- i -

SECTION I - DEFINITION AND ABBREVIATIONS

i. DEFINITIONS Term Description “YWL” or “Company” or “YOGINDERA WORSTED LIMITED” or “we” or “us” and “our”

YOGINDERA WORSTED LIMITED, a public limited Company incorporated under the Companies Act, 1956

ii. CONVENTIONAL / GENERAL TERMS

TERMS DESCRIPTION Act The Companies Act, 1956 as amended from time to time BSE The Bombay Stock Exchange Limited CDSL Central Depository Services (India) Limited Directors The Directors of the Company i.e. YOGINDERA WORSTED LIMITED Equity Shares The Equity Shares of the Company of the face value of Rs.10/- each unless

otherwise specified in the context thereof FEMA Foreign Exchange Management Act, 1999 as amended from time to time and

the rules and regulations framed there under. FII’s Foreign Institutional Investor as defined under SEBI (Foreign Institutional

Investors) Regulations, 1995 registered with SEBI and as defined under FEMA (Transfer or issue of security by a person resident outside India) Regulations, 2000 and under other applicable laws in India

Indian GAAP Generally Accepted Accounting Principles in India. IT Act The Income Tax Act, 1961, as amended from time to time RBI Reserve Bank of India SEBI The Securities and Exchange Board of India constituted under the SEBI Act. SEBI Act Securities and Exchange Board of India Act, 1992

as amended from time to time SEBI Guidelines SEBI (Disclosure and Investors Protection) Guidelines, 2000, issued by SEBI

as amended from time to time

iii. OFFERING RELATED TERMS Terms Description Allotment Issue of Equity Shares pursuant to the Issue to the successful allottee. Allottee The successful investor to whom the Equity Shares are being / have been

issued. Applicant Any prospective Investor who makes an application for Shares in terms of this

Draft Prospectus. Application Form The form in terms of which the investors shall apply for the Equity Shares of

the Company. Banker(s) to the Issue UTI Bank Ltd. 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 funds are transferred from the Escrow Account to the

Public Issue Account after the Draft Prospectus is filed with the RoC, following which the Board of Directors shall allot the Equity Shares to successful allottee.

Issue / Fresh Issue / IPO Initial public offer of 60,00,000 Equity Shares by YOGINDERA WORSTED LIMITED.

- ii -

Issue Opening Date The date on which the issue opens for subscription by the public. Issue Closing Date The date on which the issue closes for subscription by the public. Issue Period The period between the issue opening date and the issue closing date and

includes both these dates. Issue Price The price at which the Equity Shares will be issued by the Company vide this

Draft Prospectus. Mutual Fund / MF A fund established in the form of a trust to raise monies through the sale of

units to the public or a section of the public under one or more schemes for investing in securities, including money market instrument and registered with the SEBI (Mutual Funds) Regulations, 1996.

Net Issue/Net Issue to the Public

Issue of 60,00,000 Equity Shares of Rs.10/- each at a premium of Rs.14/- per share amounting to Rs.1440.00 Lacs.

Draft Prospectus / Offer Document

Refers to this document, in terms of which the present issue of Equity Shares are proposed to be made, to be filed with Registrar of Companies Punjab, H.P & Chandigarh.

Project The proposed expansion plans of the Company. Registrar Registrar to the Issue Intime Spectrum Registry Limited. Stock Exchange(s) Unless otherwise mentioned refers to the Bombay Stock Exchange Limited

(BSE).

iv. COMPANY / INDUSTRY-RELATED TERMS Term Description Act The Companies Act, 1956 as amended from time to time. Articles The Articles of Association of YOGINDERA WORSTED LIMITED. Auditors The Statutory Auditors of YOGINDERA WORSTED LIMITED.

M/s., Datta Singla & Co. Chartered Accountants. ATC Agreement on Textiles and Clothing. Board / Board of Directors The Board of Directors of YOGINDERA WORSTED LIMITED. DEPB Duty Entitlement Pass Book Scheme. EPCG Export Promotion Capital Goods. Fiscal or FY or Financial Year

Twelve months ending 31st March each year.

GATT General Agreement on Tariff and Trade. GDP Gross Domestic Product. Insurance Act Insurance Act, 1938, as amended from time to time. IT Act The Income Tax Act, 1961 as amended from time to time. ICAI The Institute of Chartered Accountants of India. Memorandum/Memorandum of Association

The Memorandum of Association of YOGINDERA WORSTED LIMITED.

MIS Management Information System. NRI’s/ Non-Resident Indians A Person resident outside India, as defined under FEMA and who is a citizen of

India or a Person of Indian origin under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000)

NCAER National Council of Applied Economic Research Overseas Corporate Body / OCB

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 (Deposit) Regulations, 2000. OCBs are not allowed to invest in this Issue.

Person or Persons Any individual, sole proprietorship, unincorporated association, unincorporated organization, body corporate, corporation, Company, partnership, limited liability Company, joint venture, or trust or any other entity or organization validly constituted and/or incorporated in the jurisdiction in which it exists and operates, as the context requires.

- iii -

Promoters Mr. Jagmohan Lal Gupta Mr. Anil Kumar Gupta Mr. Ajay Kumar Gupta Mr. Gautam Aggarwal Mrs. Kusum Lata Mr. Yogesh Gupta Mrs. Shukla Gupta Anil Kumar Gupta – HUF Jagmohan Lal Gupta – HUF

Group Companies Unless the context otherwise requires, refers to those companies mentioned in the section titled “Our Group Companies” on page 104 of this Draft Prospectus.

Public Issue Account Account opened with Bankers to the Issue for the purpose of depositing the application money by the applicant, on or after the issue Opening Date.

PSEB Punjab State Electricity Board. ROC Registrar of Companies Punjab, H.P & Chandigarh. Registered office of the Company

Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, District Ludhiana – 141 113, Punjab.

Reserved Categories Means reservation for employees of the Company. Retail Applicant Individual applicant (including HUF’s & NRI’s ) who have not applied for an

amount more than Rs.1,00,000/- in this issue. Retail Portion The Portion of the Issue being minimum 50% of the Net Issue to the Public i.e.

30,00,000 Equity Shares of Rs.10/- each available for allocation to Retail Individual.

Stock Exchange Bombay Stock Exchange Limited. Abbreviations of General Terms

AGM Annual General Meeting AS Accounting Standards as issued by the Institute of Chartered Accountants of

India A.Y./AY Assessment Year CAGR Compounded Annual Growth Rate Capex Capital Expenditure DP Depository Participant EPS Earnings Per Share i.e. profit after tax divided by outstanding number of

Equity Shares at the year end EBITA Earning Before Interest, Tax, Depreciation and Amortization FCNR Account Foreign Currency Non Resident Account FIPB Foreign Investment Promotion Board FI Financial Institution GOI/Government The Government of India GIR Number General Index Registrar Number HUF Hindu Undivided Family IDBI Industrial Development Bank of India Limited KW Kilo Watt Mn. Million MF Mutual Fund MOU/MoU Memorandum of Understanding NAV Net Asset Value being paid up Equity Share Capital plus free reserves

(excluding reserves created out of revaluation) less deferred expenditure not written off (including miscellaneous expenses not written off) and debit balance of Profit & Loss Account, divided by number of issued Equity Shares

NRE Account Non Resident External Account NRO Account Non Resident Ordinary Account NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited NOC No Objection Certificate

- iv -

P.A / p.a. Per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PUDA Punjab Urban Development Authority PSIDC Punjab State Industrial Development Corporation Ltd. RBI The Reserve Bank of India RBI Act The Reserve Bank of India Act 1934, as amended from time to time ROC Registrar of Companies Punjab, H.P & Chandigarh RONW Return on Net Worth Rs./ Rupees /INR Indian Rupees TUFS Technology Up-gradation Funds Scheme USA United States of America USD/US$ United States Dollar VAT Value Added Tax

- v -

SECTION II – RISK FACTORS i. FORWARD-LOOKING STATEMENTS AND MARKET DATA

Our Company have included statements in this Draft Prospectus which contain words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “may”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue”, “seek to” 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 textile industry in India and our ability to respond to the same Our ability to successfully implement our strategy; Our growth and expansion plans and technological changes; Monetary and fiscal policies of India; Equity prices or other rates and prices; Performance of financial markets in India and globally; Inflation, deflation and unanticipated fluctuations in interest rates; General economic and business conditions in India; Changes in the value of the Rupee and other currencies; and Changes in laws and regulations that apply to the Indian and global textile industry.

For further discussion of factors that could cause our actual results to differ, see section titled “Risk Factors envisaged by management and Managements proposals to address the Risk ” beginning on page vi of this Draft 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 any member of the Syndicate nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances 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 Lead Managers will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges. ii. CERTAIN CONVENTIONS, USE OF MARKET DATA Unless stated otherwise, the financial data in this Draft Prospectus is derived from the restated financial statements of YOGINDERA WORSTED LIMITED as of and for the fiscal years ended March 31 2002, 2003, 2004, 2005 and 2006, all prepared in accordance with Indian GAAP and included in this Draft Prospectus. Our fiscal year commences on April 1 and ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month period ended March 31 of that year. In this Draft Prospectus, any discrepancies in any table between the total and sums of the amounts listed are due to rounding off. iii. MARKET DATA Unless stated otherwise, industry data used throughout this Draft Prospectus has been obtained from industry publications, newspaper and magazine articles etc. Such publications generally state that content therein 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 that the industry data used in this Draft Prospectus is reliable, it has not been verified by any independent source. In this draft Prospectus, unless the context otherwise requires, all references to the word “Lakh” or “Lac”, means “One hundred thousand” and the word “Crore” means “ten million”. In this Draft Prospectus, any discrepancies in any table between total and the sum of the amounts listed are due to rounding off. Throughout this Draft Prospectus, all the figures have been expressed in Lacs of Rupees, except when stated otherwise. All references to “Rupees” and “Rs.” in this Draft Prospectus are to the legal currency of India.

- vi -

II. RISK FACTORS ENVISAGED BY MANAGEMENT AND MANAGEMENT’S PROPOSALS TO ADDRESS

THE RISKS An investment in Equity Shares involves a high degree of risk. One should carefully consider all of the information in this Draft Prospectus, including the risks and uncertainties described below, before making an investment in our Equity Shares. To obtain a complete understanding of our Company, one should read this section in conjunction with the sections titled “Business overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page no.47 and page no.109 respectively. If any of the following risks actually occur, our business, results of operations and financial condition could suffer, the trading price of our Equity Shares could decline, and one may lose all or part of their investment. A. Risk Factors Specific to the Project and Internal to us 1. (a) Our Company has not made definite arrangements for procurement of certain equipment

/machinery for the project, which may cause a delay in implementation of the project. Our Company is yet to place orders for equipments/ machinery amounting to Rs.610.70 Lacs as per the “Objects of Issue” on page no.20 of this Draft Prospectus. The equipment / machinery proposed to be acquired by our Company are easily available with low leadtime. Our Company does not foresee any problems in procuring and installing the same within shortest possible time. Our Company has already received the quotations from suppliers of plant and machinery and negotiations in respect of technical specifications with the vendors have been commenced. The orders will be placed after availability of public issue proceeds for utilization. The expected date of delivery would vary but we are confident that the machinery proposed to be procured shall be installed within two months of the placement of order. (b) The Company intends to import part of plant & machinery required for implementation of

the project and as per the quotations received, cost has been determined in foreign currency. Any adverse fluctuations in the exchange rate of foreign currency vis-a-vis Indian Rupee could affect the implementation of the project and may result in cost escalation.

