 are as set out in Annexure I to this report. These profits have been arrived at after charging all expenses including depreciation and after making such adjustments / restatements and regrouping as in our opinion are appropriate and are subject to the Significant Accounting Policies and notes to accounts as appearing in Annexure V to this report. The Company has not paid any dividend on Equity Shares in any of the years mentioned above.

B. We have examined the following financial information relating to the Company proposed to be included in

the Draft Red Herring Prospectus, as approved by you and annexed to this report:

1. Statement of Operational Income in Annexure I a to this report; 2. Statement of Other Income in Annexure I b to this report; 3. Statement of Cash Flow as appearing in Annexure III to this report; 4. Statement of Reserves & Surplus as appearing in Annexure IV to this report 5. Statement of Unsecured Loans as appearing in Annexure IV a to this report; 6. Statement of Secured Loans as appearing in Annexure IV b to this report; 7. Statement of Principal terms and conditions for term loans outstanding as on 30th September 2006 as

appearing in Annexure IV b-1 to this report; 8. Statement of loans and advances as appearing in Annexure IV c to this report; 9. Statement of Debtors enclosed as Annexure IV d to this report; 10. Statement of Investments enclosed as Annexure IV e to this report; 11. Statement of Current Liabilities & Provisions enclosed as Annexure IV f to this report; 12. Statement of Accounting Ratios as appearing in Annexure V a to this Report; 13. Capitalisation Statement as at September 30, 2006 as appearing in Annexure V b to this report;

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14. Related Party Transactions as appearing in Annexure V c to this report; 15. Segmental Accounting as appearing in Annexure V d to this report; 16. Statement of Tax Shelters as appearing in Annexure V e to this report;

C a) In our opinion the financial information of the Company as stated in Para A and B above read with

Significant Accounting Policies and Notes to Accounts enclosed in Annexure V to this report, after making adjustments / restatements and regroupings as considered appropriate has been prepared in accordance with Part II of Schedule II of the Act and the SEBI Guidelines.

b) This report is intended solely for your information and for inclusion in the Draft Red Herring

Prospectus in connection with the specific Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

c) The preparation and presentation of this financial information is the responsibility of the Company’s

management. We have reported on the said financial information on the basis of information and explanations provided by the management and a review of the books of accounts & other records produced to us.

d) This report should neither in any way be construed as a re-issuance or redrafting of any of the previous

audit reports issued by us nor construed as a new opinion on any financial statements referred to therein.

For Gupta Vigg & Company Chartered Accountants L C Gupta Partner Membership No: 11652 Place: Ludhiana Date: November 27, 2006

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FINANCIAL STATEMENTS Summary statement of Profits and Loss of OWM, as restated.

Annexure – I

(Rs. in million) Particulars September

2006 Fiscal 2006 Fiscal

2005 Fiscal 2004

Fiscal 2003

Fiscal 2002

Income: Operational Income (Gross) 1371.92 2411.36 2320.90 2500.37 2170.03 2172.58Less: Excise Duty 11.45 30.34 66.08 202.65 122.44 140.97Operational Income (Net) 1360.47 2381.02 2254.82 2297.72 2047.59 2031.61Other Income 67.46 151.83 126.04 165.91 144.23 188.06Increase / (Decrease) in Stocks 245.39 87.57 (104.03) 104.94 51.98 13.56

Total 1673.32 2620.42 2276.83 2568.57 2243.80 2233.23Expenditure:

Raw Material Consumed 881.31 1258.95 1171.21 1424.51 1321.58 1222.67Manufacturing Expenses 295.32 452.65 396.34 384.57 316.28 283.10Employees' Remuneration & Benefits 122.26 191.03 176.15 168.09 157.28 156.74Administrative and Other Expenses 47.86 80.17 77.67 76.04 56.41 61.66Interest and Financial Charges 50.15 80.45 84.00 102.35 102.35 126.70Selling & Distribution Expenses 61.21 170.77 150.38 123.29 110.38 143.57Miscellaneous Expenditure written off - - 0.05 0.34 0.34 0.34Total 1458.11 2234.02 2055.80 2279.19 2064.62 1994.78Profit before Depreciation and Tax 215.21 386.40 221.03 289.38 179.18 238.45Depreciation 84.42 118.41 118.13 131.03 134.10 135.22Profit before Taxation 130.80 267.99 102.90 158.35 45.08 103.23Provision for Taxation: - Current Tax (net) 25.26 54.04 37.02 44.31 1.80 16.36- Deferred Tax 7.05 54.78 (8.35) 14.92 12.02 18.17-Fringe Benefit Tax 1.00 2.00 - - - -Profit After Tax as per Audited Financial statements (A)

97.48 157.17 74.23 99.12 31.26 68.70

Adjustments: - Less/ (Add): Previous Year Adjustments (I) (6.16) 13.10 (21.90) 3.47 4.88 (0.25)- Less/ (Add): Stock Adjustments (II) - - - (2.65) - -- Less: Provision for diminution of investment (III)

- - - - 0.20 0.51

Total Adjustments (B = I+II+III) (6.16) 13.10 (21.90) 0.82 5.08 0.26Tax Impacts on Adjustments: - Current Tax (y) 2.07 (4.98) 7.22 3.54 (1.74) 0.10- Deferred Tax (z) - 0.57 0.99 (3.84) 0.00 -Total Tax Impact (C=y+z) 2.07 (4.41) 8.21 (0.30) (1.74) 0.10Total Adjustments net of Tax Effects (D=B+C)

(4.09) 8.69 (13.69) 0.52 3.34 0.36

Restated Profits (E=A-D) 101.57 148.48 87.92 98.60 27.92 68.34Profit available for appropriations 101.57 148.48 87.92 98.60 27.92 68.34Add: General Reserves brought from previous year

545.66 397.18 475.26 376.66 345.74 309.01

Add: Debenture redemption reserve written back

- - - - 3.00 3.50

Less: Capitalization for Issue of Bonus Shares - - 166.00 - - 0.00Less: Deferred Tax Liability as on April 2002 - - - - - 35.11General Reserves Carried over to Balance Sheet

647.23 545.66 397.18 475.26 376.66 345.74

Notes: 2. None of the Fixed Assets have been revalued during any of the period under reporting

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Statement of Operational Income

Annexure – 1a (Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Export Sales – Manufacturing 106.98 190.09 143.28 43.62 95.96 52.21Export Sales – Trading - - - - 39.40 58.57Domestic Sales – Manufacturing 1203.38 2097.52 2078.99 2321.75 1956.20 1969.90Export Incentives 2.49 8.88 2.87 1.89 6.50 11.03Job Work Income 59.07 114.87 95.76 133.11 71.97 80.87Operational Income 1371.92 2411.36 2320.90 2500.37 2170.03 2172.58

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Statement of Other Income

Annexure – 1b

(Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Remarks Activity

Rent Income 55.95 104.24 98.61 101.89 108.64 97.39 Recurring Business Interest Received 4.93 15.40 14.44 24.47 16.23 22.63 Recurring Non

Business Dividend Received 0.32 0.44 1.65 0.06 0.02 0.13 Recurring Non

Business Foreign Exchange Fluctuation

- - 0.65 - - 0.15 Recurring Non Business

Rebate Discount 0.16 0.03 0.04 0.01 - 0.02 Recurring Non Business

Miscellaneous Income 0.65 1.70 3.46 3.98 7.97 1.81 Non Recurring

Non Business

Profit on Sale of Assets (net)

1.35 4.44 0.29 35.43 2.87 59.32 Non Recurring

Non Business

Profit/ (Loss) on Sale of Investments (net)

0.15 2.44 1.32 (7.26) - - Non Recurring

Non Business

Other Income 3.95 23.13 5.58 7.33 8.50 6.61 Recurring Non Business

Total 67.46 151.83 126.04 165.91 144.23 188.06

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Summary Statement of Assets & Liabilities of OWM, as restated.

Annexure – II

(Rs. in million) Particulars September

2006 Fiscal 2006 Fiscal 2005 Fiscal 2004 Fiscal 2003 Fiscal 2002

Fixed Assets(A) : Gross Block 2617.10 2543.70 1848.87 1770.38 1711.92 1559.06Less: Accumulated Depreciation

1421.25 1341.32 1235.25 1120.59 995.33 864.83

Net Block 1195.85 1202.38 613.62 649.79 716.59 694.23Capital Work in Progress 131.71 28.70 101.35 8.57 19.09 18.75Total (A) 1327.56 1231.08 714.97 658.36 735.68 712.98Investments (B) 131.22 134.70 131.70 273.63 129.92 130.13Current Assets, Loans & Advances (C):

Inventories 1179.18 945.10 846.25 870.92 887.19 678.02Sundry Debtors 624.41 410.85 362.81 443.61 350.68 397.68Cash and Bank Balances 77.73 10.16 351.23 187.50 13.76 141.08Loans and Advances 203.08 208.09 132.55 143.56 268.91 129.40Total (C) 2084.40 1574.20 1692.84 1645.59 1520.55 1346.18Liabilities and Provisions (D):

Secured Loans 1634.27 1152.93 1027.63 1049.82 918.75 861.84Unsecured Loans 187.76 206.49 309.24 339.45 405.67 432.42Deferred Tax Liability (Net) 131.40 124.35 69.00 76.36 65.29 53.28Current Liabilities & Provisions

693.52 661.55 487.45 553.75 537.16 410.74

Total (D) 2646.95 2145.32 1893.33 2019.38 1926.87 1758.28Net Worth (A+B+C-D) = E 896.23 794.66 646.18 558.21 459.28 431.01

Represented by: 1 Share Capital 249.00 249.00 249.00 83.00 83.00 83.002 Reserves & Surplus 647.23 545.66 397.18 475.26 376.66 348.74

Total 896.23 794.66 646.18 558.26 459.66 431.74Less: Miscellaneous Expenditure not written off

- - - 0.05 0.39 0.73

Net Worth 896.23 794.66 646.18 558.21 459.27 431.01 Notes: 4. None of the Fixed Assets have been revalued during any of the period under reporting.

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Statement of Restated Cash Flows

Annexure – III

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Cash Flows from Operating Activities (A) Restated Net Profit before Taxes

136.96 254.89 124.80 157.53 40.00 102.97 Adjustments for Non Cash Items: Depreciation 84.42 118.41 118.13 131.03 134.10 135.22Interest Paid 45.96 76.11 76.13 94.64 88.56 123.10Miscellaneous Expenditure written off - - 0.05 0.34 0.34 0.34Assets Written Off / Written Back - 0.04 0.38 - - -Loss / (Profit) on Sale of Fixed Assets (1.35) (4.44) (0.29) (35.43) (2.87) (59.31)Loss / (Profit) on Sale of Investments (0.15) (2.45) (1.32) 7.26 - -Dividend Income (0.32) (0.44) (1.65) (0.06) (0.02) (0.13) Operating Profit before Working Capital 265.52 442.12 316.23 355.31 260.11 302.19 Changes : Trade and other Receivables (208.55) (123.59) 91.82 32.42 (92.51) (72.96)Inventories (234.08) (98.85) 24.67 16.27 (209.17) 28.59Trade Payables 31.98 174.10 (66.30) 16.59 126.42 8.40

Cash Generation from Operations (145.13) 393.79 366.42 420.59 84.84 266.22Interest Paid (33.43) (60.83) (51.28) (71.18) (55.46) (94.92)Direct Taxes Paid (28.33) (51.06) (44.24) (47.85) (0.06) (16.46) Net Cash Flows from Operating Activities (206.89) 281.90 270.90 301.56 29.33 154.84Cash Flows from Investing Activities (B) Purchase of Fixed Assets (182.54) (637.89) (177.55) (55.49) (158.46) (175.20)Sale of Fixed Assets 2.97 7.75 2.73 37.20 4.52 68.61Purchase of Investments 0.00 (65.07) (744.52) (152.35) (0.21) (50.00)Sale of Investments 3.63 64.53 887.77 1.36 - 0.51Dividend Received 0.32 0.44 1.65 0.06 0.02 0.13 Net Cash Flows from Investing Activities (175.62) (630.23) (29.92) (169.22) (153.71) (155.95) Cash Flows from Financing Activities (C) Proceed from Long Term Borrowings 405.77 209.58 68.39 14.74 22.29 135.09Repayment of Long Term Borrowings (11.07) (26.87) (29.01) (127.09) (57.36) (79.52)Proceed from Short Term Borrowings 400.56 167.46 250.14 279.08 375.40 350.39Repayment of Short Term Borrowings (332.65) (327.62) (341.92) (101.87) (310.17) (266.35)Finance Charges on Long Term Borrowings (12.53) (15.28) (24.85) (23.46) (33.10) (28.18) Net Cash Flows from Financing Activities 450.08 7.26 (77.25) 41.40 (2.94) 111.43

Net Increase/(Decrease) in Cash & Cash Equivalent (A+B+C) 67.57 (341.07) 163.73 173.74 (127.32) 110.32 Cash & Cash Equivalents at beginning of the year 10.16 351.23 187.50 13.76 141.08 30.76 Cash & Cash Equivalents at end of the year 77.73 10.16 351.23 187.50 13.76 141.08

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Statement of Reserves & Surplus

Annexure – IV

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

General Reserves 647.23 545.66 397.18 476.26 376.66 345.74Debenture Redemption Reserve - - - - - 3.00Total 647.23 545.66 397.18 476.26 376.66 348.74

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Statement of Unsecured Loan Annexure – IV a

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

From Promoters/ Promoters Group/ Group Companies

147.76 167.56 270.31 278.63 273.89 251.01

Others 40.00 38.93 38.93 60.82 131.78 181.41Total 187.76 206.49 309.24 339.45 405.67 432.42

All the unsecured Loans from Promoters/ Promoters Group/ Group Companies bears interest @ 9.5% per annum & are repayable on demand.

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Statement of Secured Loan Annexure – IV b

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Term Loans 875.54 480.30 298.13 258.74 304.88 339.96Working Capital Facilities 758.73 672.09 729.50 791.08 613.87 521.88Secured Loans 1634.27 1152.93 1027.63 1049.82 918.75 861.84

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Statement of Principal Terms and Conditions of Term Loans Outstanding As at September 30, 2006 Annexure – IV b-1

(Rs. in million) Sl

No. Name of Lender Amount

Interest Rate

% Repayment Terms Security

1. ICICI Bank Limited 20.00 9.25 7 (Seven) Years including moratorium of 1 (One) years repayable in 24 equated quarterly instalments.

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

2 State Bank of Patiala 47.88 9.75 9 (Nine) Years including moratorium of 1 (one) year, repayable in 32 equated quarterly instalments

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

3. Central Bank of India 31.64 9.50 9 (Nine) Years including moratorium of 1 (one) year, repayable in 32 equated quarterly installments.

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

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Sl No.

Name of Lender Amount

Interest Rate %

Repayment Terms Security

4. State Bank of Patiala 153.29 9.75 9 (Nine) Years including moratorium of 1 (one) year, repayable in 32 equated quarterly installments.

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

5 State Bank of Patiala 50.35 9.75 9 (Nine) Years including moratorium of 1 (one) year, repayable in 32 equated quarterly installments.

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

6. State Bank of Patiala 455.14 8.75 10 (Ten) Years including moratorium of 2 (two) years i.e. 32 equated quarterly installments.

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

7. State Bank of Patiala 32.04 9.00 10 (Ten) Years including moratorium of 2 (two) years i.e. 32

- Hypothecation charge on First Pari – Passu basis (with other term lenders) on Plant and Machinery on the

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Sl No.

Name of Lender Amount

Interest Rate %

Repayment Terms Security

equated quarterly installments.

company’s existing works at Ludhiana and Lalru including equitable mortgage of Land & Building at Ludhiana and Lalru. - Second Charge on current assets of the company with other term lenders.

- Personal Guarantee of the three promoter directors Sh. Jawahar Lal Oswal, Sh. Kamal Oswal & Sh. Dinesh Oswal.

8 Allahabad Bank 85.20 9.50 10 (Ten) Years including moratorium of 2 (two) years i.e. 32 equated quarterly installments.

- Exclusive First Charge on the Plant & Machinery acquired under the project and second joint pari-passu charge over movable assets of the company subject to prior charges of the banks meeting working capital requirements.

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Statement of Loans & Advances Annexure – IV c

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Advances Receivable in Cash or kind or for value to be received

178.07 148.34 46.36 53.14 131.59 89.53

Securities Deposits 9.15 9.13 6.83 6.84 6.16 5.26 Prepaid Taxes - - 37.38 24.01 31.16 33.76 Due from Directors/ Promoters & Group Companies

15.86 50.62 41.98 59.57 100.00 0.85

Total 203.08 208.09 132.55 143.56 268.91 129.40 Loans & Advances Due from Director/Promoters & Group Companies

(Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Nahar International Limited - - - 2.44 60.00 -Nahar Sugar & Allied Ind. Limited - - 28.93 45.46 40.00 0.04Nahar Spinning Mills Limited 0.32 50.09 0.02 11.67 - -Nahar Industrial Enterprises Limited 14.81 - 13.01 - - 0.81Nahar Exports Limited - - 0.02 - - -Nahar Retail Limited 0.53 0.53 - - - -Kulu Investments & Trading Pvt. Limited 0.20 - - - - -

Total 15.86 50.62 41.98 59.57 100.00 0.85

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Statement of Sundry Debtors Annexure – IV d

(Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

From Others: Exceeding Six Months 72.36 49.15 51.41 50.75 14.42 13.11Other Debts 477.87 316.32 311.40 373.00 335.85 384.57Due From Promoters/ Director and Group Companies:

Exceeding Six Months - - - - - -Other Debts 74.18 45.38 0.00 19.86 0.41 -Sundry Debtors (Net) 624.41 410.85 362.81 443.61 350.68 397.68 Sundry Debts Due from Director/Promoters & Group Companies

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Nahar Sugar and Allied Industries Limited

- - - - 0.41 -

Nahar Industrial Enterprises Limited 61.63 45.38 0.00 19.86 - -Nahar Spinning Mills Limited 11.60 - - - - -Nahar Exports Limited 0.95 - - - - -

Total 74.18 45.38 0.00 19.86 0.41 -

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Statement of Investments Annexure – IV e

(Rs in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Trade Quoted: Fully paid up Equity Shares of Rs. 10/- each

Malwa Cotton Spinning Mills Limited

-- -

0.57

0.78 0.78

Nahar International Limited - - 11.18 11.18 11.18 11.18 Nahar Exports Limited 3.80 3.80 3.80 2.34 - - Indo Rama Synthetics Limited 0.03 0.03 0.03 - - - Vardhman Acrylics Limited 2.81 2.81 3.99 - - - Nahar Industrial Enterprises Limited 118.16 118.16 - - - -Unquoted: Fully paid up 7% Non-cumulative Redeemable Preference Shares of Rs. 100/- each of Nahar Industrial Enterprises Limited

- - 22.50 50.00 50.00 50.00

Partly paid up Equity Shares of Rs. 10/- each of Nahar International Limited

- - 56.99 56.99 56.99 56.99

Partly paid up shares of NIEL - - - - - -Partly paid up Warrant – A of Rs. 65.78 each of NIEL

- - 27.50 - - -

Others Quoted:

Fully paid up Equity Shares of Rs. 10/ each

ICICI Limited - - - - 1.75 1.75 ICICI Bank Limited - - 1.75 1.75 - - I.E.C. Software Limited 0.02 0.02 0.02 0.02 0.02 0.04 Reliance petroleum LImited - - - - - 0.63 Reliance Industries Limited - - 0.63 0.63 0.63 - D.S.Q. Software Ltd - - - - - 0.02 Himachal Futuristic Communication Ltd (HFCL)

0.03 0.03 0.03 0.03 0.03 0.20

Punjab National Bank - - 1.84 - - - H.T.Media Limited - 3.48 - - - -Allahabad Bank 6.24 6.24 - - - - Zee Telefilms Limited - - - - 4.63 4.63 Rolta India Limited - - - - 3.79 3.79 Alok Tex-Ind. Limited - - - 0.12 0.12 0.12

UNQUOTED

Fully paid up Equity Shares of Rs. 50/- each of Raheja Chambers & Premises Co-op. Society Ltd, Mumbai

- - - - - -

QUOTED Mangnum Insta Cash Fund of Rs. 10/- each fully paid up of SBI Mutual Fund

0.13 0.13 1.44 150.00

-

-

Total 131.22 134.70 131.70 273.63 129.92 130.13Aggregate Amount of: Quoted Investments 131.22 134.70 24.71 166.64 22.93 23.14Unquoted Investments 0 0 106.99 106.99 106.99 106.99Market value of quoted investments 254.96 185.03 30.81 162.67 6.41 4.64

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Statement of Current Liabilities & Provision Annexure – IV f

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Sundry Creditors 464.87 525.60 381.96 401.18 385.12 245.56Other Liabilities & Provisions 228.65 135.95 105.49 152.57 152.04 165.18Total 693.52 661.55 487.45 553.75 537.16 410.74

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Statement of Significant Accounting Policies & Notes to Accounts Annexure – V

Significant Accounting Policies

i) The accounts are prepared on accrual basis under the historical cost conventions in accordance with the applicable accounting standards issued by the ICAI and relevant presentational requirements of the Companies Act, 1956.

ii) Material events occurring after the Balance Sheet date are taken into cognizance. iii) The accounts of the company are prepared on the principles of a going concern.

iv) Fixed Assets & Depreciation

a) Tangible assets are stated at historical cost less accumulated depreciation. Depreciation on

fixed assets, is charged, on diminishing balance method in case of woollen textile units and on straight line method in case of new Denim Fabric unit, at the rates prescribed under Schedule XIV of the Companies Act, 1956. Depreciation on assets costing Rs.0.005 million or below is charged @100%.

b) Intangible assets are stated at cost less accumulated amount amortized. c) Amortization

Intangible assets are amortized, on straight-line method. These assets are amortized over their estimated useful life.

v) Investments

- Long term investments are stated at cost. Diminution in value on account of market fluctuations are not being provided for, being temporary in nature.

- Current investments have been valued at lower of cost or market price.

vi) Inventories Raw-Materials, stores and spares (except for stores and spares in company’s main textile unit and unit No.I and Raw Materials and stores in case of Denim fabric unit which have been valued at cost on moving transaction average ) are valued at weighted average cost, trading goods are valued at weighted average cost, work in process is valued at cost or net realizable value, finished good are valued at lower of cost or net realizable value plus excise duty payable thereon. The term 'at cost' means cost as reduced by the credit of duty taken in respect of duty paid on inputs in terms of Central Excise Rules, 1944.

vii) Excise Duty/ Value Added Tax (VAT)

a) Excise duty payable on finished goods is accounted for on clearance of goods from the factory.

b) Credit of excise duty (wherever allowable under Central Excise Rules, 1944) paid on inputs or

capital goods is reduced from the purchase cost of related goods and debited to advance excise duty Account.

c) Credit of value added tax paid on inputs or capital goods is reduced from the purchase cost of

related goods and debited to input tax credit account.

viii) Accounting for taxes on income, fringe benefits & wealth tax. (a) The accounting treatment followed for taxes on income is to provide for current tax and deferred tax at

the rates prescribed under the Income Tax Act, 1961. Current tax is the aggregate amount of income tax determined to be payable in respect of taxable income for a period. Deferred tax is the tax effect of timing differences between taxable income and accounting income that originate in one period and are

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capable of reversal in one or more subsequent periods. (b) Fringe Benefit tax is provided on the aggregate amount of fringe benefits determined in accordance

with the provisions of the relevant enactments at the rates prescribed under the Income Tax Act,1961.

(c) Wealth tax is provided on the net taxable wealth at the rates prescribed under the Wealth Tax Act.

ix) Impairment of Assets At each balance sheet date, an assessment is made as to whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of asset exceeds its recoverable amount, is provided in the books of accounts. x) Retirement Benefits a) Gratuity :

The company has taken from the Life Insurance Corporation of India (LIC) a policy of group gratuity –cum life insurance to discharge its liability under the payment of gratuity Act.

b) Leave with wages :

Provision for leave with wages is made on the basis of leaves accrued to the employees during the financial year

c) Provident fund :

Contribution to Provident fund is made in accordance with the provisions of the provident fund Act, 1952 and charged to Profit & Loss account

xi) Foreign Exchange Transactions

Foreign currency liabilities incurred for acquisition of fixed assets are converted at exchange rate prevailing on the last working day of the accounting year. The net variation arising on conversion is adjusted to the cost of fixed assets. Current Assets and Liabilities remaining unsettled at the year end are translated at contracted rates when covered by foreign exchange forward contracts and in other cases at the rates prevailing on the last day of the financial year and the resultant effect is given under the respective head of account. In the case of short-term foreign currency loans, premium paid for foreign exchange forward contracts, has been provided on pro-rata basis for the period of cover and is charged under the head bank charges.

xii) Expenditure incurred during construction period

In respect of new/major expansion of Units, the indirect expenditure incurred during construction period upto the date of the commencement of commercial production is capitalized on various categories of fixed assets on proportionate basis.

xiii) Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualiFiscaling assets are capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.

xiv) Sales

Sale of goods is recognized at the point of dispatch of finished goods to the customers. The sale value is inclusive of excise duty paid on the clearance of finished goods.

xv) Scrap

Scrap sale of empties and other worn out store & spare items is accounted for on sale basis.

xvi) Warranty/Claims

As per the nature of the company's business, the question of warranty/claims does not arise. The

routine claims on account of quality or quantity lodged with the company, other than those, which are, disputed one, are accounted for as and when accepted by the company.

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Notes To Accounts: 1. Impact of Changes in Accounting Policy/Prior Period Items

(Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Profit After Tax as per Audited Financial statements (A)

97.48 157.17 74.23 99.12 31.26 68.70

Adjustments: - Less/ (Add): Previous Year Adjustments (I)

(6.16) 13.10 (21.90) 3.47 4.88 (0.25)

- Less/ (Add): Stock Adjustments (II) - - - (2.65) - 0.00- Less: Provision for diminution of investment (III)

- - - 0.00 0.20 0.51

Total Adjustments (B = I+II+III) (6.16) 13.10 (21.90) 0.82 5.08 0.26Tax Impacts on Adjustments: - Current Tax (y) 2.07 (4.98) 7.22 3.54 (1.74) 0.10- Deferred Tax (z) 0.00 0.57 0.99 (3.84) 0.00 0.00Total Tax Impact (C=y+z) 2.07 (4.41) 8.21 (0.30) (1.74) 0.10Total Adjustments net of Tax Effects (D=B+C)

(4.09) 8.69 (13.69) 0.52 3.34 0.36

Restated Profits (E=A-D) 101.57 148.48 87.92 98.60 27.92 68.34 Note: Current Tax and Deferred Tax had also being charged to conform to changes in accounting policy.

2. Statement of Contingent Liability (Rs. in million)

Particulars September 2006

Fiscal 2006 Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Liability for arbitration award 6.47 6.47 6.47 6.47 6.47 6.47Sales Tax Demand 2.03 2.39 3.54 4.63 2.92 16.29Central Excise Demand 40.33 40.33 2.18 5.59 3.56 3.50Custom Duty Demand 0.12 0.12 0.12 1.71 1.27 1.66Port Trust Claim - - - 0.28 - -Counter Guarantees 2.14 1.10 3.94 12.42 14.14 13.60Contracts remaining to be executed on Capital Account (net of advances)

78.16 18.09 17.68 23.75 8.79 5.47

Total 129.25 68.50 33.93 54.85 37.15 46.99

3. Statement of Deferred Taxation (Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Deferred Tax Liability / (Assets) On account of Depreciation 7.05 54.78 (8.35) 14.91 16.53 22.69Carried forward Losses - - - - - -Unabsorbed Depreciation - - - - - -Disallowance u/s 43 B - 0.57 0.99 (3.84) (4.52) (4.52)Disallowance u/s 36(1)(va) - - - - - -Disallowance u/s 36(1)(v) - - - - - -Disallowance u/s 35D - - - - - -Debited / (Credited) to Profit / Loss Account

7.05 55.35 (7.36) 11.07 12.01 18.17

Add / Less: Opening Balance of Deferred Tax

124.35 69.00 76.36 65.29 53.28 35.11

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Add: Deferred Tax Liability of Transferor Companies transferred due to amalgamation

- - - - - -

Add: Deferred Tax (Asset) of Transferor Companies transferred due to amalgamation

- - - - - -

Total Deferred Tax Liability / (Assets) as on Balance Sheet Date

131.40 124.35 69.00 76.36 65.29 53.28

4. Lease Rentals ( Gurgaon Property)

(Rs. in million) Fiscal Year ended on 31st March Lease Rentals Receivable in

Next One Year Lease Rentals Receivable after One Year but before 5 Years

2002 22.11 - 2003 - - 2004 89.94 112.42 2005 89.94 22.48 2006 22.48 - Half Year ended on 3oth September,2006

96.01 360.03

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Statement of Accounting Ratios Annexure – V a

(Rs. in million) Particulars September

2006 Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Earnings Per Share Restated Profits 101.57 148.48 87.92 98.60 27.92 68.34 Weighted Average Number of Equity Shares

24,900,000 24,900,000 24,900,000 8,300,000 8,300,000 8,300,000

Restated Average Number of Equity Shares

24,900,000 24,900,000 24,900,000 24,900,000 24,900,000 24,900,000

Basic/ Diluted Earnings Per Share ( Rs.)

8.16* 5.96 3.53 11.88 3.36 8.23

Basic/ Diluted Earnings Average Per Share ( Rs.)

8.16* 5.96 3.53 3.96 1.12 2.74

Net Asset Value per Share Networth 896.23 794.66 646.18 558.21 459.27 431.01 Weighted Average Number of Equity Shares

24,900,000 24,900,000 24,900,000 8,300,000 8,300,000 8,300,000

Restated Average Number of Equity Shares

24,900,000 24,900,000 24,900,000 24,900,000 24,900,000 24,900,000

Net Asset Value Per Share (Rs.)

35.99 31.91 25.95 67.25 55.33 51.93

Net Asset Value Average Per Share (Rs.)

35.99 31.91 25.95 22.42 18.44 17.31

Return on Net Worth Restated Profits 101.57 148.48 87.92 98.60 27.92 68.34 Networth 896.23 794.66 646.18 558.21 459.27 431.01 Return on Net Worth 22.66* 18.68 13.61 17.66 6.08 15.86 Face Value Per Share (Rs.) 10 10 10 10 10 10

*Annualised Notes:

(a) Net Worth includes Share Capital and Reserves & Surplus minus Miscellaneous Expenditure not

written off excluding revaluation reserves, if any. (b) Return on Net Worth = Restated Profits / Net Worth (c) Net Asset Value includes Share Capital and Reserves & Surplus minus Miscellaneous Expenditure not

written off excluding revaluation reserves, if any. (d) Weighted Average number of Equity Shares are number of Equity Shares outstanding at any time

during the financial year. (e) Earnings Per Share is computed in accordance with AS-20 " Earnings Per Share" issue by the Institute

of Chartered Accountants of India. (f) Basic Earnings Per Share = Profit after Tax attributable to equity shareholders Weighted Average number of Equity Shares (g) Restated average no of Equity Shares is calculated after considering adjustments for bonus issue.

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Statement of Capitalisation Statement Annexure – V b

(Rs. in million) Particulars Pre-Issue as at September

30, 2006 Post Issue

Short-term Debt 1172.62 1172.62Long-Term Debt 649.41 649.41

Total Debt 1822.03 1822.03 Shareholders Funds : Share Capital 249.00 * Free Reserves 647.23 *

Total Shareholders Funds 896.23 * Long Term Debt/Equity Ratio 0.73:1 *

*Share Capital & Free Reserves Post issue can be calculated only on conclusion of Book Building process. Notes: (a) Short- term debt represents debts, which are due within twelve months. (b) Long Term debt Equity Ratio = Long Term Debt/Total Shareholders Funds

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Statement of Related Party Transactions Annexure – V c

Break-Up of Significant Transactions with Related Parties: Name of Related Parties and Relationships: Half Year ended September 30, 2006

Name Relationship Nahar Exports Limited Associates Sh J.L.Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives Ms Ruchika Oswal Key Management Personnel & Relatives Ms Monika Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to

exercise significant influence Girnar Investment Limited Enterprises over which key Management Personnel is able to

exercise significant influence J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to

exercise significant influence Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to

exercise significant influence Ludhiana Holding Limited Enterprises over which key Management Personnel is able to

exercise significant influence Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to

exercise significant influence Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Half Year ended September 30, 2006

(Rs. in million) Particulars Associates Key

ManagementPersonnel

Relatives of KMP

Enterprises over which key

Management Personnel is able to exercise significant

influence

Total

Purchase/Processing of Goods 3.34 - - 10.58 13.92Sale/Processing of Goods - - - 4.86 4.86Paid off Lease rentals - - - 0.34 0.34Finance provided (including Loans and equity contributions in cash or in kind)

- - - 45.72 45.72

Finance received (including Loans and equity contributions in cash or in kind)

- - - 33.90 33.90

Interest Paid - - - 1.74 1.74Managerial Remuneration - 2.71 - 0.00 2.71Closing Balance due to as on 30.09.06 1.78 - - 26.33 28.11

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Closing Balance due from as on 30.09.06

- - - 1.71 1.71

Fiscal 2006

Name Relationship Nahar Exports Limited Associates Sh J.L.Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives Ms Ruchika Oswal Key Management Personnel & Relatives Ms Monika Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to exercise

significant influence Girnar Investment Limited Enterprises over which key Management Personnel is able to exercise

significant influence J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to exercise

significant influence Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to exercise

significant influence Ludhiana Holding Limited Enterprises over which key Management Personnel is able to exercise

significant influence Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to exercise

significant influence Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Fiscal 2006

(Rs. in million) Particulars Associates Key

ManagementPersonnel

Enterprises over which key Management

Personnel is able to exercise significant

influence

Total

Purchase/Processing of Goods 6.09 - 13.09 19.18Sale/Processing of Goods - - 1.90 1.90Purchase of Fixed Assets - - 0.62 0.62Sale of Fixed Assets - - 0.01 0.01Receipt of Lease rentals - - 0.34 0.34Paid off Lease rentals - - 0.60 0.60Finance provided (including Loans and equity contributions in cash or in kind)

- - 45.70 45.70

Finance received (including Loans and equity contributions in cash or in kind)

- - 28.45 28.45

Interest Paid - - 4.49 4.49Guarantees Given - - 20.00 20.00Managerial Remuneration - 14.98 - 14.98Closing Balance due to as on 31.03.06 5.81 - 41.47 47.28

Fiscal 2005

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Name Relationship Nahar Exports Limited Associates Sh J.L.Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives Ms Ruchika Oswal Key Management Personnel & Relatives Ms Monika Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to

exercise significant influence Girnar Investment Limited Enterprises over which key Management Personnel is able to

exercise significant influence J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to

exercise significant influence Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to

exercise significant influence Ludhiana Holding Limited Enterprises over which key Management Personnel is able to

exercise significant influence Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to

exercise significant influence Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

(Rs. in million) Particulars Associates Key

ManagementPersonnel

Enterprises over which key Management

Personnel is able to exercise significant

influence

Total

Purchase/Processing of Goods 5.15 - 58.28 63.43Sale/Processing of Goods 0.02 - 33.71 33.73Receipt of Lease rentals - - 1.16 1.16Paid off Lease rentals - - 0.60 0.60Finance provided (including Loans and equity contributions in cash or in kind)

- - 29.37 29.37

Finance received (including Loans and equity contributions in cash or in kind)

- - 2.62 2.62

Interest Paid - - 5.56 5.56Managerial Remuneration - 7.46 - 7.46Closing Balance due to as on 31.03.05

- - 72.50 72.50

Closing Balance due from as on 31.03.05

0.03 - - 0.03

Fiscal 2004

Name Relationship Nahar Exports Limited Associates Sh J.L.Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives Ms Ruchika Oswal Key Management Personnel & Relatives

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Ms Monika Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to exercise

significant influence Girnar Investment Limited Enterprises over which key Management Personnel is able to exercise

significant influence J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to exercise

significant influence Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to exercise

significant influence Ludhiana Holding Limited Enterprises over which key Management Personnel is able to exercise

significant influence Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to exercise

significant influence Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

(Rs. in million)

Particulars Associates Key Management

Personnel

Enterprises over which key Management

Personnel is able to exercise significant

influence

Total

Purchase/Processing of Goods 3.21 - 121.78 124.99Sale/Processing of Goods - - 93.50 93.50Purchase of Fixed Assets 0.45 - - 0.45Sale of Fixed Assets - - 0.15 0.15Receipt of Lease rentals - - 1.86 1.86Paid off Lease rentals - - 0.60 0.60Finance provided (including Loans and equity contributions in cash or in kind)

- - 9.87 9.87

Finance received (including Loans and equity contributions in cash or in kind)

- - 16.35 16.35

Interest Paid - - 7.00 7.00Managerial Remuneration - 9.46 - 9.46Closing Balance due to as on 31.03.04 1.46 - 86.01 87.47

Fiscal 2003

Name Relationship Nahar Exports Limited Associates Nahar Spinning Mills Limited Associates Nahar International Limited Associates Nahar Industrial Enterprises Limited Associates Nahar Sugar & Allied Industries Limited Associates Nahar Industrial Infrastructure Corporation Limited

Associates

Sh J.L.Oswal Key Management Personnel & Relatives Sh. Kamal Oswal Key Management Personnel & Relatives Sh. Dinesh Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives

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Ms Ruchika Oswal Key Management Personnel & Relatives Smt. Abhilash Oswal Key Management Personnel & Relatives Sh. Vidya Sagar Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to exercise

significant influence Abhilash growth Fund (p) Limited Enterprises over which key Management Personnel is able to exercise

significant influence Bermuda Insurance Brokers (P) Limited Enterprises over which key Management Personnel is able to exercise

significant influence Cannanore Investment Co Limited Enterprises over which key Management Personnel is able to exercise

significant influence Cabot Trading & Investment Co Pvt Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Dundee Investment Co Limited Enterprises over which key Management Personnel is able to exercise significant influence

Girnar Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Georgian Trading & investment Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Interpace Trading & Investment Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to exercise significant influence

Kovalam Investment & Trading Co Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to exercise significant influence

Ludhiana Holding Limited Enterprises over which key Management Personnel is able to exercise significant influence

Michel Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Monica growth Fund Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to exercise significant influence

Neha Credit & Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nahar Growth Fund Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nahar Financial & Investments Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nabisco Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Oswal Leasing Limited Enterprises over which key Management Personnel is able to exercise significant influence

Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Powai Traders Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Sankeshwar Holding Co Limited Enterprises over which key Management Personnel is able to exercise significant influence

Shri Atam Fabrics Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

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Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vigil Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

(Rs. in million) Particulars Associates Key

ManagementPersonnel

Relatives of KMP

Enterprises over which key

Management Personnel is able to exercise significant

influence

Total

Purchase/Processing of Goods 216.03 - - 119.32 335.35Sale/Processing of Goods 133.67 - - 90.80 224.47Purchase of Fixed Assets 6.05 - - 1.04 7.09Sale of Fixed Assets 0.31 - - - 0.31Rendering Of services - - - 0.29 0.29Receipt of Lease rentals 4.22 - - 2.00 6.22Paid off Lease rentals 0.12 - 0.02 0.60 0.74Finance provided (including Loans and equity contributions in cash or in kind)

358.00 - - 45.26 403.26

Finance received (including Loans and equity contributions in cash or in kind)

250.00 - - 64.35 314.35

Interest Paid 10.45 - - 15.07 25.52Interest Received 0.39 - - - 0.39Guarantees Given - - - 20.00 20.00Guarantees received 170.00 - - - 170.00Managerial Remuneration - 4.14 - - 4.14Gratuity paid - - 0.10 - 0.10Closing Balance due to as on 31.03.03

161.26 - - 155.75 317.01

Closing Balance due from as on 31.03.03

100.00 - - 19.61 119.61

Fiscal 2002

Name Relationship Nahar Exports Limited Associates Nahar Spinning Mills Limited Associates Nahar International Limited Associates Nahar Industrial Enterprises Limited Associates Nahar Sugar & Allied Industries Limited Associates Nahar Industrial Infrastructure Corporation Limited

Associates

Sh J.L.Oswal Key Management Personnel & Relatives Sh. Kamal Oswal Key Management Personnel & Relatives Sh. Dinesh Oswal Key Management Personnel & Relatives Sh Sandeep Jain Key Management Personnel & Relatives Ms Ruchika Oswal Key Management Personnel & Relatives Atam Vallabh Financiers Limited Enterprises over which key Management Personnel is able to exercise

significant influence Abhilash growth Fund (P) Limited Enterprises over which key Management Personnel is able to exercise

significant influence

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Annedale Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Bermuda Insurance Brokers (P) Limited Enterprises over which key Management Personnel is able to exercise significant influence

Cannanore Investment Co Limited Enterprises over which key Management Personnel is able to exercise significant influence

Cabot Trading & Investment Co Pvt Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Dundee Investment Co Limited Enterprises over which key Management Personnel is able to exercise significant influence

Girnar Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Honanu Investment & Trading Pvt Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Interpace Trading & Investment Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

J.L Growth Fund Pvt.Limited Enterprises over which key Management Personnel is able to exercise significant influence

Kovalam Investment & Trading Co Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Kulu Investment & Trading Pvt Ltd Enterprises over which key Management Personnel is able to exercise significant influence

Ludhiana Holding Limited Enterprises over which key Management Personnel is able to exercise significant influence

Michel Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Monica growth Fund Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nagdevi Trading & Investment Co Enterprises over which key Management Personnel is able to exercise significant influence

Neha Credit & Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nahar Growth Fund Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nahar Financial & Investments Limited Enterprises over which key Management Personnel is able to exercise significant influence

Nabisco Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Oswal Leasing Limited Enterprises over which key Management Personnel is able to exercise significant influence

Ogden Trading & Investments Co Pvt. Limited

Enterprises over which key Management Personnel is able to exercise significant influence

Powai Traders Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Ruchika Growth Fund Pvt. Limited Enterprises over which key Management Personnel is able to exercise significant influence

Sankeshwar Holding Co Limited Enterprises over which key Management Personnel is able to exercise significant influence

Shri Atam Fabrics Limited Enterprises over which key Management Personnel is able to exercise significant influence

Tahira Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Investors Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vanaik Spinning Mills Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vardhman Investment Limited Enterprises over which key Management Personnel is able to exercise significant influence

Vigil Investment Pvt Limited Enterprises over which key Management Personnel is able to exercise significant influence

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(Rs. in million)

Particulars Associates Key Management

Personnel

Enterprises over which key

Management Personnel is

able to exercise significant influence

Total

Purchase/Processing of Goods 149.50 - 94.54 244.04Sale/Processing of Goods 83.07 - 106.46 189.53Purchase of Fixed Assets 14.24 - 0.05 14.29Sale of Fixed Assets 62.00 - - 62.00Rendering of Services - - 0.24 0.24Receipt of Lease rentals 4.68 - 2.05 6.73Paid off Lease rentals 0.12 - 0.60 0.72Finance provided (including Loans and equity contributions in cash or in kind)

52.10 - 70.13 122.23

Finance received (including Loans and equity contributions in cash or in kind)

- - 84.26 84.26

Interest Paid 11.66 - 14.01 25.67Guarantees given 0.00 - 50.00 50.00Guarantees Received 320.00 - - 320.00Managerial Remuneration - 3.91 - 3.91Closing Balance due to as on 31.03.02 137.45 - 136.95 274.40Closing Balance due from as on 31.03.02

0.61 - 20.51 21.12

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Statement of Segmental Accounting Annexure – V d (Rs. In million)

Particulars Textile Hosiery Knitwears's / Cotton Garments Total

Fiscal

2006 Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Revenue Net External

Sales 1562.24 1619.55 1777.98 1359.46 1406.95 818.78 635.27 519.74 688.13 624.66 2381.02 2254.82. 2297.72 2047.59 2031.61

Inter-Segment

Sales

8.66 99.45 10.30 16.10 8.71 213.68 6.86 197.56 33.70 63.12 222.34 106.31 207.86 49.80 71.83

Other Income

132.26 108.06 137.84 120.31 162.62 4.17 3.54 3.60 7.69 2.81 136.43 111.60 141.44 128.00 165.43

Total Revenue

1703.16 1827.06 1926.12 1495.87 1578.28 1036.63 645.67 720.90 729.52 690.59 2739.79 2472.73 2647.02 2225.39 2268.87

Segment Results before

Interest & Tax

152.24 65.80 131.09 (57.88) 73.43 167.70 128.56 104.32 184.00 133.61 319.94 194.36 235.41 126.12 207.04

Interest Expenses

64.31 70.88 85.68 88.04 106.90 16.14 13.12 16.67 14.31 19.80 80.45 84.00 102.35 102.35 126.70

Interest Income

7.60 7.85 17.35 9.25 16.09 7.80 6.59 7.12 6.98 6.54 15.40 14.44 24.47 16.23 22.63

Income Tax – Current

- - - - - - - - - - 51.06 44.24 47.85 0.06 16.46

Deferred - - - - - - - - - - 55.35 (7.36) 11.08 12.02 18.17 Restated Net

Profit - - - - - - - - - - 148.48 87.92 98.60 27.92 68.34

Segment Assets

2311.37 2011.87 1888.05 1879.20 1711.81 493.91 395.94 415.95 377.42 348.08 2805.28 2407.81 2304.00 2256.62 2059.89

Unallocated corporate

assets

- - - - - - - - - - 134.70 131.70 273.63 129.92 130.13

Total Assets 2311.37 2011.87 1888.05 1879.20 1711.81 493.91 395.94 415.95 377.42 348.08 2939.98 2539.51 2577.63 2386.54 2190.02 Segment

Liabilities 1924.61 1693.31 1881.13 1785.15 1637.33 220.71 200.02 138.25 141.72 120.95 2145.32 1893.33 2019.38 1926.87 1758.28

Unallocated corporate

- - - - - - - - - - - - - - -

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Particulars Textile Hosiery Knitwears's / Cotton Garments Total

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

liabilities Total

Liabilities 1924.61 1693.31 1881.13 1785.15 1637.33 220.71 200.02 138.25 141.72 120.95 2145.32 1893.33 2019.38 1926.87 1758.28

Capital Expenditure

614.55 145.96 51.79 111.28 129.78 23.34 31.58 3.70 47.18 45.41 637.89 177.55 55.49 158.46 175.20

Depreciation 94.11 94.82 106.41 107.39 111.99 24.30 23.31 24.62 26.71 23.23 118.41 118.13 131.03 134.10 135.22 Non-cash expenses other than

Depreciation

- 0.05 0.34 0.34 0.34 - - - - - - 0.05 0.34 0.34 0.34

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Segment Accounting for the half-year ended September 2006 (Rs in million)

Particulars Textile Hosiery Knitwear/ Cotton Garments

Total

Revenue Net External Sales 1088.95 271.52 1360.47 Inter-Segment Sales 2.57 128.09 130.66 Other Income 61.05 1.48 62.53 Total Revenue 1152.59 401.09 1553.66 Segment Results before Interest & Tax

120.19 61.98 182.17

Interest Expenses 40.69 9.46 50.15 Interest Income 1.28 3.65 4.93 Income Tax – Current 28.33 Deferred 7.05 Restated Net Profit 101.57 Other Information Segment Assets 2676.82 735.14 3411.96 Unallocated corporate assets - - 131.22 Total Assets 2676.82 735.14 3543.18 Segment Liabilities 3271.82 602.29 3543.18 Unallocated corporate liabilities

- - -

Total Liabilities 3271.82 602.29 3543.18 Capital Expenditure 122.24 60.30 182.54 Depreciation 70.15 14.27 84.42 Non-cash expenses Other than Depreciation

- - -

Notes:Segment Revenue & Expenses: Segment revenue comprises sales to external customers and inter- segment sales. Segment expenses comprise expenses that are directly attributable to the segment and expenses relating to the transactions With other segments of the enterprises (a) Segment Assets & Liabilities: Segment assets include all operating assets used by a segment and consist of cash & bank balances, debtors, inventories and fixed assets Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include current and deferred taxes. (b) Inter Segment Transfers: Inter segment transfer are accounted for at prevailing market prices

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Statement of Tax Shelters Annexure – V e

(Rs. in million)

Particulars September 2006

Fiscal 2006

Fiscal 2005

Fiscal 2004

Fiscal 2003

Fiscal 2002

Profits before Tax as per books (Audited) 130.80 267.99 102.90 158.35 45.08 103.23Total Tax % (i) 33.66 33.66 36.59 35.88 36.75 35.70Tax at actual rate on book profits 44.03 90.21 37.65 56.82 16.57 36.85

Adjustments :

Timing Differences: Difference between Tax Depreciation & Book Depreciation

20.90 115.49 (10.19) 6.70 26.72 18.42

Other Adjustments - (10.00) (4.90) 1.31 3.82 (0.96)Total Timing Differences (a) 20.90 105.49 (15.09) 8.01 30.54 17.46Permanent Differences: Deduction u/s 80IB - - - 0.37 3.25 0.76Deduction u/s 80HHC - - - 5.51 0.10 0.34Other Adjustments 1.80 6.75 2.79 28.43 2.45 34.80Total Permanent Difference (b) 1.80 6.75 2.79 34.31 5.80 35.90Net Adjustments (c=a+b) 22.70 112.24 (12.30) 42.32 36.34 53.36Tax Savings thereon (c *i) 7.64 37.90 (4.50) 15.18 13.41 22.81Profits as per Income Tax Returns - 155.76 115.20 116.17 8.74 49.85Tax as per Tax Returns - 52.31 42.15 41.68 3.16 14.04

Notes: . (a) For half year ending September 2006 , Provision for income tax has been made on provisional basis.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP The following is a general summary of certain significant differences between Indian GAAP and U.S. GAAP. The difference identified below are limited to those significant differences that are appropriate to the financial statement of Oswal Woollen Mills Limited However, they should not be construed as exhaustive as no attempt has been made to quantify the effects of those differences, nor has a complete reconciliation of Indian GAAP to U.S.GAAP been undertaken. Had any such quantification or reconciliation been undertaken other potential significant accounting and disclosure differences might have come to its attention, which are not identified below. No attempt has been made to identify all disclosures, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial statements and the notes thereto. The financial statements have not been prepared in accordance with U.S. GAAP. Accordingly, there can be no assurance that the table below is complete or that the differences described would give rise to the most material differences between Indian and U.S. GAAP. Further, no attempt has been made to identify future differences between Indian GAAP and U.S. GAAP as a result of prescribed changes in accounting standards. Potential investors should consult their own potential advisors for an understanding of the principal differences between Indian GAAP and U.S. GAAP and how these differences might affect the Financial Statements. S No. Particulars Indian GAAP U.S. GAAP

1.

Changes in accounting policies

The effect of a change in accounting policy, which has a material effect, must be disclosed in the financial statements of the period in which such change is made. Where the effect of such change is not ascertainable, wholly or in part, the fact should be indicated.

The effect of a change in accounting policy is generally included (net of taxes) in the current year income statement, after extraordinary items. Pro-forma comparatives reflecting the impact of the change is generally disclosed.

2.

Consolidation

In accordance with AS 21 on “Consolidated Financial Statements”, the financial statements of the parent and its subsidiaries should be combined on a line by line basis by adding together like items of assets, liabilities, income and expenses.

The equity method is typically used to account for a majority owned unconsolidated subsidiary when the parent has effective control over the subsidiary.

3. Business Combination

Restricts the use of pooling of interest method to circ*mstances, which meet the criteria listed for an amalgamation in the nature of a merger. In all other cases, the purchase method is used.

Business combination is accounted for by the purchase method. However, in certain circ*mstances, the ‘pooling of interest’ method is also permissible.

4. Intangible assets

Intangible assets are capitalized if specific criteria as laid down for its recognition in paragraph 20 of AS-26 on Intangible Assets are met. Such assets are amortized over their useful like, generally not exceeding 10 years.

Intangibles are recorded at cost. The cost at which the tangible are recorded depends upon whether the intangible was developed internally acquired form others, In general, expenses incurred to develop an identifiable intangible assets, such as patents, trademarks and copyrights should be capitalized.

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5. Segment information

Specific requirements govern the format and content of a reportable segment and the basis of identification of a reportable segment. The information for disclosure is to be prepared in conformity with the AS-17 on Segment Reporting.

There are requirements for related disclosures about products and services, geographic areas and major customers. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. The amount reported for each segment item is based on what is used by the “chief operating decision maker” in formulating a determination as to how many resources to assign to a segment and how to appraise the performance of that segment.

6. Property, Plant and Equipment

Fixed assets are recorded at the historical costs or revalued amounts as the case may be. Foreign exchange gains or losses relating to the procurement of fixed assets from outside India have to be capitalized as part of the cost of such fixed asset in accordance with the requirement of AS-11. Depreciation has been charged on the WDV method/straight line method in accordance with and in the manner specified in Schedule XIV to the Companies Act, 1956. Borrowing costs incurred on qualifying assets is capitalized as part of the cost of the fixed assets.

Revaluation of fixed assets is not permitted. All foreign exchange gains or losses relating to the payables for the procurement of property, plant and equipment are recorded in the income statement. Depreciation is provided on a systematic and rational manner over the estimated useful economic life of the asset. The interest cost, if material, eligible for capitalization shall be the interest cost recognized on borrowings and other obligations. The amount capitalized is an allocation of the interest cost incurred during the period required to complete the asset. The interest rate for capitalization purposes is to be based on the rates on the company’s outstanding borrowings.

7. Investments Investments are classified as current or long- term. Current investments are Long- term investments are carried at cost. Provision for diminution in the value is made only if there is a decline, which is other than temporary.

Investments are classified as Trading securities, available for sale securities and held to maturity securities. Trading and held to maturity securities are stated at fair value. Held to maturity securities are carried at amortized costs.

8. Inventory Are stated at cost or net realizable value whichever is lower

Measurement is done at lower of cost or market value. Market value is defined as being current replacement cost subject to an upper limit of net realizable value.

9. Impairment of assets

AS-28 requires that the company has to assess whether there is any indication that an asset has been impaired. Impairment loss, if any, is provided to the extent the

An impairment analysis is performed if impairment indicators exist. An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and

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carrying amount of assets exceeds its recoverable amount.

exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from, the use and eventual disposition of the asset (asset group). An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value (which is determined based on discounted cash flows).

10. Pension/Gratuity/ Post Retirement Benefits

The liability for defined benefit plants like gratuity is determined as per actuarial valuation.

The liability for defined benefit schemes is determined using the projected unit credit method.

11. Deferred Tax Deferred tax results from timing differences between accounting income and taxable income is accounted for using the tax rates and laws that have been substantively enacted at the balance sheet date.

Deferred tax liabilities and assets are recorded for the tax effect of all temporary differences between the accounting and tax base of assets and liabilities and operating loss carry forwards at enacted rates.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial conditions and results of operations should be read in conjunction with our restated audited financial statements for the Fiscal ended March 31, 2002, 2003, 2004, 2005, 2006, and for the half- year ended September 30, 2006 including notes thereto and reports thereon. They are prepared in accordance with Indian GAAP, the accounting standards referred to in Section 211(3C) of the Companies Act, and other applicable provisions of the Companies Act and Indian Securities regulations and restated as per requirements of (Disclosure and Investor Protection) Guidelines, 2000. Indian GAAP differs in certain significant respects from U.S. GAAP. For more information on these differences, see the section titled “Summary of Significant Differences between Indian GAAP and US GAAP” beginning on page [●] of this Draft Red Herring Prospectus. The following discussion is also based on internally prepared statistical information and publicly available information. You are advised to read the section titled “Risk Factors” beginning on page [●] of this Draft Red Herring Prospectus which discusses a number of factors and contingencies that could affect our financial conditions, results of operations and cash flows. Certain industry, technical and financial terms with initial capitals used in this discussion shall have the meanings ascribed to them in the section entitled “Definitions and Abbreviations” beginning on page [●] of this Draft Red Herring Prospectus. Overview

We are the flagship company of the Nahar Group of Companies (the Nahar Group). The Nahar Group is an industrial conglomerate based at Ludhiana in Punjab with group turnover in excess of Rs. 19,000 million for Fiscal 2006. The Nahar Group is one of the old and well-recognized business houses in India having focus on woollen and cotton textile industry. Our Company was incorporated in 1949 by Late Mr. Vidya Sagar Oswal, father of Mr. Jawahar Lal Oswal, our present Chairman and Managing Director. Our Company is one of the pioneers of the organized Indian woollen hosiery industry. We made a modest beginning as a manufacturer of hosiery items, which was followed by setting up a worsted woollen spinning plant of 800 spindles in 1954 to serve as a backward integration of the then existing manufacturing activities. We believe that this worsted woollen spinning plant is one of the first worsted woollen spinning plants in the Northern India. Marching ahead in the journey and keeping pace with overall industrial development in India, our Company is now a vertically integrated woollen textile company, having presence in diverse market, with wide range of products including woollen hosiery and cotton garments. In our woollen hosiery segment, we started our operations with the import of raw greasy wool mostly from Australia and our products include various types of specialty yarns, such as, worsted woollen yarn, lamb wool yarn, acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting yarn and knitted and hosiery garments etc. Subsequently, in Fiscal 2002, we added cotton garments to our existing product portfolio which is outsourced as per our requirements and sold under our own brand name. Since March 2006, we have started manufacture of indigo dyed specialty denim fabric, which has added to our existing vast range of product portfolios. Our manufacturing facilities are spread across various locations in and around Ludhiana in Punjab fully backed by the facilities for product development, design studio and efficient sampling infrastructure to provide quality products to our customers. Currently, we are employing over 4,000 people and our present manufacturing facilities include 26,248 spindles to manufacture worsted woollen yarn besides machines for weaving, knitting, dyeing and finishing. Presently, our manufacturing facilities are producing approximately 2.50 million lbs of wool tops per annum, 750,000 pieces of readymade knitted garments per annum and 10 million meters of denim fabric per annum. We are the registered owners of well-known trade name ‘Monte Carlo’ for selling our woollen hosiery and cotton garments. ‘Monte Carlo” has been recognized as a ‘Superbrand’ for woollen hosiery garments since Fiscal 2003 by the International Society for Superbrands. Our distribution channel comprises of a mix of ‘Monte Carlo Exclusive Brand Outlets’, network of national chain stores and multi brand outlets. Our products in

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woollen hosiery segment are also sold under the brand names of ‘Canterbury’, for premium quality woollen hosiery garments and ‘OWM’, for our specialty worsted woollen yarn etc. including the hand knitting yarn. We also own landed properties admeasuring approximately 5.01 acres in Gurgaon and 12.70 acres in Chennai, which have been presently leased out and are contributing significantly to the overall revenues and profitability of our Company. These properties are in addition to the landed properties that we own in and around Ludhiana in which our manufacturing facilities are based. Capacities Post Expansion Our capacities post implementation of the Expansion Project has been shown in the table below.

Activity Existing Capacity Capacity under the Project Capacity Post expansion

Company Owned Boutique Showrooms

2 showrooms 4 showrooms 6 showrooms

Exclusive Franchisee Showrooms

21 showrooms 123 showrooms 144 showrooms

Design Studios 1 studio 2 studio 3 studio Knitted Woollen Garment

750,000 pieces 125,000 pieces 875,000 pieces

Wool/Blended Tops 2.5 million lbs - 2.5 million lbs Worsted/ Woollen Spinning

26,248 spindles 4,784 spindles 31,032 spindles

Denim Fabrics 10 million meters * 20 million meters Cotton Spinning Nil 14,400 spindles

2,160 rotors 14,400 spindles 2,160 rotors

Captive Co-generation Power Capacity

3.5 MW 7.5 MW 11 MW

*Capacity expansion to 20 million meters of denim fabrics is entirely funded through term loans, eligible for interest rate subsidy under TUFS and, hence not forming part of the Issue proceeds.

For the Fiscals 2005 and 2006, our net operating income was Rs. 2,254.82 million and Rs. 2,381.02 million respectively. For the Fiscals 2005 and 2006, we had earned restated profit after tax of Rs. 87.92 million and Rs. 148.48 million respectively. For the half-year ended September 30, 2006 our net operating income was at Rs. 1,360.47 million and our restated profit after tax was at Rs. 101.57 million. FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Our business, results of operations and financial condition are affected by a number of factors, including: Growth in the textile industry. Our business is significantly dependent on general economic conditions and textile sector activity in India and in international market. The Indian government in recent years has introduced a number of policies and incentives aimed at encouraging the domestic textile sector, while the removal of textile quotas internationally has created potentially significant market opportunities for textile manufacturers from countries with relatively lower production costs. Our ability to anticipate and respond to the expected rapid growth, and consequent competition, in the Indian and international textile industry will be critical to our results of operations in the coming years. Growth expected out of de-reservation of Hosiery sector from small scale industries sector: Historically knitted hosiery sector was in small scale industries (SSI) domain. In last few years we had not ramped up our capacities in this area in view of prevailing restrictions in this sector. De-reservation of the sector from SSI list from Fiscal 2005 has provided a potential growth sector for players like us. Demand and supply. Our products sales realizations are influenced by the demand for and supply of these products in the Indian and international markets. Demand and supply is influenced by factors such as fashion

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trends, consumer preferences, perception of prospective demand, competition, tax, manufacturing incentives, the Indian and international macroeconomic and retail environment and the cost of raw materials, principally cotton. Timely Availability of Raw Material and Price Fluctuations thereof: Raw material costs comprise largest part of our total operating expenditure. Our major raw materials include greasy wool and cotton. Majority of our greasy wool requirements are imported from Australia and availability of wool is dependent on climatic factors and occurrence of drought may seriously hamper our ability to timely source our greasy wool requirements at competitive prices. We have a practice of stocking up in advance our six months requirements of greasy wool. Our cotton yarn requirements are sourced from domestic market mainly from Punjab. Availability of cotton yarn and its prices in domestic market is largely dependent on availability of cotton to spinners in India which depends on the state of monsoons in India each year. Delays or deficiency in monsoon may affect timely availability of cotton yarn at competitive prices for requisite quality. Establishing Monte Carlo as an All Seasons Pan India Brand: We had introduced cotton garments under the ‘Monte Carlo’ brand during Fiscal 2002. We intend to leverage the strength of our brand ‘Monte Carlo’ to sell these all seasons products to all parts of India. Introduction of these new products will also add to our brand recall value. We intend to expand our reach by opening more ‘Monte Carlo Exclusive Brand Outlets’ across the country to reposition the brand ‘Monte Carlo’ as an ‘All Seasons Pan Indian Brand’. Our ability to predict trends, fashion and our ability to penetrate competitive market will critical to our vision of establishing Monte Carlo as an all seasons brand. Taxation: The Government of India has provided textile producers with the option to adopt a zero-excise duty option with effect from July 2004. In such case they are not entitled to avail CENVAT credit on inputs used in the manufacture of final products. Alternatively, a manufacturer can opt for payment of duty at specified rate as applicable and also claim CENVAT credit. We have opted for this zero-excise duty option in respect of some of our products. In case this option is withdrawn, we may be impacted to the extent we are unable to pass the additional duty incidence to our customers. OVERVIEW OF OUR RESULTS OF OPERATIONS Overview of Our Results of Our Operations for the Half-Year Ended September 30, 2006

(Rs. in million) Particulars Amount % of Total

Income Income Operational Income (Net) 1,360.47 95.28 Other Income 67.46 4.72 Total Income 1,427.93 100.00 Expenditure 75.81 Raw Material Consumed 881.31 61.72 Manufacturing Expenses 295.32 20.68

Personnel Expenses 122.26 8.56 (Increase)/ Decrease in Work in Process and Finished Goods (245.39) (17.19)

Cost Of Production 1,053.50 73.78 Administrative and Other Charges 47.86 3.35 Selling and Distribution Expenses 61.21 4.29 Cost Of Sales/Operating Expenditure 1,162.57 81.42 EBIDTA 265.36 18.58 Depreciation & Amortization 84.42 5.91 Financial Charges 50.15 3.51 Profit Before Tax 130.80 9.16 Current Tax 25.26 1.77 Deferred Tax 7.05 0.49 Fringe Benefit Tax 1.00 0.07

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Profit After Tax 97.48 6.83 Less: Adjustments (net) (4.09) (0.29) Restated Profits After Tax 101.57 7.12

Details of Total Income

(Rs. in million) Particulars Amount % of Total

Income Revenues: Sales 1,310.36 Less: Excise Duty 11.45 Net Sales 1,298.91 90.96 Export Incentives 2.49 0.17 Job-work Income 59.07 4.14 Operational Income (Net) 1,360.47 95.28

Other Income 67.46 4.72 Total Income 1,427.93 100.00

Details of Net Sales

(Rs. in million) September 2006

Particulars Amount % of Net Sales Wool Tops 40.44 3.11 Worsted Yarn 556.73 42.86 Lamb Wool Yarn 106.94 8.23 Woollen Textiles 33.93 2.61 Woollen Garments 93.33 7.19 Cotton Garments 172.66 13.29 Denim Fabric 190.35 14.65 Others 104.53 8.05 Net Sales 1,298.91 100.00

Total Income: Our total income for the half-year ended September 30, 2006 was Rs. 1,427.93 million, comprises of net sales of Rs. 1,298.91 million, export incentives of Rs. 2.49 million, job-work income of Rs. 59.07 million and other income of Rs. 67.46 million. Other income mainly comprises of rental income from lease properties amounting to Rs. 55.95 million. Net sales mainly comprises of sale of worsted yarn of Rs. 556.73 million or 42.96% of net sales, sale of denim fabric of Rs. 190.35 million, or 14.65% of net sales, sale of cotton garments of Rs. 172.66 million or 13.29% of net sales. Cost of production: Our cost of production for the half-year ended September 30, 2006 was Rs. 1,053.50 million, or 73.78% of total income. Earnings before Interest, Depreciation, Taxation and Amortization (EBIDTA): Our EBIDTA for the half-year ended September 30, 2006 was Rs. 265.36 million or 18.58% of our total income. Restated Profit after Tax: Our Profit before tax was Rs. 130.80 million, or 9.16% of our total income. After providing depreciation of Rs. 84.42 million, interest and financial charges of Rs. 50.15 million, Rs. 33.31 million on account of taxes and after adjusting Rs. 4.09 million on account of restatement, our restated profit after tax was Rs. 101.57 million. The following table sets forth certain information with respect to our revenues, expenditure and profits, for the periods indicated

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(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Particulars Amount % of Total Income

Amount % of Total Income

Amount % of Total Income

Income Operational Income (Net) 2,381.02 94.01 2,254.82 94.71 2,297.72 93.27

Other Income 151.83 5.99 126.04 5.29 165.91 6.73 Total Income 2,532.85 100.00 2,380.86 100.00 2,463.63 100.00 Expenditure Raw Material Consumed 1,258.95 49.70 1,171.21 49.19 1,424.51 57.82

Manufacturing Expenses 452.65 17.87 396.34 16.65 384.57 15.61

Personnel Expenses 191.03 7.54 176.15 7.40 168.09 6.82 (Increase)/ Decrease in Work in Process and Finished Goods

(87.57) (3.46) 104.03 4.37 (104.94) (4.26)

Cost Of Production 1,815.06 71.66 1,847.73 77.61 1,872.23 75.99Administrative and Other Charges

80.17 3.17 77.67 3.26 76.04 3.09

Selling and Distribution Expenses

170.77 6.74 150.38 6.32 123.29 5.00

Cost of Sales/ Operating Expenditure

2,066.00 81.57 2,075.78 87.19 2,071.56 84.09

EBIDTA 466.85 18.43 305.08 12.81 392.07 15.91 Depreciation & Amortization

118.41 4.67 118.18 4.96 131.37 5.33

Financial Charges 80.45 3.18 84.00 3.53 102.35 4.15 Profit Before Tax 267.99 10.58 102.90 4.32 158.35 6.43 Current Tax 54.04 2.13 37.02 1.55 44.31 1.80 Deferred Tax 54.78 2.16 (8.35) (0.35) 14.92 0.61 Fringe Benefit Tax 2.00 0.08 0.00 0.00 0.00 0.00 Profit After Tax 157.17 6.21 74.23 3.12 99.12 4.02 Less: Adjustments 8.69 0.34 (13.69) (0.58) 0.52 0.02Restated Profits After Tax

148.48 5.86 87.92 3.69 98.60 4.00

Total Income Comparison

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Particulars Amount % of Total Income

Amount % of Total Income

Amount % of Total Income

Revenues: Sales 2,287.61 2,222.27 2,365.37 Less: Excise Duty 30.34 66.08 202.65 Net Sales 2,257.27 89.12 2,156.19 90.57 2,162.72 87.79Export Incentives 8.88 0.35 2.87 0.12 1.89 0.08Job-work Income 114.87 4.54 95.76 4.02 133.11 5.40Operational Income (Net)

2,381.02 94.01 2,254.82 94.71 2,297.72 93.27

Other Income 151.83 5.99 126.04 5.29 165.91 6.73Total Income 2,532.85 100.00 2,380.86 100.00 2,463.63 100.00

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Details of Net- Sales

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Particulars Amount % of Net Sales

Amount % of Net Sales

Amount % of Net Sales

Wool/Blended Tops 86.26 3.82 133.38 6.19 142.96 6.61 Worsted Yarn 988.29 43.78 955.99 44.34 857.14 39.63 Lamb Yarn 120.12 5.32 93.25 4.32 49.84 2.30 Woollen Textiles 77.61 3.44 253.47 11.76 460.51 21.29 Woollen Garments 455.66 20.19 414.84 19.24 418.88 19.37 Cotton Garments 283.97 12.58 206.86 9.59 147.24 6.81 Others 245.36 10.87 98.40 4.56 86.15 3.98 Net Sales 2,257.27 100.00 2,156.19 100.00 2,162.72 100.00

Fiscal ended March 31, 2006 compared to Fiscal ended March 31, 2005 Net Sales: Net sales had registered modest increase of 4.69 % from Rs. 2,156.19 million in Fiscal 2005 to Rs. 2,257.27 million in Fiscal 2006. However there was change in our overall product mix with proportion of higher value added products increasing, driven by 37.28% increase in sale of cotton garments from Rs. 206.86 million in Fiscal 2005 to Rs. 283.97 million in Fiscal 2006, 28.82 % increase in sale of lamb wool yarn from Rs. 93.25 million in Fiscal 05 to Rs. 120.12 million in Fiscal 06, 149.35% increase in sale of other textile products mainly comprising of sale of raw-wool from Rs. 98.40 million in Fiscal 2005 to Rs. 245.36 million in Fiscal 2006. This was offset by decline in sale of woollen textiles by 69.38% from Rs. 253.47 million in Fiscal 2005 to Rs. 77.61 million and 35.53% decline in sale of woollen tops from Rs. 133.38 million in Fiscal 2005 to Rs. 86.26 million in Fiscal 2006. Operational Income: Operational income had increased by 5.56% from Rs. 2,254.82 million in Fiscal 2005 to Rs. 2,381.02 million in Fiscal 2006, driven primarily by 4.69 % growth in net sales, 19.96% growth in job-work income from Rs. 95.76 million to Rs. 114.87 million. Other Income: Other income had increased from Rs. 126.04 million in Fiscal 2005 to Rs. 151.83 million in Fiscal 2006, exhibiting growth of 20.46% driven primarily by increase in lease rent income from Rs. 98.61 million in Fiscal 2005 to Rs. 104.24 million in Fiscal 2006. Total Income: Due to reasons discussed above, total income for Fiscal 2006 was Rs. 2,532.85 million, compared to total income of Rs. 2,380.86 million for Fiscal 2005, showing an increase of 6.38 %. Fiscal ended March 31, 2005 compared to Fiscal ended March 31, 2004 Net Sales: Net Sales had declined marginally by 0.30 % from Rs. 2,162.72 million in Fiscal 2004 to Rs. 2,156.19 million in Fiscal 2005. The decline was due to 44.96% decline in sale of woollen textiles from Rs. 460.51 million in Fiscal 2004 to Rs. 253.47 million in Fiscal 2005. This was compensated by 40.49% growth in sale of cotton garments from Rs. 147.24 million in Fiscal 2004 to Rs. 206.86 million in Fiscal 2005 and 87.10% growth in sale of lamb yarn from Rs. 49.84 million in Fiscal 2004 to Rs. 93.25 million in Fiscal 2005. Operational Income: Operational income had decreased by 1.87% from Rs. 2,297.72 million in Fiscal 2004 to Rs. 2,254.82 million in Fiscal 2005. This was pursuant to 0.30% decline in net sales and further aggravated by 28.06% drop in job-work income from Rs. 133.11 million in Fiscal 04 to Rs. 95.76 million in Fiscal 2005. Other Income: Other income had declined from Rs. 165.91 million in Fiscal 2004 to Rs. 126.04 million in Fiscal 2005, i.e. a decline of 24.03%. Decrease in other income was primarily on account of high base of profit on sale of fixed assets amounting to Rs. 35.43 million in Fiscal 2004, as against Rs. 0.29 million in Fiscal 2005, which

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was a non-recurring event. Further interest income has declined by 53.74% from Rs. 24.47 million to Rs. 11.32 million. Total Income: Due to reasons discussed above, total income for Fiscal 2005 was Rs. 2,380.86 million, compared to the total income of Rs. 2,463.63 million for Fiscal 2005, showing a decrease of 3.36 %. Comparison of Total operating expenses and EBIDTA

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Particulars Amount % of Total Income

Amount % of Total Income

Amount % of Total Income

Expenditure Raw Material Consumed

1,258.95 49.70 1,171.21 49.19 1,424.51 57.82

Manufacturing Expenses

452.65 17.87 396.34 16.65 384.57 15.61

Personnel Expenses 191.03 7.54 176.15 7.40 168.09 6.82 (Increase)/ Decrease in Work in Process and Finished Goods

(87.57) (3.46) 104.03 4.37 (104.94) (4.26)

Cost Of Production 1,815.06 71.66 1,847.73 77.61 1,872.23 75.99

Administrative and Other Charges

80.17 3.17 77.67 3.26 76.04 3.09

Selling and Distribution Expenses

170.77 6.74 150.38 6.32 123.29 5.00

Cost of Sales/ Operating Expenditure

2,066.00 81.57 2,075.78 87.19 2,071.56 84.09

EBIDTA 466.85 18.43 305.08 12.81 392.07 15.91 Fiscal ended March 31, 2006 compared to Fiscal ended March 31, 2005 Raw material consumed: In Fiscal 2006 we had consumed raw materials worth Rs. 1,258.95 million, or 49.70 % of total income, compared to Rs. 1,171.21 million, or 49.19 % of total income in Fiscal 2005, exhibiting growth of 7.49% in line with growth in total income. Manufacturing Expenses: Our manufacturing expenses stood at Rs. 452.65 million, or 17.87 % of total income in Fiscal 2006, compared to Rs. 396.34 million, or 16.65 % of total income in Fiscal 2005. Manufacturing expenses had increased by 17.87% mainly on account of increase in processing charges of Rs. 100.70 million in Fiscal 2006, compared to Rs. 67.62 million in Fiscal 2005. This increase of 48.92% was mainly due to increase in cotton garment fabrication charges. We also experienced increase in cost of stores from Rs. 132.58 million in Fiscal 2005 to Rs. 163.24 million in Fiscal 2006. Personnel Expenses: Personnel expenses increased to Rs. 191.03 million, or 7.54 % of total income in Fiscal 2006, compared to Rs. 176.15 million, or 7.40 % of total income in Fiscal 2005. This increase of 8.45% is on account of increase in overall wage rates coupled with increase in number of employees. Cost of production: Cost of production was lower at Rs. 1,815.06 million, or 71.66% of total income in Fiscal 06, compared to Rs. 1,847.73 million, or 77.61 % of total income in Fiscal 2005. This efficiency is achieved on account of better product mix. Administrative and Other Charges: Administrative and other charges increased to Rs. 80.17 million, or 3.17% of total income, in Fiscal 2006 from Rs. 77.67 million, or 3.26 % of total income in Fiscal 2005. Selling and Distribution Expenses: Selling and distribution expenses amounted to Rs. 170.77 million, or 6.74% of total income, in Fiscal 2006 compared to Rs. 150.38 million, or 6.32% of total income in Fiscal 2005.