Our Company has made adequate provisions in the contingencies to take care of marginal fluctuations in the exchange rates.

2. Our Company has installed one Diesel Genarating Set without obtaining prior approval of Punjab State Electricity Board (PSEB).

Our Company has installed three Diesel Generating (DG) Set of which two DG sets are 400KVA capacity and one DG set of 1500 KVA Capacity. The Company has not obtained the requisite prior approval for installation / operation of the DG set of 1500 KVA capacity taken on lease. Failure to obtain such permission may result in initiating of legal / punitive action against our Company and may affect the production and consequently the profitability. Our Company has made an application to PSEB for obtaining the required approval and condoning the delay in submission of application. The Company does not envisage any difficulty in obtaining the said approval from PSEB

3 Our Company is expanding capacity without firm commitments / orders.

Our Company is expanding its capacity in spinning and entering into knitting, which will require a larger customer base. In the absence of guaranteed customers for the increased production, there can be no assurance that we will be successful in selling the increased production. This may result in lower capacity utilization and adversely affect the operations and financial results. Most of the yarn manufactured by our Company is dyed in fiber stage, resulting in good quality, which in turn leads to excellent color fastness. The yarns manufactured by us are knotless and have been appreciated and accepted for its quality. Our Company envisages no difficulty / hindrance in marketing

- vii -

and selling its expanded production as there exist a significant demand for Company’s product. Moreover, the Company has repeated orders from its existing customers

4. Major requirement of the primary raw material viz. Acrylic is procured from a single Supplier. Acrylic is the primary raw material for Company’s manufacturing operations. In order to manufacture yarn of consistent quality, major requirement of Acrylic is procured through single supplier viz. Pasupati Acrylon Ltd. Hence, we are exposed to risk of dependence on one supplier. It may also lead to variation in Acrylic prices. Any delay or non-conformance to quality requirements by the suppliers can impact Company’s ability to meet its customer’s requirements and thus impact Company’s business. The Company has so far been procuring the raw material from a single supplier which has helped in maintaining consistency in the quality and evenness in the yarn. It has been felt that if the raw material is procured from various suppliers, there is likelihood that the quality of final product may detoriate. Our Company has so far not faced any problem from its existing supplier and the relationship continues to be cordial.

5. Dependence upon few customers: For the financial year ended March 31, 2006, top few customers constitute nearly 50 per cent of our total turnover. Concentration on few customers leads to higher dependency, which in the long run may not be in the interest of the Company.

As a matter of strategy, we have been working to enlarge our client base and product range, which would ultimately reduce depedencey on few customers despite the fact that these are repeated customers and has been consistently dealing with the Company.

6. Our Company is subject to restrictive covenants in certain short-term and long-term debt

facilities provided by banks / financial institutions.

Our Company had availed loans and financial facilities from banks and financial institutions. The agreements entered into by the Company for availing such loans and financial assistance contain several restrictive covenants, some of which operate on a day-to-day basis and the others which operate on any default by the Company in meeting its repayment obligations or not complying with the terms of those agreement. These covenants, especially (but not restricted to) those which require the Company to obtain approval from bankers for undertaking certain activities and those which operate on default, are restrictive and can prejudicially and adversely affect and continue to affect our current operations and future plans. However, these restrictive covenants may affect some or all of the rights of the shareholders.

7. The Loan agreement entered into between our Company and IDBI is subject to the condition that

in the event of default by us in repayment of principal and interest, the entire amount outstanding, on the date of default, would be converted into Equity.

The Corporate loan of Rs.425 Lacs and Term Loan of Rs.150 Lacs availed by the Company from IDBI is subject to the condition that in the event of default made by our Company, in repayment of Principal and interest, the entire outstanding amount(s) as on the date of default would be converted into Equity. Our Company, in the past has never defaulted in repayment of any loan to bank / financial institutions. The principal amount outstanding as of 31/03/2006 against the said Corporate Loan and Term Loan is Rs.421.50 Lacs and Rs.75.56 Lacs respectively.

8. Our Company has obtained working capital limits for our existing operations from State Bank of

Patiala. The enhanced working capital facilities for expansion / diversification project are yet to be assessed and sanctioned by State Bank of Patiala

Presently our Company has been sanctioned working capital limits (fund & non fund based) aggregating to Rs.1040.00 lacs. However the bank has created charge on the assets of the company

- viii -

for an amount aggregating to Rs.940.00 lacs. Keeping in view of our proposed expansion cum diversification project, Our Company has already made an application to State Bank of Patiala for Enhancement of Working Capital limits to Rs.1190.00 lacs which are yet to be assessed and sanctioned by the said Bank.

9. The Object of the issue for which funds are being raised have not been appraised by any Bank

or Financial Institutions All the figures under the “Objects of the Issue” on page no. 20 are based on our own estimates which are based on the current business plans, which may undergo changes based on market and industry condition and opportunities. The project is subject to various variables such as cost overrun, delay in implementation, which may include rescheduling / terminating projects Company has successfully implemented expansion plans in the past without time or cost Overruns / escalations.

10. Success of Company’s business depends on its senior management and its ability to attract and retain its key personnel. Any significant changes in the key managerial personnel, may affect the performance of the Company.

Our Company’s success depends on the continued service and performance of the senior management team and other key employees. Competition for senior and experienced personnel in the industry is intense at present. The loss of services of senior management or other key personnel could seriously impair the ability to continue to manage and expand the business, which may adversely affect the financial condition. Our Company provides a challenging, open and professionally satisfying work environment to its employees and have never experienced work stoppage as a result of labour disagreement or otherwise. We do not forsee any problems in hiring and retaining competent manpower.

11. Our Company may not be able to sustain effective implementation of its business and growth strategy. Success of our business depends greatly on its ability to effectively implement its business and growth strategy. We have successfully executed business strategy in the past, there can be no assurance that it will be able to execute its strategy on time and within the estimated budget, or that it will meet the expectations of targeted customers. Inability to manage business and growth strategy would have a material adverse effect on its business, financial condition and results of operations.

12. Our Company may have to face pricing pressure on its products due to removal of quota

systems.

The end of quota restrictions on textile products has resulted in price competition among suppliers from low cost economies. We could further face pricing pressure as various suppliers who were hitherto restrained by quotas will start competing for the same orders in the international markets. With the removal of quota restrictions on textile products, Our Company is in a better position to expand its base in the existing foreign markets and penetrate/ search for newer markets due to high standard quality products manufactured by us.

13. Our Company will have to match with the technological advancement taking place in the

industry.

Technology by its very nature is dynamic and ever changing and hence plays a vital role. Our Company may not be able to pace with the rapidly changing technological environment. Any failure on our part could adversely affect our ability to compete efficiently, cost-competitiveness and quality of product, which could consequentially affect our sales and profitability. Our Company has been keeping pace with the technological advancement taking place in the industry

- ix -

and from time to time had installed machines with latest technology, procured from reputed overseas suppliers. Recently, we have imported and installed Fancy Twisting Machine from China, wherein various types of Fancy Yarns of high value additions are made.

14. The Promoters along with person acting in concert, currently holds 81.47 % of the present paid

up Equity Capital, which would decrease to 48.67 % Post-issue.

Our Promoter group will beneficially own approximately 48.67 % of the post issue Equity Share Capital. The Promoters would continue to exercise significant influence over the affairs of the Company being the single largest group. Further, in addition to above, as per the terms of the financial collaboration agreement entered into between PSIDC and Mr. Ajaj Kumar Gupta (Jt. Managing Director and one of the promoter), 9,00,000 (Nine lac) Equity Shares of Rs.10/ each fully pai`d up, of the Company are required to be bought back from PSIDC by Mr. Ajay Gupta on or before 31st July, 2007 which were acquired by PSIDC from the Company, under the above agreement. On completion of buy-back as per the above agreement, the holding of promoters group will be 54.71 per cent of the post issued paid up capital of our Company. Accordingly, the shareholders arising out of this issue may not be in a position to influence any decisions taken over by the promoter group.

15. Certain Loans of our Company were restructured / rescheduled in past

Our Company had availed loans from IDBI amounting to Rs.800.00 Lacs and Rs.150.00 Lacs vide loan agreements dated 27/08/98 and 09/07/99 respectively. On our request, IDBI had restructured both the term loans vide letter bearing ref. no. 85/DA3(240) dated 27/08/04 wherein the amount of instalments are lower in the initial quarters and increases gradually. The number of quarterly instalments in which the loan is repayable remains unchanged. As of date our company had not defaulted in repayment of quarterly instalments of the aforesaid loans.

16. Unsecured Loans taken by our Company can be recalled by lenders at any time which may

adversely affect cash flows/ operations of the Company.

Unsecured loans taken by the Company are mainly from Promoters / Directors and relatives of Promoters. The loans are repayable on demand. Our Company is profit making and would be able to repay the same out of the internal accruals without adversely affecting its cash flows/operations.

17. Our Company is diversifying into manufacture of ready to wear garements, for which an Acknowledgement Receipt from The Entrepreneurial Assistance Unit, Secretarial for Industrial Approvals, Department of Industrial Development, Ministry of Industry, Government of India, is yet to be obtailed.

Our Company shall file the Industrial Entrepreneous Memorandum with the concerned authorities well before the commencement of the commercial production of the diversified products.

18. Outstanding Litigation, defaults, etc involving our Company, our Directors and past cases in which penalties imposed.

Cases filed by our Company

Civil Cases:

There are no civil cases filed by our Company Criminal Cases:

Yogendera Worsted Ltd. V/s Umen Knitwears Pvt. Ltd Case Under Section 138 of Negotiable Instrument Act 1881, Case no. 141/2 (2004)

- x -

Our Company had a business transaction with the accused Company. The accused Company was liable to pay Rs.2,31,000/- towards settlement of account and issued cheque bearing no. 170164 dated 10.07.2004 for Rs.2,31,000/-(Rupees Two Lacs Thirty One Thousand only) drawn on PNB at RCC branch, Ludhiana. The said cheque was dishonored and the complainant issued a registered notice on 30th July 2004. Being aggrieved by the act of the accused Company, our Company has filed the criminal Compliant against Umen Knitwears Pvt. Ltd in the Hon’ble Court of Judicial Magistrate Ist Class, Samrala. The next date of hearing is 10th July, 2006. Cases filed against our Company There are no Civil or Criminal cases filed against our Company, our Individual / Corporate Promoters, our Directors / officers of the Company.

18. Mishaps or accidents at Company’s Factory / office could lead to property damages, property

loss and accident claims

Our Company has insured itself against property damages, loss of assets, theft, natural calamities, etc. We have adequate insurance coverage to take care of certain contingencies. No assurances can be given that various insurance policies taken by the Company will be sufficient to cover one or more large claims.

19. We have not provided for contingent liabilities.

Our Company has not provided for contingent liability on account of Bank Guarantee amounting to Rs.4.96 Lacs as of 31st March, 2006.