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Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA): During Fiscal 2006 EBIDTA was Rs. 466.85 million i.e. 18.43 % of total income, compared to EBIDTA during Fiscal 2005 of Rs. 305.08 million i.e. 12.81 % of total income. The total year-on-year growth was 53.03 %. This was driven decrease in total cost of sales/ operating expenditure as a percentage of total income at 81.57% for Fiscal 2006 as compared to 87.19% of total income in Fiscal 2005. Fiscal ended March 31, 2005 compared to Fiscal ended March 31, 2004 Raw material consumed: In Fiscal 2005 we had consumed raw materials worth Rs. 1,171.21 million, or 49.19 % of total income, compared to Rs. 1,424.51 million, or 57.82 % of total income in Fiscal 2004. Manufacturing Expenses: In Fiscal 2005 manufacturing expenses stood at Rs. 396.34 million, or 16.65 % of total income, compared to Rs. 384.57 million, or 15.61 % of total income in Fiscal 2004. Personnel Expenses: Personnel expenses increased to Rs. 176.15 million, or 7.40 % of total income in Fiscal 2005, compared to Rs. 168.09 million, or 6.82% of total income in Fiscal 2004. The total year-on-year increase of 4.80% was due mainly to increments payable to our staff in respect of salaries and wages, bonuses, provident fund, and similar expenses and was also driven by increase in number of personnel employed. Cost of production: Cost of production was higher at Rs. 1,847.73 million, or 77.66% of total income in Fiscal 2005, compared to Rs. 1,872.23 million, or 75.99 % of total income in Fiscal 2004. Our cost as a percentage of total income has increased due to increase in volume of cotton garments outsourced by us which as compared to our own manufactured product generates lesser operating margins. Besides the value added product in the woollen segment also could not realize the full sale value with reference to the expenditure on value addition. Administrative and Other Charges: Administrative and other charges increased to Rs. 77.67 million, or 3.26% of total income, in Fiscal 2005 from Rs. 76.04 million, or 3.09 % of total income in Fiscal 2004. Selling and Distribution Expenses: Selling and distribution expenses amounted to Rs. 150.38 million, or 6.32% of total income, in Fiscal 2005 from Rs. 123.29 million, or 5.00 % of total income in Fiscal 2004 due to higher advertising and brand promotion expenses. Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA): During Fiscal 2005, EBIDTA was Rs. 305.08 million i.e. 12.81 % of total income, compared to EBIDTA of Rs. 392.07 million in Fiscal 2004 i.e. 15.91 % of total income resulting in year on year decline of 22.19%. This was due to reasons stated above. Comparison of Profitability and other Expenses

(Rs. in million) Fiscal 2006 Fiscal 2005 Fiscal 2004

Particulars Amount % of Total Income

Amount % of Total Income

Amount % of Total Income

Total Income 2,532.85 100.00 2,380.86 100.00 2,463.63 100.00 EBIDTA 466.85 18.43 305.08 12.81 392.07 15.91 Depreciation & Amortization

118.41 4.67 118.18 4.96 131.37 5.33

Financial Charges 80.45 3.18 84.00 3.53 102.35 4.15 Profit Before Tax 267.99 10.58 102.90 4.32 158.35 6.43 Current Tax 54.04 2.13 37.02 1.55 44.31 1.80 Deferred Tax 54.78 2.16 (8.35) (0.35) 14.92 0.61 Fringe Benefit Tax 2.00 0.08 0.00 0.00 0.00 0.00 Profit After Tax 157.17 6.21 74.23 3.12 99.12 4.02 Less: Adjustments 8.69 0.34 (13.69) (0.58) 0.52 0.02Restated Profits After Tax

148.48 5.86 87.92 3.69 98.60 4.00

Fiscal ended March 31, 2006 compared to Fiscal ended March 31, 2005 Depreciation and amortization: Depreciation expenses amounted to Rs. 118.41 million, in Fiscal 2006 compared to Rs. 118.18 million in Fiscal 2005.

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Financial Expenses: Interest and financial expense costs had reduced marginally to Rs. 80.45 million, in Fiscal 2006 compared to Rs. 84 million in Fiscal 2005. Profit Before Tax: Due to reasons discussed above, during Fiscal 2006, profit before tax was Rs. 267.99 million i.e. 10.58 % of total income, compared to profit before tax during Fiscal 2005 of Rs. 102.90 million i.e. 4.32 % of total income. The total year-on-year growth was 160.44 %. Provision for Taxation: Provision for taxation amounted to Rs. 110.82 million in Fiscal 2006, or 41.35 % of Profit before tax, compared to Rs. 28.67 million, or 27.86 % of profit before tax in Fiscal 2005. Restated Profit After Tax: Due to reasons discussed above, during Fiscal 2006 restated profit after tax was Rs. 148.48 million i.e. 5.86 % of total income, compared to restated profit after tax, during Fiscal 2005 of Rs. 87.92 million i.e. 3.69% of total income. The total year-on-year growth was 68.88 %. Fiscal ended March 31, 2005 compared to Fiscal ended March 31, 2004 Depreciation and amortization: Depreciation expenses amounted to Rs. 118.18 million, in Fiscal 2005 compared to Rs. 131.37 million in Fiscal 2004. Financial Expenses: Interest and financial expense costs had decreased to Rs. 84.00 million, in Fiscal 2005 compared to Rs. 102.35 million in Fiscal 2004. Profit Before Tax: Due to reasons discussed above, during Fiscal 2005, profit before tax was Rs. 102.90 million i.e. 4.32 % of total income, compared to profit before tax during Fiscal 2004 of Rs. 158.35 million i.e. 6.43 % of total income. The total year-on-year decline was 35.02 %. Provision for Taxation: Provision for taxation amounted to Rs. 28.67 million in Fiscal 2005, or 27.86 % of profit before tax, compared to Rs. 59.23 million, or 37.40 % of profit before tax in Fiscal 2004. Restated Profit After Tax: Due to reasons discussed above, during Fiscal 2005 restated profit after tax, was Rs. 87.92 million i.e. 3.69 % of total income, compared to restated profit after tax, during Fiscal 2004 of Rs. 98.60 million i.e. 4.00% of total income. The total year-on-year decline was 10.83 %. LIQUIDITY & CAPITAL RESOURCES Liquidity Our primary liquidity requirements are to finance our working capital needs and our capital expenditures. We require working capital to finance the purchase of raw materials, make necessary advances to suppliers. To fund these costs, we have relied on short-term and long-term borrowings, including working capital financing and term loan and cash flows from operating activities. As at September 30, 2006, we had cash and cash equivalents of Rs. 77.73 million. To date we have funded our growth principally from internal accruals, affiliate loans and bank borrowings. Cash Flows The following table summarizes our cash flow for the half-year ended September 30, 2006 and years ended March 31, 2004, 2005 and 2006.

(Rs. in million) September 2006 Fiscal 2006 Fiscal 2005 Fiscal 2004 Net Cash Flow from Operating activities

(206.89) 281.90 270.90 301.56

Net Cash Flow from Investing activities

(175.60) (630.23) (29.92) (169.22)

Net Cash Flow from Financing activities

450.08 7.26 (77.25) 41.40

Net Cash Flows 67.57 (341.07) 163.73 173.74

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September 2006 Fiscal 2006 Fiscal 2005 Fiscal 2004 Cash and cash equivalents at the year-end.

77.73 10.16 351.23 187.50

Our cash flow from operating activities has being Rs. 281.90 million for Fiscal 2006, Rs. 270.90 million for Fiscal 2005 and Rs. 301.56 million for Fiscal 2004. Our cash flow from operations for the half-year ended September 30, 2006 was negative amounting to Rs. 206.89 million. Cash flows for the half-year ended September 30, 2006 are not indicative of our annual cash flows, as we have to maintain higher working capital during the months from July to December due to higher inventory levels both of raw materials as well as finished goods. INDEBTEDNESS The following table and description summarizes our secured long-term indebtedness as of September 30, 2006.

(Rs. in million) Payment due by March 31, Indebtedness Outstanding amount as on

September 30, 2006 2007 2008 2009 Secured Long Term Debt 875.54 59.34 89.17 86.37 Secured Short Term Debt 758.73 ----------------- N.A----------------- Unsecured Debt 187.76 Repayable on Demand Short-term debt comprises cash-credit, export packing credit and vehicle finance loans. HISTORICAL AND PLANNED CAPITAL EXPENDITURE Our capital expenditure for the Fiscal ended March 31, 2006 was 630.14 million. Our capital expenditure in each of the Fiscals ended March 31, 2005 and 2004 was Rs. 174.82 million and Rs. 18.29 million respectively. We further plan to expand our capacities at an estimated capital expenditure of Rs. 2,529.87 million over next two Fiscals, which we intend to fund through borrowings, internal accruals and the proceeds of this issue. SIGNIFICANT ACCOUNTING POLICIES For details relating to our significant accounting policies see the section titled “Financial Statements” beginning on page [●] of this Draft Red Herring Prospectus. Unusual or Infrequent Events or Transactions During the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent. Significant Economic changes that materially affect or likely to affect Income from continuing operations There have been no significant economic changes during the periods under review that have materially affected or are likely to affect our income. Known Trends or Uncertainties

To our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations. Future Changes in Relationship between Costs and Revenues, in case of Events such as Future Increase in Labour or Material Costs or Prices that Will Cause a Material Change are Known Nil

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The Extent to which material increases in Net Sales or Revenue are due To Increased Sale Volumes, Introduction Of New Products Or Services Or Increased Sales Prices Since March 2006, we have started the manufacture of indigo dyed specialty denim fabric, which has added to our existing range of rich product portfolios. For half year ended September 30, 2006, we achieved increased turnover of Rs. 190.35 million by sale of our new product i.e. denim fabric. Apart from this, in our cotton garment operations we achieved a significant growth of 58.25% in sales for half year ended September 30, 2006 over the sales of corresponding period during previous Fiscal. This was primarily due to our increased thrust on retailing of our branded readymade garments through exclusive stores by opening of various “Monte Carlo Exclusive Brand Outlets” in many new cities across India. Business Segment

Our Company operates in only one industry segment – Textile and Apparel industry The Extent to which Business is Seasonal

Our business is not seasonal. However, sale of our woollen hosiery products are higher during the winters. Any Significant Dependence on a Single or Few Suppliers or Customers

We don’t have any significant dependence on a single or few suppliers or customers for any of our products. Competitive Conditions

The textile and apparel industry is highly competitive. No single company dominates the industry. We seek to compete in the domestic and export markets on the basis of the price, range, quality of our products, our delivery times and customer service capacities. In the woollen hosiery garments range, which is sold under our brand ‘Monte Carlo’ we do not have any significant competition and we enjoy brand loyalty from our customers. In respect of our woollen/blended worsted yarn business, we compete primarily with other large organised players based in north India as well as a large segment of small unorganized players based mainly in Punjab. The main competitors of our woollen/blended worsted yarn business are Vardhman Textiles Limited, Woolworth (India) Limited, Jayshree Textiles Limited and Malwa Cotton Mills Limited. As regards our branded woven garments primarily cotton shirts and trousers, we are new entrant in already highly competitive market. We face competition from many established domestic as well as international brands. However, the woven cotton textile industry is highly competitive and no single company dominates the industry. We seek to compete in the domestic market on the basis of the price, range, quality of our products and our delivery times. In respect of denim fabrics business, we compete primarily with other fabrics manufacturers. The main competitors of our denim fabric business in India are Arvind Mills Limited and Raymond Limited. However, with our focus on value added denim fabric segment and advanced product and process design initiatives, we are well positioned to face competition more efficiently. Significant Developments after September 30, 2006 that may affect our Future Results of Operations

To our knowledge no circ*mstances have arisen since the date of the last financial statements as disclosed in this prospectus which materially and adversely affects or is likely to affect, the operations or profitability of our company, or the value of our assets or our ability to pay our material liabilities within the next twelve months. There is no subsequent development after the date of the Auditors Report, which we believe, is expected to have a material impact on the reserves, profits, earnings per share and book value of our Company.

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OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions, proceedings or tax liabilities against our Company, our Directors, our Promoters, Promoter Group companies and companies in which we hold a substantial number of equity shares, that would have a adverse effect on our business and there are no defaults, nonpayment or overdue of statutory dues, institutional/bank dues and dues payable to holders of any debentures, bonds and fixed deposits that would have an adverse effect on our business other than unclaimed liabilities against our Company or Directors or Promoters or Promoter Group companies or companies in which we hold a substantial number of equity shares.

I. LITIGATION AGAINST OUR COMPANY

A. Contingent liabilities not provided for are as follows:

(Rs. in million) Particulars September 2006

Liability for arbitration award 6.47 Sales Tax Demand 2.03 Central Excise Demand 40.33 Custom Duty Demand 0.12 Port Trust Claim - Counter Guarantees 2.14 Contracts remaining to be executed on Capital Account (net of advances)

78.16

Total 129.25

B. Litigation pending against Our Company

Excise Cases There are nine excise cases pending against us before various courts and authorities in India. The aggregate liability claimed against us, as on the date of institution of these case is approximately Rs. 40.29 million. The details of these cases are as follows: a. The High Court of Delhi pursuant to an order dated May 5, 1977, allowed the export of a consignment

without payment of duty, against the bank guarantee of the State Bank of Patiala. The Superintendent of Customs, Jamnagar has issued a show cause notice dated October 15, 1977, to our Company, raising a customs duty demand of Rs. 0.12 million in relation to the said consignment, as the guarantee provided by the State Bank of Patiala was to expire on December 6, 1977 and no final order of the High Court was delivered. Subsequently, we have issued a continuing bank guarantee in the relation to the same to valid until the final disposal of the matter.

b. The Deputy Commissioner of Central Excise (“DCCE”), Ludhiana has issued show cause notices dated

February 6, 2001, October 24, 2003 and January 2, 2004 to our Company alleging short payment of central excise duty amounting to Rs. 5.19 million, Rs. 0.13 and Rs. 0.95 million, respectively for the period January 1, 2002 to September 30, 2002, October 1, 2002 to November 30, 2002, December 1, 2002 to March 31, 2003, respectively in relation to goods manufactured by our Company, which were cleared to our units and our interconnected undertakings namely Nahar Spinning Mills Limited by declaring a lesser assessable value. Pursuant to personal hearings being held, the demand was further increased to Rs. 9.18 million, Rs. 0.99 million and Rs. 3.39 million, respectively on grounds of mis-declaration of correct value of goods. Subsequently on an appeal by our Company, the Commissioner of Excise, while hearing the said orders together, vide order dated April 8, 2005 reduced the demand of Rs. 2.39 million along with interest and additionally imposed a penalty of Rs. 2.39 million. Vide order dated August 31, 2005 granted a stay on the demand and penalty of Rs. 2.39 million each.

c. The DCCE, Ludhiana issued a show cause notice dated July 27, 2001 to our Company in relation to

alleged short payment of duty during the period July 1, 2000 to March 31, 2001 on the grounds of under valuation of blended woolen worsted yarn, acrylic yarn, gimped yarn and acrylic blanket, manufactured and cleared to our units and units of related undertakings namely, Oswal Woollen Mills and Nahar Spinning Mills. The DCCE, Ludhiana confirmed a demand of Rs. 2.71 million and imposed

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a personal penalty of Rs. 0.20 million, on us, pursuant to order dated March 16, 2002. As we failed to comply with the stay order dated October 9, 2002 our appeal was dismissed for default by the Commissioner (Appeals) Central Excise (“CACE”), Ludhiana vide order dated September 26, 2003. On an appeal to the Customs Excise Service Tax Appellate Tribunal (“CESTAT”), the CESTAT vide order dated March 23, 2004 remanded the matter for fresh consideration on merits. The CACE, Ludhiana, [partly upheld the demand] to the extent of Rs. 2.18 million and disposed the penalty imposed pursuant to order dated November 29, 2004. Vide order dated March 23, 2005 CESTAT granted a stay on the demand of Rs. 2.18 million.

d. The Commissioner of Central Excise (“CCE”), Ludhiana issued a show cause notice dated February 4,

2005, to our Company, raising a demand of Rs. 29.47 million for the period January 01, 2000 to March 31, 2004, in relation to the alleged evasion of central excise duty on the value addition of goods outsourced by our Company for manufacturing purposes to Vanaik Spinning Mills Limited (“Vanaik”) on the grounds that Vanaik was owned and totally controlled by certain of our officers of our Company, namely Mr. Ashok Kumar Verma, Mr. Gagnish Kumar Bhalla, Mr. Neeraj Uppal and Mr. R.M. Sood. The CCE, Ludhiana vide order dated November 11, 2005 imposed the demand of Rs. 16.68 million along with interest and additionally imposed a penalty of Rs. 16.68 million. Pursuant to which our Company and Vanaik filed appeals (No. 421-422/06) dated February 11, 2006 the CESTAT. Vide order dated March 29, 2006 CESTAT granted a stay on the demand, and penalty.

e. Our Company claimed rebate on excise duty paid on finished products exported under the duty

drawback scheme. The Assistant Commissioner of Central Excise (“ACCE”), Ludhiana issued the following show cause notices in relation to the non admissibility of rebate claim as we had availed duty drawback on the inputs used in the manufacture of and export of excisable goods on the grounds that a double benefit could not be permitted.

(i) Show cause notice dated January 5, 2006 in relation to the non admissibility of a rebate claim

of Rs. 0.58 million for the period July 2005. Subsequently, the ACCE vide order dated March 10, 2006 rejected the rebate claim of Rs. 0.58 million but allowed the same amount in Central Value Added Tax (“CENVAT”) credit. We have filed an appeal on May 26, 2006 before the CCE, Chandigarh which is pending.

(ii) Show case notice dated June 20, 2006, in relation to the non admissibility of a rebate claim of

Rs. 0.61 million for the period December 2005. We have replied to the show cause notice vide letter dated October 20, 2006 which is pending

f. The ACCE, Division-I, Ludhiana issued a show cause notice dated April 3, 2006 to our

Company, alleging us of wrongfully availing the CENVAT credit of Rs. 0.09 million on capital goods used exclusively in the manufacture of exempted goods for the period of Mach 2005 to September 2005 on the grounds that the credit was applicable only to final products which were exempted from excise duty and not on capital goods used exclusively in the manufacture of exempted goods. We have filed an appeal before the CACE, Chandigarh on December 3, 2006 which is pending.

i. The DCCE, Division-I, Ludhiana has issued a show cause notice dated August 4, 2006, to our

Company, alleging short payment of duty of Rs. 0.32 million on the depreciated value of a carding machine that was bought by us and on which we availed of a CENVAT credit, alleging that we are required to pay the duty equal to the CENVAT credit taken by us on the impugned capital goods.

g. The ACCE, Division-III, Ludhiana issued a show cause notice dated April 17, 2006, to our Company,

alleging short payment of service tax of Rs. 0.12 million. The said notice alleged that we were in contravention of the CENVAT Credit Rules 2004 as the total amount of such service tax is liable to be paid in cash, whereas we had paid nil service tax and paid the remaining amount of Rs. 0.12 million through CENVAT account dated December 3, 2004. We have replied to the show cause notice vide letter dated June 27, 2006 and the matter is currently pending.

Income Tax Cases

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There are nine income tax cases involving our Company, pending before various courts and authorities in India. The aggregate claim against us, as on the date of institution of these cases is approximately Rs. 14.02 million. The details of the cases are as follows: a. Our Company filed an income tax return for Rs. 116.162 million on November 1, 2004, for the

assessment year 2004-2005. The Assistant Commissioner of Income Tax (“ACIT”), Ludhiana vide order dated March 24, 2006 imposed an additional demand of Rs. 0.23 million on the grounds of disallowance of deduction in respect of export profits, payment to clubs, guest house expenses and expenses on gift articles amongst others. An appeal dated April 25, 2006 against the same filed by us to the Commissioner of Income Tax (Appeals) (“CIT (A)”), Ludhiana, is currently pending.

b. Our Company filed an income tax return for Rs. 8.74 million for the assessment year 2003-2004. The

ACIT, Ludhiana, vide order dated May 24, 2005, imposed an additional demand of Rs. 0.30 million on the grounds of disallowance of certain deductions in respect of export profits disallowance of expenditure on account of payments to clubs, disallowance of reduction of income derived from letting out parts of factory on the grounds that the same is not derived from the business of an industrial undertaking, disallowance of expenditure incurred on guest house amongst others. On an appeal filed by us to the CIT (A), Ludhiana, the CIT (A) vide order dated September 12, 2006 partly allowed our claim. Subsequently we have filed an appeal on November 4, 2006 to the ITAT which is pending. The next date of hearing is yet to be fixed.

c. Our Company filed income tax returns for the assessment year 2002-2003 for an amount of Rs. 49.85

million. The ACIT, Ludhiana, vide order dated June 3, 2004, imposed an additional demand of Rs. 0.22 million on the grounds of disallowance of certain deductions in respect of export profits, inclusion of interest on bank fixed deposits and debentures as income from other sources, disallowance of deduction on negative profits on export of trading goods, payments to clubs, gifts to business associates, disallowance of expenditure incurred in relation to tax free income amongst others. We filed an appeal (No.100/IT/2004-05) before the CIT (A). The appeal has been heard and the decision is awaited.

d. Our Company filed income tax returns for the assessment year 1994-1995 for an amount of Rs. 17.63

million. The ACIT, Ludhiana, vide order dated June 6, 1996 imposed an additional demand of Rs. 2.83 million on the grounds of disallowance of certain deductions of leave with wages and leave with salary, guest house expenses, payments to clubs, legal and professional expenses, depreciation in respect of units which did not have any manufacturing activity during the year, miscellaneous expenses written off. On an appeal filed by us before the CIT (A), the CIT (A) vide order dated October 18, 1996 partly allowed our appeal. The Department of Income Tax (“DIT”) filed an appeal and we filed cross appeals before the Income Tax Appellate Tribunal (“ITAT”), Chandigarh. The ITAT vide order received on February 13, 2003 partly allowed the appeal filed by the DIT and dismissed the cross appeal filed by us. We have filed an appeal before the High Court of Punjab and Haryana at Chandigarh, which is currently pending.

e. Our Company filed an income tax return for Rs. 9.17 million on December 31, 1992 for the assessment

year 1992-93. The Deputy Commissioner of Income Tax (“DCIT”), Ludhiana vide order dated March 31, 1994 imposed an additional demand of Rs. 2.2 million on the grounds of disallowance of leave with wages and salary on guest house expenses, valuation of closing stock of Ludhiana, interest on borrowed money amongst others. The CIT (A), Ludhiana, vide order dated February 16, 1995 partly allowed the appeal filed by us. Subsequently, on an appeal filed by us before the ITAT, the ITAT partly allowed our appeal. We have filed an appeal (ITA No. 166/2002) against the said order before the High Court of Punjab and Haryana, which is currently pending.

f. Our Company filed an income tax return for Rs.26.93 million on December 31, 1991 for the

assessment year 1991-92. The DCIT, Ludhiana vide order dated March 15, 1993 imposed an additional demand of Rs. 3.30 million on the grounds of disallowance of leave with wages and salary on guest house expenses, entertainment expenses, previous year expenses, amongst others. The CIT (A), Ludhiana, vide order dated December 15, 1994 partly allowed the appeal filed by us]. On an appeal by us to the ITAT, the ITAT partly allowed our appeal. The DIT has filed an appeal (ITA No. 162/2002) against the said order before the High Court of Punjab and Haryana, which is currently pending.

g. Our Company filed an income tax return for Rs.7. 93 million on December 12, 1990 for the assessment

year 1990-91. The DCIT, Ludhiana vide order dated March 30, 1992 imposed an additional demand of

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Rs. 2.89 million on the grounds of disallowance of leave with wages and salary on guest house expenses, depreciation expenses amongst others. The CIT (A) and ITAT partly allowed the appeals. The DIT filed an appeal against the same before the High Court of Punjab and Haryana, which is currently pending. In addition he imposed a penalty of Rs. 0.48 million. The CIT (A), Ludhiana, vide order dated September 14, 1992 partly allowed the appeal filed by us. Additionally, the CIT (A), on an appeal filed by us, vide order dated July 11, 1997, reduced the penalty payable by us to Rs. 0.12 million. Thereafter an appeal (ITA No. 960/Chandi/1997), against the same was filed by our Company before the ITAT which allowed our appeal and waived the penalty. The DIT has filed an appeal against the same before the High Court of Punjab and Haryana, which is currently pending.

h. Our Company filed an income tax return for Rs 2.44 million on July 14, 1987 for the assessment year

1987-88. The DCIT, Ludhiana vide order dated February 21, 1990 imposed an additional demand of Rs. 0.13 million on the grounds of disallowance of leave with wages and salary on entertainment expenses, valuation of closing stock, previous year expenses amongst others. The CIT (A), Ludhiana, vide order dated August 6, 1990 partly allowed the appeal filed by us. Thereafter, the ITAT partly allowed our appeal, vide order dated November 22, 1995. The DIT has filed an appeal (ITR No. 93/1999) against the same before the High Court of Punjab and Haryana, which is currently pending.

i. Our Company filed an income tax return for net loss of Rs. 8.11 million on October 10, 1985 for the

assessment year 1985-86. The Income Tax Officer, Ludhiana vide order dated March 9, 1988 imposed an additional demand of Rs. 1.92 million and disallowed leave with wages expenses, entertainment expenses, guesthouse expenses, advertisem*nt and car maintenance expenses amongst others. The CIT (A), Ludhiana, partly allowed the appeal filed by us, vide order dated February 20, 1989. Thereafter we filed an appeal before the ITAT, Chandigarh who partly allowed our claim, vide order dated August 18, 1994. The DIT has filed an appeal (ITA No. 75 & 76 of 1995) against the same before the High Court of Punjab and Haryana, which is currently pending.

Sales Tax Cases There are 12 cases relating to sales tax pending against our Company. The aggregate claim against us, as on the date of institution of these cases is approximately Rs. 5.4 million. The details of the cases are as follows: a. Our unit Oswal Oil and Vanaspati Industries, received the following show cause notices from the

Deputy Commercial Tax Commissioner (“DCTC”), Chennai, alleging that we were liable to pay tax at the rate of 11% on the lease rent obtained by us from our various leased machineries, as the same had not been filed with the income tax returns. • Show cause notice dated March 11, 2002 imposing an additional tax of Rs. 0.61 million for

the year 1998-1999. Additionally a penalty of Rs. 0.10 million was also imposed. We replied to the notice vide letter dated July 25, 2002.

• Show cause notice dated March 11, 2002 imposing an additional tax of Rs. 0.55 million for the year 1999-2000. Additionally a penalty of Rs. 0.09 million was also imposed. We replied to the notice vide letter dated July 25, 2002.

b. The Commercial Tax Officer (“CTO”), Chennai, issued the following notices against our unit Oswal Oil & Vanaspati Industries alleging that we were liable to pay tax of a certain percentage on amounts we were claiming turn over exemption, on the grounds that we had failed to file any proof that the machineries and plant on which we were claiming a turn-over exemption were purchased from local registered dealers on which we had already paid tax.

(i) Notice dated June 9, 2003 alleging that we were liable to pay tax at the rate of 11% on Rs.

0.03 million for the year 2000 - 2001. We replied to the notice vide letter dated July 28, 2003. (ii) Notice dated August 14, 2003 alleging that we were liable to pay tax at the rate of 11% on Rs.

0.49 million and at the rate of 12% on Rs.0.86 million for the period from April 1, 2001 to August 17, 2001 and from August 18, 2001 to March 31, 2002 respectively. Additionally tax at the rate of 8% was levied on the turnover of sales of caustic soda of Rs.0.02 million on the grounds that we had allegedly purchased the same at a reduced tax. We replied to the notice vide letter dated October 8, 2003.

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(iii) Notice dated May 21, 2004 alleging that we were liable to pay tax at the rate of 12% on Rs. 0.14 million. Additionally our claim for exemption on the taxable turn-over of Rs. 0.13 million received by us on the re-sales of motor cycles, old transformers, old electric motor etc. for the period from July1, 2002 to March 31, 2003 was rejected and a re-sale tax at the rate of 1% on such turnover was sought to be imposed. We replied to the notice vide letter dated June 14, 2004.

(iv) Notice dated July 21, 2006, alleging that we were liable to pay tax at the rate of 12% on Rs.

0.73 million. Additionally our claim for exemption on the taxable turn-over of Rs. 1,500 million received on the resale’s of old use to the leased computer and cell phone was rejected and a re-sale tax at the rate of 1% on such turnover was sought to be imposed. We replied to the notice vide letter dated August 24, 2006.

(v) Notice dated September 28, 1999 alleging that we were liable to pay tax at the rate of 11% on

Rs. 2.40 million. Pursuant to a reply filed by us the CTO, vide order dated October 29, 1999, confirmed the demand. On an appeal filed by us before the Appellant Assistant Commissioner (“AAC”) for the grant of stay on the collection of the balance tax of Rs. 0.26 million, the AAC directed us to pay a sum of Rs. 0.08 million and furnish security in the form of bank guarantee/immovable property for the balance sum of Rs. 0.18 million by February 4, 2000. An appeal was filed by us against the order of the CTO, before the AAC, which was dismissed vide order dated May 16, 2001. Subsequently, on an appeal filed by us before the Sales Tax Appellate Tribunal (“STAT”), Tamil Nadu, for the grant of an absolute stay on the balance of Rs. 0.19 million, the STAT directed us to pay 50% of tax to the Assessing Officer by August 17, 2001 and a stay was granted in respect of the balance of 50% of tax on furnishing security. We have deposited the balance amount of tax of Rs. 0.09 million under protest.

c. The CTO, Chennai, issued a notice dated November 13, 2003 against our unit Oswal Oil and Vanaspati

Industries’ disallowing a claim for exemption on the taxable turn-over on certain goods and imposed sales tax on the same. The CTO also alleged that, we being the consignee agent for sale had received crude cottonseed oil from other States, the receipts of which were entered in our stock register but the stocks received and processed were not suffered to tax within the State and hence we were liable to pay sales tax on the same at 150% of the tax due on the alleged suppressed turnover of Rs. 7.68 million. Pursuant to the reply filed by us, the CTO passed an assessment order dated March 31, 2004 whereby the total taxable turnover was Rs. 70.86 million and Rs. 70.65 million for the years 1990 and 1991 respectively and imposed a penalty of Rs. 0.81 million. We filed an appeal before the AAC for an absolute stay of the collection of the balance tax and the penalty totaling to Rs. 1.23 million. The AAC, vide order dated June 17, 2004 directed us to pay 25% of the disputed amount of taxes of Rs. 0.14 million by July 16, 2004 and penalty of Rs. 0.81 million, such that the remaining 50% of the taxes of Rs. 0.28 million were stayed till December 31, 2004. On an appeal (Appeal No.107/2004) filed before the AAC against the order of the CTO the AAC ordered that a tax of 4% be charged on the vegetable oil and the penalty of 150% of the tax due on the alleged suppressed turnover of Rs. 7.68 million be withdrawn. An appeal for absolute stay on the collection of disputed tax of Rs. 0.266 million as imposed by this order, was made before the Sales Tax Tribunal, Chennai and the same was granted.

d. On August 28, 1998, a vehicle transporting hosiery items for our Company was intercepted by the

Assistant Excise and Taxation Officer cum Assistant Director Enforcement, Ludhiana as it was found that 126 nags of hosiery were loaded in the vehicle whereas bill was produced for 25 cartons only. We appeared before the detaining officer and explained that we had handed over 234 nags of hosiery, 209 relating to Vanaik Spinning Mills Limited and 25 nags of our Company, to the transporter. It was the transporter who loaded 25 nags of our hosiery along with 83 nags of hosiery of Vanaik Spinning Mills Limited into one vehicle and the rest of 126 nags of Vanaik Spinning Mills Limited into another vehicle. The vehicle carrying 108 nags crossed unchecked, whereas the vehicle with 126 nags of hosiery was detained. We also pleaded that as the goods detained were meant for export, no tax was due on the same. Subsequently, the detaining officer referred the proceedings to the Deputy Director, Enforcement, who pursuant to order dated October 30, 1998 held that we were allegedly trying to evade tax and as such imposed a penalty of Rs. 0.35 million. Being aggrieved with the order we filed an appeal (Appeal No. 468 of 99-00) before the Deputy Excise & Taxation Commissioner (“DETC”), Jalandhar which was dismissed vide order dated June 26, 2006. We have filed an appeal before the Sales Tax Tribunal Chandīgarh on September 18, 2006 against the said order which is currently pending.

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e. Our Company exported goods to dealers in Nepal, in relation to which we filed return on time. The

Assessing Officer, Ludhiana pursuant to the following orders, imposed additional demands on us under the Central Sales Tax Act, 1956, on the grounds that there was inadequate proof that the of export of goods to Nepal.

f. Order dated November 23, 2004 imposing an additional demand of Rs. 0.17 million in respect of the

year 1996-1997. Subsequently, we filed an appeal before the DETC, Patiala for setting aside the order of the Assessing Officer with costs with refund of the 25% of the additional demand. The DETC, Patiala vide order dated April 26, 2005 dismissed the appeal. Thereafter we filed an appeal (Appeal No. 74-A of 2005-06) before the Presiding Officer of the Sales Tax Tribunal, Chandigarh, who vide order dated September 29, 2005, remanded the case back to the Assessing Authority which is currently pending.

g. Order dated September 30, 2004 imposing an additional demand of Rs. 0.06 million in respect of the year 1994-1995. Subsequently, we filed an appeal before the DETC, Patiala for setting aside the order of the Assessing Officer with costs with refund of the additional demand. The DETC, Patiala vide order dated April 26, 2005 dismissed the appeal. Thereafter we filed an appeal (Appeal No. 74 of 2005-06) before the Presiding Officer of the Sales Tax Tribunal, Chandigarh, who vide order dated September 20, 2005 remanded the case back to the Assessing Authority which is currently pending.

h. The CTO, Chennai issued three separate show cause and demand notices for the provisional assessment years 1990-91, 1991-92, 1992-93, against our unit, Oswal Oil & Vanaspathy Industries alleging us of wrongfully availing concessional rates, for purchases of tin containers for packing purposes of our products and paying less sales tax on such products. Pursuant to replies filed by our Company, the CTO vide order dated March 27, 1998 confirmed the demand of Rs. 1.33 million against us. On an appeal filed by us before the AAC, Chennai, praying for a stay on the collection of Rs. 1.33 million, the AAC allowed for a stay to the extent of Rs. 1.15 million vide order dated May 8, 1998. Thereafter the AAC pursuant to a common order, dated June 25, 1999 remanded all three appeals to the CTO who vide order dated March 28, 2002 confirmed the demands against us. Subsequently, pursuant to three separate appeals filed by us before the AAC (Appeal Nos. 87/2002, 88/2002, 89/2002) for stay on collection of balance of tax demanded, the AAC allowed for the stay of 50% of the total amount that is Rs. 0.67 million. The AAC modified the orders dated July 2, 2002 and confirmed a stay on a total sum Rs. 0.14 million and ordered payment of Rs. 0.14 million. On February 13, 2003 a common order was passed with regard to the three appeals filed by us by the AAC who partly dismissed and partly modified the earlier order, reducing the penalty to 100% of the tax due. We then appealed (Appeal Nos. 257/03, 262/03 and 258/03) before the STAT, Tamil Nadu for setting aside the orders of the first appellate authority confirming the differential tax and penalty, which was dismissed.

Other Cases Instituted by Statutory and other Authorities There are three notices, suits instituted against us by other statutory and other authorities. The aggregate monetary claim against us as on the date of institution of these cases is approximately Rs. 6.40 million. The details of the cases are as follows: a. The Additional Revenue Officer, Chennai has vide various orders against our unit Oswal Oils &

Vanaspati Industries, alleging that though we had paid property tax on the premises situated at 107 Cochrane Road, in the light of the fact that both the premises 106 and 107 had been amalgamated we had failed to pay tax on our premises situated at 106 Cochrane Road, Chennai. We have filed various writ petitions and miscellaneous petitions before the High Court of Madras praying for stay on the collection of the enhanced property tax of Rs. 6.37 million. Pursuant to the same, the High Court has vide various orders granted interim stay for the collection of the amount. The total amount involved in this case is Rs. 6.37 million for the period April 1, 1993 to September 30, 2006.

b. Our unit Oswal Oil & Vanaspati Industries was served with a notice dated November 28, 2002 by the

Corporation of Madras to remove the alleged encroachment built by us, in the Cochrane Basin Road. We replied to the said notice vide letter dated December 4, 2002. Thereafter a suit (O.S. No. 6135 of 2002) was instituted by us against the Commissioner, Corporation of Chennai and others before the Chennai City Civil Court praying for an injunction against the Corporation. An ad-interim injunction was granted till December 13, 2002 and was subsequently made final vide order of the Assistant Judge

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of the Chennai City Civil Court dated February 4, 2003. The Civil Court also appointed an advocate commissioner who submitted a report dated June 18, 2003 stating that we had allegedly encroached into an area of 19,285 sq. ft into the Corporation’s land by putting up a superstructure for our workers.

c. Our unit Oswal Oil & Vanaspati Industries had made an application for conversion of low tension

electricity supply to high tension supply for a M.D of 300 KVA for its’ factory situated at 107 Cochrane Basin Road for manufacturing of refine oil and vanaspati and in lieu thereof had paid Rs. 0.210 million. The permission for conversion was granted by the Tamil Nadu Electricity Board (“Board”) vide letter dated December 24, 1999. Due to certain changes in the government policy on import of edible oils and increase in custom duty we dropped the idea of going for high tension supply and requested for refund of the earnest money deposit amount of Rs. 0.210 million. The Board vide letter dated June 14, 2000 stated that Rs. 0.210 million would have to be forfeited and cannot be refunded as the terms and conditions of the Board did not permit for the same. We then filed a writ petition before the High Court of Madras challenging the action of the Board and praying for refund of Rs. 0.210 million which is currently pending.

Civil Cases There are three civil cases pending against our Company before various courts and authorities. The aggregate monetary claim against us as on the date of institution of these cases is approximately Rs. 38.91million. The details of the cases are as follows: a. Oswal Agro Mills Limited (“OAML”) and our Company had entered into two agreements for import of

crude palm kernl oil by OAML on licenses held by us and processing of the same by us for supply to OAML. Subsequently, disputes arose, wherein OAML and our Company claimed certain amounts against each other in relation to alleged breach of the said agreements. OAML claimed a sum of Rs. 37.38 million along with interest at the rate of 18% per annum and further alleged that they suffered losses on account of failure by our Company to authorize/furnish OAML with replenishment license of the value Rs. 6.99 million due to which OAML could not import certain material. Our Company filed a counter claim for a sum of Rs. 20.88 million in relation to value of goods supplied and loss of profits. The High Court of Delhi vide a common order dated July 18, 1991, in the suits (No. 777A of 1985 and No. 2037 (A) of 1985) fled by OAML and us referred the dispute to arbitration. Pursuant to the said order of the High Court, two nominee arbitrators were appointed who in turn appointed an umpire. In light of high fees claimed by the umpire, we filed an application (No. OMP 168/99) to revoke the authority of the umpire and appoint another suitable person. Our Company also filed an application for stay of all further proceedings before the arbitrators till the final decision of the petition. OAML filed its reply to the same and the same application is currently pending. The arbitrators in the minutes dated February 19, 1999 recorded that they differed with each other and directed the parties to refer the matter to the umpire. Our Company filed an application before the umpire for de novo commencement of arbitration proceedings which was disposed vide order dated January 31, 2000. The umpire vides order dated February 21, 2000 awarded a sum of Rs. 6.47 million in favour of OAML along with an interest of 18% p.a with effect from November 1, 1991. OAML filed a suit (NO. 795 A of 2000) before the High Court of Delhi to make the award of the umpire a rule of the court. Subsequently our Company filed an objection pursuant to which OAML filed its reply.

b. Mr. Dhananjayalu, a minor represented by his mother has instituted a case (M.V.O.P 86 of 2004)

against us claiming a sum of Rs. 0.05 million plus interest at the rate of 12% per annum from February 2004 till date, before the Motor Accidents Claim Tribunal, Tirupathi, alleging that on May 19, 2000 he sustained severe bleeding injuries by the rash and negligent driving of the driver of a maruti car owned by us. We have filed a counter reply in July 2004 to the same. The matter is currently pending.

c. Our Company entered into a contract for purchase of soyabean extraction with M.P State Co-operative

Oil Seeds (“MCOS”). With regard to the same, MCOS raised a claim of Rs. 1.48 million under Section 64 of the Madhya Pradesh Co-Operative Societies Act, pursuant to which we filed our objections before the Madhya Pradesh Board of Revenue (“Board”) stating that the dispute is not maintainable and the same should be tried before the civil court only. The Board rejected our claim.

Labour Cases

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Mr. R. Bas Bahadur Singh was appointed as a trainee operator, in Oswal Oil & Vanaspati Industries in 1970, wherein he continued working till 1995 and later rejoined as operator again in 1997 in Grace Oils Private Limited where he worked until his services were allegedly illegally terminated on April 6, 2000. During his employment he was provided with an accommodation and after his termination of service, he was requested to vacate the same. Mr. R. Bas Bahadur Singh then instituted a suit (O.S No. 3067 of 2000) against our unit Oswal Oil & Vanaspati Industries and Grace Oils Private Limited in the Chennai City Civil Court, praying for a permanent injunction restraining us from interfering with his peaceful occupation and possession of the quarter at 107, Cochrane Road Chennai. Meanwhile Mr. R. Bas Bahadur Singh has filed a petition (I.D No. 745 of 2000) before the Labour Court, Madras praying for reinstatement with back wages with effect from April 7, 2000 to date with continuity of service and related benefits. We have filed our counter statement to the same dated May 8, 2001. II. LITIGATION FILED BY OUR COMPANY

There are three civil cases filed by our Company against certain third parties pending before various courts and authorities in India. The aggregate claim made by us as on the date of institution of these cases is approximately Rs. 2.28 million. The details of the cases are as follows: a. We filed an application (Application No.5398 of 2000) before the High Court of Madras praying for an

attachment of Madhukant Agrotech Private Limited’s (“MAP”) palmolein stored in tank no.1 of Tamil Nadu Co-operative Oil Seed Growers Federation Limited, pursuant to MAP’s refusal to pay the security deposit and one month’s rent of Rs. 0.20 million each, in lieu of storage facilities to be provided by us, as was agreed vide an agreement dated March 5, 1999. The same being granted, MAP filed a petition, dated December 22, 2000 at the High Court of Madras for vacation of the attachment order. Thereafter arbitration proceedings were held and an order dated December 30, 2001 was passed which awarded us Rs. 0.31 million with interests at 12% per annum with proportionate costs. As MAP did not pay the said amount we then sent a certificate for non-satisfaction of decree to MAP.

b. Our unit Oswal Oil & Vanaspati Industries entered into an agreement dated May 4, 1998 with Southern

Brick Works Limited (“SBWL”) by which we rented our Shore Tank No. 3 to SBWL for a period of six months commencing from May 8, 1998, in consideration of a monthly rent of Rs. 0.27 million. Thereafter vide letter dated September 4, 1998 SBWL illegally withdrew from the agreement and requested the return of all post-dated cheques issued by it. We replied to SBWL vide letter dated September 7, 1998 stating that as the contract was valid up to November 7, 1998, SBWL could not withdraw before such time. We issued a statutory notice dated September 14, 1998 to SBWL for dishonour of cheques, as SBWL had blocked the cheques issued to us. We then filed a complaint, (C.C No. 529 of 1999) at the Metropolitan Magistrate Court, dated October 20, 1998, for the issuance of summons to SBWL for the payment of rental charges due. The case is currently pending.

c. We entered into an agreement with the State Trading Corporation (“STC”) dated September 9, 1979,

for packing of their RBD palm oil and storing them in our godown for a free period of 15 days, beyond which STC would have to pay us storage fees. Due to non-availability of space at STC’s godown we stored the tins much over the free period, thus becoming entitled under the agreement to the godown rent of Re.1 PMT per day amounting to Rs. 0.22 million and additional transportation costs amounting to Rs. 0.04 million. The same was notified to STC vide letter dated April 29, 1980, but it refused to pay the amount. The matter was then referred for arbitration and a formula was agreed between the parties for the calculation of the storage rental charges. However, STC did not settle the claim by way of this formula, and instead made a counter claim for an arbitrary amount towards transportation charges and tinning loss. In the meantime pursuant to the recommendations of the Parameswaran Committee which decided to reimburse the sales tax to vanaspati units, we submitted our refund claim through STC for Rs. 1.06 million for which we bore the sales tax in respect of 3857.419 MT of oil lifted during the period August 6, 1983 to October 31, 1984. STC paid the refund amount but with unjust deductions to the tune of Rs.0.22 million. We then filed a petition (C.S No. 548 of 1985) dated August, 1985 at the High Court of Madras, for the recovery of Rs. 0.47 million inclusive of a sum of Rs. 0.22 million illegally deducted from the refund of sales-tax made by the Government of India, to which STC filed its written statement dated December 9, 1985.

III. LITIGATION AGAINST OUR DIRECTORS

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There are two cases pending against our Directors before various courts and authorities in India. The aggregate claim made against our Directors as on the date of institution of these cases is approximately Rs. 50 million. The details of the cases are as follows:

a. Mr. G Parthasarathy filed a suit (C.S No. 351 of 1993) against our Managing Director, Mr. Kamal

Oswal and Executive Director of our unit Oswal Oils and Vanaspati Industries, Mr. A.P Jain, amongst others in the High Court of Madras stating that all alleged evidence produced by our Company showing that Mr. Parthasarathy in collusion with a sales officer, Mr. Srinivasan Rao, took cash from various dealers for personal benefit were false. Additionally the sale agreement dated February 12, 1993 that was executed between Mr. Parthasarathy and the defendants, for the transfer his house to our Company, as means of compensation for his alleged illegal acts was illegal and void as the same was done under coercion. We have filed our written statement.

b. Manipur Vanaspati and Allied Industries Limited (“MVAIL”) was incorporated by the then Oswal

group along with Manipur Industrial Development Corporation to set up a vanaspati unit at Imphal, Manipur. Pursuant to a split in the then Oswal Group in 1992, the ownership of promoter shares and day to day management rights pursuant to that ownership in MVAIL was transferred to the new emerged group known as V.S Oswal Group constituting of Mr. V.S. Oswal and his two sons. After this, when the family settlement was endorsed by the Company Law Board, the directorship of group companies and the respective personal guarantees issued by the Oswal family director in favour of banks and institution for financial assistance were changed by the new family directors appointed by the respective group in the respective company. Since the management of MVAIL was given to the V.S. Oswal group, Mr. Kamal Oswal had resigned from the board of MVAIL and his guarantee given to the banks for financial assistance was substituted by the new promoters. However, in the year 1998 M/s. Allahabad Bank filed a suit against MVAIL and certain directors, including Mr. Kamal Oswal before the Debt Recovery Tribunal (DRT), for the alleged recovery of Rs. 49.40 million in relation to the personal guarantee given by Mr. Kamal Oswal. Mr. Kamal Oswal filed an objection before the DRT, Jaipur and Chandigarh. However, the case filed by Allahadbad Bank against all the directors and MVAIL was rejected ex-parte vide order dated January 27,2004 and has now been re-opened under revisionary power on the application filed by Allahabad Bank and is currently subjudice.

IV. LITIGATION AGAINST OUR PROMOTERS AND PROMOTER GROUP COMPANIES B. Nahar Spinning Mills Limited (“NSML”) Excise Cases There are 30 excise cases pending against NSML before various courts, authorities and tribunals in India. The aggregate claim against NSML as on the date of institution of this case was approximately Rs. 8.85 million. The details of the cases are as follows: a. The ACCE, Bhopal, issued a show cause notice dated January 3, 1997 to NSML in relation to the

alleged short payment of duty during the period June 1, 1996 to October 31, 1996 on the grounds of under valuation of basic customs duty and additional customs duty, on blended and cotton yarn, manufactured and cleared to NSML’s unit. The DCE, Bhopal, vide order dated September 3, 1997, confirmed a demand of Rs.0.21 million and imposed a penalty of Rs.0.02 million on NSML. Pursuant to the order NSML deposited Rs.0.18 million under protest and the balance amount of Rs. 0.06 million was adjusted vide rebate claim passed in favour of NSML vide order (O-I-O No.428/refund/AC/ Div-II/Bpl/2004) dated December 28, 2004. Subsequently NSML filed an appeal (No. E/S/3351/04) dated October 9, 2004 before the CESTAT. The matter is currently pending for final order.

b. The ACCE, Bhopal, issued show causes notices, to NSML, in relation to the alleged short payment of

service tax during the various periods as regards the commission paid by NSML to foreign commission agents on the export clearance of its unit. Details of the show cause notices, periods for which they were issued, amount demanded, and present status of the cases are as follows:

(i) Show cause notice dated, March 28, 2006 for the period January 1, 2005 to November 30,

2005 raising a demand of Rs.0.02 million. NSML filed a reply dated April 21, 2006. The matter is currently pending before the JCCE, Bhopal.

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(ii) Show cause notice dated, March 13, 2003 for the period July 1, 2004 to November 30, 2005 raising a demand of Rs. 0.74 million. Vide order dated July 28, 2006, the JCCE, Bhopal confirmed the demand of Rs.0.74 million and imposed a penalty of Rs.1, 000 on NSML. Subsequently NSML filed an appeal (No. 80/ST/BPL/Appeal/2000/4663) before the CACE dated October 10, 2006. The matter is currently pending.

c. The ACCE, Bhopal, issued a show cause notice dated, February 2, 2006 to NSML in relation to the

alleged wrongful availment of CENVAT credit with regard to service tax, utilized against credit taken on goods transport agency’s outward services during the period January 1, 2005 to November 30, 2005. The amount involved in this case is Rs.0.16 million. NSML filed a reply dated March 29, 2006 before the ACCE, Bhopal, which is currently pending.

d. The ACCE, Bhopal, issued a show cause notice dated, February 3, 2006 to NSML in relation to the

alleged evasion of service tax by NSML to the extent of 75% of the total value of service tax payable by it, with regard to the GTA services on export and domestic clearance of its unit, during the period January 1 2005 to November 30, 2005. The amount involved in this case is Rs.1.40 million. NSML filed a reply dated March 17, 2006 before the JCCE, Bhopal. The matter is currently pending.

e. The ACCE, Bhopal, issued show cause notices, to NSML, for various periods in relation to the alleged

short payment of duty on the ground that NSML had failed to include certain earnings which would otherwise form part of the assessable value for the purpose of determination of the duty payable by NSML. Details of the show cause notices, periods for which they were issued amount demanded, and present status of the cases are as follows:

(i) Show cause notice dated, November 4, 1999, for the period April 1, 1999 to Feb 28,

2000, alleging short payment of Rs. 0.02 million. Vide order dated October 30, 2001 the ACCE, Bhopal confirmed a demand of Rs. 0.02 million against NSML and additionally imposed a penalty of Rs. 0.002 million. Subsequently NSML filed an appeal (No. 78/ CE/BPL/Appeal/01) dated January 14, 2002 before the CACE, who vide order dated January 14, 2004 granted a stay on the matter on the condition that NSML would pay 25% of the duty and penalty within two weeks. NSML paid the amount under protest. The matter is currently pending for final order.

(ii) Three separate show cause notices dated, June 12, 2006, August 22, 2002 and November

20, 2002 respectively for the period October 1, 1998 to July 31, 1999 alleging short payment of Rs. 0.29 million. Vide order dated July 29, 2004 the CACE, Bhopal, confirmed a demand of Rs. 0.29 million. Subsequently NSML filed an appeal (No. CE/6108/6110/04 (S.M.) BR) dated May 26, 2005 before the CESTAT. The matter is currently pending.

f. The ACCE, Bhopal, issued show cause notices, to NSML, for various periods in relation to the alleged

evasion of duty payable on the waste generated from oil and lubricants cleared from NSML. Details of the show cause notices, periods for which they were issued amount, demanded, and present status of the cases are as follows:

(i) Show cause notice dated, January 27, 2003 for the period February 1, 2002 to October 31,

2002 alleging evasion of Rs. 0.03 million. Vide order dated August 20, 2004 the CACE confirmed a demand of Rs. 0.03 million against NSML and additionally imposed a penalty of Rs. 0.02 million. Subsequently NSML filed an appeal (No. E/1535/05) dated October 4, 2005 before CESTAT. The matter is currently pending for order.

(ii) Show cause notice dated, July 29, 2004 to NSML for the period April 1, 2003 to

November 30, 2003 alleging evasion of Rs.0.02 million. Vide order dated October 28, 2004 the CACE confirmed a demand of Rs 0.02 million against NSML and additionally imposed a penalty of Rs. 0.01 million. Subsequently NSML filed an appeal (No. E/6047/2004 - NB (C)) dated December 15, 2004 before CESTAT. The matter is currently pending for order.

(iii) Show cause notice dated, June 5, 2002 for the period July 1, 1997 to February 28, 2002

alleging evasion of Rs. 0.14 million. Vide order dated December 3, 2003 the Additional

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Commissioner of Central Excise confirmed a demand of Rs. 0.14 million against NSML and additionally imposed a penalty of Rs. 0.24 million. Subsequently NSML filed an appeal (No. E/2890/04 –B) dated April 21, 2005 before CESTAT which rejected the appeal, vide order dated February 21, 2006. NSML then filed a write petition (No. MACE Appeal no. 6 of 2006) before the High Court of Madhya Pradesh at Jabalpur. The matter is currently pending.

(iv) Show cause notice dated, June 27, 2005 for the period September 1, 2004 to March 31,

2005 alleging evasion of Rs.0.04 million. Vide order dated June 27, 2005, the CESTAT remanded the case to ACCE Bhopal. The matter is currently pending before the ACCE Bhopal.

g. The Assistant Collector, Bhopal, issued show cause notices for various periods, to NSML stating that

NSML was not entitled to the MODVAT credit claimed by it on certain capital goods, as it had failed to file the requisite declaration under law. Details of the show cause notices, periods for which they were issued, amount demanded, and present status of the cases are as follows:

(i) Show cause notice dated August 30, 1995 for the month of December 1994. Vide order

dated September 2, 1996, the CACE confirmed a demand of Rs. 0.97 million against NSML. Subsequently NSML filed an appeal before CESTAT which vide order dated March 5, 2004 dismissed the appeal. NSML then filed a writ petition (Writ No. 2296/2004) dated June 16, 2004 before the High Court of Madhya Pradesh at Jabalpur. The matter is currently pending for order.

(ii) Show cause notice dated, May 3, 1999 for the period October 1, 1998 to December 31,

1998. Vide order dated October 31, 1998, the CACE confirmed a demand of Rs.0.09 million and additionally imposed a penalty of Rs. 0.02 million. Subsequently NSML filed an appeal before CESTAT which vide order dated July 13, 2006 remanded the case to the ACCE. The matter is currently pending.

h. The ACCE, Bhopal, issued a show cause notice dated, May 13, 2005 to NSML stating that NSML was

not entitled to claim the refund and rebate in relation to the freight and ocean freight expenditure incurred by it during the period May 1, 2004 to June 30, 2004. Vide order dated March 23, 2006 the CACE rejected the NSML’s refund claim and confirmed a demand of Rs.0.03 million. Subsequently NSML filed an appeal (Writ No. 6474 of 2006) before the High Court of Madhya Pradesh at Jabalpur. The matter is currently pending.

i. The Assistant Collector, Bhopal, issued a show cause notices in relation to the alleged short payment of

duty on the depot sale at Ludhiana during various periods on the grounds of short payment of duty on assessable value, octroi, freight and insurance paid on stock transfer to Ludhiana. Vide order dated April 22, 2004 the CACE confirmed a total demand of Rs. 3.2 million and imposed a penalty of Rs. 0.025 million. Details of the notices issued, respective periods for which claims have been made, are as follows.

(i) Notice dated, October 30, 1998 for the period October 1, 1996 to July 30, 1997. (ii) Notice dated November 11, 1998 for the period August 1, 1997 to February 28, 1998. (iii) Notice dated December 12, 1998 for the period March 1, 1998 to July 31, 1998.

j. The ACCE, Bhopal, issued a show cause notices stating that NSML was not entitled to claim rebate on

excise duty for freight elements for various periods. However CACE allowed NSML’s rebate claim in each case, pursuant to which CCE filed revision separate appeals before the Join Secretary of the Government of India (“JSGI”). Details of the notices, period for which rebate claim was made and revision appeals filed by CCE are as follows

(i) Notice dated, July 22, 2005, for the month of March 2004 in relation to NSML’s rebate

claim of Rs. 0.09 million. CCE has filed an appeal (No. 198/386-388/2005-RA ) for revision dated December 19, 2005 before the JSGI, which is currently pending.

(ii) Notice dated, December 21, 2005 during the period April 1, 2004 to June 30, 2004 in relation to NSML’s rebate claim of Rs. 0.21 million. CCE has filed an appeal (No. 198/18-20/2006-RA) for revision dated January 30, 2006 before the JSGI, which is currently pending.

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(iii) Notice dated, October 26, 2005 during the period February 1, 2004 to April 30, 2004 in relation to NSML’s rebate claim of Rs. 0.16 million. CCE has filed an appeal (No.198/18-20/2006-RA) for revision dated January 30, 2006 before the JSGI, which is currently pending.

(iv) Notice dated, October 26, 2005 during the period February 1, 2005 to March 31, 2005 in relation to NSML’s rebate claim of Rs. 0.09 million. CCE has filed an appeal (No. 198/18-20/2006-RA) for revision dated January 30, 2006 before the JSGI, which is currently pending.

(v) Notice dated, October 26, 2005 during the period December 1, 2004 to February 28, 2005 in relation to NSML’s rebate claim of Rs. 0.12.million. CCE has filed an appeal (No. 198/388/2005-RA) for revision dated December 23, 2006 before the JSGI, which is currently pending.

(vi) Notice dated, December 5, 2005 for the month of June 2004 in relation to NSML’s rebate claim of Rs. 0.02 million. CCE has filed an appeal (No. 198/281/2006-RA) for revision dated June 19, 2006 before the JSGI, which is currently pending.

(vii) Notice dated, March 7, 2006 during the period July 1, 2005 to September 20, 2005 in relation to NSML’s rebate claim of Rs. 0.05 million. CCE has filed an appeal (No. 198/348/2006-RA) for revision dated September 06, 2006 before the JSGI, which is currently pending.

(viii) Notice dated, January 6, 2006 during the period July 1, 2006 to August 31, 2006 in relation to NSML’s rebate claim of Rs. 0.05 million. CCE has filed an appeal (No. 198/289/2006-RA) for revision dated July 07, 2006 before the JSGI, which is currently pending.

(ix) Notice dated, December 9, 2005 during the period January1, 2005 to March 31, 2005 in relation to NSML’s rebate claim of Rs. 0.09 million. CCE has filed an appeal (No.198/291/2006-RA) for revision dated July 11, 2006 before the JSGI, which is currently pending.

k. The ACCE, Bhopal, issued show cause notices alleging short payment of service tax for various

periods as regards the commission paid by NSML to foreign commission agents. Pursuant to appeal against the same by NSML, the JCCE, Bhopal, confirmed the demand raised in each case. Details of the notices and appeals filed by NSML against the order of the JCCE, are as follows:

(i) Notice dated, August 5, 2005 to NSML raising a demand of Rs.0.38 million for the period

July 1, 2004 to February 28, 2005. Against the order of the JCCE, Bhopal, confirming the demand, NSML filed an appeal (No. 89/ST/2006/BPL/APPL/2006/4860) dated November 13, 2006, before the CACE. The matter is currently pending.

(ii) Notice dated, March 13, 2006 to NSML raising a demand of Rs.0.90 million for the period March 1, 2005 to November 30, 2005. Against the order of the JCCE, Bhopal, confirming the demand, NSML filed an appeal (No.90/ST/2006/BPL/APPL/2006) dated November 13, 2006 before the CACE. The matter is currently pending.

r The ACCE, Bhopal, issued a show cause notice dated, February 3, 2006 to NSML in relation to the

alleged evasion of service tax of Rs. 0.19 million, on services of the goods transport agency during the period January 1, 2005 to November 30, 2005. The matter is currently pending.

s. The CCE, Bhopal, issued a show cause notice dated, February 3, 2006 to NSML disallowing NSML’s

75% abetment on the total freight of Rs. 1.62 million paid by it in relation to service tax payable on transport of goods. The matter is currently pending.

Income Tax Cases There are 18 income tax cases pending against NSML before various courts, authorities and tribunals in India. The aggregate claim against NSML as on the date of institution of these case was approximately Rs. 188.72 million. The details of the cases are as follows: a. The ACIT created an additional demand of Rs. 18.90 million for the assessment year 2004-2005 on the

grounds of disallowance of various expenses, such as guest house, gift articles, disputed electricity demand and reduction of relief on profits of exports. NSML filed an appeal before C.I.T.(A) Ludhiana who partly allowed NSLM’s claim. The appeal effect to the order of CIT (A) is currently pending.

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b. The ACIT created an additional demand of Rs. 18.80 million for the assessment year 2003-2004 on the

grounds of disallowance of various expenses, such as guest house, gift articles, disputed electricity demand, cess on electricity payable and reduction of relief on profits of exports. On an appeal filed by NSML to the CIT (A), the CIT (A) vide order dated October 5, 2006 partly allowed NSML’s claim. The appeal effect is currently pending.

c. The ACIT created an additional demand of Rs. 12.10 million for the assessment year 2002-2003 on the

grounds of disallowance of various expenses such as guest house, gift articles and reduction of relief on profits of exports. On an appeal filed by NSML to the CIT (A), the CIT (A) vide order dated October 5, 2006 partly allowed NSML’s claim. The appeal effect is currently pending.

d. The ACIT created an additional demand of Rs. 18.80 million for the assessment year 2001-2002 on the

grounds of disallowance of various expenses, such as gift articles, festival expenses, payment made to miscellaneous fees paid to Pollution Control Department and reduction of relief on profits of exports. The CIT (A) Ludhiana in an appeal filed by NSLM, partly allowed NSML’s claim vide order dated February 22, 2005. The appeals filed by DIT and cross objection filed by NSML are currently pending before ITAT.

e. The ACIT created an additional demand of Rs. 8.60 million for the assessment year 2000-2001 on the

grounds of disallowance of various expenses, such as gift articles, festival expenses, and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT before the ITAT, who vide order dated August 12, 2005 partly allowed the appeal. NSML has filed an appeal before High Court of Punjab and Haryana, which is currently pending.

f. The ACIT created an additional demand of Rs. 19.50 million for the assessment year 1999-2000 on the

grounds of disallowance of various expenses such as gift articles, festival expenses, impact of section 145A of the Income Tax Act, a reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT before the ITAT, who vide order dated August 12, 2005, partly allowed the appeal. NSML has filed an appeal before High Court of Punjab and Haryana, which is currently pending.

g. The ACIT created an additional demand of Rs. 34.50 million for the assessment year 1998-1999 on the

grounds of disallowance of various expenses, such as gift articles, festival expenses, repair of machinery and reduction of relief on profits of exports amongst others. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Subsequently NSML filed an appeal before ITAT which is currently pending.

h. The ACIT created an additional demand of Rs. 22.00 million for the assessment year 1997-1998 on the

grounds of disallowance of various expenses such as gift articles, festival expenses and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT before the ITAT, who vide orders dated October 27, 2005 and November 29, 2005 allowed the NSML’s claim. Subsequently the DIT has filed appeal before High Court of Punjab and Haryana, which is currently pending.

i. The ACIT created an additional demand of Rs. 7.70 million for the assessment year 1996-1997 on the

grounds of disallowance of various expenses such as gift articles, festival expenses and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT before the ITAT, who vide order dated April 29, 2005 partly allowed NSML’s claim. Subsequently the DIT has filed appeal before the High Court of Punjab and Haryana, which is currently pending.

j. The ACIT created an additional demand of Rs. 4.84 million for the assessment year 1995-1996 on the

grounds of disallowance of various expenses, such as gift articles, festival expenses, club expenses, capital enhancement fees and reduction of relief on profits of exports. Cross appeals were filed by NSML and the DIT before the ITAT, who vide order dated April 29, 2005 allowed the NSML’s claim. The DIT has filed appeal before the High Court of Punjab and Haryana, which is currently pending.

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k. The ACIT created an additional demand of Rs. 4.50 million for the assessment year 1994-1995 on the grounds of disallowance of various expenses such as guest house expenses, club expenses and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. NSML filed an appeal before the ITAT who vide order dated May 31, 2005 partly allowed the appeal. Subsequently NSML has filed an appeal before the High Court of Punjab and Haryana which is currently pending.

l. The ACIT created an additional demand of Rs. 8.06 million for the assessment year 1993-1994 on the

grounds of disallowance of various expenses such as entertainment expenses, previous year expenses, pre-operative expenses and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. NSML filed an appeal before the ITAT who vide order dated May 31, 2005 partly allowed the appeal. NSML has filed an appeal before the High Court of Punjab and Haryana which is currently pending.

m. The ACIT created an additional demand of Rs. 4.54 million for the assessment year 1992-1993 on the

grounds of disallowance of various expenses such as interest expenditure and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. NSML filed an appeal before the ITAT who vide order dated April 23, 2004 partly allowed NSML’s claim. The appeals filed by NSML as well as DIT are currently pending before the High Court of Punjab and Haryana.

n. The ACIT created an additional demand of Rs. 2.10 million for the assessment year 1991-1992 on the

grounds of reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. NSML filed an appeal before the ITAT who vide order dated December 18, 2003 partly allowed the appeal. NSML has filed an appeal before the High Court of Punjab and Haryana, which is currently pending.

o. The ACIT created an additional demand of Rs. 0.36 million for the assessment year 1990-1991 on the

grounds of reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT who vide order dated May 31, 2002 partly allowed the appeal. NSML has filed an appeal before the High Court of Punjab and Haryana, which is currently pending.

p. The ACIT created an additional demand of Rs. 0.30 million for the assessment year 1989-1990 on the

grounds of disallowance of donation and reduction of relief on profits of exports. Subsequently, the CIT (A) vide order dated March 23, 1995 set aside the assessment order. The ACIT re-assessed the income and created an additional demand and interest of Rs. 3.74 million. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML as well as the DIT before ITAT who vide orders dated June 28, 2001, September 5, 2001 and June 3, 2003 allowed NSML’s and the DIT’s claim. NSML and the DIT filed appeals before the High Court of Punjab and Haryana, which are currently pending.

q. The ACIT created an additional demand of Rs. 3 million for the assessment year 1988-1989 on the

grounds of disallowance of various expenses such as previous year’s income written back, embedment of stock and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. Cross appeals were filed by NSML and the DIT before ITAT who vide order dated August 28, 2001 allowed the DIT’s claim. NSML has filed an appeal before High Court of Punjab and Haryana which is currently pending.

r. The ACIT created an additional demand of Rs. 0.48 million for the assessment year 1987-1988 on the

grounds of disallowance of redemption of fine and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NSML. The DIT filed an appeal before the ITAT who vide order dated May 5, 1999 partly allowed NSML’s claim. The DIT filed an appeal before the High Court of Punjab and Haryana which is currently pending.

Sales Tax Case There are two sales tax cases pending against NSML before the Joint Director, (Enforcement) Patiala and Jalandhar. The aggregate claim against NSML as on the date of institution of these case was approximately Rs. 1.41 million. The details of the cases are as follows:

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a. NSML filed an appeal before the Joint Director, (Enforcement) Patiala, against the order of the Deputy

Director (Enforcement), Sangraur imposing a penalty of Rs. 0.25 million in relation to the alleged evasion of sales tax with regard to cotton yarn supplied by NSML to M/s Feungning Industries Limited, Hong Kong. The matter is currently pending for order.

b. The Assessing Authority, Ludhiana, vide assessment order dated July 18, 2004 created an additional

demand of Rs. 0.52 million and additionally imposed a penalty of Rs. 0.05 million and interest of Rs. 0.59 million. Subsequently NSML filed an appeal dated August 26, 2004 before the Joint Director (Enforcement) Jalandhar which dismissed NSML’s claim.

Other Cases Instituted by Statutory and other Authorities There are two cases filed against NSML by a statutory authority. The aggregate claim against NSML as on the date of institution of these case was approximately Rs. 0.5 million. The details of the cases are as follows: a. NSML has filed a writ petition (WP No. 3670/2000) dated June 19, 2000 before the High Court of

Madhya Pradesh at Jabalpur, against the M.P State Electricity Board’s order dated May 24, 1999, in relation to the alleged short payment of electricity bill dues by NSML

b. NSML has filed an appeal dated April 1, 2002 against the order of the Chairman of PSEB before High

Court, in relation to certain disputes arising out of the alleged short payment of Rs. 0.31 million, payable under electricity bill for the period of November 4, 1998 to November 10, 1998 by NSML. Subsequently a new circulation on penalty rates was brought about, under which the penalty amount was reduced to Rs. 0.11 million. The matter is currently pending.

Cases filed by NSML Criminal Complaints There are two criminal complaints filed by NSML before various courts and authorities in India. The aggregate amount claimed by NSML as on the date of institution of these case was approximately Rs. 2.98 million. The details of the cases are as follows. a. NSML has filed a criminal complaint dated August 8, 2000 against Sarabjit Singh and others in relation

to certain disputes arising out of the misappropriation of certain materials in transit for an amount of Rs. 2.30 million. The matter is currently pending.

b. NSML has filed a criminal complaint dated March 23, 2000 under Section 138 of the Negotiable

Instruments Act, against Rangi International Private Limited, before Judicial Magistrate (First Class) Ludhiana for the recovery Rs 0.685 million. The matter is currently pending.