20. Mr. Ajay Kumar Gupta “Collaborator” have not complied with Clause 20(A) and 22 of the

Financial Collaboration agreement entered with PSIDC (“Corporation”), pertaining to buy back of shares from the Corporation

Financial collaboration agreement was entered on 23.12.1998 between Punjab State Industrial Development Corporation Ltd. (PSIDC) (Corporation) and Mr. Ajay Kumar Gupta, (Collaborator) Promoter and Joint Managing Director of our Company for setting up of a project for manufacture of Pre-dyed Woollen Worsted/ Acrowool Yarn with a capacity of 950 MT per annum in the State of Punjab. The Equity participation by PSIDC was Rs.90.00 Lacs (15%) and that of Mr. Ajay Kumar Gupta and Associates was 510.00 Lacs (85 %) The capital requirement of Company to be arranged by the Board of Directors through loans and other borrowings and/ or in such other manner as may be decided upon. As per the said agreement the Collaborator was bound to purchase the said shareholding of the Corporation in the Company in two equal installments before the expiry of the 3rd and 4th years after the commencement of the commercial production. The 1st and 2nd installments of 4,50,000 Equity Shares of Rs.10/- each had become due for buy-back on 09/09/2002 & 09/09/2003 respectively. The collaborator did not buy back the shares under clause 20-A of the said agreement. In year 2003, Government of Punjab with a view to assist the collaborators of PSIDC promoted ventures and to amicably settle buy back of PSIDC shareholding in their respective companies, came out with One Time Settlement (OTS) Policy, operational till 31st May 2003. The Collabortor did not opted for the said scheme. Legal notice for non compliance of the Financial Collaboration Agreement was issued by Legal counsel of PSIDC. Later on, the government of Punjab extended the validity of OTS Policy till 30.06.2004 and this time Mr. Ajay Kumar Gupta opted for settlement under the policy and accordingly the legal notice served thereof was not enforced. As per the said policy, the Collaborator is committed to complete the entire buy-back before 30th June, 2007. The Collaborator Mr. Ajay Kumar Gupta has made payment of Rs.35.00 Lacs to PSIDC vide demand Draft bearing no. 609840 dated 27/03/2006 drawn on Standard Chartered Bank, towards part payment

- xi -

of One Time Settlement Amount in addition to payment of Rs.28.50 Lacs made earlier. The Collaborator has also issued post dated cheques amounting to Rs.1,24,10,341/-, being the balance amount and given an undertaking not to seek transfer of Shares in the names of persons in whose favour transfer is not permitted as per SEBI guidelines during the lock in period even, if the entire payment of One Time Settlement is made. PSIDC vide its letter bearing ref. No. PSIDC:PD:8936 dated 27th March, 2006 have given its consent to the stipulation of lock-in for a period of one year from the date of allotment on the shareholding of PSIDC in the Company on agreeing to the following conditions by Mr. Ajay Kumar Gupta, the collaborator. 1. that he will not seek further benefits over and above the OTS policy already announced, that

may be announced later on for the other collaborations / units under OTS. 2. that he will not seek transfer of Shares against the amount deposited / already deposited

towards buy-back consideration till the entire amount is paid.

Besides the above and notwithstanding anything contained in the aforesaid, in case the entire payment towards buy back of Shares of PSIDC invested in the Company is not received by PSIDC within the stipulated period as per the terms of OTS on account of any reason, including delay in the completion of public issue resulting in extension of lock-in period of Shares beyond the last date of completion of OTS as per the terms of OTS, the OTS shall, stand cancelled automatically and the buy-back will be governed as per the terms of Financial Collaboration Agreement and payments already received shall be adjusted towards the said liability. Further, in terms of Clause 14 of the Financial Collaboration Agreement dated 23.12.1998, PSIDC has the right to nominate one director so far as it is holding any Shares in the Company.

B. Risk External to our Company 1. Changes in economic policies and the political situation in India could adversely affect the

fortunes of the industry.

The Government has traditionally exercised and continues to exercise a significant influence over many aspects of the Indian economy. Since 1991, the Government of India has pursued policies of economic liberalization. We cannot assure of these liberalization policies to continue in future. Protest against liberalization could slowdown the pace of economic development. The rate of economic liberalization could change specific law, Policies, foreign investment, currency exchange rates and other matters relating to investment in our securities could change as well. Our Company’s business, its market price and liquidity of Equity Shares, may be affected by interest rates, changes in Government policy, taxation, social & civil unrest, political, economic or other developments in or affecting India.

2. Force majeure events, terrorist attacks and other acts of violence or war involving India, or other countries could adversely affect the financial markets, result in loss of client confidence and adversely affect Company’s business, results of operations, financial conditions and cash flows. South Asia has, from time to time, experienced instances of civil unrest and hostilities among neighboring countries such as between India and Pakistan. In recent years, there have been military confrontations along the India-Pakistan border. Military activity or terrorist attacks in the future could influence the Indian economy. These acts may also result in loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. Any such event could adversely affect our financial performance or market price of Equity Shares.

- xii -

3. The price of our Equity Shares may be volatile, or an active trading market for Equity Shares of our Company may not develop. The Equity Shares of our Company are currently not listed. The price of Equity Shares on the Stock Exchanges may fluctuate after this issue as a result of several factors including:

Volatility in Indian and Global securities market;

Results of operations and performance of our Company in terms of market share;

Performance of Company’s competitors and perception in the Indian market about investment in the textile sector;

Performance of the Indian Economy;

Adverse media reports, if any, on our Company or the Indian Textile Industry.

Changes in the estimates of our Company’s performance or recommendations by financial analysts.

Significant development in India’s economic liberalization and de-regulation policies; and

Significant development in India’s fiscal and environmental regulations.

4. Reduction or termination of policies instituted to promote growth of the textile sector

The Government of India has instituted several policies to promote the growth of Indian textile sector. These include interest rate subsidies and duty / tax reimbursement schemes viz. duty drawback / DEPB and Advance Licenses under the EXIM Policy. Termination of / or variation in terms of such policies can adversely impact the profitability of textile companies in the Country, including ours. Further, any change in regulatory environment in relation to manufacturing in India or for marketing the products within and outside India will significantly impact our Company’s business.

5. Growing competition may adversely affect our Company’s operations

We operate in a globally competitive business environment and hence face significant competition from other countries, having cheap labour and significant production capacities. We may also face competition from other established companies and future entrants into the Industry. The growing competition may force us to reduce prices of our products, which may reduce our revenues and margins and/or decrease our market share, either of which could adversely affect our business, financial condition and results of operations.

6. Inability of our Company to comply with environmental laws & regulations or facing

environmental litigation, may adversely affect business operations.

Environmental laws & regulations in India have been increasing in stringency and may become significantly more stringent in the future. If, as a result of compliance or non-compliance with any environmental regulations, the entire unit or part of its operations are shut down, our Company will continue to incur costs in complying with regulations, appealing any decision to close the facilities, maintaining production at existing facilities and continuing to pay labour and other costs which continue even if the facility is closed. As a result, overall operating expenses will increase and our profits may decrease.

7. Increase in taxes and other levies imposed by the Central or State Governments in India on

acquisition of capital goods /components, purchase of raw materials or finished goods may have an adverse effect on profitability of our Company.

- xiii -

Notes To Risk Factors 1. The net worth of our Company before the issue is Rs.1585.21 Lacs as at 31st March, 2006. 2. Public issue of 60,00,000 Equity share of Rs.10/- each for cash at a price of Rs.24/- per share

(including premium of Rs. 14/- per share) amounting to Rs.1440 lacs 3. The cost per share to the promoters is Rs.10.00 per share and the book value per share is Rs.17.81 as

on 31st March, 2006. 4. Our Promoters / Directors/ Key managerial personnel of our Company are interested in the Company to

the extent of reimbursement of expenses, normal remuneration or benefits, and their respective shareholding in the Company. (Please refer interest of Promoters / Directors appearing on page no 85 in the Draft Prospectus)

5. The investors are advised to refer to the para on “Basis of Issue Price” before making any investment in

the issue. 6. Please read this Draft Prospectus and the instructions contained herein before taking any action. 7. Investors may note that in case of over-subscription in the Public Issue, allotment shall be done on a

proportionate basis (refer to “Basis of Allotment” on page 142) in consultation with the Designated Stock Exchange (BSE)

8. The investors may contact the lead managers or the Compliance officer for any complaints /

clarification/ information pertaining to the issue, who will be obliged to attend to the same. 9. In addition to the Lead Managers, the issuer company is obliged to update the prospectus and keep the

public informed of any material changes till listing and trading commences in respect of the shares issued through this Issue.

10. Our Company has entered into the following Related Party Transaction

List of Related Parties

Relationship Name of the Related Party Subsidaries The Company has no Subsidaries

Hoshiarpur Rollers Flour Mills Private Ltd Himachal Flour Mills Private Ltd Brijeshwari Textiles Pvt. Ltd

Group Companies / Firms

Balmukhi Textiles Pvt. Ltd Mr. Jagmohan Lal Gupta Mr. Anil Kumar Gupta Mr. Ajay Kumar Gupta

Key Managerial Persons

Mr. Gautam Aggarwal Anil Kumar Gupta - HUF Associate Jagmohan Lal Gupta – HUF Mr.Yogesh Gupta Smt.Kusum Lata Sh.Rishi Aggarwal Mr.Raghav Aggarwal Smt.Shakuntla Devi

Relative of Directors

Smt.Garima Aggarwal

- xiv -

Details of Transactions with related parties:

Amount in Rs. Lacs Name of Related Party Nature of

Relationship Nature of Transaction

31/03/06 31/03/05 31/03/04 31/03/03 31/03/02

Himachal Flour Mills Pvt. Ltd Group Company Deposit recd due at end of year

1.86 9.50 7.00 9.50 1.86

Anil Kumar Gupta Managing Director

Salary, Interest payment and deposit recd at end of year

12.51 7.25 6.37 4.20 1.20

Ajay Kumar Gupta Jt. Managing Director

Salary, Interest payment and deposit recd at end of year

2.59 2.28 2.12 2.70 1.20

Gautam Aggarwal Executive Director

Salary, Interest payment and deposit recd at end of year

7.41 7.55 7.22 5.20 1.20

Yogesh Gupta Associate Salary, Interest paymentand deposit recd at end of year

8.16 6.39 5.62 3.70 1.20

Shakuntla Devi Relative Deposit recd due at end of year

11.97 11.97 0 0 0

Garima Aggarwal Relative Deposit recd due at end of year

0.80 0.80 0 0 0

Jagmohan Lal Gupta Chairman Deposit recd due at end of year

0 2.90 0 0 0

Kusum Lata Relative Deposit recd due at end of year

0.78 0 0 0 0

Rishi Aggarwal Relative Deposit recd due at end of year

4.34 0 0 0 0

- 1 -

SECTION III - INTRODUCTION SUMMARY

Industry and business of our Company You should read the following summary together with the risk factors included from page no.v to xii and the detailed information about our Company and its financial data included in this Draft Prospectus. Note: Unless otherwise indicated, all financial and statistical data relating to the industry in the

following discussion is derived from internal Company’s reports & data, industry publication and estimates. This data has been reclassified in certain respects for purposes of presentation. For more information, see “Forward-Looking Statements” beginning in page v in this Draft Prospectus

INDUSTRY OVERVIEW Indian Textile Industry The Indian Economy continues its growth trajectory, with GDP growth at 8.1 % in current fiscal year (up from 7.5% in the previous year) buoyed by a strong industrial and consumer goods sector growth, the FY 06-07 growth is projected at a robust 7.5 – 8 %. The Textile sector, one of the earliest to come into existence in India accounts for 14 % of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture providing direct employment to about 350 Lacs people. Besides this, there are a large number of ancillary industries, which are dependent upon this sector, such as manufacturing various machines, accessories, stores, ancillary items and chemicals. Known globally for its skill and craftsmanship, the Indian textile industry is also one of the largest export earner. Trade restrictions have hitherto kept the Indian textile industry from soaring to the heights it is capable of, but this is expected to change, due to removal of Quota and other trade restrictions. Textile covers the following sub-segments:

Fibre intermediates; P-X, DMT, PTA, MEG, Wood Pulp etc.