Civil Cases NSML has filed three recovery suits before various courts and authorities in India for the recovery of Rs. 4.92 million. The matters are all currently pending. B. Girnar Investment Limited. (“GIL”) Income Tax Case There are two income tax cases pending against GIL before the CIT (A). The aggregate claim against GIL as on the date of institution of these cases was approximately Rs. 5.75 million. The details of the cases are as follows: a. The ACIT imposed penalty of Rs. 3.22 million on GIL vide order dated April 29, 1998. Subsequently

GIL filed an appeal against the penalty before the CIT (A), Delhi which was granted. Pursuant to which the DIT filed an appeal before ITAT, Delhi. ITAT vide its order set aside the order of CIT (A) and remanded the matter back to the CIT (A), Delhi. The matter is currently pending before CIT (A) for disposal.

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b. The Assessing Officer, Delhi imposed an interest of Rs. 2.53 million while giving effect to the order dated July 20, 2004 of the ITAT, New Delhi. Subsequently GIL filed an appeal before ITAT, Delhi. GIL also filed an application for waiver of the said interest charged before the CIT (A) which is pending.

C. Nagdevi Trading & Investment Company Limited. (“NTICL”) Income Tax Case The Income Tax Officer vide notice dated February 28, 2003 created an additional demand of Rs. 0.8 million for the assessment year 2001-2002 disallowing deductions claimed by NTICL on the grounds of interest on expenditure. Subsequently NTICL filed an appeal before CIT (A), Mumbai which was dismissed and an additional amount of Rs. 0.66 million was imposed as penalty. NTICL then appealed before the ITAT, Mumbai, against the additional demand raised. The appeal against the penalty imposed is currently pending before the CIT (A). D. Ogden Trading & Investment Company Private Limited. (“OTL”) The Income Tax Officer vide notice dated September 30, 2006 created an additional demand of Rs 0.03 million for the assessment year 2004-2005 disallowing deductions claimed by OTL on expenditure to earn dividend income. Subsequently OTL filed an appeal dated December 12, 2006 before the CIT (A), Mumbai, which is currently pending.

E. Nahar Industrial Enterprises Limited (“NIEL”) Cases against NIEL Criminal Complaint Marketing Committee, Lalru, has filed criminal complaint dated December 14, 2004 against NIEL, before the Judicial Magistrate, Rajpura, for certain violations under the Punjab Agriculture Produce Market Act, 1961 demanding compensation. The matter is currently pending. Excise Cases There are five excise cases pending against NIEL before various courts and authorities in India. The aggregate claim against NIEL, as on the date of institution of these cases was approximately Rs 27.27 million. The details of the cases are as follows: a. The Deputy Excise Commissioner (“DEC”), Ludhiana, issued a show cause notice dated April 28,

2006 against NIEL for allegedly wrongfully availing the exemption of Rs. 0.66 on branded and non-branded garments. Pursuant to which NIEL filed an appeal dated December 12, 2006 before the CACE, Chandigarh, which is currently pending.

b. NIEL has filed an appeal before the, CESTAT, Delhi against the CACE August 28, 2006, in relation to

refund of Rs. 1.16 million in relation to additional excise duty of textile and textile articles on exports of final products. The matter is currently pending for order.

c. The Joint Commissioner of Central Excise (“JCCE”), Chandigarh vide notice dated October 4, 2002

sought to impose a duty of Rs. 24.02 million on NIEL in relation to certain disputes arising out of the disallowance of deemed credit on grey fabrics of Oswal Cotton Mills Limited which was later amalgamated into NIEL. Subsequently NIEL file a reply dated October 10, 2003 which is currently pending for order.

d. The ACCE Chandigarh vide notice dated May 27, 2003 against NIEL disallowed CENVAT credit of

Rs. 0.28 million in relation to certain disputes arising out of the disallowance of deemed credit on grey fabrics. Subsequently NIEL filed a reply dated July 7, 2003 before the Commissioner of Central Excise (“CCE”), Chandigarh, which is currently pending for order.

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e. NIEL has filed an appeal dated October 11, 2006 before the CACE, Chandigarh against the order of JCCE dated July 31, 2006 challenging the imposition of service tax of Rs. 1.15 million on certain buffer stock of sugar maintained by Nahar Sugar & Allied Industries. The matter is currently pending for order.

Income Tax Cases There are seven income tax cases pending against NIEL before various courts and authorities in India. The aggregate claim against NIEL, as on the date of institution of these cases was approximately Rs 2.55 million. The details of the cases are as follows: a. NIEL filed an income tax return at NIL on October 26, 2004 for the assessment year 2004-2005. The

ACIT Ludhiana vide order dated May 8, 2006 did not impose any additional demand and completed the assessment at nil. However he refused to grant deductions on expenditures on account of gift articles and club expenses as was shown by us. An appeal dated June 8, 2006 against the same was filed by NIEL to the CIT (A), Ludhiana, which is currently pending.

b. NIEL filed an income tax return at Rs.68.8 million on November 28, 2003 for the assessment year

2003-2004. The ACIT Ludhiana vide order dated May 12, 2005 decided the assessment to be on Rs. 77.5 million, disallowing deduction on festival expenses and reduction of relief on profits of export. NIEL paid the additional demand of Rs. 0.77 million under protest. An appeal dated June 6, 2005 against the same was filed by NIEL to the CIT (A), Ludhiana, which is currently pending.

c. NIEL filed an income tax return at NIL on October 31, 2002 for the assessment year 2002-2003. The

ACIT Ludhiana vide order dated February 25, 2004 did not impose any additional demand and reduced the unabsorbed depreciation to be carried forward. An appeal dated May 29, 2004 against the same was filed by NIEL to the CIT (A), Ludhiana, which is currently pending.

d. NIEL filed an income tax return at Rs (-).73.4 million on October 31, 2001 for the assessment year

2001-2002. The ACIT Ludhiana vide order dated May 7, 2003 decided the assessment to be on Rs.(-) 65.8 million, disallowing amongst other things deduction on guest house expenses, gift articles, club expenses and reduction in claim of deduction. However no additional demand was created. An appeal dated May 29, 2006 against the same was filed by NIEL to the ITAT, Chandigarh, which is currently pending.

e. NIEL filed an income tax return at Rs. (-) 156.8 million on November 27, 2000 for the assessment year

2000-2001. The ACIT Ludhiana vide order dated August 29, 2002 decided the assessment to be on Rs. (-) 15.62 million, disallowing amongst other things deduction on guest house expenses, festival expenses, advertisem*nts and club expenses. However no additional demand was created. An appeal dated January 17, 2005 against the same was filed by NIEL to the ITAT, Chandigarh, which is currently pending.

f. NIEL filed an income tax return at Rs. (-) 44.9 million on December 30, 1999 for the assessment year

1999-2000. The ACIT Ludhiana vide order dated March 28 2002 reduced the unabsorbed depreciation to be carried forward to Rs. (-) 18.1 million and assessed the income to be at Rs. 153.4 million. He also imposed an additional demand of Rs. 0.061 million. NIEL paid the additional demand under protest. An appeal dated July 7, 2004 against the same was filed by NIEL to the ITAT, Chandigarh, which is currently pending.

g. NIEL filed an income tax return at nil on November 30, 1998 for the assessment year 1998-1999 but

paid minimum alternate tax at income of Rs. 4.06 million. The ACIT, Ludhiana vide order dated December 21, 2000 decided the assessment to be on Rs. 15.8 million, disallowing amongst other things deduction on, festival expenses, advertisem*nts ISO expenses, club memberships, AGM expenses and reduction in claim of section 80-HHC & 80-HH of the Income Tax Act. He also imposed an additional demand of Rs. 2.55 million. NIEL paid the additional demand under protest. An appeal dated November 18, 2002 against the same was filed by NIEL to the ITAT, Chandigarh, which is currently pending.

Sales Tax Cases

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NIEL has filed an appeal (T.A.No.1238/2002) dated August 27, 2002, before the STAT, against the order of the of AAC, Chennai imposing tax and penalty of Rs. 8.66 million, on high seas sales turnover The matter is currently pending for order. Civil Cases There are seven civil suits pending against NIEL before various courts and authorities in India out of which four are recovery suits. The aggregate claim against NIEL in these cases was approximately Rs. 34.04 million. The details of the cases are as follows: a. The Punjab State Electricity Board (“PSEB”) issued a demand of Rs. 20.6 million to NIEL vide notice

dated August 5, 2004 in relation to certain disputes arising out of the advance consumption deposit (ACD) load connected with Turbine Generating Set (“TG”). NIEL challenged the same before the State Regulatory Commission Board (“SRCB”). The SRCB then filed a special leave petition (CA No. 4425/4124 of 2006) before the Supreme Court of India which vide order dated October 9, 2006 remanded the case to the Appellate Tribunal for Electricity, Delhi, to decide the matter regarding the applicability of ACD and load surcharge/parallel operation charges on the TG set. The matter is currently pending for order.

b. Malachand and Sons, and Laxmi Narayan Shyamlal, have filed two civil suits both dated May 28, 2001

against NIEL, before the Civil Judge, Narwana, Haryana for rendition of accounts against NIEL. The matters are currently pending.

c. There are four recovery suits pending against NIEL for a total amount of Rs. 13.44 million before

various courts and authorities in India. The matters are all currently pending. Cases filed by NIEL Criminal Complaints There are 23 criminal complaints filed by NIEL before various courts and authorities in India. The aggregate claim by NIEL, as on the date of institution of these cases was approximately Rs. 122.61 million. The details of the complaints are as follows: a. There are two complaints filed by Nahar Farbics, a unit of NIEL against various parties under section

420 of the IPC in relation to non payment of various sums of money aggregating to Rs. 0.10 million in lieu of supply of fabrics and yarn made by it to the defaulting parties. Details of the criminal complaints and amounts are as follows:

i) Criminal complaint dated October 12, 2003 filed against Delphin Industries, for non payment of Rs. 0.07 million. The matter is fixed for the summoning of the accused.

ii) Criminal complaint dated September 6, 2006 against Hari Tex Fashion Private Limited, for non payment of Rs 0.03 million. The matter is fixed for the summoning of the accused.

b. NIEL filed a criminal complaint dated December 11, 2003 against M/s B.S.M. Knit and Fabs (“BSM”),

for non payment of Rs.1.33 million in lieu of supply of fabrics and yarn made by it to BSM. The matter is fixed for the summoning of the accused.

c. NIEL has filed suits against 20 individuals/entities under Section 138 of the Negotiable instruments

Act, before various authorities and courts in India for the recovery of a total sum of Rs 121.18 million. Civil Cases There are 12 cases filed by NIEL before various courts and authorities in India out of which nine are recovery suits. The aggregate claim by NIEL as on the date of institution of these cases was approximately Rs. 12.91 [•] million. The details of the cases are as follows: a. Oswal Fats & Oils a unit of NIEL has filed two suits for a mandatory injunction directing the

defendants to specifically enforce the contract for the supply of palm acid oil:

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i) Oswal Fats & Oils, a unit of NIEL has filed a suit dated April 30, 2003 against Imperial Commodities (Asia) PTE, Singapore (“Imperial Commodities”), before the Civil Judge, Ludhiana praying for a mandatory injunction against Imperial Commodities for the specific enforcement of the contract for the supply of 362.600 MTs palm acid oil at the rate of US $ 210 PMT as per the contract dated May 14, 2002.

ii) Oswal Fats & Oils, a unit of NIEL has filed a suit dated May 19, 2003 against Nespalm Sendirin Berhard, Malaysia (“Nespalm”), before the Civil Judge, Ludhiana, praying for a mandatory injunction against Nespalm for the specific enforcement of the contract for the supply of 185.000 MTs palm acid oil at the rate of US $ 207 PMT as per the contract dated May 21, 2002.

b. NIEL has filed an appeal dated January 14, 2002 against American President Lines Limited, before the

high Court of Punjab and Haryana, against the order of District Judge, Ludhiana dated May 16, 2000 directing the opposite party to deliver the steel scrap to ICD Ludhiana.

c. NIEL has filed nine recovery suits before various courts and authorities in India for the recovery of

Rs. 7.80 million. The matters are all currently pending. Cases against erstwhile Punjab Con-Cast Steels. (“PCCS”) Excise Cases There are 12 excise cases pending against erstwhile PCCS, which has been amalgamated with NIEL, before various courts and authorities in India. The aggregate claim against erstwhile PCCS, as on the date of institution of these cases was approximately Rs. 10.25 million. The details of the cases are as follows: a. The DEC had issued various show cause notices to erstwhile PCCS demanding MODVAT credit to the

extent of Rs. 9.48 million on certain capital goods. The matter is currently pending for order before CACE, Chandigarh. Details of the notices and respective amounts claimed therein are as follows:

(i) Notice dated March 9, 1995 demanding MODVAT credit to the extent of Rs. 0.97 million. (ii) Notice dated April 20, 1995 demanding MODVAT credit to the extent of Rs. 0.28 million. (iii) Notice dated May 19, 1995 demanding MODVAT credit to the extent of Rs. 3.32 million. (iv) Notice dated October 30, 1995 demanding MODVAT credit to the extent of Rs. 1.99 million. (v) Notice dated November 30, 1995 demanding MODVAT credit to the extent of Rs. 0.81

million. (vi) Notice dated June 21, 1996 demanding MODVAT credit to the extent of Rs. 0.56 million. (vii) Notice dated July 5, 1996 demanding MODVAT credit to the extent of Rs. 0.68 million. (viii) Notice dated October, 30 1996 demanding MODVAT credit to the extent of Rs. 0.87 million.

b. The DEC had issued various show cause notice to erstwhile PCCB demanding MODVAT credit to the

extent of Rs. 0.77 million on certain inputs. The matters are currently pending for order before the CACE. Details of the notices and respective amounts claimed therein are as follows:

(i) Notice dated October 15, 1997 demanding MODVAT credit to the extent of Rs. 0.12 million. (ii) Notice dated June 22, 1998 demanding MODVAT credit to the extent of Rs.0.14 million. (iii) Notice dated January 20, 2000 demanding MODVAT credit to the extent of Rs.0.39 million. (iv) Notice dated January 11, 2005 demanding MODVAT credit to the extent of Rs.0.12 million.

Sales Tax Cases Erstwhile PCCS had filed a revision case (TC (R ) 63/2003) before TTST Chennai, against the order of the Tamilnadu Sales Tax Appellate Tribunal (Additional Bench), challenging the levy of sales tax and penalty of Rs. 6.27 million, on high seas sales turnover in the State of Tamil Nadu. The matter is currently pending for order. Civil Case

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Streamline Enterprises Limited, has filed a suit dated April 4, 2001, against erstwhile PCCS, before the Civil Judge, Ludhiana, for recovery of freight charges amounting to Rs. 0.56 million in relation to transportation services provided by it for carrying furnace oil for erstwhile PCCS. The matter is currently pending for hearing.

Cases against erstwhile Nahar International Limited. (“NIL”) Excise Cases There are three excise cases pending against erstwhile NIL which was subsequently merged into NIEL, before various courts and authorities in India. The aggregate claim against erstwhile NIL, as on the date of institution of this case was approximately Rs. 21.4 million. The details of the cases are as follows: a. The Additional Commissioner of Central Excise, Jaipur, vide order dated July 28, 2006 alleged that

erstwhile NIL had wrongly availed of the refund of Rs. 1.28 million. Subsequently erstwhile NIL filed an appeal dated September 28, 2006 before the CACE, Jaipur which is currently pending for order.

b. The CCE, Jaipur vide order dated February 23, 2004 had imposed a duty of Rs. 12.92 million on

erstwhile NIL, inter alia on the grounds that duty was not paid on freight and insurance that were levied in the invoices. Pursuant to which erstwhile NIL had filed an appeal (No. ES/1916-18/04-NB (A) INE/2930-3204-NB (A)) before the CESTAT, Delhi which is currently pending for order.

c. PSEB had filed an appeal dated July 22, 2005 against erstwhile NIL, before the CACE, Patiala against

the order of the Chief Electrical Inspector, imposing an amount of Rs. 7.20 million. The matter is currently pending for order.

Civil Cases There are four recovery suits pending against erstwhile NIL for a total amount of Rs. 12.26 million before various courts and authorities in India. The matters are all currently pending.

Cases against erstwhile Nahar Sugar and Allied Industries. (“NSAI”) There are three cases pending against erstwhile NSAI which was subsequently merged into NIEL, before various courts and authorities in India. Details of the same are as follows: Sales Tax Cases Erstwhile NSAI had filed two appeals both dated March 8, 2005 and July 22, 2005 one before the Sales Tax Tribunal and second before the Deputy Excise Tax Commissioner Appeal against the imposition of purchase tax of Rs. 5.97 million on the purchase of sugarcane. The matters have been adjourned sine-die Civil Case Erstwhile NSAI had filed a petition dated January 13, 2005 before the District Court, Fatehgarh Sahib against the demand of Rs. 2.51 million raised by PSEB in relation to certain disputes about amount of charges on account of paralleloperation of turbine generating set. The matter was adjourned by the District Court sine-die and is currently pending for final decision before the appellate tribunal. Cases against erstwhile Arham Spinning Mills. (“ASM”) There are three recovery suits pending against erstwhile ASM, which has been merged with NIEL, before before various courts and authorities in India. The aggregate claim against erstwhile ASM as on the date of institution of this case was approximately Rs. 0.74 million. F. Nahar Exports Limited (“NEL”) Excise Cases

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There are 11 excise cases pending against NEL before various courts, authorities and tribunals in India. The aggregate claim against NEL as on the date of institution of these case was approximately Rs. 4.59 million. The details of the cases are as follows: a. The ACCE vide dated September 11, 1995 disallowed the CENVAT credit of Rs.0.03 million claimed

by NEL in relation to the purchase of control panel and distribution boards. NEL filed an appeal before the CACE which was allowed in favour of NEL vide dated February 19, 1998. Pursuant to which the Department of Central Excise (“DCE”) filed an appeal dated May 13, 2000, by way of special leave before the Supreme Court of India, which is currently pending.

b. The ACCE vide dated March 16, 1998 disallowed the CENVAT credit of Rs. 0.05 million taken by

NEL in relation to purchase of transformers. NEL filed an appeal before the CACE which was allowed in favour of it vide dated April 28, 1999. Pursuant to which the DCE filed an appeal with CESTAT which was rejected vide dated November 1, 1999. Subsequently DCE filed an appeal before the High Court of Punjab and Haryana, which is currently pending.

c. The DCE has filed an appeal dated May 27, 2004 against the order of the CCE dated January 31, 2001

before the CESTAT New Delhi challenging the refund of excise duty of Rs. 0.56 million in relation to the sale of acrylic/viscose yarn through the depot for the months of January and February, 1998. The case is currently pending.

d. The DCE has filed an appeal dated September 14, 2004 before CESTAT against the order of the

CACE, allowing clearance by NEL of capital goods at the realizable/transaction value instead of clearance of capital goods as such against sale of old machinery sold by it. The total amount involved in the case is Rs. 0.59 million.

e. The JCCE, Ludhiana has issued a show cause dated April 21, 2006 in relation to certain exemptions

availed by NEL amounting to Rs. 0.651 million under notification No. 32/2004-ST dated December3, 2004 which allowed 75% exemption from the gross amount payable by NEL on its taxable services (GTA). The matter is currently pending for decision.

f. The DCE vide dated May 26, 2006 imposed services tax of Rs. 0.01 million on the commission paid by

NEL to its foreign based agents stating that the same was not covered under the service provided by the carriage and forwarding agent. Pursuant to which NEL filed an appeal dated July 26, 2006, before the CACE, Chandigarh, which is currently pending.

g. The JCCE issued a show cause notice dated February 15, 2006 in relation to the inadmissibility of the

refund of duty of Rs. 0.95 million claimed by NEL on expenses paid by it on furnace oil, which was duly taken as CENVAT credit in the books of account as 100% export oriented unit for the unit at Lalru. The matter is currently pending.

h. The ACCE, Ludhiana, issued a showcause notice dated April 17, 2006 for payment of service tax of

Rs. 0.38 million as NEL had allegedly availed of CENVAT credit and not made the required cash payment. Pursuant to which NEL filed its reply and personal hearing is currently awaited in the matter.

i. The ACCE vide three separate orders all dated September 22, 2005 disallowed the rebate claim of duty

of Rs. 0.42 million paid on export of finished goods. NEL filed an appeal before the CACE. Vide order dated February 17, 2006 CACE allowed NEL’s claim. Pursuant to which DCE filed a revision application before the Joint Secretary, Ministry of Finance, New Delhi. The matter is currently pending for decision.

j. The ACCE vide two separate orders dated October 26, 2006 imposed service tax along with the interest

and penalty of the same amount of Rs. 0.24 million and Rs. 0.36 million respectively, for making the payment of service tax by utilizing the CENVAT credit instead of cash credit.

k. The ACCE vide dated October 23, 2006 confirmed the demand along with the interest and penalty of

Rs. 0.35 million for the wrong availment of CENVAT credit of service tax paid on transport services.

Income Tax Cases

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There are 13 income tax cases pending against NEL before various courts, authorities and tribunals in India. The aggregate claim against NEL as on the date of institution of these case was approximately Rs. 101.69 million. The details of the cases are as follows: a. The ACIT created an additional demand of 12.70 million for the assessment year 2004-2005 on the

grounds of disallowance of various expenses such as guest house, gift articles, interest and reduction in relief of profits on exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. The appeal filed before ITAT by NEL is currently pending.

b. The ACIT created an additional demand of Rs. 19.50 million for the assessment year 2003-2004 on the

grounds of disallowance of various expenses such as guest house, gift articles and reduction in relief of profits on exports. The CIT (A) vide order dared October 5, 2006 partly allowed NEL’s claim. The appeal effect is currently pending.

c. The ACIT created an additional demand of Rs. 6.38 million for the assessment year 2002-2003 on the

grounds of disallowance of various expenses such as guest house, gift articles and reduction in relief of profits on exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which are currently pending.

d. The ACIT created an additional demand of Rs. 17.40 million for the assessment year 2001-2002 on the

grounds of disallowance of expenses on gift articles and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which are currently pending.

e. The ACIT created an additional demand of Rs. 7.98 million for the assessment year 2000-2001 on the

grounds of reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, The appeal effect is currently pending.

f. NEL filed its return at Rs. (-) 50.50 million on December 30, 1999 and tax was paid u/s 115JA of the

IT Act at an income of Rs. 24.60 million for the assessment year 1999-2000. The ACIT completed the assessment at Rs.24.60 million and reduced the unabsorbed depreciation to be carried forward. No additional demand was created. The appeal filed by NEL before CIT (A) Ludhiana was decided on January 31, 2006 partly in favour of NEL. Subsequently NEL and the DIT filed cross appeals before the ITAT which are currently pending.

g. The ACIT created an additional demand of Rs. 8.12 million for the assessment year 1998-1999 on the

grounds of disallowance of various expenses such as foreign gifts, entertainment and reduction of relief on profits on export. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which vide order dated July 28, 2005 and September 27, 2006 partly allowed the appeal. NEL has filed an appeal before the High court of Punjab and Haryana, which is currently pending.

h. The ACIT created an additional demand of Rs. 6.79 million for the assessment year 1997-1998 on the

grounds of disallowance of various expenses such as foreign gifts, entertainment and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which vide order dated July 31, 2006 partly allowed the appeal. The appeal effect is currently pending.

i. The ACIT created an additional demand of Rs. 19.50 million for the assessment year 1996-1997 on the

grounds of disallowance of various expenses such as foreign gifts, entertainment, expenses incurred in closed unit and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which vide order dated July 31, 2006 partly allowed the appeal. The appeal effect is currently pending.

k. The ACIT created an additional demand of Rs. 0.58 million for the assessment year 1994-1995 on the

grounds disallowance of various expenses such as depreciation, machinery repair, miscellaneous expenses and reduction in deduction of new undertaking. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. NEL filed an appeal before the ITAT, which vide order dated December 18, 2003

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partly allowed the claim of NEL and the DIT. Subsequently, NEL and the DIT filed cross appeals before Punjab & Haryana High Court, which are currently pending.

m. The ACIT created an additional demand of Rs. 0.20 million for the assessment year 1992-1993 on the

grounds of reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which vide order dated September 24, 2003 and July 31, 2006 partly allowed the appeal. NEL has filed appeal before the High Court of Punjab and Haryana, which is currently pending.

n. The ACIT created an additional demand of Rs. 2.23 million for the assessment year 1991-1992 on the

grounds of valuation of closing stock and reduction of relief on profits of exports. The CIT (A) Ludhiana partly allowed the appeal filed by NEL. Cross appeals were filed by NEL and the DIT before ITAT, which vide order dated September 24, 2003 and December 18, 2003 partly allowed appeal. NEL has filed appeal before the High Court of Punjab and Haryana, which is currently pending.

o. The ACIT created an additional demand of Rs. 3,866 for the assessment year 1990-1991 on the

grounds of depreciation. The appeal filed by NEL before the High Court of Punjab and Haryana is currently pending.

p. The ACIT created an additional demand of Rs. 0.31 million for the assessment year 1989-1990 on the

grounds of depreciation and valuation of closing stock. The appeal filed by the DIT before the High Court of Punjab and Haryana is currently pending.

Sales Tax Cases NEL has filed an appeal dated August 12, 2006 against a penalty order dated May 4, 2006 by the Incharge, of Information Collection Centre (Export) Patiala before the Joint Director, (Enforcement) Patiala Division, in relation to certain disputes that arose in connection with the alleged evasion of sales tax by NEL to the extent of 6%, with regard to the supply of yarn by Rishab Spinning Mills at Vill, Jordan, a unit of NEL to M/s Bharat Ram Raj Kumar. The matter has not yet been fixed for hearing.

Others M/s Goodwill Transport Corporation, Indore (“GTC”) has filed an appeal dated May 7, 2006 against the order of the sub-ordinate authority dated February 19, 2005 before the High Court of Punjab and Haryana in relation to certain disputes that arose when United India Insurance Company Limited (“UIIC”) was given the right to recover the amount UIIC paid as insurance sum to NEL on behalf of GTC for damages due to fire to a certain consignment of NEL that was being transported by GTC. The matter is currently pending. Cases filed by NEL

Criminal Complaints

There are seven criminal complaints filed by NEL against various parties, under section 138 of the Negotiable Instruments Act, before Judicial Magistrate (First Class) Ludhiana. The aggregate sum involved in these disputes is Rs. 0.69 million. Civil Cases There are four civil suits filed by NEL, out of which three are recovery suits against various parties, before various courts and authorities in India. The aggregate claim by NEL as on the date of institution of these cases was approximately Rs. 6.01million. The details of the cases are as follows: a. NEL has filed an execution decree dated September 13, 2003 before the Civil Judge, Ludhiana against

B.H. Yarns for Rs. 1.41 millions. The matter is currently pending. b. NEL has filed three recovery suits before various courts and authorities in India for the recovery of

Rs. 4.6 million. The matters are all currently pending.

V. MATERIAL DEVELOPMENTS

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In the opinion of our Board, there have not arisen, since the date of the last financial statements disclosed in this Draft Red Herring Prospectus, any circ*mstances that materially or adversely affect or are likely to affect our profitability taken as a whole or the value of its consolidated assets or our ability to pay material liabilities within the next 12 months.

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GOVERNMENT AND OTHER APPROVALS In view of the approvals listed below, we can undertake this Issue and our current business activities and no further major approvals from any governmental or regulatory authority or any other entity are required to undertake the Issue or continue our business activities. Unless otherwise stated, these approvals are all valid as of the date of this Draft Red Herring Prospectus. I. Approvals for the Issue The Board of Directors has, pursuant to resolution passed at its meeting held on October 18, 2006, authorised the Issue, subject to the approval by the shareholders of our Company under section 81 (1 A) of the Companies Act. The shareholders have, pursuant to a resolution dated November 18, 2006 under Section 81(1 A) of the Companies Act, authorised the Issue. II. Approvals for our business We have received the following major Government and other approvals pertaining to our business:

Description Reference/License Number

Date of Issue Date of Expiry

Permanent Account Number AAACO1973F June 23, 1949 Not applicable Tax Deduction Account Number JLDO00323B August 5, 2004 Not applicable Registration for manufacture of excisable goods under Central Excise Rules, 2002

AAACO1973FXM008 June 23, 1949 Valid until cancelled or revoked.

TIN 03981068260 April 1, 2006 Not Applicable Acknowledgement from the Secretariat for Industrial Assistance, Ministry of Commerce & Industry, Government of India for the manufacture of cotton/blended yarns with the capacity of 14400 spindles and 2160 rotors at Lalru, Punjab, India.

5535/SIA/IMO/2006 October 19, 2006

Not applicable

Acknowledgement from the Secretariat for Industrial Assistance, Ministry of Commerce & Industry, Government of India as amended on July 18, 2005 for the manufacture of denim fabrics at Lalru, Punjab

2296/SIA/IMO/2005 May 12, 2005 Not applicable

Registration under the Factories Act 1948 for Unit V and VI

LDH-2/0-5/8 August 19. 2003

December 31, 2005

Registration under the Factories Act 1948 for Unit IV

LDH-I/0-2/288 March 21, 2003

December 31, 2005

Registration under the Factories Act 1948 for Unit I

LDH-6/0-3/387 March 27, 2006

December 31, 2005

Registration under the Factories Act 1948 for Unit III

LDH-I/0-3/290 December 30, 2004

December 31, 2005

Registration under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for unit V and VI

PN 3903 Not available# Not applicable

Registration under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for office located at Chennai.

TN-850 June 1, 1957 Not applicable

Registration under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for Unit I, III and VII

PN125 Not available# Not applicable

Registration under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for Unit IV

PB/LD/16323 Not available# Not applicable

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Description Reference/License Number

Date of Issue Date of Expiry

Registration under Employee State Insurance Act for office located at Chennai

51-8612-06 Not available# Not applicable

Registration of the logo “Monte Carlo” under the Trademarks Act, 1999

630095 (Class 25) June 6, 1994 June 5, 2014*

Registration of the logo “M” under the Trademarks Act, 1999

521939 (Class 25) December 28, 1989

December 27, 2013

Registration of the logo of Oswal Woollen Mills Limited under the Trademarks Act, 1999 in respect of hosiery.

256772 (Class 25) May 14, 1969 May 14, 2014**

Registration of the title “Oswal” under the Copyrights Act, 1957

A-23616/79 March 30, 1979

As provided under the Copyrights Act, 1957

Certificate of registration under the Central Sales Tax Act, 1956 for operations in Punjab.

LUDH/CST/1493 January 1, 1998

Valid until cancelled

Certificate of Registration under the Punjab Value Added Tax Act 2005.

03981068260 April 1, 2005 Valid until cancelled.

Certificate of registration under the Central Sales Tax Act, 1956 for operations in Haryana.

AMB-CST 33730 June 22, 2000 Valid until cancelled

Registration under Haryana Value Added Tax, 2003

06711033730 April 1, 2003 Valid until cancelled

Certificate of Registration, under the West Bengal Sales Tax Rules, 1995

BG/11793 September 8, 2002

Valid until cancelled.

Certificate of registration under the Central Sales Tax Act, 1956 for operations in Kolkata.

7426 (BG)C September 9, 2002

Valid until cancelled

Certificate of registration under the Central Sales Tax Act, 1956 for operations in Chennai.

CST-7656 November 6, 1973

Valid until cancelled.

Certificate of Registration under Tamil Nadu General Sales Tax Act, 1959.

1220168/95-96 November 6, 1973

2007

Registration under the Punjab Shops and Establishments Act, 1958 for shop located at Gurgaon.

345 August 21, 2006

March 31, 2009

* Registered for a period of 10 years from the date of application and may be renewed for a period of 10 years and also at the expiration of each period of 10 years. ** Registered for a period of 7 years from the date of application and may be renewed for a period of 7 years and also at the expiration of each period of 7 years. # The information relating to the date of issue of the said approvals is not available due to loss of records, in a fire at our office at Miller Ganj, Ludhiana on November 18, 1981. Approvals/licenses which have been applied for:

• Application dated July 6, 1996 for registration of trademark “Monte Carlo’s Canterbury” in class 25. • Application dated May 5, 2005 for registration of trademark “Blue -Cult” in class 25 • Application dated May 27, 2005 for registration of trademark “Indigo-Cult” in class 25 • Application dated May 27, 2005 for registration of trademark “Bellerina” in class 25. • Application dated September 14, 2006 for registration of trademark “Yaguchi” in class 24.

a. Approvals obtained for Unit III factory located at G.T Road, Sherpur, Ludhiana 141 003,

Punjab, India:

Description Reference/License Number

Date of Issue Date of Expiry

License under the Hazardous Waste (Management and Handling) Rules, 1989

HMC/LDH-II/2005-2007/R-2276

February 8, 2005

February 7, 2007

License under the Air (Prevention and Control of Pollution) Act, 1981

LDH-II/APC/2006/V-1531

July 19, 2006 July 18, 2007

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Description Reference/License Number

Date of Issue Date of Expiry

License under the Water (Prevention and Control of Pollution) Act, 1974

LDH-II/WPC/2006/V-2201

July 19, 2006 July 18, 2007

Registration for manufacture of excisable goods under Central Excise Rules, 2002

AAACO1973FXM006 May 23, 2003 Valid until cancelled or revoked.

Registration of boiler no. PI-3330 under the Indian Boilers Act, 1923

1984 April 29, 2006 April 28, 2007

Registration of boiler no. PI-3411 under the Indian Boilers Act, 1923

2299 August 11, 2006 August 10, 2007

Approvals/licenses which have been applied for:

• Application for renewal of registration of boiler PI-4245 under the Indian Boilers Act, 1923. b. Approvals obtained for Unit V, Industrial Area A, Ludhiana, Punjab, India:

Description Reference/License Number

Date of Issue Date of Expiry

License under the Hazardous Waste (Management and Handling) Rules, 1989

HMC/LDH/2006-2008/R-105

February 1, 2006 January 31, 2008

License under the Air (Prevention and Control of Pollution) Act, 1981

LDH-I/APC/2004/F-1407

January 2, 2004 March 31, 2015

License under the Water (Prevention and Control of Pollution) Act, 1974

LDH-I/WPC/2004/F-2074

January 2, 2004 March 31, 2015

Registration for manufacture of excisable goods under Central Excise Rules, 2002

AAACO1973FXM006 May 23, 2003 Valid until revoked or suspended.

Registration of boiler no. PI-3892 under the Indian Boilers Act, 1923

2563 October 26, 2006 October 26, 2007

Registration of boiler no. PI-3703 under the Indian Boilers Act, 1923

2562 October 26, 2006 October 26, 2007

c. Approvals obtained for Oswal Denims, Village Lalru, P.O. Dappar, Chandigarh-Ambala Road,

Patiala, Punjab, India:

Description Reference/License Number

Date of Issue

Date of Expiry

License under the Hazardous Waste (Management and Handling) Rules, 1989

HMC/MLI/2006-08/F-3432

September 22, 2006

September 21, 2008

License under the Air (Prevention and Control of Pollution) Act, 1981

PTA/APC/2006/F-338 March 9, 2006

March 8, 2007

License under the Water (Prevention and Control of Pollution) Act, 1974

PTA /WPC/2006/F-297 March 9, 2006

March 8, 2007

Registration for manufacture of excisable goods under Central Excise Rules, 2002

AAACO1973FXM006 September 28, 2005

Valid until cancelled or revoked.

Registration with the Regional Provident Fund Commissioner, under the Employees Provident Funds and Miscellaneous Provisions Act, 1952

PB/CHD/29856 Not available*

Not applicable

Approvals/licenses which have been applied for: Application dated November 6, 2006 to the Punjab Pollution Control Board, under the for approval under the Water (Prevention and Control of Pollution) Act, 1974 and under the Air (Prevention and Control of Pollution ) Act 1981 to increase capacity from 10 million meter per annum to 20 million meter per annum. * The information relating to the date of issue of the said approvals is not available due to loss of records, in a fire at our office at Miller Ganj, Ludhiana on November 18, 1981.

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OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

The Board of Directors has, pursuant to resolution passed at its meetings held on October 18, 2006, authorised the Issue subject to the approval by the shareholders of our Company under section 81 (1 A) of the Companies Act.

Our shareholders have authorised the Issue by a special resolution in accordance with section 81(1 A) of the Companies Act, passed at the extra ordinary general meetings of our Company held on November 16, 2006 at the registered office of our Company.

We have also obtained all necessary contractual consents required for the Issue. For further information, see the section titled "Government and Other Approvals" beginning on page [●] of this Draft Red Herring Prospectus.

Prohibition by SEBI

Our Company, our Directors, our Promoters, directors or the person(s) in control of our Promoters, Promoter Group companies, companies in which we have substantial shareholding and companies in which our Directors are associated with as directors, have not been prohibited from accessing or operating in capital markets under any order or direction passed by SEBI.

Further, our Promoters and Promoter group entities have confirmed that they have not been detained as willful defaulters by the RBI or any other governmental authority and there are no violations of securities laws committed by them in the past or are pending against them.

Eligibility for the Issue Our Company is eligible for the Issue in accordance with Clause 2.2.1 of the SEBI Guidelines as described below:

• Our Company has net tangible assets of at least Rs.30 million in each of the preceding three full years (of 12 months each), of which not more than 50% is held in monetary assets;

• Our Company has a track record of distributable profits in terms of Section 205 of the Companies Act for at least three out of immediately preceding five years;

• Our Company has a net worth of at least Rs.10 million in each of the preceding three full years (of 12 month each);

• The proposed Issue size, including all previous public issues in the same financial years, is not expected to exceed five times the pre-Issue net worth; and

• The net profit, dividend, net worth, net tangible assets and monetary assets for purposes of the eligibility criteria described above have been derived from the auditor’s report included in this Draft Red Herring Prospectus under the section titled “Financial Statements”, beginning on page [●] of this Draft Red Herring Prospectus.

(Rs. in million)

Sl. No

Eligibility Criteria Fiscal 2002 Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006

1. Net Tangible assets1 2,189.29 2,386.15 2,577.59 2,539.51 2939.98 2. Monetary assets2 141.08 13.76 187.50 351.23 10.16 3. Distributable profits,

as per Section 205 of the Companies Act 68.34 27.92 98.60 87.92 148.48

4. Net worth 431.01 459.27 558.21 646.18 794.66 (1)“Net tangible assets” means the sum of all net assets of our Company, excluding intangible assets, as defined in Accounting Standard 26 (AS 26) issue by the Institute of Chartered Accountants of India). (2) Monetary assets include cash in hand and at bank.

Our Company undertakes that the number of Allottees in the Issue shall be at least 1,000. Otherwise, the entire application money shall be refunded forthwith. In case of delay, if any, in refund, our Company shall pay interest on the application money at the rate of 15 % per annum for the period of delay.

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Disclaimer Clause

AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING PROSPECTUS 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 DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGERS, UTI BANK LIMITED AND MOTILAL OSWAL INVESTMENT ADVISORS PRIVATE LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 AS FOR THE TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGERS, UTI BANK LIMITED AND MOTILAL OSWAL INVESTMENT ADVISORS PRIVATE LIMITED HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED [•], 2006 IN ACCORDANCE WITH THE 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 DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE.

(II) 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, WE CONFIRM THAT: A. THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY

WITH THE DOCUMENTS, MATERIALS AND PAPERS 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;

C. THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE; AND

D. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID.

WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS. AS PART OF PROMOTERS' CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE PROMOTERS' CONTRIBUTION SUBJECT TO LOCK-IN WILL NOT BE DISPOSED/ SOLD/TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH SEBI TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS."

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The filing of the Draft Red Herring Prospectus does not, however, absolve our Company from any liabilities under section 63 and section 68 of the Companies Act or from the requirement of obtaining such statutory and 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 Book Running Lead Managers, any irregularities or lapses in the Draft Red Herring Prospectus.

All legal requirements pertaining to the Issue will be complied with at the time of filing of the Draft Red Herring Prospectus with the RoC in terms of section 60B of the Companies Act. All legal requirements pertaining to the issue will be complied with at the time of registration of the Prospectus with the RoC in terms of section 56, section 60 and section 60B of the Companies Act.

Disclaimer from our Company and the BRLMs

Our Company, our Directors, and the BRLMs accept no responsibility for statements made otherwise than in this Draft Red Herring Prospectus or in the advertisem*nts or any other material issued by or at instance of the above mentioned entities and anyone placing reliance on any other source of information, including our website, www.owmnahar.com would be doing so at his or her own risk.

The BRLMs accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding entered into among the BRLMs and us dated December 16, 2006 and the Underwriting Agreement to be entered into among the Underwriters and us.

All information shall be made available by us and BRLMs to the public and 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 show presentations, in research or sales reports or at bidding centres etc.

We shall not be liable to the Bidders for any failure in downloading the Bids due to faults in any software/hardware system or otherwise.

Disclaimer in Respect of Jurisdiction

The Issue is being made in India to persons resident in India (including Indian nationals resident in India who are majors, HUFs, 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), or trusts (under the applicable trust law and who are authorised under their constitution to hold and invest in shares), permitted insurance companies and pension funds and to permitted non residents including Eligible NRIs, FIIs and other eligible foreign investors (viz. FVCIs, multilateral and bilateral development financial institutions). This Draft Red Herring Prospectus does not, however, constitute an invitation to subscribe to Equity Shares offered hereby in any other jurisdiction or to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Draft Red Herring Prospectus comes is required to inform himself or herself about and to observe, any such restrictions. Any dispute arising out of the Issue will be subject to the jurisdiction of appropriate court(s) in Ludhiana 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 Draft Red Herring Prospectus has been filed with SEBI for observations. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and this Draft Red Herring Prospectus may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall, under any circ*mstances, create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

The Equity Shares are being offered and sold outside the United States of America in compliance with Regulation S under the U.S. Securities Act, 1933.

The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended from time to time (the “Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares will be offered and sold only outside the United States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur.

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Disclaimer Clause of the NSE

As required, a copy of the Draft Red Herring Prospectus has been submitted to NSE. NSE has given by its letter no. [●] dated [●] permission to us to use NSE's name in this Draft Red Herring Prospectus as one of the stock exchanges on which our further securities are proposed to be listed, subject to the Company fulfilling the various criteria for listing including the one related to paid up capital and market capitalization (i.e., the paid up capital shall not be less than Rs 100 million and the market capitalization shall not be less than Rs 250 million at the time of listing). The NSE has scrutinised this Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to us. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed to mean that this Draft Red Herring Prospectus 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 Draft Red Herring Prospectus; nor does it warrant that our securities will be listed or will continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this Company.

Every Person who desires to apply for or otherwise acquires any of our securities may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against NSE 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.

Disclaimer Clause of the BSE

As required, a copy of the Draft Red Herring Prospectus has been submitted to BSE. BSE has given by its letter dated [●], permission to the Company to use BSE's name in this Draft Red Herring Prospectus as one of the stock exchanges on which our further securities are proposed to be listed. BSE has scrutinised this Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to us. BSE does not in any manner:

(i) warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring Prospectus; or

(ii) warrant that this Company's securities will be listed or will continue to be listed on BSE; 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 it should not for any reason be deemed or construed to mean that this Draft Red Herring Prospectus has been cleared or approved by BSE. 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 BSE 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.

Filing

A copy of the Draft Red Herring Prospectus has been filed with SEBI at Corporation Finance Department, SEBI Bhavan, Block G, Plot No. C-4A, Bandra Kurla Complex, Bandra (East) Mumbai 400 051.

A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the Companies Act, will delivered for registration to the RoC and a copy of the Prospectus required to be filed under Section 60 of the Companies Act will be delivered for registration to the RoC.

Listing

Applications have been made to the NSE and BSE for permission to deal in and for an official quotation of the Equity Shares. The NSE, shall be the Designated Stock Exchange with which the basis of allocation will be finalised for the Issue.

If the permissions to deal in and for an official quotation of the Equity Shares are not granted by any of the Stock Exchanges, our Company shall forthwith repay, without interest, all moneys received from the applicants in pursuance of this Draft Red Herring Prospectus. If such money is not repaid within eight days after our Company becomes liable to repay it (i.e., from the date of refusal or within 15 days from the date of Bid/Issue Closing Date, whichever is earlier), then our Company shall, on and from expiry of eight days, be liable to

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repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act.

Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at both the Stock Exchanges mentioned above are taken within seven working days of finalisation of the basis of allotment for the Issue.

Consents

Consents in writing of: (a) our Directors, the Company Secretary and Compliance Officer, the Auditors, the Legal Advisors, the Bankers to the Issue; and (b) the Book Running Lead Managers, the Syndicate Members, the Escrow Collection Bankers and the Registrar to the Issue to act in their respective capacities, have been obtained and filed along with a copy of this Draft Red Herring Prospectus as required under Sections 60 and 60B of the Companies Act and such consents have not been withdrawn up to the time of delivery of this Red Herring Prospectus for registration with the RoC. M/s Gupta Vigg & Company, Chartered Accountants, our Auditors have given their written consent to the inclusion of their reports in the section titled ‘Financial Statements’, ‘Statement of Tax Benefits’, ‘Summary of Significant Differences between US GAAP and India GAAP’ and ‘Other Regulatory and Statutory Disclosures -Eligibility for the Issue” in the form and context in which it appears in this Draft Red Herring Prospectus and such consent and reports have not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with the RoC.

Expert Opinion

Except the as disclosed in the sections titled ‘Financial Statements’, ‘Statement of Tax Benefits’, ‘Summary of Significant Differences between US GAAP and India GAAP’ and ‘Other Regulatory and Statutory Disclosures -Eligibility for the Issue” beginning on pages [●], [●], [●], [●] and [●], respectively of this Draft Red Herring Prospectus, we have not obtained any expert opinions.

Expenses of the Issue

The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertisem*nt expenses and listing fees. The estimated expenses of the Issue are as follows:

(Rs. in million) Activity Expense

Lead management, underwriting and selling commission* [•] Advertisem*nt & Marketing expenses** [•] Printing, stationery including transportation of the same** [•] Others (Registrar’s fees, Legal fees, listing fees, etc.)** [•] Total estimated Issue expenses [●] * Will be incorporated after finalisation of Issue Price

** Will be incorporated at the time of filing of the Prospectus.

Fees Payable to the Book Running Lead Managers and Syndicate Members

The total fees payable to the Book Running Lead Managers and Syndicate Members (including underwriting commission and selling commission) will be as stated in the Engagement Letter with the BRLMs, a copy of which is available for inspection at the corporate office of our Company and reimbursem*nt of their out of pocket expenses.

Fees Payable to the Registrar to the Issue

The fees payable to the Registrar to the Issue for processing of application, data entry, printing of CAN/refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as per the Memorandum of Understanding to be executed with our Company, a copy of which is available for inspection at the corporate office of our Company. The Registrar to the Issue will be reimbursed for all out-of-pocket expenses including cost of stationery, postage, stamp duty and communication expenses. The funds required for making refunds to unsuccessful Bidders shall be made available to the Registrar to the Issue by us.

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Particulars regarding Public or Rights Issues during the Last Five Years

There have been no public or rights issue by the Company during the last five years.

Issues otherwise than for Cash

Except as disclosed in the section tiled “Capital Structure”, we have not issued any Equity Shares for consideration otherwise than for cash

Commission and Brokerage paid on Previous Issues of our Equity

There has not been any previous public issue of our Equity Shares. Companies under the Same Management We do not have any other company under the same management within the meaning of erstwhile Section 370 (1B) of the Companies Act, save and except for the Promoter Group companies mentioned in the section titled “Our Promoters and Promoter Group” beginning on page [●]of this Draft Red Herring Prospectus. Promise vs. Performance - Last Three Issues Until date, we have not made any public issue of our Equity Shares. Promise vs. Performance - Last Issue of Group/Associate Companies For details see the section titled “Our Promoter and Group Companies” beginning on page [●] of this Draft Red Herring Prospectus Outstanding Debentures or Bonds Our Company does not have any outstanding debentures or bonds. Outstanding Preference Shares There are no outstanding preference shares. Stock Market Data of our Equity Shares The Equity Shares are not listed. Other Disclosures Except as disclosed in the section titled “Capital Structure” beginning on page [•], our Promoter Group, or the directors of our Promoter companies or our Directors have not purchased or sold any securities of the Company during a period of six months preceding the date of this Draft Red Herring Prospectus. Mechanism for Redressal of Investor Grievances by our Company The Memorandum of Understanding between the Registrar to the Issue and us, will provide for retention of records with the Registrar to the Issue for a period of at least one year from the last date of dispatch of letters of allotment, demat credit, refund orders to enable the investors to approach the Registrar to the Issue for redressal of their grievances. All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name, address of the applicant, application number, number of shares applied for, amount paid on application, Depository Participant, and the bank branch or collection centre where the application was submitted. Disposal of Investor Grievances by our Company We estimate that the average time required by us or the Registrar to the Issue for the redressal of routine investor grievances shall be seven days from the date of receipt of the complaint. In case of non-routine

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complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible. We have appointed Mr. Nitin Sharma, Company Secretary as the Compliance Officer and he may be contacted in case of any pre-Issue or post-Issue-related problems. He can be contacted at the following address: Mr. Nitin Sharma Oswal Woollen Mills Limited G.T. Road, Sherpur, Ludhiana 141 003, India Tel: +91 161 2542 501-07. Fax: +91 161 2542 509 E-mail: [emailprotected]

Mechanism for Redressal of Investor Grievances by Companies under the Same Management

We do not have any other company under the same management within the meaning of erstwhile Section 370 (1B) of the Companies Act, save and except for the Promoter Group companies mentioned in the section titled "Our Promoters and Promoter Group" beginning on page [●] of this Draft Red Herring Prospectus.

Changes in Auditors

There has been no change in our auditors for the last three fiscals. Capitalisation of Reserves or Profits We have not capitalised our reserves or profits at any time during last five years, except as described in the section titled “Capital Structure” beginning on page [●] of this Draft Red Herring Prospectus

Revaluation of Assets

We have not revalued our assets in the last five Fiscals.

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ISSUE STRUCTURE The present Issue of up to 8,320,000 Equity Shares comprising of Net Issue of up to 8,305,000 Equity Shares and a reservation for Employees of up to 15,000 Equity Shares, at a price of Rs. [●] per Equity Share for cash aggregating Rs. [●] million is being made through the Book Building Process. The Net Issue will constitute 25% of the fully diluted post Issue paid up capital.

Employees QIB Bidders Non-Institutional Bidders

Retail Individual Bidders

Number of Equity Shares*

Up to 15,000 Equity Shares

Not more than 4,152,500 Equity Shares or Net Issue less allocation to Non Institutional Bidders and Retail Individual Bidders

Not less than 1,245,750 Equity Shares or Net Issue less allocation to QIB Bidders and Retail Individual Bidders.

Not less than 2,906,750 Equity Shares of Net Issue or Net Issue less allocation to QIB Bidders and Non Institutional Bidders.

Percentage of Issue Size available for allocation

Up to 0.18 % of size of the Issue**

Not more than 50% of Net Issue or Net Issue less allocation to Non Institutional Bidders and Retail Individual Bidders

Not less than 15% of Net Issue or Net Issue less allocation to QIB Bidders and Retail Individual Bidders.

Not less than 35% of Net Issue or Net Issue less allocation to QIB Bidders and Non Institutional Bidders.

Basis of Allocation if respective category is oversubscribed

Proportionate Proportionate (provided that not more than 50% of the Net Issue) as follows: (a) 207,625 Equity Shares shall be allocated on a proportionate basis to Mutual Funds; and (b) 3,944,875 Equity Shares shall be allotted on a proportionate basis to all QIBs including Mutual Funds receiving allocation as per (a) above

Proportionate Proportionate

Minimum Bid [●] Equity Shares Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount exceeds Rs 100,000

Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount exceeds Rs 100,000

[●] Equity Shares

Maximum Bid Such number of Equity Shares in multiples of [●] Equity Shares not exceeding 15,000 Equity Shares.

Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid does not exceed the Net Issue, subject to applicable limits

Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid does not exceed the Net Issue, subject to applicable limits

Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount does not exceed Rs. 100,000

Mode of Allotment

Compulsorily in dematerialised form

Compulsorily in dematerialised form

Compulsorily in dematerialised form

Compulsorily in dematerialised form

Trading Lot One Equity Share One Equity Share One Equity Share One Equity Share Who can Apply All or any of the Public financial Resident Indian Individuals

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Employees QIB Bidders Non-Institutional Bidders

Retail Individual Bidders

*** following: (a) a permanent employee of our Company as of [●], 2006 and based working and present in India as on the date of submission of the Bid cum Application Form. (b) a director of our Company, except any Promoters or members of the Promoter Group, whether a whole time Director part time Director or otherwise as of the date of the Red Herring Prospectus and based and present in India as on the date of submission of the Bid cum Application Form.

institutions, as specified in Section 4A of the Companies Act, FIIs, scheduled commercial banks, FVCIs, multi lateral and bilateral financial institutions, mutual funds, venture capital funds registered with SEBI, State Industrial Development Corporations, permitted insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs. 250 Million and pension funds with minimum corpus of Rs. 250 Million in accordance with applicable law.

individuals, HUF (in the name of Karta), companies, corporate bodies, NRIs, scientific institutions societies and trusts

(including HUFs and Eligible NRI’s) applying for Equity Shares such that the Bid Amount does not exceed Rs. 100,000 in value.

Terms of Payment

Margin amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members

Margin amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members

Margin amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members

Margin amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members

Margin Amount 100% of Bid Amount

At least 10% of the Bid Amount

100% of Bid Amount

100% of Bid Amount

* Under subscription, if any, in the Non-Institutional, Retail categories and the Reservation Portion would be allowed to be met with spill over from any of the other categories at the discretion of our Company in consultation with the BRLMs. However, if the aggregate demand by Mutual Funds is less than [●] Equity Shares, the balance Equity Shares available for allocation in the Mutual Funds Portion will first be added to the QIB Portion and be allocated proportionately to the QIB Bidders

** Any under subscription in Equity Shares, if any, reserved for Employees would be included in the Net Issue and allocated in accordance with the description in the section titled “Issue Procedure- Basis of Allocation” beginning on page [●] of this Draft Red Herring Prospectus.

*** In case the Bid Cum Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the same joint names and are in the same sequence in which they appear in the Bid Cum Application Form.

Letters of Allotment or Refund Orders

We shall give credit to the beneficiary account with depository participants within two working days from the date of the finalisation of basis of allocation. We shall ensure dispatch of refund orders, if any, of value up to Rs.1, 500 by "Under Certificate of Posting", and shall dispatch refund orders above Rs.1, 500, if any, by registered post or speed post at the sole or First Bidder's sole risk within 15 working days of the Bid/Issue Closing Date.

Interest in Case of Delay in Dispatch of Allotment Letters/Refund Orders.

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In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, we undertake that:

• Allotment shall be made only in dematerialised form within 15 days from the Bid/ Issue Closing Date;

• Dispatch of refund orders shall be done within 15 days from the Bid/ Issue Closing Date; and • We shall pay interest at 15% per annum, if Allotment is not made, refund orders are not dispatched and/ or

demat credits are not made to investors within the 15 day time prescribed above.

We will provide adequate funds required for dispatch of refund orders or Allotment advice to the Registrar to the Issue.

Refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centers will be payable by the Bidders. Bidding Period/Issue Period

BID/ISSUE OPENS ON [● ] BID/ISSUE CLOSES ON [ ●]

Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form except that on the Bid/Issue Closing Date, the Bids shall be accepted only between 10 a.m. and 1 p.m. (Indian Standard Time) and uploaded till such time as permitted by the BSE and the NSE on the Bid/Issue Closing Date.

Our Company reserves the right to revise the Price Band during the Bidding Period in accordance with SEBI Guidelines. The cap on the Price Band should not be more than 20% of the Floor Price. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the Floor Price in the Red Herring Prospectus and the Cap Price will not be more than 20% of such floor price.

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after revision of Price Band subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release, and also by indicating the change on the web site of the BRLMs and at the terminals of the Syndicate.

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ISSUE PROCEDURE

Book Building Procedure

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Net Issue shall be available for allocation on a proportionate basis to QIB Bidders , including up to 5% of the QIB Portion which shall be available for allocation to the Mutual Funds only. Further, not less than 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders and not less than 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders, subject to valid Bids being received at or above the Issue Price. Our Company will complete the issuance, if any, of such Equity Shares prior to the filing of the Red Herring Prospectus with the RoC.

Bidders are required to submit their Bids through the Syndicate. Further QIB Bids can be submitted only through the BRLMs. In case of QIB Bidders, our Company in consultation with BRLMs may reject Bid at the time of acceptance of Bid cum Application Form provided that the reasons for rejecting the same are provided to such Bidders in writing. In case of Non-Institutional Bidders, Retail Individual Bidders and bids under the Employee Reservation Portion, our Company would have a right to reject the Bids only on technical grounds.

Investors should note that the Equity Shares would be allotted to all successful Bidders only in the dematerialized form. Bidders will not have the option of getting Allotment of the Equity Shares in physical form. The Equity Shares on Allotment shall be traded only in the dematerialized segment of the Stock Exchanges.

Bid cum Application Form

Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of this Draft Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the allocation of Equity Shares, dispatch of the CAN, and filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to a member of the Syndicate, the Bidder is deemed to have authorized our Company to make the necessary changes in this Draft Red Herring Prospectus and the Bid cum Application Form as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder.

The prescribed colour of the Bid cum Application Form for various categories, is as follows:

Category Colour of Bid cum Application Form

Indian public and Eligible NRI’s applying on a non-repatriation basis

White

FIIs, FCVI’s and Eligible NRI’s applying on a repatriation basis

Blue

Bidders in the Employee Reservation Portion Pink

Who can Bid? a. Persons eligible to invest under all applicable laws, rules, regulations and guidelines. b. Indian nationals resident in India who are majors in single or joint names (not more than three); c. Hindu undivided families or HUFs in the individual name of the Karta. The Bidder should specify that

the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: "Name of Sole or First Bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta". Bids by HUFs would be considered at par with those from individuals;

d. Eligible NRIs on a repatriation basis or a non-repatriation basis subject to compliance with applicable laws. NRI’s other than Eligible NRI’s are not permitted to participate in this Issue.

e. Companies and corporate bodies registered under the applicable laws in India and authorized to invest in equity shares;

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f. Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts/societies and who are authorized under their constitution to hold and invest in equity shares;

g. Scientific and/or industrial research authorized to invest in equity shares; h. Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to the

RBI regulations and the SEBI guidelines and regulations, as applicable); i. Mutual funds registered with SEBI; j. Foreign Institutional Investors (FIIs) and FCVI’s registered with SEBI on a repatriation basis. k. Venture capital funds registered with SEBI; l. State industrial development corporations; m. Multilateral and bilateral development financial institutions. n. Insurance companies registered with the Insurance Regulatory and Development Authority, India; o. As permitted by the applicable laws, provident funds with minimum corpus of Rs. 250 million and who

are authorized under their constitution to invest in equity shares; and p. Pension funds with a minimum corpus of Rs. 250 million and who are authorized under their

constitution to invest in equity shares. q. Permanent employees or Directors (whole-time Directors, part-time Directors or otherwise) of our

Company, who are Indian Nationals and are based in India. The permanent employees should be on the payroll of our Company as of [●], 2006 and the Directors should be Directors on the date of the Red Herring Prospectus.

Note: As per the existing policy of the Government of India, OCBs cannot participate in this Issue. Participation by Associates of BRLMs and the Syndicate Members: Associates of BRLMs and the Syndicate Members may Bid and subscribe to Equity Shares in the Issue either in the QIB Portion or in Non Institutional Portion as may be applicable to such investors. Such bidding and subscription may be on their own account or on behalf of their clients. Allotment to all investors including associates of BRLMs and the Syndicate Members shall be on a proportionate basis.

Further, the BRLMs and the Syndicate Members shall not be entitled to subscribe to this Issue in any manner except towards fulfilling their underwriting obligation.

Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law.

Maximum and Minimum Bid Size

(a) For Retail Individual Bidders: The Bid must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter and it must be ensured that the Bid Amount payable by the Bidder does not exceed Rs. 100,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed Rs. 100,000. In case the Bid Amount is over Rs. 100,000 due to revision of the Bid or revision of the Price Band or on exercise of option to Bid at Cut off Price, the Bid would be considered for allocation under the Non Institutional Portion. The option to Bid at Cut-off Price is an option given to the Retail Individual Bidders indicating their agreement to Bid and purchase Equity Shares at the final Issue Price as determined at the end of the Book Building Process.

(b) For Non-Institutional Bidders and QIB Bidders: The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount exceeds Rs. 100,000 and is a multiple of [●] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. Under existing SEBI guidelines, a QIB Bidder cannot withdraw its Bid after the Bid /Issue Closing Date. In case of revision in Bids, the Non Institutional Bidders, who are individuals, have to ensure that the Bid Amount is greater than Rs. 100,000 for being considered for allocation in the Non Institutional Portion. In case the Bid Amount reduces to Rs. 100,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non Institutional Bidders who are eligible for allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non Institutional Bidders and QIB Bidders are not entitled to the option of bidding at Cut-off Price.

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Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in this Draft Red Herring Prospectus. (c) For Bidders in the Employee Reservation Portion

The Bid must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter. Bidders in the Employee Reservation Portion applying for a maximum Bid in any of the bidding options not exceeding Rs. 100,000 may Bid at Cut-off Price. The allotment in the Employee Reservation Portion will be on a proportionate basis.

Information for the Bidders: (a) Our Company will file the Red Herring Prospectus with the RoC at least three days before the Bid/Issue

Opening Date. (b) The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum

Application Form to potential investors. (c) Any investor (who is eligible to invest in our Equity Shares) who would like to obtain the Red Herring

Prospectus and/or the Bid cum Application Form can obtain the same from the Registered Office or from any of the members of the Syndicate.

(d) The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms should bear the stamp of a member of the Syndicate. Bid cum Application Forms, which do not bear the stamp of a member of the Syndicate will be rejected.

(e) The Price Band has been fixed at Rs. [•] to Rs. [•] per Equity Share. The Bidders can Bid at any price within the Price Band, in multiples of Rs. 1 (One). In accordance with the SEBI Guidelines, our Company, in consultation with the BRLMs, reserves the right to revise the Price Band during the Bidding Period. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of the Price Band.

(f) In case the Price Band is revised, the Bidding/ Issue Period may be extended, if required, by an additional three days, subject to the total Bidding/ Issue Period not exceeding 10 working days. The revised Price Band and Bidding/ Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, and by issuing published in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper with a wide circulation and also by indicating the change on the websites of the BRLMs and at the terminals of the members of the Syndicate.

Method and Process of Bidding

(a) Our Company and the BRLMs shall declare the Bid/Issue Opening Date, the Bid/Issue Closing Date and the Price Band at the time of filing the Red Herring Prospectus with RoC and also publish the same in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper with a wide circulation. This advertisem*nt shall subject to the provision of Section 66 of the Companies Act contain the minimum disclosures as specified under Schedule XX-A of the SEBI Guidelines. The members of the Syndicate shall accept Bids from the Bidders during the Bidding/Issue Period in accordance with the terms of the Syndicate Agreement. Investors who are interested in subscribing to our Equity Shares should approach any of the members of the Syndicate or their authorized agent(s) to register their Bid.

(b) The Bidding Period shall be a minimum of three working days and shall not exceed seven working days. In case the Price Band is revised, the revised Price Band and Bid/ Issue Period will be published in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper with a wide circulation and the Bidding Period may be extended, if required, by an additional three days, subject to the total Bidding Period not exceeding 10 working days.

(c) Each Bid cum Application Form will give the Bidder the choice to Bid for up to three optional prices (for details, see the section titled "Issue Procedure - Bids at Different Price Levels" beginning on page [●] of this Draft Red Herring Prospectus) within the Price Band and specify the demand (i.e. the number of Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation and the rest of the Bid(s), irrespective of the Bid Price, will become automatically invalid.

(d) The Bidder cannot Bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been submitted to a member of the Syndicate. Submission of a second Bid cum Application Form to

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either the same or to another member of the Syndicate will be treated as multiple Bids and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the section titled "Issue Procedure - Build up of the Book and Revision of Bids" beginning on page [●] of this Draft Red Herring Prospectus.

(e) The members of the Syndicate will enter each Bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip ("TRS"), for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.

(f) During the Bidding Period, Bidders may approach a member of the Syndicate to submit their Bids. Every member of the Syndicate shall accept Bids from all clients/investors who place orders through them and shall have the right to vet the Bids, subject to the terms of the Syndicate Agreement and this Draft Red Herring Prospectus.

(g) Along with the Bid cum Application Form, all Bidders will make payment in the manner described in the section titled "Issue Procedure - Terms of Payment" beginning on page [●] of this Draft Red Herring Prospectus.

Bids at different price levels

(a) The Price Band has been fixed at Rs. [●] to Rs. [●] per Equity Share of Rs. 10 each, Rs. [●] being the Floor Price and Rs. [●] being the Cap Price. The Bidders can Bid at any price within the Price Band, in multiples of Re. 1.

(b) In accordance with the SEBI Guidelines, our Company in consultation with the BRLMs reserves the right to revise the Price Band during the Bidding Period. The cap on the Price Band should not be more than 20% of the Floor Price. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of the Price Band.

(c) In case of revision in the Price Band, the Issue Period will be extended for three additional days after revision of Price Band subject to a maximum of 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a public notice in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper with a wide circulation and also by indicating the change on the websites of the BRLMs and at the terminals of the members of the Syndicate.

(d) We, in consultation with the BRLMs, can finalise the Issue Price within the Price Band, without the prior approval of, or intimation to, the Bidders.

(e) The Bidder can Bid at any price within the Price Band. The Bidder has to Bid for the desired number of Equity Shares at a specific price. Retail Individual Bidders and Bidders in the Employee Reservation Portion applying for a maximum Bid in any of the bidding options not exceeding Rs. 100,000 may Bid at Cut-off Price. However, bidding at Cut-off Price is prohibited for QIB Bidders and Non Institutional Bidders in excess of Rs. 100,000 and such Bids from QIBs and Non Institutional Bidders shall be rejected.

(f) Retail Individual Bidders who Bid at Cut-off Price and Employees bidding under the Employee Reservation Portion at Cut- Off Price agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders bidding at Cut-Off Price and Employees bidding under the Employee Reservation Portion at Cut-Off Price shall deposit the Bid Amount based on the Cap Price in the Escrow Account. In the event the Bid Amount is higher than the subscription amount payable by the Retail Individual Bidders, who Bid at Cut-off Price and Employees bidding under the Employee Reservation Portion at Cut-Off Price (i.e. the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail Individual Bidders, who Bid at Cut-off Price, shall receive the refund of the excess amounts from the Escrow Account or the Refund Account, as the case may be.

(g) In case of an upward revision in the Price Band announced as above, Retail Individual Bidders and Employees bidding under the Employee Reservation Portion at Cut-Off Price, who had Bid at Cut-off Price could either (i) revise their Bid or (ii) make additional payment based on the cap of the revised Price Band (such that the total amount i.e. original Bid Amount plus additional payment does not exceed Rs. 100,000 if the Bidder wants to continue to Bid at Cut-off Price), with the member of the Syndicate to whom the original Bid was submitted. In case the total amount (i.e. original Bid Amount plus additional payment) exceeds Rs. 100,000, the Bid by a Retail Individual Bidder will be considered for allocation under the Non- Institutional Portion in terms of this Draft Red Herring Prospectus. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the Cap Price prior to revision,

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the number of Equity Shares Bid for shall be adjusted downwards for the purpose of Allotment, such that no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut-off Price.

(h) In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders and Employees bidding under the Employee Reservation Portion, who have Bid at Cut-off Price, could either revise their Bid or the excess amount paid at the time of bidding would be refunded from the Escrow Account or the Refund Account, as the case may be. The minimum application size shall be in the range of Rs. 5,000 to Rs. 7,000, even in case of revision in the Price Band, if any.

Application in the Issue

Equity Shares being issued through the Red Herring Prospectus can be applied for in the dematerialized form only. Bids by Eligible NRIs Bid cum Application Forms have been made available for Eligible NRIs at the Registered Office of our Company and with members of the Syndicate. NRI applicants should note that only such applications as are accompanied by payment in free foreign exchange shall be considered for Allotment under the Eligible NRI Category. The Eligible NRIs who intend to make payment through the Non-Resident Ordinary account shall use the application form meant for Resident Indians (white form).

Bids by Mutual Funds

An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Funds Portion. In the event that the demand is greater than [●] Equity Shares, allocation shall be made to Mutual Funds on a proportionate basis to the extent of the Mutual Funds Portion. The remaining demand by Mutual Funds shall, as part of the aggregate demand by QIB Bidders, be made available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual Funds Portion.

The Bids made by the asset management companies or custodian of Mutual Funds shall specifically state the names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme for which the Bid has been made.

As per the current regulations, the following restrictions are applicable for investments by Mutual Funds:

No Mutual Fund scheme shall invest more than 10% of its net asset value in equity shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes should own more than 10% of any company's paid-up capital carrying voting rights.

The above information is given for the benefit of the Bidders. Our Company and the BRLMs are not liable for any amendments or modification or changes in applicable laws or regulations, which may happen after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares Bid for do not exceed the applicable limits under laws or regulations.

Escrow Mechanism

We shall open Escrow Accounts with one or more of the Escrow Collection Banks in whose favour the Bidders shall write the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a certain category would be deposited in the Escrow Accounts. The Escrow Collection Banks will act in terms of the Red Herring Prospectus, the Prospectus and the Escrow Agreement. The monies in the Escrow Accounts shall be maintained by the Escrow Collection Bank(s) for and on behalf of the Bidders. The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the monies from the Escrow Accounts to the Issue Account and the Refund Account as per the terms of the Escrow Agreement, the Red Herring Prospectus and the Prospectus.

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The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between us, the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Issue to facilitate collections from the Bidders.

Terms of Payment and Payment into the Escrow Accounts Each Bidder, shall pay the applicable Margin Amount, with the submission of the Bid cum Application Form by way of a cheque or demand draft in favour of the Escrow Accounts (for details see the section titled "Issue Procedure - Payment Instructions" beginning on page [●] of this Draft Red Herring Prospectus) and submit the same to the member of the Syndicate to whom the Bid is being submitted. The Bidder may also provide the applicable Margin Amount by way of an electronic transfer of funds through the RTGS mechanism. Bid cum Application Forms accompanied by cash/Stockinvest/money order shall not be accepted.

Each category of Bidders i.e. QIB Bidders, Non Institutional Bidders, Retail Individual Bidders and Employees bidding under the Employee Reservation Portion would be required to pay their applicable Margin Amount at the time of the submission of the Bid cum Application Form. Each QIB shall provide their QIB Margin Amount only to a BRLM. The Margin Amount payable by each category of Bidders is mentioned in the section titled "Issue Structure" beginning on page [●] of this Draft Red Herring Prospectus. The maximum Bid Price has to be paid at the time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder. Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Amount, any difference between the amount payable by the Bidder for Equity Shares allocated at the Issue Price and the Margin Amount paid at the time of Bidding, shall be payable by the Bidder no later than the Pay-in-Date, which shall be a minimum period of two days from the date of communication of the allocation list to the members of the Syndicate by the BRLMs. If the payment is not made favouring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled. However, if the members of the Syndicate do not waive such payment, the full amount of payment has to be made at the time of submission of the Bid cum Application Form.

QIB Bidders will be required to deposit the QIB Margin Amount at the time of submitting of their Bids. After the Bid Closing Date, the level of subscription in all categories shall be determined. Based on the level of subscription, additional margin money, if any may be called for from the QIB Bidders. If such additional margin money is not paid into the appropriate Escrow Accounts within the time and in the manner stipulated above, the Bid of the Bidder is liable to be rejected. Further, we may call for additional Margin Amount over and above the minimum prescribed 10% Margin Amount from certain QIBs at our discretion prior to acceptance of the Bid anytime up to the Bid/Issue Closing Date and shall have the right to reject such bids on technical ground in case of non-receipt of such additional margin. The members of the Syndicate shall deposit the cherub or demand draft with the Escrow Collection Bank(s), which will hold the monies for the benefit of the Bidders till the Designated Date. On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds equivalent to the size of the Issue from the Escrow Account, as per the terms of the Escrow Agreement, into the Issue Account. The balance amount after transfer to the Issue Account shall be transferred to the Refund Account.

Where the Bidder has been allocated lesser number of Equity Shares than he or she had Bid for, the excess amount paid on bidding, if any, after adjustment for allotment, will be refunded to such Bidder within 15 days from the Bid /Issue Closing Date, failing which we shall pay interest at 15% per annum for any delay beyond the periods as mentioned above.

Electronic registration of Bids

(a) The members of the Syndicate will register the Bids using the on-line facilities of the BSE and the NSE. There will be at least one on-line connectivity in each city, where a stock exchange is located in India and where Bids are being accepted.