Fibres: ginning and processing of cotton, manufacture of PFT, NFT Rayon fibres etc.

Synthetic fibre / filament processing viz. drawing, texturising, twisting etc.

Yarn: spinning cotton and blends on rotors and ring frames

Weaving / knitting

Processing

Distribution and

Garmenting India is globally a significant player in the textile sector and is globally the

Third largest producer of cotton and cellulose fibre / yarn Second largest producer of cotton yarn Largest producer of jute, second largest producer of silk Fifth largest producer of synthetic fibre / yarn

(Source: Wake up call for India’s textile Industry, Report of Expert Committee on Textile Policy, ICAC)

- 2 -

Structure of the Textile Industry The industry has a complex structure marked by presence of large scale and small scale production units. The industry is manufacturer driven with spinning having large scale operations and the retailing as the weakest link. From growing own raw material (cotton, jute, silk and wool) to providing value added products (fabrics and garments) to customers, the textile industry covers a wide range of economic activities and results in employment in both organized and unorganized sectors. Post MFA Global Environment Till December 31, 1994, the exports of textiles to certain developed countries ( e.g. United States of America (USA); Member countries of European Union(EU), Canada) were governed by bilateral textile arrangement entered into between India and these countries under the aegis of the Multi-Fibre Arrangement (MFA), outside the rules of the General Agreement on Tariffs and Trade (GATT). With effect from January 01, 1995, the quantitative restrictions (import quotas) in bilateral agreements under the MFA, were taken over by the Agreement on Textiles and Clothing (ATC) contained in the Final Act on the Uruguay Round negotiations of the GATT. Implication on Indian Textile Industry India has a very strong and diverse raw material base for manufacturing fibres / yarns from natural (i.e. cotton, wool, silk, jute) to artificial (i.e. synthetic, cellulosic and multiple blend of such fibres / yarns) raw materials. India has comparative advantage in terms of labour cost also. International Textiles Manufacturers Federation (ITMF) conducted a comparative manufacturing cost study of seven countries including India. This study has indicated that Indian Industry has competitive advantage in terms of Raw material cost and labour cost in manufacture of yarn and fabric. Therefore MFA phase out may not have much adverse impact on domestic textile industry. Top textile importing countries like USA and the EU are looking towards India for meeting their import requirements. India according to several research studies, is going to emerge as alternative source of supply to China. India’s Growth in Export will be driven by value added ups and apparel as India has a competitive advantage over its competitors in relation to (1) availability of relatively inexpensive and skilled work force; (2) design expertise; (3) large production base of basic raw material like home grown cotton, yarns and fabrics; and (4) availability of wide range of textiles. (Source: Ministry of Textiles, Annual Report 04-05)

- 3 -

Initiatives in the Recent Past to Grant Impetus to the Textile Industry 1. Announcements in the Union Budget 2006-07: To strengthen domestic textile industry for meeting the

growing global competition, the following important announcements have been made in the Union Budget 2006-07:

Technology Upgradation Fund - The Government has allocated additional Rs.100 crores, making this year’s total allocation Rs.535 crores. TUF schemes to be provided for interest subsidy

Scheme for Integrated Textile Parks (SITP) have been introduced wherein the Government has allocated Rs.189 crore for the development of 10 parks. The Scheme will encourage new players and entrepreneurs.

Jute Technology mission will be launched soon and the government proposes to establish a National Jute Board for the same.

Reduction in Excise Duty for Man Made Fibres (MMF) from 16% to 8% - Positive for spinners as they can procure raw material at a cheaper cost. New duty structure have been introduced, as in the former duty structure there use to be an unutilized credit to the extent of Rs.4-6 per kg which was not on favour of the spinners.

Reduction in Import duty on man-made fibres and yarn from 15% to 10% Reduction in Import duty on raw material from 15% to 10%. Raw material includes PTA, MEG, DMT etc. Custom duty on textile machinery – peak rate reduced to 12.5%. Duty on certain machinery & parts reduced to 10 % The Cluster development approach will continue, 100 additional cluster at a cost of Rs.50.00 crore will be covered. TUF’s will be extended to the handloom sector to provide interest subsidy on term loans.

2. Announcement of National Textile Policy: One of the main objectives of the National Textile Policy

(NTP-2000) announced in November 2000 is to facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing. The policy endeavours to achieve the target of textile and apparel exports from the present level to USD 50 billion by 2010 of which the share of garments will be USD 25 billion.

3. Technology Upgradation Fund Scheme: In view of the urgent need for stepping up the process of

modernization and technology upgradation of the textile industry in India, Ministry of Textiles launched a Technology Upgradation Fund Scheme (TUFS) for the textile and jute industry for a five year time frame from 01.04.1999 to 31.03.2004. The scheme has since been extended till 31.03.2007. The scheme provides 5% interest reimbursement in respect of loans availed there under from the concerned financial institutions for investments in benchmarked technology for the sectors of the Indian textile industry specified there under. An additional option has been given to powerloom units for 20% capital subsidy under Credit Linked Capital Subsidy (CLCS-TUFS) upto a cost of Rs. 100 Lacs in eligible machinery with facility to obtain credit from a credit network that includes all co-operative banks and other genuine non banking financial companies (NBFC) recognized by the Reserve Bank of India.

4. Liberalization of FDI Policy: Government of India has allowed foreign Equity participation upto 100%,

through automatic route, in the textile sector. 5. Export Promotion Capital Goods (EPCG) Scheme: The scheme facilitates import of capital goods at 5%

concessional rate of duty with appropriate export obligation. Import of second hand capital goods without any restriction on age is also allowed under the new Foreign Trade Policy as announced on August 31, 2004.

- 4 -

6. Advance Licensing Scheme: With a view to facilitating exports and to access duty free inputs under the scheme, standard input-output norms for about 300 textile and clothing export products have been prescribed and this scheme remains operation.

7. Duty Exemption Pass Book (DEPB) Scheme: DEPB credit rates have been prescribed for 83 textile

and clothing products. The nomenclature and rates for DEPB entries pertaining to certain textile products have been rationalized. The DEPB credit rates were reduced by 45% across the board on all textile items on 23.09.2004. While addressing the concerns of certain segments of the trade, the DEPB credit rates were again revised on 30.12.2004 by announcing changes to the extent of 60% reduction in respect of cotton textile items, 30% reduction in blended textile and woolen items and 22.5% reduction in man-made textile and silk items in place of the 45% reduction effected earlier.

8. Duty Drawback Scheme: The exporters are allowed refund of the excise and import duty suffered on

inputs of the export products under this Scheme. The Department of Revenue announced revision in All Industry Rates of Duty Drawback (AIR of DBK) on 18.01.2005 and the changes made effective from 19.01.2005. There has been substantial reduction in AIR of DBK in almost all textile export products except certain items of silk and wool sectors. In the revised Drawback Schedule, 165 new entries of textile products have been created in addition to earlier 101 entries. The revised rates have been prescribed on the basis of weight of the export product instead of earlier system based on FOB value of the product. Besides, in respect of apparel items, the drawback rates have also been given on the basis of composition of textiles.

Business Overview Our Company is engaged in manufacture of Acrylic & blended Yarns. These yarns are utilized in apparels, undergarments, Terry Towels, Denims, Medical Fabrics, Furnishing Fabrics and Industrial Fabrics. Ours is the latest Worsted Spinning unit to produce single and double yarns for hosiery as well as weaving purposes. We have installed plant & machineries imported from renowned Textile Machinery Manufacturers like Rieter (Switzerland), Savio (Italy), Mayer & Cie (Germany), Schlafhorst AG & Co. (Germany), Truetzschler (Germany) and Elitex (Czechoslovakia). We have also installed plant & machineries purchased from Laxmi Machine Works, Kirloskar Toyota Textile Machine & Zinser Textile System In addition to worsted spinning, our Company has a range of fancy yarn machines and are equipped with 100% yarns/ fibers dyeing facilities for running a textile unit, manufacturing pre-dyed worsted woollen /acro woollen yarn with 6,475 spindles. The Company has an existing installed capacity of 2,695 MTS (6475 spindles) per annum. Company is going in for further capacity expansion of 825 MTS (3200 spindles). Accordingly, the total capacity post expansion will be 3,520 MTS (inclusive of 435 MTS of Fancy yarn for which Industrial License in not required) (9675 spindles) per annum. Our Company also proposes to set up a unit having capacity of manufacturing 2.52 Lacs pieces of garment per annum. We have continuously expanded and modernized our facilities in line with the industry trend, which has been supported by term loans from Financial Institutions and Banks under Technology Up-gradation Funds Scheme (TUFS) introduced by Government of India. We export worsted yarns and knitted fabrics to countries like Kenya, South Africa, United Kingdom, Maruitius, Spain and others. Our customers are in apparel and garment industry, industrial fabrics, furnishing fabrics, towels, Denims etc. At present, our exports are restricted to around 9 -10 countries only, which leaves more scope for us to develop new markets and to increase our presence accordingly. Further, with the phasing out of quota restrictions, we expect to achieve high growth rate by taping the global markets in the coming years. Our Company offers a large variety of synthetic blended yarns in acrylic, polyester, and chenille for textile end uses and industrial applications.

- 5 -

OFFERING DETAILS OF THE ISSUE

Equity Shares Offered: (Issue Size / Net Offer to Public)

60,00,000 Equity Shares

Face Value Rs.10/- Issue Price Rs.24/- Of which: 1. Retail Portion Minimum of 30,00,000 Equity Shares.*

Constituting at least 50% of the Net offer to the Public (Allocation on a proportionate basis)

2. Other than Retail 30,00,000 Equity Share * Constituting at least 50% of the Net offer to the Public (Allocation on a proportionate basis)

Under subscription in any of the category, shall be allowed to be met through over subscription in any other category. *The percentage may be increased in consultation with BSE (Designated Stock Exchange) Depending on the extent of response to the Issue from the investors in the category

Equity Shares outstanding prior to the issue

89,04,213 Equity Shares

Equity Shares outstanding after the issue

1,49,04,213 Equity Shares

Objects of the Issue Expansion of our existing installed capacity by addition of 825 MTS (3200 spindles) per annum of yarn. & Setting up of a unit for manufacture of ready to wear garment with annual capacity of 2.52 Lacs pieces.

Corporate Information YOGINDERA WORSTED LIMITED Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil - Samrala, District Ludhiana – 141 113, Punjab. Tel.No: (0161) 283 43 24/ 25/ 26 Fax: (0161) 283 40 00 Website: www.yoginderaworsted.com Email: info@yoginderaworsted.com Contact Person: Mr. Jaspal Bansal Company Secretary & Compliance Officer:Mr.Maninder Kanwar

ISSUE PROGRAM ISSUE OPENS ON DD/MM/YYYY ISSUE CLOSES ON DD/MM/YYYY Object of the issue The Objects of the issue are to raise capital aggregating to Rs.1440.00 Lacs for financing the fund requirement of Rs.1598.70 Lacs for the project. The proposed project of our Company includes expansion in the production capacity by addition of 825 MTS (3200 spindles) per annum to its existing capacity of 2695 MTS (6040 spindles) and setting up a unit for manufacture of ready to wear garment with annual capacity of 2.52 Lacs pieces. The fund requirement includes Rs.150.00 Lacs for Building, Rs.610.70 lacs for Plant and Machinery, Rs.174.00 lacs for Misc.fixed assets, Rs.55.00 lacs for Contingencies, Rs.15.00 lacs for Preliminary & pre-operative expenses, Rs. 144.00 Lacs for Public issue expenses and Rs.450 00 Lacs as margin money for Working Capital The object of the issue also includes creating a public trading market for the Equity shares of our Company by listing them on the Stock Exchange. We believe that the listing of our Equity Shares will enhance our viability and brand name and enable us to avail of future growth opportunities.

- 6 -

The Main Object Clause of the Memorandum of Association of the Company enables us to undertake the activities for which the funds are being raised in the present issue. Further, we confirm that the activities carried out until now is in accordance with the object of Memorandum of Association of the Company. Cost of Project and means on finance The cost of project and means of finance are given below: Cost of Expansion /Diversification project

Amount in Rs. Lacs Sr. No. Particulars Spinning

Section Garmenting

Section Total cost

1 Building 131.10 18.90 150.002 Plant & Machinery 410.70 200.00 610.703 Miscellaneous Fixed Assets 122.00 52.00 174.004 Contingencies 40.00 15.00 55.005 Preliminary & Pre-Operative Expenses 15.00 0.00 15.006 Public issue expenses 144.00 0.00 144.007 Margin Money for Working Capital 450.00 0.00 450.00

Total 1312.80 285.90 1598.70 Means of Finance

Amount in Rs. Lacs Sr. No.

Particulars Amount

1 Share Capital – Public issue 600.002 Share Premium 840.003 Internal Accruals 158.70

Total 1598.70

- 7 -

SUMMARY OF FINANCIAL / OPERATING DATA The following summary of financial data has been prepared in accordance with Indian GAAP, the Companies Act, 1956 and the SEBI Guidelines and restated as described in the Auditor’s Report of M/s Datta Singla & Co., Chartered Accountants dated 25/05/2006 in the section titled “Financial Information”. You should read this financial data in conjunction with our financial statements for each of Fiscal 2002, 2003, 2004, 2005 and 2006, including the Notes thereon and the Reports thereon, which appears under the para on “Auditors Report” on page no.87 in this Prospectus and “Management Discussion and Analysis of Financial Condition and Results of Operations” on page no.109 of this Draft Prospectus. SUMMARY ASSETS AND LIABILITIES, AS RESTATED

Amount in Rs. Lacs Year Ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 APPLICATION OF FUNDS Fixed Assets Gross Block 2892.74 2,365.27 2,274.78 2,229.51 1,990.46 Less: Depreciation 730.29 598.22 470.68 347.80 237.82 Net Block (A) 2162.45 1,767.05 1,804.10 1,881.71 1,752.64 Investments (B) 0 0 0 0 0 Current Assets, Loans and Advances Inventories 1099.96 817.60 598.16 387.22 224.83 Sundry Debtors 187.68 244.64 203.58 165.28 171.59 Cash and Bank Balances 173.54 64.97 74.31 54.87* 57.99 Loans and Advances 333.67 268.28 193.91 111.84* 152.68 Total (C) 1794.85 1,395.49 1,069.96 719.21 607.09 Liabilities and Provisions Secured Loans 1570.61 1,128.88 1,250.32 1,221.17 1,172.84 Unsecured Loans 114.65 194.39 165.18 98.59 88.69 Deferred Tax Liability 187.49 141.70 121.12 66.86 0.00 Current liabilities and provisions 499.34 398.66 325.94 287.45 223.29 Total (D) 2372.09 1863.63 1862.56 1674.07 1484.82 Net Worth (A+B+C-D) 1585.21 1298.91 1011.50 926.85 874.91 Represented by Share Capital 890.42 875.42 875.42 875.42 835.02 Share Application Money 0.00 15.00 0.00 0.00 40.40 Reserves and Surplus 711.12 415.84 141.23 53.21 1.55 Miscellaneous Expenditure (16.33) (7.35) (5.15) (1.77) (2.07) Net Worth 1585.21 1298.91 1011.50 926.85 874.91

*Note: Figures relating to Cash and Bank Balances and Loans and Advances for the year ending 31/03/2003 are regrouped and rearrange in accordance with 31/03/2004.

- 8 -

SUMMARY PROFIT & LOSS ACCOUNT, AS RESTATED

Amount in Rs. Lacs Year ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02INCOME Sales and Job Charges 4072.50 3,344.51 3,033.80 2,471.37 2422.46

Other Income 37.33 13.46 7.17 6.87 32.35Total Income 4109.83 3,357.97 3,040.97 2,478.24 2,454.80Increase / (Decrease) in stock) 186.87 (42.52) 25.42 153.39 (34.87) 4296.69 3315.45 3066.39 2631.63 2419.94EXPENDITURE Raw Material 2646.99 1,797.94 1657.99 1375.86 1246.41Manufacturing Expenses 353.94 331.94 315.62 276.25 241.56Excise Duty 255.38 243.47 366.65 339.16 330.52Personnel Expenses 81.57 68.46 59.53 55.58 50.77Administrative Expenses 61.11 47.32 43.33 32.11 45.48Selling and Distribution Expenses 195.01 174.62 99.11 73.83 65.71Misc. Expenditure written off 0.65 0.30 0.30 0.30 0.30Repairs and Maintenance 18.78 19.60 20.39 32.15 47.84Total Expenditure 3613.42 2,683.65 2562.91 2185.23 2028.59Net Profit before Interest, Depreciation, Tax and Extraordinary item

683.27 631.80 503.48 446.40 391.35

Interest & Financial Charges 174.55 183.23 224.97 205.67 166.74Depreciation 132.08 127.54 122.87 109.98 102.40Profit Before Tax 376.65 321.03 155.63 130.75 122.21Provision for taxation Income Tax 31.70 25.17 11.89 10.30 8.71 Deferred Tax 45.79 20.58 54.27 46.80 0.00 Fringe Benefit Tax 2.02 0.00 0.00 0.00 0.00Profit after Tax but before Extra-ordinary Items

297.14 275.28 89.48 73.65 113.50

Extraordinary Items 0.00 0.00 0.00 0.00 0.00Profit after Extra-ordinary Items 297.14 275.28 89.48 73.65 113.50Adjustment on account of prior period Expenses including deffered tax

0.00 1.86 0.67 1.46 21.99

Adjusted Profit 297.14 273.42 88.81 72.19 91.51

- 9 -

GENERAL INFORMATION

YOGINDERA WORSTED LIMITED

(The Company was incorporated as YOGINDERA WORSTED LIMITED on 24th September, 1997 with the Registrar of Companies, Punjab, H.P. & Chandigarh, Jalandhar.)

Registered Office: Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil - Samrala,

District Ludhiana – 141 113, Punjab. Tel.No:+ 91-161- 28 34 324 / 325/ 326 Fax: +91-161-283 40 00

E-Mail: info@yoginderaworsted.com Website: www.yoginderaworsted.com Registration Number: 16-20489

Address of Registrar of Companies : Kothi no.286, Defence Colony, Jalandhar – 144 001, Tel No.+91-181-2433192

Board of Directors Name of Director Designation

Mr. Jagmohan Lal Gupta Chairman

Mr. Anil Kumar Gupta Managing Director

Mr. Ajay Kumar Gupta Jt. Managing Director

Mr. Gautam Aggarwal Executive Director

Mr. Deepak Kumar Gupta Director (Works)

Mr. Yogesh Goel Nominee Director – PSIDC

Mr. Ashwani Kumar Gupta Director

Mr. S.M. Ishtiaque Director

BRIEF PROFILE OF CHAIRMAN, MANAGING DIRECTOR AND WHOLETIME DIRECTORS. MR. JAGMOHAN LAL GUPTA- Chairman, aged 69 years has a business experience of more than 40 years. He started as a trader in food grains and wholesalers of various products like cement etc. In the year 1954 he set up a rice mill namely M/s Yoginder Pal Mohinder Pal Rice Mills at Gurdaspur, which was the first industrial unit in Gurdaspur District. Thereafter, he had set up a 100 TPD Roller Flour Mill (i.e.Himachal Flour Mill) at Kangra in 1974 in Himachal Pradesh which incidentally was also the first Roller Flour Mill in the state of Himachal Pradesh and at present has annual turnover of around Rs.13.00 crores. MR. ANIL KUMAR GUPTA- Managing Director, aged 59 years is a B.E. in Mechanical Engineering. After completing his education, he had joined the family business of Rice Sheller and Flour Mills in the year 1975. He was instrumental in expanding the capacity of the rice sheller from 1 Ton/hr to 6 Ton/hr. In the year 1981, he set up a 150 TPD Roller Flour Mill at Hoshiarpur namely Hoshiarpur Roller Flour Mills. The present combined turnover of these units is approx.Rs.12.00 Crores. Sh. Anil Kumar Gupta is technically qualified and looks after the policy matters, corporate planning & Management and New project. MR. AJAY KUMAR GUPTA- Jt. Managing Director, aged 39 years is a commerce graduate. He is a young entrepreneur and had joined the family business of Roller Flour Mills at Kangra in 1985. After joining he had expanded the capacity of the mill from 100 TPD to 200 TPD. He has hands on experience in the operations of the Company, as he was associated with the Company since incorporation. He has spearheaded the expansion of capacity undertaken by the Company from time to time. Mr.Ajay Kumar Gupta looks after the day to day corporate affairs, Financial matters and managing the operation of the Company as a whole and is well equipped to handle the same with his business background and rich experience gained in management and expansion of Himachal Roller Flour Mill Pvt. Ltd.