(b) The BSE and the NSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the terminals of the members of the Syndicate and their authorized agents during the Bidding/Issue Period. The members of the Syndicate can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently download the off-line data file into the on-line facilities for book building on a regular basis. On the Bid /Issue Closing Date, the members of the Syndicate shall upload the Bids till such time as may be permitted by the Stock Exchanges.

(c) The aggregate demand and price for Bids registered on the electronic facilities of the BSE and the NSE will be uploaded on a regular basis, consolidated and displayed on line at all bidding centers and at the websites

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of BSE and NSE. A graphical representation of consolidated demand and price would be made available at the bidding centers during the Bidding/Issue Period.

(d) At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the on line system: • Name of the Bidder(s). Bidders should ensure that the name given in the Bid cum Application Form is

exactly the same as the name in which the Depository Account is held. In case the Bid cum Application Form is submitted in joint names, Bidders should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form;

• Investor category - individual, corporate,QIBs, Eligible NRI, FCVI, FII or Mutual Fund etc; • Numbers of Equity Shares Bid for; • Bid price; • Bid cum Application Form number; • Margin Amount paid upon submission of Bid cum Application Form; • Depository participant identification no. and client identification no. of the beneficiary account of the

Bidder. (e) A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding

options. It is the Bidder's responsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be allocated either by the members of the Syndicate or our Company.

(f) Such TRS will be non-negotiable and by itself will not create any obligation of any kind. (g) It is to be distinctly understood that the permission given by the BSE and the NSE to use their network and

software of the online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by our Company or the BRLMs are cleared or approved by the BSE and the NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, our Promoters, our management or any scheme or project of our Company.

(h) It is also to be distinctly understood that the approval given by the BSE and the NSE should not in any way be deemed or construed that this Draft Red Herring Prospectus has been cleared or approved by the BSE and the NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring Prospectus; nor does it warrant that our Equity Shares will be listed or will continue to be listed on the BSE and the NSE.

(i) In case of QIB Bidders, members of the Syndicate have the right to accept the Bid or reject it. A rejection can be made only at the time of receiving the Bid and only after assigning a reason for such rejection in writing. In case on Non-Institutional Bidders and Retail Individual Bidders who Bid, Bids should not be rejected except on technical grounds as listed in the section titled “Issue Procedure” beginning on page [•] of this Draft Red Herring Prospectus.

(j) Only Bids that are uploaded on the online IPO system of the NSE and BSE shall be considered for Allocation. In case of discrepancy of data between the BSE or the NSE and the members of the Syndicate, the decision of the BRLMs, based on the physical records of Bid cum Application Forms, shall be final and binding on all concerned.

Build Up of the Book and Revision of Bids

(a) Bids registered through the members of the Syndicate shall be electronically transmitted to the BSE or the NSE mainframe on a regular basis.

(b) The book gets built up at various price levels. This information will be available with the BRLMs on a regular basis.

(c) During the Bidding/Issue Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the Price Band during the Bidding/Issue Period using the printed Revision Form which is a part of the Bid cum Application Form.

(d) Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum Application Form and he is changing only one of the options in the Revision Form, he must still fill the details of the other two options that are not being changed in the Revision Form. Incomplete or inaccurate Revision Forms will not be accepted by the members of the Syndicate.

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(e) The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate through whom he or she had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof.

(f) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this Draft Red Herring Prospectus. In case of QIB Bidders, the members of the Syndicate shall collect the payment in the form of cheque or demand draft or electronic transfer of funds through RTGS for the incremental amount in the QIB Margin Amount, if any, to be paid on account of upward revision of the Bid at the time of one or more revisions by the QIB Bidders.

(g) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised the previous Bid.

Price Discovery and Allocation

(a) After the Bid /Issue Closing Date, the BRLMs will analyze the demand generated at various price levels and discuss pricing strategy with our Company.

(b) We, in consultation with the BRLMs, shall finalise the Issue Price and the number of Equity Shares to be allocated in each investor category.

(c) The allocation to QIBs will be not less than 50% of the Net Issue and allocation to Non-Institutional and Retail Individual Bidders will be at least 15% and 35% of the Net Issue, respectively, on a proportionate basis, in a manner specified in the SEBI Guidelines and this Draft Red Herring Prospectus, in consultation with the Designated Stock Exchange, subject to valid Bids being received at or above the Issue Price.

(d) Any under-subscription in the Employee Reservation Portion would be included in the Net Issue. Under subscription, if any, in the Non-Institutional, Retail categories and the Reservation Portion would be allowed to be met with spill over from any of the other categories at the discretion of our Company in consultation with the BRLMs. However, if the aggregate demand by Mutual Funds is less than [●] Equity Shares, the balance Equity Shares available for allocation in the Mutual Funds Portion will first be added to the QIB Portion and be allocated proportionately to the QIB Bidders.

(e) The BRLMs, in consultation with us, shall notify the members of the Syndicate of the Issue Price and allocations to their respective Bidders, where the full Bid Amount has not been collected from the Bidders. We reserve the right to cancel the Issue any time after the Bid/Issue Opening Date but before the Allotment without assigning any reasons whatsoever.

(f) In terms of the SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date.

(g) QIB Bidders will be required to deposit the QIB Margin Amount at the time of submitting of their Bids. After the closure of bidding, the level of subscription in the various categories shall be determined. Based on the level of subscription, additional margin money, if any, shall be called for from the QIB Bidders. The QIB Bidders shall pay such additional margin money within a period of two days from the date of the letter communicating the request for such additional margin money.

(h) Allocation to FIIs and eligible NRIs on repatriation basis will be subject to the applicable law.

Signing of Underwriting Agreement and ROC Filing

(a) Our Company, the BRLMs and the Syndicate Members shall enter into an Underwriting Agreement upon finalisation of the Issue Price.

(b) After signing the Underwriting Agreement, we would update and file the updated Red Herring Prospectus with RoC, which then would be termed 'Prospectus'. The Prospectus would have details of the Issue Price, Issue size, underwriting arrangements and would be complete in all material respects.

(c) We will file a copy of the Prospectus with the RoC in terms of Section 56, Section 60, and Section 60B of the Companies Act.

Announcement of pre-Issue Advertisem*nt Subject to Section 66 of the Companies Act, our Company shall after receiving final observations, if any, on this Draft Red Herring Prospectus from SEBI, publish an advertisem*nt, in the from prescribed by the SEBI

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Guidelines in an English national newspaper, a Hindi national newspaper and a Punjabi newspaper with a wide circulation Issuance of Letter for Additional Margin Money In case of QIB Bidders, who have submitted their Bids with the QIB Margin Amount, additional Margin Amount may be called for by our Company, in consultation with the BRLMs. The amount of such additional Margin Amount called for shall depend on the level of subscription in various categories, as determined on the basis of the electronic registration of Bids. The allotment of shares to QIB Bidders shall be finalized by our Company, in consultation with the BRLMs and the Designated Stock Exchange.

Advertisem*nt regarding Issue Price and Prospectus

After filing of the Prospectus with the RoC, a statutory advertisem*nt will be issued by our Company in a widely circulated English national newspaper, a Hindi national newspaper and a Punjabi newspaper of wide circulation. This advertisem*nt, in addition to the information that has to be set out in the statutory advertisem*nt, shall indicate the Issue Price along with a table showing the number of Equity Shares and the amount payable by an investor. Any material updates between the date of Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisem*nt.

Issuance of CAN

(a) Upon approval of the basis of Allotment by the Designated Stock Exchange, the BRLMs or the Registrar to the Issue shall send to the members of the Syndicate a list of their Bidders who have been allocated Equity Shares in the Issue. The approval of the basis of allocation by the Designated Stock Exchange for QIB Bidders may be done simultaneously with or before the approval of the basis of allocation for the Retail and Non-Institutional Bidders. However, the investor should note that our Company shall ensure that the date of Allotment of the Equity Shares to all investors in this Issue shall be done on the same date. Investors should note that our Company shall ensure that the demat credit of Equity Shares pursuant to Allotment shall be made on the same date to all investors in this Issue;

(b) The BRLMs or members of the Syndicate would then send the CAN to their Bidders who have been allocated Equity Shares in the Issue. The dispatch of CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to such Bidder; Those Bidders who have paid the Margin Amount into the Escrow Account at the time of bidding shall pay the balance amount payable into the Escrow Account by the Pay-in Date specified in the CAN; and

(c) Such Bidders who have been allocated Equity Shares and who have already paid the Margin Amount for the said Equity Shares into the Escrow Account at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, to realisation of their cheque or demand draft paid into the Escrow Accounts. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to such Bidder.

INVESTORS ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE EQUITY SHARES THAT MAY BE ALLOTTED TO THEM PURSUANT TO THIS ISSUE.

Notice to QIBs: Allotment Reconciliation and Revised CANs After the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar on the basis of Bids uploaded on the BSE/NSE system. This shall be followed by a physical books prepared by the Registrar on the basis of Bid-cum Application Forms received. Based on the electronic book or the physical book, as the case may be, QIBs will be sent a CAN, indicating the number of Equity Shares that may be allocated to them. This CAN is subject to the basis of final Allotment, which will be approved by the Designated Stock Exchange and reflected in the reconciled physical book prepared by the Registrar. Subject to SEBI Guidelines, certain Bid applications may be rejected due to technical reasons, non-receipt of funds, cancellation of cheques, cheque bouncing, incorrect details, etc., and these rejected applications will be reflected in the reconciliation and basis of Allotment as approved by the Designated Stock Exchange and specified in the physical book. As a result, a revised CAN may be sent to QIBs, on or prior to [•], 2006, and the allocation of Equity Shares in such revised CAN may be different from that specified in the earlier CAN. QIBs should note that they may be required to pay additional amounts, if any, by the Pay-in Date specified in the revised CAN, for any increased allocation of Equity Shares. The CAN will constitute the valid, binding and irrevocable contract (subject only to the issue of a revised CAN) for the QIB to pay the entire Issue Price for all the Equity Shares allocated to such QIB. The revised CAN, if issued, will supersede in entirety the earlier CAN.

Designated Date and Allotment of Equity Shares

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(a) Our Company will ensure that the Allotment of Equity Shares is done within 15 days of the Bid/Issue Closing Date. After the funds are transferred from the Escrow Account to the Issue Account and the Refund Account on the Designated Date, our Company would ensure the credit to the successful Bidders' depository accounts of the allotted Equity Shares to the Allottees within two working days from the date of Allotment.

(b) As per the SEBI Guidelines, Equity Shares will be issued and allotted only in the dematerialised form to the Allottees. Allottees will have the option to re-materialise the Equity Shares so allotted, if they so desire, as per the provisions of the Companies Act and the Depositories Act.

Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated to them pursuant to this Issue.

Letters of Allotment or Refund Orders

Our Company shall give credit of Equity Shares allotted, if any, to the beneficiary account with Depository Participants within two working days from the date of the finalisation of basis of allocation. Applicants residing at 15 centres where clearing houses are managed by the RBI will get refunds through ECS (subject to availability of information for crediting the refund through ECS) except where applicant is otherwise disclosed as eligible to get refunds through Direct Credit, NEFT or RTGS. Our Company shall ensure dispatch of refund orders, if any, of value up to Rs.1, 500 by "Under Certificate of Posting", and shall dispatch refund orders above Rs.1, 500, if any, by registered post or speed post or Direct Credit, NEFT, RTGS or ECS at the sole or First Bidder's sole risk within 15 days of the Bid/ Issue Closing Date. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter (refund advice) through ordinary post intimating them about the mode of credit of refund within 15 working days of the closure of the Issue. Our Company shall ensure dispatch of refund orders/refund advice (for Direct Credit, NEFT, RTGS or ECS), if any, by “Under Certificate of Posting” or registered post or speed post, as applicable, only at the sole or First Bidder’s sole risk within 15 days of the Bid/Issue Closing Date and adequate funds for making refunds to applicants as per the mode(s) disclosed shall be made available to the Registrar to the Issue. In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, we undertake that:

Allotment and transfer shall be made only in dematerialised form within 15 days from the Bid/Issue

Closing Date; Dispatch of refund orders shall be done within 15 days from the Bid/Issue Closing Date; and We shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned

above), if Allotment is not made, refund orders are not dispatched and/or demat credits are not made to investors within the 15 day time period prescribed above.

Our Company will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Issue.

Save and except refunds effected through the electronic mode, i.e. Direct Credit, NEFT, RTGS or ECS, refunds will be made by cheques, pay orders or demand drafts drawn on a bank appointed by our Company as an Escrow Collection Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders. GENERAL INSTRUCTIONS Do's:

a) Check if you are eligible to apply, having regard to applicable laws, rules, regulations, guidelines, approvals and the terms of the Red Herring Prospectus.

b) Ensure that you Bid within the Price Band.

c) Read all the instructions carefully and complete the Bid cum Application Form. d) Ensure that the details about your Depository Participant and beneficiary account are correct and the

beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only.

e) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate.

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f) Ensure that you have been given a TRS for all your Bid options. g) Submit Revised Bids to the same member of the Syndicate through whom the original Bid was placed and

obtain a revised TRS. h) Where Bid(s) is/are for Rs. 50,000 or more, each of the Bidders, should mention their Permanent Account

Number (PAN) allotted under the IT Act. The copies of the PAN card or PAN allotment letter should be submitted with the Bid cum Application Form. If you have mentioned "Applied For" or "Not Applicable", in the Bid cum Application Form in the section dealing with PAN number, ensure that you submit Form 60 or 61, as the case may be, together with permissible documents as address proof.

h) Ensure that the name(s) given in the Bid cum Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the Bid cum Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Bid cum Application Form.

i) Ensure that the Demographic Details are updated, true and correct, in all respects. Don'ts:

(a) Do not Bid for lower than the minimum Bid size. (b) Do not Bid/revise Bid price to less than Floor Price or higher than the Cap Price. (c) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the members of the

Syndicate. (d) Do not pay the Bid amount in cash, by money order or by postal order or by stockinvest. (e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate

only. (f) Do not Bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders, and for Retail Individual

Bidders and Employees bidding under the Employee Reservation Portion for whom the Bid Amount exceeds Rs. 100,000).

(g) Do not fill up the Bid cum Application Form such that the Equity Shares Bid for exceeds the Issue size and/or investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations.

(h) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground. Bids and Revisions of Bids

Bids and revisions of Bids must be: (a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable. (b) In single name or in joint names (not more than three, and in the same order as their Depository Participant

details). (c) Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained

herein, in the Bid cum Application Form or in the Revision Form. (d) The Bids from the Retail Individual Bidders must be for a minimum of [●] Equity Shares and in multiples

of [●] Equity Shares thereafter subject to a maximum Bid Amount of Rs. 100,000. (e) For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity

Shares in multiples of [●] Equity Shares such that the Bid Amount exceeds Rs. 100,000 and in multiples of [●] Equity Shares thereafter. Bids cannot be made for more than the Net Issue. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of shares that can be held by them under the applicable laws or regulations.

(f) For Bidders bidding under the Employee Reservation Portion, the Bid must be for a minimum of [●] Equity Shares in multiples of [●]Equity Shares thereafter, subject to a maximum of Bid Amount does not exceed 15,000 Equity Shares.

(g) Thumb impressions and signatures other than in the languages specified in the Eighth Schedule in the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.

Bidder's Depository Account and Bank Account Details

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Bidders should note that on the basis of the name of the Bidders, Depository Participant’s name, Depository Participant-Identification number and beneficiary account number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depository, demographic details of the Bidders such as their address, bank account details for printing on refund orders or giving credit through ECS or Direct Credit, and occupation (hereinafter referred to as ‘‘Demographic Details’’). These bank account details would be used for giving refunds to the Bidders. Hence, Bidders 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 Bidders at the Bidders sole risk and neither the BRLMs nor the Bank shall have any responsibility or undertake any liability for the same. Hence, Bidders should carefully fill in their Depository Account details on the Bid cum Application Form.

IT IS MANDATORY FOR ALL THE BIDDERS TO GET THE EQUITY SHARES IN DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT'S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM.

These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/ECS credit or credit through Direct Credit, NEFT or RTGS for refunds/CANs/Allocation advice and printing of Company particulars on the refund order and the Demographic Details given by Bidders in the Bid cum Application Form would not be used for these purposes by the Registrar. Hence, Bidders are advised to update their Demographic Details as provided to their Depository Participants.

By signing the Bid cum Application Form, the Bidder would deemed to have authorised the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records.

Refund orders/allocation advices/CANs would be mailed at the address of the Bidder as per the Demographic Details received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at the Bidders sole risk and neither the Escrow Collection Bank(s) nor the BRLMs shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay.

In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Bidders (including the order of names of joint holders), the Depository Participant's identity (DP ID) and the beneficiary account number, then such Bids are liable to be rejected.

Bids under Power of Attorney

In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum and articles of association and/or bye laws must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to reject such Bids in whole or in part, in either case, without assigning any reason therefor.

In case of the Bids made pursuant to a power of attorney by FIIs, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefor.

In case of the Bids made pursuant to a power of attorney by Mutual Funds, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to reject such Bid in whole or in part, in either case, without assigning any reason therefor.

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We, in our absolute discretion, reserve the right to relax the above condition of simultaneous lodging of the power of attorney along with the Bid cum Application Form, subject to such terms and conditions that we/the BRLMs may deem fit.

We, in our absolute discretion, reserve the right to permit the holder of the power of attorney to request the Registrar to the Issue that for the purpose of printing particulars on the refund order and mailing of the refund order/CANs/allocation advice, the Demographic Details given on the Bid cum Application Form should be used (and not those obtained from the Depository of the Bidder). In such cases, the Registrar to the Issue shall use Demographic Details as given in the Bid cum Application Form instead of those obtained from the depositories.

Bids by Employees

For the purpose of the Employee Reservation Portion, Employee means all or any of the following:

(a) a permanent employee of our Company as of [●] and based working and present in India as on the date of

submission of the Bid cum Application Form. (b) a Director of our Company, whether a whole time director except any Promoters or members of the

Promoter Group, part time director or otherwise as of date of the Red Herring Prospectus and based and present in India as on the date of submission of the Bid cum Application Form. Bids under Employee Reservation Portion by Employees shall be: • Made only in the prescribed Bid cum Application Form or Revision Form (i.e. pink colour form). • Employees, as defined above, should mention the Employee Number at the relevant place in the Bid

cum Application Form. • The sole/ first Bidder should be Employees. • Only Employees would be eligible to apply in this Issue under the Employee Reservation Portion. • Only those Bids, which are received at or above the Issue Price, would be considered for allocation

under this category. • Employees can apply at Cut-Off Price if the Bid Amount does not exceed Rs. 100,000. • Bid by Employees can be made also in the "Net Issue" portion and such Bids shall not be treated as

multiple bids. • If the aggregate demand in this category is less than or equal to 15,000 Equity Shares at or above the

Issue Price, full allocation shall be made to the Employees to the extent of their demand. Under-subscription, if any, in the Employee Reservation Portion will be added back to the Net Issue.

• If the aggregate demand in this category is greater than 15,000 Equity Shares at or above the Issue Price, the allocation shall be made on a proportionate basis. For the method of proportionate basis of allocation, refer to "Issue-Procedure-Basis of Allocation" beginning on page [●] of this Draft Red Herring Prospectus.

Bids made by Insurance Companies

In case of the Bids made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to reject such Bids in whole or in part, in either case, without assigning any reason therefor.

Bids made by Provident Funds

In case of the Bids made by provident funds, subject to applicable law, with minimum corpus of Rs. 250 million and pension funds with minimum corpus of Rs. 250 million, a certified copy of certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefor.

Bids by NRI’s, FIIs registered with SEBI / FVCIs registered with SEBI on a repatriation basis

(i) As per the current regulations, the following restrictions are applicable for investments by FIIs:

No single FII can hold more than 10% of our Company’s post-Issue paid-up capital (i.e., 10% of 33,220,000 Equity Shares). In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our Company’s total issued capital or 5% of our Company’s total issued capital in case such sub account is a foreign corporate body or an individual.

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As of now, the aggregate FII holding in our Company cannot exceed 24% of our Company’s total issued capital. With approval of our Board and that of the shareholders of our Company by way of a special resolution, the aggregate FII holding limit can be enhanced up to 100%.

However, as of the date of this Draft Red Herring Prospectus, no such resolution has been recommended to our shareholders for approval.

(ii) As per the current regulations, any venture capital fund or foreign venture capital investors shall not invest more than 33.33% of their investible funds by way of subscription to initial public offer of a venture capital undertaking, whose shares are proposed to be listed or in a preferential allotment of equity shares of a listed company subject to a lock-in period of one year.

Bids and revision to the Bids must be made:

1. On the Bid cum Application Form or the Revision Form, as applicable, and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.

2. In a single name or joint names (not more than three and in the same order as their Depository Participant details).

3. By Eligible NRIs – Bids for a Bid Amount of up to Rs. 100,000 would be considered under the Retail Portion for the purposes of allocation and for a Bid Amount of more than Rs. 100,000 would be considered under Non-Institutional Portion for the purposes of allocation.

4. In the names of individuals, or in the names of FIIs or FVCIs, but not in the names of minors, OCBs, firms or partnerships, foreign nationals (excluding Eligible NRIs) or their nominees.

Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only at the prevailing exchange rate and net of bank charges and/or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into U.S. Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.

Our Company does not require any approval for the Issue of Equity Shares to Eligible NRIs, FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral development financial institutions and other Eligible NRIs. As per the RBI regulations, OCBs are not permitted to participate in the Issue. Further, NRIs who are not Eligible NRIs are not permitted to participate in the Issue.

It is to be distinctly understood that there is no reservation for Eligible NRIs and FIIs, and all such Bidders will be treated on the same basis with other categories for the purpose of allocation.

PAYMENT INSTRUCTIONS

We shall open Escrow Accounts with the Escrow Collection Bank(s) for the collection of the Bid Amounts payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Issue.

Payment into Escrow Account Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the following terms: (i) The Bidders for whom the applicable margin is equal to 100% shall, with the submission of the Bid cum

Application Form draw a payment instrument for the Bid Amount in favour of the Escrow Account and submit the same to the members of the Syndicate.

(ii) In case the above Margin Amount paid by the Bidders during the Bidding Period is less than the Issue Price multiplied by the Equity Shares allocated to the Bidder, the balance amount shall be paid by the Bidders into the Escrow Account within the period specified in the CAN which shall be subject to a minimum period of two days from the date of communication of the allocation list to the members of the Syndicate by the BRLMs.

(iii) The payment instruments for payment into the Escrow Account should be drawn in favour of: (a) In case of Resident QIB Bidders: "Escrow Account - OWM IPO-QIB-Resident"; (b) In case of Non-Resident QIB Bidders: "Escrow Account - OWM IPO-QIB-Non-Resident";

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(c) In case of Resident Non-Institutional Bidders and Retail Individual Bidders: "Escrow Account - OWM IPO-Non QIB-Resident"

(d) In case of Non-Resident Non-QIB Bidders: "Escrow Account - OWM IPO-Non QIB-Non-Resident"

(e) In case of Employees: "Escrow Account- OWM IPO-Employee" (iv) In case of Bids by FIIs, FVCI’s registered with the SEBI the payment should be made out of funds held

in Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to a Special Rupee Account.

(v) In the case of Bids by Eligible NRIs applying on a repatriation basis, the payments must be made

through Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in NRE Accounts or FCNR Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of the Non-Resident Bidder bidding on a repatriation basis. Payment by draft should be accompanied by a bank certificate confirming that the draft has been issued by debiting a NRE Account or a FCNR Account.

(vi) In the case of Bids by Eligible NRIs applying on a non-repatriation basis, the payments must be made

by Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application, remitted through normal banking channels or out of funds held in NRE Accounts or FCNR Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance or out of an NRO Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting an NRE or a FCNR or an NRO Account.

(vii) Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated, will be refunded to the Bidder from the Refund Account.

(viii) The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated Date.

(ix) On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account as per the terms of the Escrow Agreement into the Issue Account.

(x) On the Designated Date and not later than 15 days from the Bid/Issue Closing Date, the Escrow Collection Banks shall refund all amounts payable to unsuccessful Bidders and the excess amount paid on Bidding, if any, after adjusting for allocation to the Bidders.

Payments should be made by cheque, or demand draft drawn on any bank (including a co-operative bank), which is situated at, and is a member of or sub member of the banker's clearing house located at the centre where the Bid cum Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/stockinvest/money orders/postal orders will not be accepted.

Payment by Stockinvest

In terms of the Reserve Bank of India Circular No. DBOD No. FSC BC 42/24.47.00/2003-04 dated November 5, 2003, the option to use the stockinvest instrument in lieu of cheques or bank drafts for payment of Bid money has been withdrawn.

SUBMISSION OF BID CUM APPLICATION FORM

All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts equivalent to the Margin Amount shall be submitted to the members of the Syndicate at the time of submission of the Bid.

Separate receipts shall not be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the

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acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder.

OTHER INSTRUCTIONS

Joint Bids in case of Individuals

Bids may be made in single or joint names (not more than three). In case of joint Bids, all payments will be made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communication will be addressed to the first Bidder and will be dispatched to his or her address as per the Demographic Details received from the Depository.

Multiple Bids

A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same. In this regard, illustrations of certain procedures which may be followed by the Registrar to the Issue to detect multiple applications are provided below:

1. All applications with the same name and age will be accumulated and taken to a separate process file as probable multiple master.

2. In this master, a check will be carried out for the same PAN/GIR numbers. In cases where the PAN/GIR numbers are different, the same will be deleted from this master.

3. The Registrar will obtain, from depositories, details of the applicants’ address based on the DP ID and Beneficiary Account Number provided in the Bid-cum-Application Form and create an address master.

4. Then the addresses of all these applications from the address master will be strung. This involves putting the addresses in a single line after deleting non-alpha and non-numeric characters i.e. commas, full stops, hash etc. Sometimes, the name, the first line of address and pin code will be converted into a string for each application received and a photo match will be carried out amongst all the applications processed. A print-out of the addresses will be taken to check for common names.

5. The applications will be scanned for same or identical DP ID and Client ID numbers. In case applications bear the same numbers, these will be treated as multiple applications.

6. After consolidation of all the masters as described above, a print out of the same will be taken and the applications physically verified to tally signatures as also fathers/husbands names. On completion of this, the applications will be identified as multiple applications.

In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme for which the Bid has been made.

Bids made by Employees both under Employees Reservation Portion as well as in the Net Issue shall not be treated as multiple Bids. Our Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all categories. PAN or GIR Number

Where Bid(s) is/are for Rs. 50,000 or more, the Bidder or in the case of a Bid in joint names, each of the Bidders, should mention his/her PAN allotted under the I.T. Act. The copy of the PAN card(s) or PAN allotment letter(s) is required to be submitted with the Bid cum Application Form. Applications without this information and documents will be considered incomplete and are liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN, as the Bid is liable to be rejected on this ground. In case the sole/First Bidder and joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention "Not Applicable" and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s) should mention "Applied for" in the Bid cum Application Form. Further, where the Bidder(s) has mentioned "Applied for" or "Not Applicable", the sole/First Bidder and each of the joint Bidder(s), as the case may be, would be required to submit Form 60 (form of declaration to be filed by a person who does not have a permanent account number and who enters into any transaction specified in Rule 114B of the Income Tax Rules, 1962), or, Form 61 (form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable to income-tax in respect of transactions specified in Rule 114B of the Income Tax Rules, 1962), as may be applicable, duly filled

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along with a copy of any one of the following documents in support of the address: (a) ration card (b) passport (c) driving license (d) identity card issued by any institution (e) copy of the electricity bill or telephone bill showing residential address (f) any document or communication issued by any authority of the Central Government, state government or local bodies showing residential address (g) any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and Form 61 have been amended by a notification issued on December 1, 2004 by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance. All Bidders are requested to furnish, where applicable, the revised Form 60 or Form 61 as the case may be.

Unique Identification Number ("UIN")

With effect from July 1, 2005, SEBI had decided to suspend all fresh registrations for obtaining UIN and the requirement to contain/quote UIN under the SEBI MAPIN Regulations/Circulars by its circular MAPIN/Cir-13/2005. However, in a recent press release dated December 30, 2005, SEBI has approved certain policy decisions and has now decided to resume registrations for obtaining UINs in a phased manner. The press release states that the cut off limit for obtaining UIN has been raised from the existing limit of trade order value of Rs. 100,000 to Rs.500,000 or more. The limit will be reduced progressively. For trade order value of less than Rs.500,000 an option will be available to investors to obtain either the PAN or UIN. These changes are, however, not effective as of the date of the Draft Red Herring Prospectus and SEBI has stated in the press release that the changes will be implemented only after necessary amendments are made to the SEBI MAPIN Regulations.

Right to Reject Bids

In case of QIB Bidders, our Company in consultation with the BRLMs may reject Bids provided that the reason for rejecting the same shall be provided to such Bidders in writing. In case of Non-Institutional Bidders, Retail Individual Bidders, Bidders in the Employee Reservation Portion, we have the right to reject Bids based on technical grounds only. Consequent refunds shall be made by cheque or pay order or draft and will be sent to the Bidder's address at the Bidder's risk.

GROUNDS FOR TECHNICAL REJECTIONS

Bidders are advised to note that Bids are liable to be rejected on, among other things, the following technical grounds:

1. Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for;

2. Age of first Bidder not given; 3. In case of partnership firms, Equity Shares may be registered in the names of the individual partners and no

such partnership firm, shall be entitled to apply;

4. Bids by persons not competent to contract under the Indian Contract Act, 1872, including minors and insane persons;

5. PAN not stated if Bid is for Rs. 50,000 or more or copy of PAN, Form 60 or Form 61, as applicable, or GIR number furnished instead of PAN. See the section titled "Issue Procedure—Permanent Account Number" beginning on page [●] of this Draft Red Herring Prospectus;

6. Bids for lower number of Equity Shares than specified for that category of investors; 7. Bids at a price less than lower end of the Price Band; 8. Bids at a price more than the higher end of the Price Band; 9. Bids at Cut-off Price by Non-Institutional Bidders and QIB Bidders; 10. Bids for number of Equity Shares, which are not in multiples of [●]; 11. Category not ticked; 13. Multiple Bids as defined in this Draft Red Herring Prospectus; 14. In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents

are not submitted; 15. Bids accompanied by stockinvest/money order/postal order/cash; 16. Signature of sole and/or joint Bidders missing; 17. Bid cum Application Form does not have the stamp of the BRLMs or the Syndicate Members; 18. Bid cum Application Form does not have the Bidder's depository account details; 19. Bid cum Application Form is not delivered by the Bidder within the time prescribed as per the Bid cum

Application Form and this Draft Red Herring Prospectus and as per the instructions in this Red Herring Prospectus and the Bid cum Application Form;

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20. In case no corresponding record is available with the Depositories that matches three parameters namely, names of the Bidders (including the order of names of joint holders), the depository participant's identity (DP ID) and the beneficiary account number;

21. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations. See the details regarding the same in the section titled "Issue Procedure - Bids at Different Price Levels" beginning on page [●] of this Draft Red Herring Prospectus;

22. Bids by OCBs; 23. Bids by U.S. residents or U.S. persons, other than in reliance on Regulation S under the Securities Act; 24. Bids by QIBs not submitted through members of the Syndicate; and 25. Bids by Employees or Directors of our Company not eligible to apply in the Employee Reservation Portion. EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL

As per the provisions of Section 68B of the Companies Act, the Equity Shares in this Issue shall be allotted only in a de-materialised form, (i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode).

In this context, two agreements have been signed among our Company, the respective Depositories and the Registrar to the Issue:

a) an agreement dated [●]between NSDL, us and Registrar to the Issue;

b) an agreement dated [●] between CDSL, us and Registrar to the Issue.

All Bidders can seek Allotment only in dematerialised mode. Bids from any Bidder without relevant details of his or her depository account are liable to be rejected.

a) A Bidder applying for Equity Shares must have at least one beneficiary account with the Depository Participant’s of either NSDL or CDSL prior to making the Bid.

b) The Bidder must necessarily fill in the details (including the beneficiary account number and Depository Participant's identification number) appearing in the Bid cum Application Form or Revision Form.

c) Equity Shares allotted to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.

d) Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details with the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details with the Depository.

e) If incomplete or incorrect details are given under the heading 'Bidders Depository Account Details' in the Bid cum Application Form or Revision Form, it is liable to be rejected.

f) The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum Application Form vis à-vis those with his or her Depository Participant.

g) It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where our Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.

h) The trading of the Equity Shares would be in dematerialised form only for all investors in the demat segment of the respective Stock Exchanges.

COMMUNICATIONS

All future communication in connection with Bids made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, details of Depository Participant, number of Equity Shares applied for, date of Bid cum Application Form, name and address of the member of the Syndicate where the Bid was submitted and cheque or draft number and issuing bank thereof. Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of allotment, credit of allotted shares in respective beneficiary accounts, refund orders etc.

Disposal of Investor Grievances by our Company

We estimate that the average time required by us or the Registrar to the Issue for the redressal of routine investor grievances shall be seven days from the date of receipt of the complaint. In case of non-routine

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complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible.

We have appointed Mr. Nitin Sharma, Company Secretary as the Compliance Officer and he may be contacted in case of any pre-Issue or post-Issue-related problems. He can be contacted at the following address: Mr. Nitin Sharma Oswal Woollen Mills Limited G.T. Road, Sherpur, Ludhiana 141 003, India Tel: +91 161 2542 501-07. Fax: +91 161 2542 509 E-mail: [emailprotected]

IMPERSONATION

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Companies Act, 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."

Basis of Allocation.

A. For Retail Individual Bidders • Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together

to determine the total demand under this category. The Allotment to all successful Retail Individual Bidders will be made at the Issue Price.

• The Issue size less allocation to Non-Institutional Bidders and QIB Bidders shall be available for allocation to Retail Individual Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.

• If the valid Bids in this category is for less than or equal to 2,906,750 Equity Shares at or above the Issue Price, full allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.

• If the valid Bids in this category are for more than 2,906,750 Equity Shares at or above the Issue Price, the allocation shall be made on a proportionate basis up to a minimum of [●] Equity Shares and in multiples of 1 Equity Share thereafter. For the method of proportionate basis of allocation, refer below.

B. For Non-Institutional Bidders • Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to

determine the total demand under this category. The Allotment to all successful Non-Institutional Bidders will be made at the Issue Price.

• The Issue size less allocation to QIB Bidders and Retail Individual Bidders shall be available for allocation to Non-Institutional Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.

• If the valid Bids in this category is for less than or equal to 1,245,750 Equity Shares at or above the Issue Price, full allotment shall be made to Non-Institutional Bidders to the extent of their valid Bids.

• In case the valid Bids in this category are for more than 1,245,750 Equity Shares at or above the Issue Price, allocation shall be made on a proportionate basis up to a minimum of [●] Equity Shares and in multiples of 1 Equity Share thereafter. For the method of proportionate basis of allocation refer below.

C. For QIB Bidders • Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine

the total demand under this category. The allocation to all the QIB Bidders will be made at the Issue

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Price.

• Allotment shall be undertaken in the following manner:

(a) In the first instance allocation to Mutual Funds for 5% of the QIB Portion shall be determined as follows: (i) In the event that Mutual Fund Bids exceeds 5% of the QIB Portion, allocation to Mutual

Funds shall be done on a proportionate basis for up to 5% of the QIB Portion. (ii) In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB Portion

then all Mutual Funds shall get full allotment to the extent of valid Bids received above the Issue Price.

(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be available to all QIB Bidders as set out in (b) below;

(b) In the second instance allocation to all QIBs shall be determined as follows: (i) In the event that the oversubscription in the QIB Portion, all QIB Bidders who have submitted

Bids at or above the Issue Price shall be Allotted Equity Shares on a proportionate basis for up to 95% of the QIB Portion.

(ii) Mutual Funds, who have received allocation as per (a) above, for less than the number of Equity Shares Bid for by them, are eligible to receive Equity Shares on a proportionate basis along with other QIB Bidders.

(iii) Under-subscription below 5% of the QIB Portion, if any, from Mutual Funds, would be included for allocation to the remaining QIB Bidders on a proportionate basis.

The aggregate allocation to QIB Bidders shall be of 4,152,500 Equity Shares. The method of proportionate basis of allocation is stated below.

D. For Employee Reservation Portion • Bids received from the Employees at or above the Issue Price shall be grouped together to determine

the total demand under this category. The allocation to all the successful Employees will be made at the Issue Price.

• If the aggregate demand in this category is less than or equal to 15,000 Equity Shares at or above the Issue Price, full allocation shall be made to the Employees to the extent of their demand.