- 10 -

MR. GAUTAM AGGARWAL – Executive Director, aged 28 years is an Arts Graduate and joined his family business in 2000. Presently, he is looking after the domestic as well as International Marketing operations of our Company. He has visited many countries for business promotion, attending conference, trade fairs and exhibitions. With his efforts on the export front, our export turnover has increased from 6.00 lacs US dollars in 2002-03 to 16.00 lacs UD dollars in 2005-06. He is active in the day to day affairs as well as policy matters of our Company. MR. DEEPAK KUMAR GUPTA – Whole Time Director (Works), aged 50 years is a Bachelor of Textiles (Textile Technology) from Govt. Central Textiles Institute (GCTI), Kanpur with an overall experience of 29 years at various post in textile industry. The Job responsibility of Mr.Gupta includes but not limited to project planning & commissioning, Procurement of raw material, capital equipment & Stores, production planning, marketing and overall production administration. Mr. Gupta has business insight and deep knowledge of entire spinning & Textile industry. Since 1999, Mr. Gupta acts as advisor and provides consultancy for new as well as running projects of various textiles companies. The projects commissioned under his surveillance and consultancy includes Jindal Cottex – (Expansion in capacity to 12,000 Spindles), Garg Acrylic (Expansion in capacity to 12,000 Spindles.), Demarte Industries (Expansion in capacity to 10,000 Spindles.), Saluja Processors (Expansion in capacity to 16,000 Spindles.), Mukesh Udyog (Expansion Capacity increased to 18,000 Spindles.) Mr. Gupta has held the Executive Directorship of Sportking Synthetics Limited, Ludhiana from 1995 to 1999 and has held various managerial positions. COMPANY SECRETARY & COMPLIANCE OFFICER

MR. MANINDER KANWAR YOGINDERA WORSTED LIMITED Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil - Samrala, District: Ludhiana – 141 113, Punjab Tel.: (0161) 283 43 24 / 25 / 26 Fax: (0161) 283 40 00 Website: www.yoginderaworsted.com Email: maninder.kanwar@yoginderaworsted.com

BANKERS TO THE COMPANY:

STATE BANK OF PATIALA Commercial Branch, Aarti Complex, Near Vishwakarma Chowk, Miller Ganj, Ludhiana Tel : ( 0161) 254 78 56 Fax: ( 0161) 254 78 57 Email: b463@sbp.co.in Contact Person: Mr.Venkatanarayanan

- 11 -

ISSUE MANAGEMENT TEAM

LEAD MANAGER TO THE ISSUE: KHANDWALA SECURITIES LIMITED SEBI Regn No. INM0700001899 UIN No. 100012369 Vikas Building, Ground Floor Green Street, Fort, Mumbai: 400 023 Tel : (022) 2264 2300 1Fax: (022) 2261 5172 Website: www.kslindia.com Email: ywl@kslindia.com Contact Person: Mr.Rakesh Bhalla

REGISTRAR TO THE ISSUE: INTIME SPECTRUM REGISTRY LIMITED (SEBI Regn.No: INR000003761) C-13, Pannalal Silk Mills Compound LBS Marg, Bhandup (W) Mumbai 400078 Tel : (022) 5555 54 91- 94 Fax : (022) 5555 54 99 E-mail:Yoginderaipo@intimespectrum.com Contact Person: Mr.Vishwas Attavar

LEGAL ADVISOR TO THE ISSUE

M/S CORPORATE PROFESSIONALS, ADVOCATES & SOLICITORS 7/9, Sarvpriya Vihar, New Delhi-110 016 Tel: (011) 2696 6100, Fax No.(011) 2696 7100 Email:info@indiacp.com Contact Person: Ms. Deepika Vijay BANKERS TO THE ISSUE UTI BANK LIMITED SCO 20-21-22, Sector 34-A, Chandigarh -160 022 Tel.: (0172) 261 28 52, 508 89 27 Fax: (0172) 262 15 56 E-mail:anil.arora@utibank.co.in Contact Person: Mr. Anil Arora AUDITORS TO THE COMPANY: M/S DATTA SINGLA & CO. Chartered Accountant S.C.O. 2935-36. 1st Floor, Sector 22-C, Chandigarh – 160 022 (India) Tel :( 0172) 2707 065, 508 65 51/ 52 Fax: (0172) 5019 550 E-mail: efsl22@yahoo.com Contact Person: Mr. Mukul Bansal

- 12 -

BROKERS TO THE ISSUE All members of the recognized Stock Exchanges would be eligible to act as Brokers to the Issue. STATEMENT OF INTERSE ALLOCATION OF RESPONSIBILITIES AMONG LEAD MANGERS There is only one Lead Manager appointed for the Public Issue. CREDIT RATING/DEBENTURE TRUSTEE This being an Issue of Equity Shares, no Credit Rating or appointment of Debenture Trustee is required. IPO GRADING Our Company has not opted for IPO grading from any Credit Rating Agency. TRUSTEE This being an Issue of Equity Shares hence appointment of Trustees is not required. MONITORING AGENCY TO THE ISSUE UTI Bank having their office at Sector 34 Chandigarh – 160 034 has given their consent to act as Monitoring Agency for monitoring the utilisation of the issue proceeds of the proposed public offer. The issue proceeds will be transferred to a special account to be opened with UTI Bank Ltd. The bank will satisfy itself that the proceeds of the issue are used for the purpose as mentioned in the Prospectus. PROJECT APPRAISAL The expansion project has not been appraised by any bank or Financial Institutions and that the fund requirement and funding plans are Company’s own estimates. BOOK BUILDING PROCESS This being fixed price issue, the book building process would not be applicable UNDERWRITING/ STANDBY SUPPORT

The issuer is not proposing for the underwriting of the issue.

Issue Opens on DD/MM/YYYY Issue Closes on DD/MM/YYYY

- 13 -

CAPITAL STRUCTURE The share capital of the Company is set forth below: Amount in Rs. Lacs NOTE ON THE CAPITAL STRUCTURE

1. Details of Increase / Modification In Authorized Share Capital Sr. No Particulars of Increase / Modification Type of Meeting Date of Meeting

1 Rs.10.00 Lacs Since Incorporation -

2 Rs.10.00 Lacs to Rs.600.00Lacs Extra – ordinary General Meeting 22.08.1998

3 Rs.600.00 Lacs to Rs.900.00 Lacs Extra – ordinary General Meeting 06.07.1999

4 Rs.900.00 Lacs to Rs.1600.00 Lacs Extra – ordinary General Meeting 27.01.2006

Equity Share Capital Build-up: Our Existing Share Capital has been subscribed and allotted as under:

Date of Allotment

No. of shares Alloted

Face Value (Rs.)

Issue Price (Rs.)

ConsiderationParticulars of Allotment

Cum.Paid-up Capital (In Rs.)

30.09.1997 700 10 10 Cash To Subscribers to MOA & AOA

7,000

28.01.1999 3,355,881 10 10 Cash Further Allotment 3,35,65,810

31.03.1999 1,470,200 10 10 Cash Further Allotment 4,82,67,810

31.03.2000 3,523,432 10 10 Cash Further Allotment 8,35,02,130

30.03.2003 4,04,000 10 10 Cash Further Allotment 8,75,42,130

04.04.2005 1,50,000 10 10 Cash Further Allotment 8,90,42,130

TOTAL 89,04,213 8,90,42,130

Particulars Nominal Value

Premium Total Amount

A AUTHORISED CAPITAL 1,60,00,000 Equity Shares of Rs.10/- each.

1600.00

-

1600.00

B ISSUED, SUBSCRIBED AND PAID UP SHARE

CAPITAL 89,04,213 Equity Shares of Rs.10/- each

890.42

-

890.42

C PRESENT ISSUE –

Public issue of 60,00,000 Equity Shares of Rs.10/- each at a premium of Rs.14/- per share.

(There is no firm allotment / reservation for any specified categories and hence the entire present issue will be offered to the public)

600.00

840.00

1440.00

D PAID UP CAPITAL AFTER PUBLIC ISSUE 1,49,04,213 Equity Shares of Rs.10/- each

1490.42

840.00

2330.42

E SHARE PREMIUM

Before the Issue After the Issue

-

Nil

840.00

Nil

840.00

- 14 -

2. Promoters contribution and Lock-in: We have the following 9 Promoters whose name figure in the Draft

Prospectus as Promoters in the Paragraph on “Our Promoters and their Background”.

Sr. No.

Name of Promoter / Person in promoter

group Date of

Allotment/ transfer

No. of Shares

Consideration cash/ bonus

Face Value *

Issue Price (Rs)

% to Post Issue

Capital

Lock-in

(years)

1 Mr. Jagmohan Lal Gupta 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3 28/01/1999 2,06,907 Cash Rs.10/- Rs.10/- 1.39 3 31/03/2000 30,000 Cash Rs.10/- Rs.10/- 0.20 3 30/03/2003 39,750 Cash Rs.10/- Rs.10/- 0.27 3 22/04/2005 1,00,000 Cash Rs.10/- Rs.10/- 0.67 3 3,76,757 2.53

2 Mr. Anil Kumar Gupta 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3 28/01/1999 1,70,900 Cash Rs.10/- Rs.10/- 1.15 3 31/03/1999 40,000 Cash Rs.10/- Rs.10/- 0.27 3 31/03/2000 1,68,895 Cash Rs.10/- Rs.10/- 1.13 3 30/03/2003 39,750 Cash Rs.10/- Rs.10/- 0.27 3 4,19,645 2.82

3 Mr. Ajay Kumar Gupta 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3 28/01/1999 62,500 Cash Rs.10/- Rs.10/- 0.42 3 31/03/1999 40,000 Cash Rs.10/- Rs.10/- 0.27 3 31/03/2000 1,000 Cash Rs.10/- Rs.10/- 0.01 3 30/03/2003 39,750 Cash Rs.10/- Rs.10/- 0.27 3 25/08/2004 1,00,000 Cash Rs.10/- Rs.10/- 0.67 3 2,43,350 1.63

4 Mr. Gautam Aggarwal 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3 28/01/1999 1,12,310 Cash Rs.10/- Rs.10/- 0.75 3 30/03/2003 39,750 Cash Rs.10/- Rs.10/- 0.27 3 1,52,160 1.02

5 Kusum Lata 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3 28/01/1999 1,02,616 Cash Rs.10/- Rs.10/- 0.69 3 31/03/2000 14,999 Cash Rs.10/- Rs.10/- 0.10 3 25/08/2004 90,000 Cash Rs.10/- Rs.10/- 0.60 3 27/08/2004 50,000 Cash Rs.10/- Rs.10/- 0.34 3 27/09/2004 60,000 Cash Rs.10/- Rs.10/- 0.40 3 3,17,715 2.13

6 Yogesh Gupta 30/09/1997 100 Cash Rs.10/- Rs.10/- 0.00 3

28/01/1999 1,40,500 Cash Rs.10/- Rs.10/- 0.94 3 31/03/2000 1,04,300 Cash Rs.10/- Rs.10/- 0.70 3 22/04/2005 1,00,000 Cash Rs.10/- Rs.10/- 0.67 3 3,44,900 2.31

7 Shukla Gupta 28/01/1999 1,74,800 Cash Rs.10/- Rs.10/- 1.17 3 31/03/1999 200 Cash Rs.10/- Rs.10/- 0.00 3 31/03/2000 43,683 Cash Rs.10/- Rs.10/- 0.29 3 2,18,683 1.47

- 15 -

8 Anil Kumar Gupta – HUF 28/01/1999 3,87,723 Cash Rs.10/- Rs.10/- 2.60 3 31/03/2000 41,999 Cash Rs.10/- Rs.10/- 0.28 3 4,29,722 2.88

9 Jagmohan Lal Gupta HUF 28/01/1999 4,65,872 Cash Rs.10/- Rs.10/- 3.13 3 31/03/2000 91,513 Cash Rs.10/- Rs.10/- 0.61 3 5,57,385 3.74 Total 30,60,317 20.53

Out of the above shareholding, part of the shares have been pledged with IDBI against the term loans sanctioned to our company the details of which are given in para 5 mentioned below. IDBI has vide its letter no. DA.3(240) 3165 dated 22/06/2006 has given No Objection Certificate with respect to lockin of such shares for three years as per SEBI guidelines

3. Details of shareholding of Promoter Group

Sr. No.

Name of Person acting in Concert

Date of Allotment/ transfer

No. of Shares

Consideration cash / bonus

Face Value *

Issue Price (Rs)

% to Post Issue Capital

Lock-in (years)

1 Rishi Aggarwal 30.09.1997 100 Cash Rs.10/- Rs.10/- 0.00 1 28.01.1999 60,000 Cash Rs.10/- Rs.10/- 0.40 1 31.03.2000 30,000 Cash Rs.10/- Rs.10/- 0.20 1 11.04.2005 39,000 Cash Rs.10/- Rs.10/- 0.26 1 1,29,100 0.87

2 Ajay Kumar Gupta – HUF 28.01.1999 70,000 Cash Rs.10/- Rs.10/- 0.47 1 31.03.2000 20,000 Cash Rs.10/- Rs.10/- 0.13 1 90,000 0.60

3 Arjun Gupta 28.01.1999 1,25,000 Cash Rs.10/- Rs.10/- 0.84 1

4 Raghav Aggarwal 28.01.1999 1,00,000 Cash Rs.10/- Rs.10/- 0.67 1

5 Yoginder Pal 31.03.2000 30,580 Cash Rs.10/- Rs.10/- 0.21 1

6 Rajni 31.03.2000 15,000 Cash Rs.10/- Rs.10/- 0.10 1 25.05.2004 70,000 Cash Rs.10/- Rs.10/- 0.47 1 85,000 0.57

7 Ritika Jain 28.01.1999 34,753 Cash Rs.10/- Rs.10/- 0.23 1

8 Yoginder Pal Aggarwal – HUF

28.01.1999 1,50,000 Cash Rs.10/- Rs.10/- 1.01 1

31.03.2000 94,660 Cash Rs.10/- Rs.10/- 0.64 1 244,660 1.64

9 Balmukhi Textiles Pvt. Ltd 28/09/2005 17,65,803 Cash Rs.10/- *Rs.10/- 11.85 1

10 Brijeshwari Textiles Pvt. Ltd 28/09/2005 15,89,000 Cash Rs.10/- *Rs.10/- 10.66 1 TOTAL 41,93,896 28.14

* The share of the face value of Rs.10/- have been bought by Balmukhi Textiles Pvt. Ltd. and Brijeshwari Textiles Pvt. Ltd. at consideration per Re.1/-.

- 16 -

4. Details of Shareholders other than Core Promoter and Promoter Group

Sr. No. Name of shareholder

Date of Allotment/ transfer

No. of Shares

Consideration cash / bonus

Face Value *

Issue Price (Rs)

% to Post Issue Capital

Lock-in (years)

1 PSIDC Ltd. 31/03/1999 7,20,000 Cash Rs.10/- Rs.10/- 4.83 1 31/03/2000 1,80,000 Cash Rs.10/- Rs.10/- 1.21 1 9,00,000 6.04

2 Samtex Fashion Limited 28/01/1999 6,00,000 Cash Rs.10/- Rs.10/- 4.02 1

3 Vinay Aggarwal 28/01/1999 1,50,000 Cash Rs.10/- Rs.10/- 1.01 1 TOTAL 16,50,000 11.07

The Equity Shares will be locked-in for the periods specified in the preceding table from the date of allotment of Equity Shares in this Issue. The Equity Shares to be locked-in for a period of three years have been computed as 20% of our post issue Equity Capital. Other than as stated above, the entire pre-issue Equity Share capital of our Company will be locked-in for the period of one year from the date of allotment of Equity Shares in this issue. Locked-in Equity Shares held by the Promoters can be pledged with banks or financial institutions as collateral security for loans granted by such banks or financial institutions. In terms of clause 4.16(b) of the SEBI Guidelines, Equity Shares held by the Promoters may be transferred to and amongst the Promoters / Promoter group or to a new promoter or persons in control of the Company subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI Takeover Regulations, as applicable. The Company has not issued any Shares for consideration other than cash. 5. The Promoters along with persons acting in concert have pledged Shares with PSIDC and IDBI for securing

the facilities sanctioned by them to our Company. The details of Shares pledged to respective institution is as under:

Shares pledged with PSIDC as per the agreement entered between PSIDC and Mr. Ajay Kumar Gupta

Sr. No. Particulars No. of Shares Pledged

1. Balmukhi Textiles Pvt. Ltd 9,00,000 Total 9,00,000

Shares pledged with Industrial Development Bank of India Limited forming part of 20 per cent Promoters holding, subject to three years lockin period.

S.No. Particulars No. of Shares Pledged

1. Ajay Kumar Gupta 1,52,5002. Kusum lata 3,17,6153. Gautam Aggarwal 1,12,3104. Raghav Aggarwal 1,00,0005. Anil Kumar Gupta (HUF) 1,49,7226. Jagmohan Lal Gupta (HUF) 2,57,3857. Jagmohan Lal Gupta 1,86,9078. Shukla Gupta 2,18,4839. Anil Kumar Gupta 2,07,892

- 17 -

10. Rajni Gupta 15,00011. Yogesh Gupta 2,44,80012. Arjun Gupta 1,25,00013. Ajay Kumar Gupta (HUF) 90,00014. Yoginder Pal Aggarwal (HUF) 2,00,00015. Rishi Aggarwal 1,29,00016. Vinay Aggarwal 1,50,000

TOTAL 26,56,614 6. Our Company, our Directors, our Promoters, Promoter Group Companies, their respective Directors and the

Lead Managers have not entered into any buy-back and / or standby arrangements for purchase of Equity Shares issued by our Company through this Prospectus. However, the Promoter Mr. Ajay Kumar Gupta has entered into an agreement with PSIDC to buy back the Shares held by PSIDC. As per the said agreement the Equity Shares have to be bought back by Mr. Ajay Kumar Gupta from PSIDC by June, 2007. In case the Equity Shares are not bought back within the stipulated period of OTS scheme, on account of any reason, including delay in completion of public issue, resulting in extension of lock-in period of Shares beyond the last date of completion of OTS Scheme (i.e. June 2007), the OTS scheme shall automatically stand cancelled / withdrawn and the buy back will be governed as per the terms of Financial Collaboration Agreement and payments already received shall be adjusted towards the said liability.

7. An over-subscription to the extent of 10 per cent of the Issue can be retained for the purpose of rounding off to the nearest multiple of one (1) Equity share while finalizing the basis of allotment. Consequently, the actual allotment may go up by a maximum of 10% of the net offer to public, as a result of which the post issue paid-up capital after the issue would also increase by the excess amount of allotment so made. In such event, the Equity shares held by the promoters and subject to lock-in shall be suitably increased; so as to ensure that 20% of the post issue paid-up capital is locked-in

8. Since the entire money of Rs.24/- per share (Rs.10/- face value + Rs.14/- premium) is being called on

application. All the successful applicants will be issued fully paid-up shares. 9. The Equity shares of Our Company are fully paid-up and there are no partly paid-up shares as on date. 10. A minimum of 50% of the net offer is reserved for allotment to individual investors applying for Equity shares

of or for value less than Rs.1 Lac. The remaining 50 % of the offer to the public is reserved for individuals corporate bodies / institutions etc. applying for Equity shares of or for value more than Rs. 1 Lac. Unsubscribed portion in either of these categories shall be added to the other category interchangeably.

11. Particulars of our top ten shareholders and the number of Equity Shares of Rs.10/- each held by them on

the date of filing this Prospectus with RoC is as follows: Sr. No. Name of the Shareholder No. of

Shares held % of issued

Capital 1 Balmukhi Textiles Pvt. Ltd 17,65,803 19.832 Brijeswari Textiles Pvt Ltd. 15,89,000 17.853 Punjab State Industrial Development Corporation Ltd. 9,00,000 10.114 Samtex Fashions Limited 6,00,000 6.745 Jagmohan Lal Gupta (HUF) 5,57,385 6.266 Anil Kumar Gupta (HUF) 4,29,722 4.837 Anil Kumar Gupta 4,19,645 4.718 Jagmohan Lal Gupta 3,76,757 4.239 Yogesh Gupta 3,44,900 3.8710 Kusum Lata 3,17,715 3.57

Total 73,00,927 81.99

- 18 -

12. Particulars of our top ten shareholders and the number of Equity Shares of Rs.10/- each held by them two

years prior to date of filing this Prospectus with RoC is as follows: Sr. No. Name of the Shareholder No. of

Shares held % of issued

Capital 1. Punjab State Industrial Development Corporation Ltd 9,00,000 10.112. Samtex Fashions Ltd 6,00,000 6.743. Jagmohan Lal Gupta (HUF) 5,57,385 6.264. Anil Kumar Gupta (HUF) 4,29,722 4.835. Anil Kumar Gupta 4,19,645 4.716. Jagmohan Lal Gupta 2,76,757 3.117. Yogesh Gupta 2,44,900 2.758. Yoginder Pal Aggarwal-HUF 2,44,660 2.759. Jaswinder Kumar Litt 2,25,000 2.5310. Shukla Gupta 2,18,683 2.46

Total 41,16,752 46.23 13. Particulars of our top ten shareholders and the number of Equity Shares of Rs.10/- each held by them ten

days prior to date of filing this Prospectus with RoC is as follows: Sr. No. Name of the Shareholder Number of

Shares Held % of issued

Capital 1 Balmukhi Textiles Pvt. Ltd 17,65,803 19.832 Brijeswari Textiles Pvt Ltd. 15,89,000 17.853 Punjab State Industrial Development Corporation Ltd 9,00,000 10.11

4 Samtex Fashions Limited 6,00,000 6.745 Jagmohan Lal Gupta (HUF) 5,57,385 6.26

6 Anil Kumar Gupta (HUF) 4,29,722 4.837 Anil Kumar Gupta 4,19,645 4.718 Jagmohan Lal Gupta 3,76,757 4.23

9 Yogesh Gupta 3,44,900 3.8710 Kusum Lata 3,17,715 3.57

Total 73,00,927 81.99 14. There are no Equity Shares which have been sold or purchased by our Promoter and our Promoter Group

Companies, during the period of six months preceding the date on which the Prospectus is filed with SEBI. 15. No options have been granted or shares issued under any scheme of Employees stock option scheme or

employees stock purchase by our Company

16. The pre and post offer shareholding pattern of the Company is given below:

Particulars Pre-issue shareholding 31/03/2006

Post issue shareholding

No. of shares %age No. of shares %age

Promoter 30,60,317 34.37 30,60,317 20.53Promoter Group 41,93,896 47.10 41,93,896 28.14

Sub total (A) 72,54,213 81.47 72,54,213 48.67Financial Institution (PSIDC) 9,00,000 10.11 9,00,000 6.04Indian Public & Private Corporate Bodies 7,50,000 8.42 67,50,000 45.29

Sub total (B) 16,50,000 18.53 76,50,000 51.33Grand total (A) + (B) = (C) 89,04,213 100.00 1,49,04,213 100.00

- 19 -

17. Our Company undertakes that it shall not make any further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner (except to the extent mentioned in this Draft Prospectus) during the period commencing from the submission of the Draft Prospectus to SEBI for the Public Issue till the securities referred in the aforesaid have been listed.

19. We presently do not intend or propose to alter our capital structure for six months from the date of opening

of the Public Issue, by way of split or consolidation of the denomination of the Shares or further issue of Equity Shares on preferential basis or otherwise, except if we enter into acquisition or joint venture, we may consider raising additional capital to fund such activity or use Equity Shares as currency for acquisition or participation in such joint venture, if any.

20. There shall be only one denomination of the Equity Shares of the Company unless otherwise permitted by

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

21. We have not raised any bridge loan against the proceeds of the issue. 22. There are no outstanding warrants, option, or rights to convert debentures, loans or other instruments into

Equity Shares of our Company. 23. As on the date of filing of this Prospectus, the number of shareholders on the Register of Members is 22. 24. Our Company has not revalued assets since inception and had not issued any Shares out of the revaluation

reserves or for consideration other than cash. 25. The Equity Shares offered through this Public Issue shall be made fully paid up on allotment. 26. The Equity Shares will be issued and traded on the stock exchange only in dematerialized form. Hence, the

market lot of the Equity Shares is 1 (One share).