• If the aggregate demand in this category is greater than 15,000 Equity Shares at or above the Issue Price, the allocation shall be made on a proportionate basis up to a minimum of [●] Equity Shares. For the method of proportionate basis of allocation, refer below.

• Only Employees are eligible to apply under Employee Reservation Portion.

Method of Proportionate basis of allocation in the Issue In the event of the Issue being oversubscribed, our Company shall finalize the basis of allotment in consultation with the Designated Stock Exchange. The Executive Director (or any other Senior official nominated by them) of the Designated Stock Exchange along with the BRLMs and the Registrar to the Issue shall be responsible for ensuring that basis of allotment is finalized in a fair and proper manner.

Bidders will be categorised according to the number of Equity Shares applied for by them.

(a) The total number of Equity Shares to be allotted to each category as a whole shall be arrived at on a proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.

(b) Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a proportionate basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the over-subscription ratio.

In all Bids where the proportionate allotment is less than [●] Equity Shares per Bidder, the allotment shall be made as follows:

• Each successful Bidder shall be allotted a minimum of [●] Equity Shares; and

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• The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of Equity Shares allotted in that category is equal to the number of Equity Shares calculated in accordance with (b) above.

If the proportionate allotment to a Bidder is a number that is more than [●] but is not a multiple of one (which is the market lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0.5, it would be rounded off to the lower whole number. All Bidders in such categories would be allotted Equity Shares arrived at after such rounding off.

If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares allotted to the Bidders in that category, the remaining Equity Shares available for allotment shall be first adjusted against any other category, where the allotted Equity Shares are not sufficient for proportionate allotment to the successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of Equity Shares. The basis of allocation on a proportionate basis shall be finalised in consultation with the Designated Stock Exchange. Illustration of Allotment to QIBs and Mutual Funds (“MF”) A. Offer details

Sr. No Particulars Offer details 1 Offer size 200 million Equity Shares

2 Allocation to QIB (not more than 50% of the Offer) 100 million Equity Shares

Of which: a. Reservation For Mutual Funds, (5%) 5 million Equity Shares

b. Balance for all QIBs including Mutual

Funds 95 million Equity Shares 3 Number of QIB applicants 10 4 Number of Equity Shares applied for 500 million Equity Shares

B. Details of QIB Bids

S.No Type of QIB bidders# No. of shares bid for (in million)

1 A1 50 2 A2 20 3 A3 130 4 A4 50 5 A5 50 6 MF1 40 7 MF2 40 8 MF3 80 9 MF4 20

10 MF5 20 TOTAL 500

# A1-A5: (QIB Bidders other than Mutual Funds), MF1-MF5 (QIB Bidders which are Mutual Funds) C. Details of Allotment to QIB Bidders/Applicants

(Number of equity shares in million)

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Type of QIB bidders

Shares bid for

Allocation of 5 million Equity Shares to MF

proportionately (please see note 2

below)

Allocation of balance 95 million Equity Shares to

QIBs proportionately

(please see note 4 below)

Aggregate allocation to

MFs

(I) (II) (III) (IV) (V)

A1 50 0 9.60 0 A2 20 0 3.84 0 A3 130 0 25.95 0 A4 50 0 9.60 0 A5 50 0 9.60 0

MF1 40 1 7.48 8.48 MF2 40 1 7.48 8.48 MF3 80 2 14.97 16.97 MF4 20 0.5 3.74 4.24 MF5 20 0.5 3.74 4.24

500 5 95 42.42

Please note: 1. The illustration presumes compliance with the requirements specified in this Draft Red Herring

Prospectus in the section titled “Offer Structure” on page [●]. 2. Out of 100 million Equity Shares allocated to QIBs, 5 million (i.e. 5%) will be allocated on

proportionate basis among five Mutual Fund applicants who applied for 200 shares in the QIB Portion.

3. The balance 95 million Equity Shares [i.e. 100 - 5 (available for Mutual Funds only)] will be allocated on proportionate basis among 10 QIB Bidders who applied for 500 Equity Shares (including 5 Mutual Fund applicants who applied for 200 Equity Shares).

4. The figures in the fourth column titled “Allocation of balance 95 million Equity Shares to QIBs proportionately” in the above illustration are arrived as under: 1. For QIBs other than Mutual Funds (A1 to A5)= Number of Equity Shares Bid for X

95/495 2. For Mutual Funds (MF1 to MF5) = [(No. of shares bid for (i.e., in column II of the

table above) less Equity Shares allotted (i.e., column III of the table above)] X 95/495 3. The numerator and denominator for arriving at allocation of 95 million Equity Shares to

the 10 QIBs are reduced by 5 million shares, which have already been allotted to Mutual Funds in the manner specified in column III of the table above.

Mode of making refunds The payment of refund, if any, would be done through various modes in the following order of preference: 1. ECS—Payment of refund would be done through ECS for applicants having an account at any of the

following 15 centres: Ahmedabad, Bangalore. Bhubneshwar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram. This mode of payment of refunds would be subject to availability of complete bank account details including the nine-digit MICR code as appearing on a cheque leaf from the Depository. The payment of refund through ECS is mandatory for applicants having a bank account at any of the 15 centres named hereinabove, except where the applicant is otherwise disclosed as eligible to receive refunds through direct credit or RTGS.

Our Company, in consultation with the BRLMs and the Registrar may decide to use the National Electronic Funds Transfer (‘‘NEFT’’) facility for payment of refunds.

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2. Direct Credit—Applicants having their bank account with the Refund Bank shall be eligible to receive refunds, if any, through direct credit. Charges, if any, levied by the Refund Bank(s) for the same will be borne by our Company.

3. RTGS—Applicants having a bank account at any of the 15 centres detailed above, and whose Bid

Amount exceeds Rs. 5 million, shall have the option to receive refunds, if any, through RTGS. Such eligible applicants who indicate their preference to receive refunds through RTGS are required to provide the IFSC code in the Bid cum Application Form. In the event of failure to provide the IFSC code in the Bid cum Application Form, the refund shall be made through the ECS or direct credit, if eligibility is disclosed. Charges, if any, levied by the Refund Bank(s) for the same will be borne by our Company. Charges, if any, levied by the applicant’s bank receiving the credit will be borne by the applicant.

4. Please note that only applicants having a bank account at any of the 15 centres where clearing houses

for ECS are managed by the RBI are eligible to receive refunds through the modes detailed hereinabove. For all the other applicants, including applicants who have not updated their bank particulars along with the nine-digit MICR Code, the refund orders will be dispatched ‘‘Under Certificate of Posting’’ for refund orders of value up to Rs. 1,500 and through Speed Post/Registered Post for refund orders of Rs. 1,500 and above. Some refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.

Please note that applicants having a bank account at any of the 15 centres where the clearing houses for ECS are managed by the RBI are eligible to receive refunds through the modes detailed in I, II, III and IV above. For all the other applicants, including applicants who have not updated their bank particulars along with the nine digit MICR Code, prior to the Bid/Issue Opening Date, the refund orders would be dispatched under "Under Certificate of Posting" for refund orders less than Rs. 1,500 and through speed post/registered post for refund orders exceeding Rs. 1,500. Interest on refund of excess Bid Amount Our Company shall pay interest at the rate of 15% per annum on the excess Bid Amount received if refund orders are not dispatched within 15 days from the Bid/Issue Closing Date. DISPOSAL OF APPLICATIONS AND APPLICATIONS MONEY AND INTEREST IN CASE OF DELAY Our Company shall ensure dispatch of allotment advice, transfer advice or refund orders and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the allotment to the Stock Exchanges within two working days of the date of finalisation of allotment of the Equity Shares. Our Company shall dispatch refunds above Rs. 1,500, if any, by registered post or speed post at the sole or first Bidder’s sole risk, except for Bidders who have opted to receive refunds through the ECS facility or RTGS or Direct Credit. Our Company shall use best efforts to ensure that all steps for completion of the necessary formalities for allotment and trading at all the Stock Exchanges where the Equity Shares are proposed to be listed are taken within seven working days of finalisation of the basis of Allotment. In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Guidelines, we further undertake that: • Allotment of Equity Shares only in dematerialised form shall be made within 15 days of the Bid/Issue Closing Date; • dispatch refund orders, except for Bidders who have opted to receive refunds through the ECS facility, shall be made within 15 days of the Bid/Issue Closing Date; and our Company shall pay interest at 15% per annum for any delay beyond the 15 day time period as mentioned above, if allotment is not made or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the clearing system in the disclosed manner, and/or demat credits are not made to investors within the 15 day time period prescribed above as per the Guidelines issued by the Government of India, Ministry of Finance, pursuant to their letter No. F/8/S/79 dated 31 July, 1983, as amended by their letter No. F/14/SE/85 dated 27 September, 1985, addressed to the stock exchanges, and as further modified by the SEBI’s Clarification XXI dated 27 October, 1997, with respect to the SEBI Guidelines.

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We will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Issue.

No separate receipts shall be issued for the money payable on the submission of Bid cum Application Forms or Revision Forms. However, the collection centre of the Syndicate Member will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder.

Undertaking by our Company

We undertake as follows:

• that the complaints received in respect of this Issue shall be attended to by us expeditiously and satisfactorily;

• that all steps will be taken for the completion of the necessary formalities for listing and commencement of trading at all the stock exchanges where the Equity Shares are proposed to be listed within seven working days of finalisation of the basis of allotment;

• that the funds required for dispatch of refund orders or allotment advice by registered post or speed post shall be made available to the Registrar to the Issue by us;

• that the refund orders or allotment advice to the FIIs shall be dispatched within specified time; • that where refunds are made through electronic transfer of funds, a suitable communication shall be sent to

the applicant within 15 days of the Bid/issue closing date as the case may be giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund; and

• that except as disclosed in the section titled “Capital Structure” beginning on page [●] of this Draft Red Herring Prospectus no further issue of Equity Shares shall be made till the Equity Shares issued through this Draft Red Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription etc.

Utilisation of Issue proceeds

Our Board of Directors certifies that:

• all monies received out of the Issue shall be credited/transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Companies Act;

• details of all monies utilised out of the Issue referred above shall be disclosed under an appropriate separate head in our balance sheet indicating the purpose for which such monies have been utilised;

• details of all unutilised monies out of the Issue, if any shall be disclosed under the appropriate head in our balance sheet indicating the form in which such unutilised monies have been invested;

• we shall not have recourse to the Issue proceeds until the approval for trading of the Equity Shares from all the Stock Exchanges where listing is sought has been received.

Subscription by FIIs

It is to be distinctly understood that there is no reservation for Non-Residents, NRIs and FIIs and all Non-Resident, NRI and FII applicants will be treated on the same basis as other categories for the purpose of allocation.

The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended from time to time (the “Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares will be offered and sold only outside the United States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur. The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction.

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Withdrawal of the Issue Our Company in consultation with the BRLMs reserves the right not to proceed with the Issue at anytime including after the Bid/ Issue Opening Date, without assigning any reason thereof. In terms of the SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date

Restrictions on Foreign Ownership of Indian Securities Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the Government of India and FEMA. While the Industrial Policy, 1991 prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of the Indian economy up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. Under the current foreign investment policy, foreign equity participation up to 100% is permissible. By way of Circular No. 53 dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian company in a public offer without prior RBI approval, so long as the price of equity shares to be issued is not less than the price at which equity shares are issued to residents. In our Company, as of date the aggregate FII holding cannot exceed 24% of the total post-Issue share capital.

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of Regulation 15(A)(1) of the SEBI (Foreign Institutional Investors) Regulations 1995, as amended, an FII or its sub-account may issue, deal or hold, offshore derivative instruments such as participatory notes, equity-linked notes or any other similar instruments against underlying securities listed or proposed to be listed in any stock exchange in India only in favour of those entities which are regulated by any relevant regulatory authorities in the countries of their incorporation or establishment subject to compliance of "know your client" requirements. An FII or sub-account shall also ensure that no further downstream issue or transfer of any instrument referred to hereinabove is made to any person other than a regulated entity.

The Equity Shares have not been and will not be registered under the Securities Act or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, "U.S.persons" (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold only outside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act and the applicable laws of the jurisdiction where those offers and sales occur.

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MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF THE COMPANY

Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main provisions of the Articles of Association relating to voting rights, dividend, lien, forfeiture, restrictions on transfer and transmission of Equity Shares or debentures and/ or on their consolidation/splitting as detailed below. Please note that each provision herein below is numbered as per the corresponding article number in the Articles of Association and defined terms herein have the meaning given to them in the Articles of Association.

SHARES

SHARE CAPITAL:

4. The Authorised Share Capital of the Company is Rs. 50,00,00,000/- (Rupees Fifty Crores only) divided into 5,00,00,000 (Five Crores only) Equity Shares of Rs. 10/- (Rupees Ten only) each, with the power to increase and reduce the Capital and to divide the shares in the Capital for the time being, into several classes and to attach thereto respectively any preferential, qualified or special rights, privileges or conditions as may be determined by or in accordance with the regulations of the Company and to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be for the time being, provided by the Companies Act, 1956 or by the regulations of the Company for the time being.

REDEEMABLE PREFERENCE SHARE:

5. Subject to the provisions of these Articles, the Company shall have power to issue Preference Shares which may at the option of the Company be liable to be redeemed out of profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption and the Board may subject to the provisions of Sections 80 and 80 A of the Act, exercise such power, in such manner as it may think fit.

ALLOTMENT OF SHARES:

6. Subject to the provisions of Section 81 of the Act and these Articles, the shares Capital of the Company for the time being shall be under the control of the Board who may issue, allot or otherwise dispose of the same or any of them to such Persons, in such proportion and on such terms and conditions and either at a premium or at par or (subject to the compliance with the provision of Section 79 of the Act) at a discount and at such time as they may from time to time think fit and with the sanction of the Company in a General Meeting to give to any person or persons the option or right to call for any shares either at par or premium during such time and for such consideration as the Board deem fit, and may issue and allot shares in the share capital of the Company on payment in full or part of any property sold and transferred or for any services rendered to the Company in the conduct of its business and any shares which may so be allotted may be issued as fully paid up shares and if so issued, shall be deemed to be fully paid shares. Provided, however, that the option or right to call for shares shall not be given to any person or persons without the sanction of the Company in a General Meeting. KEEPING IN ABEYANCE RIGHT SHARES PENDING TRANSFER:

7. Notwithstanding anything contained in any other provisions of the Act, the Offer of right shares under Section 81 (1) (a) of the Act on shares in respect of which instrument of transfer of shares has been delivered to the Company for registration and the transfer of shares has not been registered by the Company shall be kept in abeyance pending transfer.

RETURN OF ALLOTMENTS:

8. As regards all allotments made from time to time, the Company shall duly comply with Section 75 of the Act.

RESTRICTION OF ALLOTMENTS:

9. The Company shall comply with Section 69 of the Act in respect of any offer of its shares to the public for subscription.

COMM ISSION AND BROKERAGE:

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10. The Company may exercise the power of paying commissions conferred by Section 76 of the Act and in such case shall comply with the requirements of that section. Such commission may be satisfied by the payment in cash or the allotment of fully or partly paid shares or debentures or partly in one way and partly in the other. The Company may also on any issue of shares or debentures pay such brokerage as may be lawful.

SHARES AT A DISCOUNT:

11. With the previous authority of the Company in General meeting and with sanction of the Company Law Board and upon otherwise complying with Section 79 of the Apt, the Board may issue at a discount shares of a class already issued.

INSTALMENT ON SHARES TO BE DULY PAID:

12. If by the conditions of allotment of any share, the whole or part of the amount or issue price thereof shall be payable by installment every such installment shall, when due, be paid to the Company by the person who, for the time being, shall be the registered holder of the share or by his executor or administrator.

TRUSTS NOT RECOGNISED:

13. Save as herein otherwise provided, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not except as ordered by a Court of competent jurisdiction or as by statute required, be bound to recognise any equitable or other claim to or interest in such share on the part of any other person.

WHO MAY BE REGISTERED:

14. Share may be registered in the name of any person, Company or other body corporate.

JOINT-HOLDERS OF SHARES:

15. 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 provisions following and to the other provisions of these Articles relating to joint holders:-

a) The Company shall not be bound to register more than four persons as the joint-holder of any share.

b) The joint-holders 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 shares.

c) On the death of any one of such joint-holders the survivor or survivors shall be the only person recognised by the Company as having any title to or interest in such share but the Board may require such evidence of death as it 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.

CERTIFICATES:

16. The certificate of title to shares and duplicate thereof when necessary shall be issued under the seal of the company in accordance with the provisions contained in the Companies (Issue of Share Certificate) Rules, 1960.

MEMBER’S RIGHT TO CERTIFICATE:

17. i) Every Member shall be entitled, without payment, to one or more certificates in marketable lots, for all the shares of each class or denomination registered in his name, or if the Board so approve (upon paying such fee as the Directors may from time to time determine) to several certificates, each

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for one or more of such shares and the Company shall complete and have ready for delivery such certificates within three months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within two months of the receipt of applications of registration of transfer, transmission, sub-division, consolidation or renewal of any of its shares as the case may be. Every certificate of shares shall be under the Seal of the Company and shall specify the number and distinctive numbers of shares in respect of which it is issued and amount paid-up thereon and shall in such form as the Board may prescribe and approve, provided that in respect of a share or shares held jointly by several persons, the Company shall not be bound to issue more than one certificate and delivery of a certificate and delivery of a certificate of shares to one of several joint holders shall be sufficient delivery to all such holder

ii) No fee shall be charged for-

(a) Registration of transfer or transmission of any class of shares.

(b) Sub-division and consolidation of shares and debenture certificates and for sub-division of letters of allotment and split, consolidation, renewal and pucca transfer receipts into denominations corresponding to the market units of trading.

(c) Sub-division of renounciable Letter of Right.

(d) Issue of new certificates in replacement of those which are old, decrepit or worn out or where the cages on the reverse recording transfers have been fully utilised.

(e) Registration of any Power of Attorney, Probate, Letters of Administration or similar other documents.

iii) The fee that may be agreed upon with exchange may be charged for:

(a) Sub-division and consolidation of share and debenture certificates and for sub-division of Letters of allotment and split, consolidation, Renewal and Pucca transfer receipt into denominations other than those fixed for the market units of trading.

(b) Except as otherwise required by a statutory provision or under an order of a competent court of law, the Directors of the Company may in their absolute discretion refuse sub-division of share certificates or Debentures certificates or debenture allotment letters etc. into denominations of less than the marketable lots.

i) The Company shall within three months after the allotment of its shares or debentures and within one month after the application for the registration of the transfer of any such shares or debentures, complete and have ready for delivery the certificates of all shares and debentures allotted or transferred, unless the conditions of issue of the shares or debentures otherwise provide and the Company, shall otherwise comply with requirements of Section 113 and other applicable provisions (if any) of the Act.

ii) If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back thereof for endorsem*nt of transfer, then upon production and surrender thereof to the Company, a new certificate may be issued in lieu thereof, and if any certificate is lost or destroyed then upon proof thereof to the satisfaction of the Company and on execution of such indemnity as the Company deems adequate, being given, a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed certificate. Every certificate under this Article shall be issued without payment of fees if the Board so decides, or on payment of such fees (not exceeding Rs. 2/- for each certificate) as the Board shall prescribe. Provided that no fee shall be charged for issue of a new certificates in replacement of those which are old, defaced or worn out or where there is no further space on the back thereof for endorsem*nt or transfer.

Provided that notwithstanding what is stated above the Board shall comply with such rules or regulation or requirements of any stock exchange of the Rules made under the Act or the rules made under the Securities Contracts (Regulation) Act, 1956 or any other Act, or Rules

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applicable in this behalf.

The provisions of this Article shall mutatis mutandis apply to debentures of the Company.

CALLS

18. The Board may, from time to time, subject to the terms on which any shares may have been issued, and subject to the provision of Section 91 of the Act, make such calls as the Board thinks fit upon the members in respect of all moneys unpaid on the shares held by them and each member shall pay the amount of every call so made on him to the persons and at the time and place appointed by the Board. A call may be made payable by installment and shall be deemed to have been made when the resolution of the Board authorising such call was passed.

RESTRICTION ON POWER TO MAKE CALLS AND NOTICE:

19. No call shall exceed one-half of the nominal amount of share, or be made payable within one month after the last preceding call was payable. Not less than one month notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid.

PAYMENT OF INTEREST ON CALLS NOT MADE IN TIME 20. The Board may, if they think fit, subject to the provisions of Section 92 of the Act, agree to and

receive from any Member willing to advance the same, whole or any part of the moneys due upon the shares held by him beyond the sums actually called for and upon the amount so paid or satisfied in advance or so much thereof, as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the Company may pay interest at such rate as the Member paying the sum in advance and the Board agree upon, provided that money paid in advance of calls shall not confer a right to participate in profits or dividend. The Board may at any time repay the amount so advanced. The Members 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. The provision of this Article shall mutatis mutandis apply to the calls on debentures of the Company.

AMOUNT PAYABLE AT FIXED TIMES OR PAYABLE BY INSTALMENTS AS CALLS:

21. If by the terms of any share or otherwise any amount is made payable upon allotment or at any fixed time or by instalments at fixed times, whether on account of the amount of the share or by way of premium, every such amount or installment shall be payable as if it were a call duly made by the Board and of which due notice had been given, and all the provisions herein contained in respect of calls shall relate to such amount or installment accordingly.

EVIDENCE IN ACTION BY COMPANY AGAINST SHAREHOLDERS:

22. On the trial or hearing of any action or suit brought by the Company against any shareholders or his representatives to recover any debt or money claimed to be due to the Company in respect of his shares, it shall be sufficient to prove that the name of the defendant is, or was, when the claim arose, on the Register as a holder, or one of the holders of the numbers of shares in respect of which such claim is made, and that the amount claimed is not entered as paid in the books of Company and it shall not be necessary to prove the appointment of the Board who made any Call, nor that a quorum was present at the Board meeting at which any call was made was duly convened or constituted, nor any other matter, whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt.

PAYMENT OF CALL IN ADVANCE:

23. The Board may, if it thinks fit, receive from any members willing to advance the same, all or any part of the money due upon the Shares in advance, or money that exceeds the amount of the calls then made and the Company may pay interest at such rates not exceeding, unless the Company in General Meeting shall otherwise direct 6 percent per annum as the member paying such sum in advance and the Board agrees upon. Money so paid in excess of the amount of calls shall not rank for dividends or

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confer a right to participate in profits. The Board may at any time repay the amount so advanced upon giving to such member not less than three month’s notice in writing.

REVOCATION OF CALLS:

24. A call may be revoked or postponed at the discretion of the Board.

FORFEITURE AND LIEN

IF CALL OR INSTALMENT NOT PAID NOTICE MAY BE GIVEN:

25. If any member fails to pay any call or installment of call on or before the day appointed for the payment of the same the Board may, at any time, thereafter during such time as the call or installment remains unpaid, serve 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.

26. The notice shall name a day (not being less than one month from the date of notice) and a place or places on and at which such call or installment and such interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or, before the time, and at the place appointed, the notice shall also state that in the event of non-payment at or, before the time, and at the place appointed, the shares in respect of which such call was made or installment is payable will be liable to be forfeited.

IF NOTICE IS NOT COMPLIED WITH SHARES MAY BE FORFEITED:

27. If the requisition of any such notice as aforesaid be not complied with, any shares in respect of which such notice has been given, may, at any time thereafter, before payment of all calls or installment interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect.

NOTICE AFTER FORFEITURE:

28. When any share shall have been so forfeited notice of the resolution shall be given to the member in whose name it stood immediately prior to the forfeiture and on entry of the forfeiture with the date thereof, shall forthwith be made in the Register, but no forfeiture shall in any manner be invalidated by an omission or neglect to give such notice or make such entry as aforesaid.

FORFEITED SHARE TO BECOME PROPERTY OF THE COMPANY:

29. Any share so forfeited shall be deemed to be the property of the Company, and the Board may sell, re-allot or otherwise dispose of the same in such manner as it thinks fit.

POWER OF ANNUL FORFEITURE:

30. The Board may, at any time before any share so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit.

LIAB ILITY ON FORFEITURE:

31. A person whose share has been forfeited shall cease to be a member in respect of the share, but shall, notwithstanding such forfeiture, remain liable to pay, and shall forthwith pay to the Company, all calls or instalments, interest and expenses, owing upon or in respect of such share, at the time of the forfeiture, together with interest thereon from the time of forfeiture, until payment, at 12 percent per annum and the Board may enforce the payment thereof, or any part thereof without any deduction or allowance for the value of the shares at the time of forfeiture, but shall not be under an obligation to do so.

EVIDENCE OF FORFEITURE:

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32. A duly verified declaration in writing that, the declarant is a Director, Manager or Secretary of the Company and has been authorised by a Board Resolution to act as declarant and that certain shares in the Company have been duly forfeited on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the shares and such declaration and the receipt of the Company for the consideration, if any given for the shares on the sale or disposition thereof, shall constitute a good title to such shares.

FORFEITURE PROVISIONS TO APPLY TO NON-PAYMENT IN TERMS OF ISSUE:

33. The provisions of Articles 25 to 32 hereof 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 a share or by way of premium, as if the same had been payable by virtue of call duly made and notified.

COMPANY’S LIEN ON SHARES:

34. The Company shall have a first and paramount lien upon all the shares/debentures (other than fully paid-up shares/debentures) registered in the name of each Member (whether solely or jointly with others) and upon the proceeds of sale thereof, for all monies (whether presently payable or not) called or payable at a fixed time in respect of such shares and no equitable interest in any shares shall be created except upon the footing and condition that this Article will have full effect and such lien shall extend to all dividends and bonuses from time to time declared in respect of such shares/debenture. Unless otherwise agreed, the registration of a transfer of Shares shall operate as a waiver of the Company’s lien, if any, on such shares/debentures. The Board may at any time declare any shares/debentures wholly or in part to be exempt from the provisions of this clause.

AS TO ENFORCING LIEN BY SALE:

35. For the purpose of enforcing such lien, the Board may sell the share subject thereto in such manner as it thinks fit, but no sale shall be made until such time for payment as aforesaid shall have arrived and until notice in writing of the intention to sell shall have been served on such member, his executor or administrator or his committee, curator bonis or legal representative as the case may be and default shall have been made by him or them in the payment of the money called or payable at a fixed time in respect of such shares for thirty days after the date of such notice.

APPLICATION OF PROCEEDS OF SALE:

36. The net proceeds of the sale shall be received by the Company and applied in or towards payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the share before the sale) be paid to the persons entitled to the share at the date of this sale.

VALIDITY OF SALES IN EXERCISE OF LIEN AND AFTER FORFEITURE:

37. Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers herein before given, the Board may appoint some persons to execute an instrument of transfer of the share sold and cause the purchaser’s name to be entered in Register in respect of the share sold, and the purchaser shall not be bound to see the regularity of the proceedings, not to the application of the purchase money and after his name has been entered in the Register in respect of such share the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

BOARD MAY ISSUE NEW CERTIFICATE:

38. Where any share under the power in that behalf herein contained is sold by the Board and the certificate in respect thereof has not been delivered to the Company by the former holder of such share, the Board may issue new certificate for such share and distinguish it in such manner as it may think fit from the certificate not so delivered up.

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TRANSFER AND TRANSMISSION

EXECUTION OF TRANSFER: 39. (1) Where at the time after the expiry of two years from the formation of the Company or at any time

after the expiry of one year from the allotment of shares in the Company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the Company by allotment of further shares then:

(a) Such further shares shall be offered to the persons who, at the date of the offer, are holders of the shares of the Company, in proportion, as nearly as circ*mstances admit, to the capital paid up on those shares at that date;

(b) Such offer shall be made by a notice specifying the number of Shares offered and

limiting a time not being less than fifteen days from the date of the offer within which the offer if not accepted, will be deemed to have been declined;

(c) The offer aforesaid shall be deemed to include a right exercisable by the Person

concerned to renounce the Shares offered to him or any of them in favour of any other Person and the notice referred to in sub clause (b) shall contain a statement of this right.

(d) After the expiry of the time specified in the aforesaid notice or on receipt of earlier

intimation from the Person to whom such notice has been given that he declines to accept the Shares offered, the Board may dispose off them in such manner as they think most beneficial to the Company.

(2) Notwithstanding anything contained in sub clause (1) above, the further shares aforesaid may

be offered to any persons (whether or not those persons include the persons referred to in clause (a) of sub-clause (1) hereof in any manner whatsoever.

(a) If a special resolution to that effect is passed by the Company in General Meeting, or (b) Where no such resolution is passed, if the votes cast (whether on a show of hands or

on a poll as the case may be) in favour of the proposal contained in the resolution moved in that General Meeting (including the casting vote, if any, of the Chairman) by the Members who, being entitled to do so, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by Members, so entitled and voting and the central government is satisfied, on an application made by the Board in this behalf, that the proposal is most beneficial to the Company.

(3) Nothing in sub clause (c) of clause (1) hereof shall be deemed:

(a) To extend the time within which the offer should be accepted; or (b) To authorise any person to exercise the right of renunciation for a second time, on the

ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.

(4) Nothing in this Article shall apply to the increase of the subscribed capital of the Company

caused by the exercise of an option attached to the debentures issued by the Company;

(i) To convert such debentures or loans into shares in the Company; or (ii) To subscribe for shares in the Company.

Provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term;

(a) Either has been approved by the Central Government before the issue of the Debentures or the raising of the loans or is in conformity with rules, if any, made by that government in this behalf; and

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(b) In the case of debentures or loans or other than debentures issued to or loans obtained from government or any institution specified by the central government in this behalf, has also been approved by a special resolution passed by the Company in General Meeting before the issue of the loans.

39A (i) An instrument of transfer shall be in writing and all the provisions of Section 108 of the Act

and of any statutory modification thereof for the time being, shall be duly complied with in respect of all transfer of shares and the registration thereof.

(ii) No fee shall be charged for registration of transfer, transmission, probate, succession

certificate and letters of administration, certificate of death or marriage, power of attorney or similar other document.

.

APPLICATION BY TRANSFEROR:

40. Application for the registration of the transfer of a share may be made either by the transferor or the transferee, provided that, where such application is made by the transferor no registration shall, in the case of a partly paid share, be effected unless the Company gives notice of the application to the transferee in the manner prescribed by the Act and subject to provisions of these Articles, 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 of the transfer was made by the transferee.

FORM OF THE TRANSFER:

41. The instrument of transfer shall be in the form prescribed by the Act or the Rules made there under or where no such form is prescribed in the usual common form or any other form approved by the stock exchanges in India or as near thereto as circ*mstances will admit.

IN WHAT CASES THE BOARD MAY REFUSE TO REGISTER TRANSFER:

42. Subject to the provisions of Section 111 of the Act, these Articles and other applicable provisions of the Act or any other law for the time being in force, the Directors may refuse whether in pursuance of any power of the Company under these Articles or otherwise to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in or debentures of the Company. The Company shall within one month from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the Company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission as the case may be, giving reasons for such refusal. Provided that registration of transfer shall not be refused on the ground of the transferors being either alone or jointly with any other Person or Persons indebted to the Company on any account whatsoever except where the Company has a lien on shares.

43. The Directors may refuse to accept an application for transfer of less than 50 (Fifty) equity shares of the Company, provided, however, this condition shall not apply to:

(i) a transfer of equity shares made in pursuance of any statutory provision or an order of a court of law.

(ii) the transfer of the entire equity shares by an existing equity shareholder holding less than 50 equity shares in a single or joint names.

(iii) the transfer of the entire equity shares of an existing equity shareholder holding less than 50 equity shares to one or more transferees whose holding in the Company will not be less than 50 equity shares, after the said transfer.

(iv) the transfer of not less than 50 equity shares in aggregate in favour of the same transferee in two or more transfer deeds, submitted together within which one or more relate/s to the transfer of less than 50 equity shares.

NO TRANSFER TO MINOR:

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44. No transfer shall be made to minor or person of unsound mind.

TRANSFER TO BE LEFT AT OFFICE WHEN:

45. Every instrument of transfer shall be left at the office for registration accompanied by the certificate of the share to be transferred or if no such certificate is in existence, by the Letter of Allotment of the share and such other evidence as the Board may require to prove the title of the transferor of his right to transfer the share. Every instrument of transfer which shall be registered shall be retained by the Company, but any instrument of transfer which the Board may refuse to register, shall be returned to the person depositing the same.

NOTICE OF REFUSAL TO REGISTER TRANSFER:

46. If the Board refuses whether in pursuance of Article 42 or otherwise to register the transfer of, or the transmission by operation of law of the right to, any share, the Company shall, within one month from the date on which the instrument of transfer or the intimation of such transmission as the case may be, was lodged with the Company or intimation was given, give notice of the refusal, giving reasons for such refusal to the transferor and the transferee or the person giving intimation of such transfer or transmission.

FEE ON REGISTRATION OF TRANSFER, PROBATE:

47. No Fee shall be payable to the Company in respect of transfer or transmission of any shares in the Company.

TRANSMISSION OF REGISTERED SHARES:

48. The executor or administrator of a deceased member (not being one of several joint-holders) shall be the only person recognised by the Company as having any title to the share 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 share, the survivor shall be the only person recognised by the Company as having any title or interest in such share, but nothing herein contained shall be taken to release the estate of deceased joint-holder from any liability on the share held by him jointly with any other person. Before recognising any executor or administrator the Board may require him to obtain a Grant or probate or Letters of Administration or other legal representation, as the case may be, from a competent Court in India; provided nevertheless that in any case where the Board in its absolute discretion thinks fit it shall be lawful for the Board to dispense with the production of probate or Letters of administration or such other legal representation upon such terms as to indemnity, as it considers proper.

AS TO TRANSFER OF SHARES OF INSANE, DECEASED, OR BANKRUPT MEMBERS:

49. 1) Any person becoming entitled to a share in consequence of the lunacy, death or insolvency of a member may, upon such evidence being produced as may from time to time properly be required by the Board and subject as hereinafter provided, elect, either

(a) to be registered himself as holder of the share, or

(b) to make such transfer of the share as the deceased or insolvent member could have made.

2) The Board shall, in either case, have the same right to decline or refuse registration as it would have had, if the deceased or insolvent member had transferred the share before his death or insolvency.

TRANSMISSION ARTICLE:

This Article is hereinafter referred to as The Transmission Article”.

50.i) If the person so becoming entitled under the Transmission Article shall elect to be registered as holder of the shares himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects.

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ii) If the person aforesaid shall elect to have the share transferred to some other person, he shall testify his election by executing an instrument of transfer of the shares.

iii) All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of instruments of transfer of a share shall be applicable to any such notice of transfer as aforesaid as if the death, lunacy, bankruptcy or insolvency of the member had not occurred and the notice of transfer were a transfer signed by that member.

RIGHT OF PERSONS ENTITLED TO SHARE UNDER THE TRANSMISSION ARTICLE:

51. A person so becoming entitled under the transmission article to a share by reason of death, lunacy, bankruptcy or insolvency of the holder shall, subject to the provisions of section 206 of the Act, be entitled to the same dividends and other advantages as he would be entitled to, as if he were the registered holder of the share.

Provided that the Board may at any time give a notice requiring any such persons to elect either to be registered himself or to transfer the share, and if the notice is not complied with within ninety days the Board may thereafter withhold payment of all dividends, bonuses, or other moneys payable in respect of the share, until the requirements of the notice have been complied with.

INCREASE AND REDUCTION OF CAPITAL

POWER TO INCREASE CAPITAL:

52. The Company in General Meeting may, from time to time increase its capital by the creation of new shares of such amount as may be deemed expedient.

ON WHAT CONDITIONS NEW SHARES MAY BE ISSUED

53. Subject to any special rights or privileges for the time being attached to any shares in the capital of the Company then issued, any shares of the Original or increased capital shall be issued upon such terms and conditions and with such rights and privileges, attached thereto as the General Meeting resolving upon the creation thereof, shall direct, and if no direction be given, and in the case of existing unissued shares, as the Board shall determine, and in particular in the case of Preference shares, such shares may be issued with a preferential or qualified rights to dividends and in the distribution of the assets of the Company and with rights of redemption.

PROVISIONS RELATING TO THE ISSUE:

54. Before the issue of any new shares, the Company in the General Meeting may make provision as to the allotment and issue of the new shares, and in particular may determine to whom the same shall be offered in the first instance and whether at par or at premium or, subject to the provisions of section 79 of the Act, at a discount and upon default of any such provisions, or so far as the same shall not extend, the new shares may be issued in conformity with the provisions of Article 6.

HOW FAR NEW SHARES TO RANK WITH EXISTING SHARES:

55. Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares shall be considered part of the then existing ca