- 20 -

OBJECTS OF THE ISSUE

The Objects of the issue are as under:

Expansion in the production capacity by addition of 825 MTS (3200 spindles) per annum to its existing capacity. Installed capacity post expansion will be 3520 MTS (9675 spindles) (inclusive of 435 spindles of fancy yarns) per annum.

Setting up a unit for manufacture of ready to wear garment with annual capacity of 2.52 Lacs pieces.

To raise margin money for working capital requirements.

To meet the expenses of this Issue.

Listing our Equity Shares on Bombay Stock Exchange Limited (BSE)

The Main Object Clause of the Memorandum of Association of the Company enables us to undertake the activities for which the funds are being raised in the present issue. Further, we confirm that the activities carried out until now is in accordance with the object of Memorandum of Association of the Company. Cost of Project and Means of Finance The cost of expansion cum diversification project and means of finance are given below: Cost of Expansion & diversification

Amount in Rs. Lacs Sr. No. Particulars Spinning

Section Garmenting

Section Total cost

1 Building 131.10 18.90 150.002 Plant & Machinery 410.70 200.00 610.703 Miscellaneous Fixed Assets 122.00 52.00 174.004 Contingencies 40.00 15.00 55.005 Preliminary & Pre-Operative Expenses 15.00 0.00 15.006 Public issue expenses 144.00 0.00 144.007 Margin Money for Working Capital 450.00 0.00 450.00

Total 1312.80 285.90 1598.70 Our Company has made an application to State Bank of Patiala for Enhancement of Working Capital limits from Rs.1040.00 lacs to Rs.1190.00 lacs (fund based and non fund based) which are yet to be assessed and sanctioned by the said Bank. Means of Finance

Amount in Rs. Lacs Sr. No.

Particulars Amount

1 Equity Share Capital – Public Issue 600.002 Share Premium 840.003 Internal Accruals 158.70

Total 1598.70

- 21 -

Brief Details about the Project Land:

Our Company already has land measuring about 8.1 acres at Village Lal Kalan on Ludhiana - Chandigarh Highway in Tehsil Samrala, Distt. Ludhiana. The said land is sufficient for our existing as well as proposed expansion. Building and Civil Works:

At present, we have total covered area of 86,200 Sq.ft. including production, utilities and administrative blocks. Additional building for production and storage has been envisaged at 42,200 sq. ft. at an estimated cost of Rs.150.00 Lacs.

Details of Additional Building

Amount In Rs. Lacs Sr. No.

PARTICULARS Covered Area (sq.ft)

Type of Construction Rate/ sq.ft. (in Rs.)

Amount

1 Garmenting Building (Ground & First Floor)

4200 RCC Roofing, Cement Plastered Walls, Kota Flooring with false ceiling

450.00 18.90

2 Spinning Shed 18000 ACC Roofing, Cement Plastered Walls, Kota Flooring with Trenches false ceiling

375.00 67.50

3 Godown 20000 ACC Roofing, Cement Plastered walls, PCC Flooring

275.00 55.00

4 Internal Road Metalic Road 7.805 Architect Fee Lumpsum 0.80

Total 150.00 Plant & Machinery Our Company proposes to purchase indigenous Plant & Machinery amounting to Rs.228.00 Lacs and imported machinery amounting to Rs.303.30 lacs. The Excise duty, Sales taxes, Packing & forwarding, Erection & Commission charges will amount to Rs.79.00 Lacs, The indigenous machinery of Rs.228.00 Lacs includes two set of Gill Box and one Cheese winding machine of M/s G. S. P. Engineers - Ludhiana, 8 Ring Frames (400 spindles) of Metro Textile Traders – Ludhiana, 4 Two for One Twister (192 drums each) of Kaavya Industries – Ahmedabad, 60 Knitting Machine with tuck double jacquard 8 – 10 guage 40” and 12 Linking Machine (of 8 guage) with stand of Elex International (Regd) and one Humidification of M/s Texair Systems – Ludhiana and spinning Accessories from different Local Suppliers The imported machinery of Rs.303.30 Lacs includes 2 Auto coners (40 heads each) reconditioned 38800 GBP per machine of M/s Greenbank Terotele Mach. Sales Ltd. - England, one Cone to Cone bulking machine of MOTOCONO – Spain, 2 soft package winder (36 drums each) of M/s Xian Yuan far International Trade Co. – China, Universal flat bed hi-speed fully fashioned knitting machines of various models, Brother for thread over locking machine, Brother underbed trim plain sewing machine, Union special neck linking machine, Rimoldi strap attaching sewing machine, Brother Button Sewing / Hole Machines, Eastman Straight Knife Cutter Machine / Circular saw Nech Cutter machine, Comptel garment steam press with built-in vaccum and boiler GBP 500 and Strap attaching machine etc to be purchased from Shamikh Textile Machinery – United Kingdom. The cost of Plant & Machinery includes provision for customs clearing & forwarding charges, expenses towards Freight, Insurance, C.S.T., Excise Duty and Erection Charges etc. The total cost of the plant and machinery

- 22 -

including costs of foundation and erection works out to Rs.610.70 Lacs of which machinery worth Rs.410.70 lacs will be used for expansion project and the remaining machinery worth Rs.200.00 lacs would be utilized for Diversification (Garmenting) project. For further details about Plant and Machinery, please refer section titled “ Plant & Machinery” beginning on page no.48 of this Draft Prospectus

Miscellaneous Fixed Assets Miscellaneous Fixed Assets have been estimated at Rs.174.00 Lacs which includes one DG Sets of 1250 KVA, Electrical Cable lighting, One transformer of 1000 KVA, Electrical Panels, Air Conditioning and ducting, Office Equipments, furniture & fixtures, Computers with UPS and Printers for designing (with software), Servo Stabiliser, Working Station, stiching station etc. Miscellaneous Fixed Assets worth Rs.122.00 Lacs will be utilized for Expansion project whereas Rs.52.00 Lacs will be utilized for diversification (Garmenting) project Pre-Operative Expenses A provision of Rs.15.00 Lacs has been made under this head additional power security for 1000 KVA from PSEB. Public Issue Expenses A provision of Rs.144.00 Lacs has been made under this head for meeting Public issue expenses which would include brokerage, fees payable to the Lead Manager, Registrar to the Issue, Legal Advisors, Stamp Duty, printing, publication, advertising and distribution expenses, bank charges, listing fees, and other miscellaneous expenses, up front fees and documentation charges.

Provision for Contingency A provision of Rs.55.00 Lacs has been made for contingencies on non-firm costs of building @ 10% and machinery and miscellaneous fixed assets @ 5% to meet any escalation in their costs during implementation period. Rs.40.00 Lacs will be appropriated towards Expansion project and Rs.15.00 lacs towards Diversification (Garmenting) project Margin Money for Working Capital: The working capital requirements of our Company for the financial year 2006-07, post expansion, at 95% capacity utilization, have been estimated at Rs.1932.66 Lacs

The working capital requirement has been based on stock of raw material holding at 1.5 months, stores and consumables for 3 months; work in progress for 0.8 month and finished goods stock for 1 month, along with receivables against sales at 1.5 months.

The net working capital requirement for the years 2007 (post expansion) has been projected at Rs.1932.66 Lacs. The permissible bank finance for the year 2007 has been estimated at Rs.775.00 Lacs.

Company intends to raise funds to meet part of its working capital requirements. Company’s working capital requirement arises primarily from inventories, sundry debtors, security deposits and advance income tax. The Company anticipates that the net working capital requirements of the Company, post expansion, have been estimated at Rs.1932.66 Lacs for the year 2006-07 against which permissible bank finance has been estimated at Rs.775.00 Lacs.

- 23 -

MEANS OF FINANCE The total cost of project is estimated at Rs.1598.70 Lacs, which is proposed to be financed as per schedule given below:

Amount in Rs. Lacs Sr. No.

Particulars Amount

1 Equity Share Capital – Public Issue 600.00 2 Share Premium 840.00 3 Internal Accruals 158.70

Total 1598.70 We hereby confirm that excluding the amount to be raised through the proposed Public Issue, firm arrangements of finance through verifiable means (viz. internal accruals) have been made. APPRAISAL The expansion cum diversification project had not been appraised by any Bank or Financial Institutions and that the fund requirement and funding plans are Company’s own projections / estimates. SCHEDULE OF IMPLEMENTATION Net Issue proceeds after meeting public issue expenses will be utilized for expansion of installed capacity and long-term working capital requirement. Sr. No. Activities Commencement

(Month, Year) Completion (Month, Year)

1. Acquisition of Land Acquired - 2. Civil Work Factory Commenced September, 06 Auxiliary Commenced September, 06

3. Plant &Machinery Order to be placed October , 06 October , 06 Delivery October, 06 November, 06

4. Miscellaneous Fixed Assets Order to be placed September, 06 September, 06 Delivery October, 06 October, 06

5. Erection of Equipment November, 06 November, 06 6. Commissioning November, 06 November, 06 7. Pre-load Sanction (Power) Sanctioned - 8. Environmental Clearance Received - 9. Trial Run December, 06 December, 06 10. Commercial Production December, 06 December, 06

Notes: a) All suppliers relating to purchase of commodities are in no way related /connected to the Promoters/

Directors of our Company. b) We are yet to place orders for plant & machinery with the suppliers.

- 24 -

FUNDS DEPLOYED Our Company has incurred capital expenditure of Rs.52.81 lacs as of 26/06/06 towards construction of new building out of which Rs.39.49 lacs relates to Building for Expansion project and that the cost of construction is met out of Internal accruals. DETAILS OF BALANCE FUND DEPLOYMENT The break-up of balance fund deployment in year 2006-07 is as under:

Amount in Rs. Lacs Particulars Building 110.51 Plant & Machinery 610.70 Misc. Fixed Assets 174.00 Contingencies 55.00 Preliminary & Pre-operative Expenses 159.00 Margin Money for Working Capital 450.00 Total 1559.21 INTERIM USES OF FUNDS Pending any use as described above, our Company intends to invest the proceeds of the Issue in high quality, interest / dividend bearing short term / long-term liquid instruments including deposits with banks for the necessary duration. These investments would be authorized by our Board or a duly authorized Committee thereof.

- 25 -

SECTION IV – ABOUT THE ISSUER COMPANY

BASIC TERMS OF ISSUE

Authority for the present issue

The present issu`e of Equity Shares is being made pursuant to a Special Resolution passed by the shareholders under Section 81 (1A) of the Act at the Extra Ordinary General Meeting held on January 27, 2006.

Principal terms and conditions of the issue

The Equity Shares now being offered are subject to the terms of this Draft Prospectus, the Application Form and Memorandum and Articles of Association of the Company, the guidelines for listing of Securities issued by Government of India and guidelines issued by the Securities and Exchange Board of India (SEBI) from time to time, the Depositories Act, 1996 and the provisions of the Companies Act, 1956.

Ranking of Equity Shares The Equity Shares being offered shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari-passu with the existing Equity Shares of the Company in all respects except the lock-in provisions applicable as per SEBI Guidelines in respect of existing Equity Shares as mentioned in the “Notes to Capital Structure”. The allottees of the Equity Shares under this Issue will be entitled to dividends and other corporate benefits, if any, declared by the Company after the date of allotment.

Face Value and Issue Price:

The Face Value of the Equity Shares is Rs.10/- per Equity Share and the Issue is at a price of Rs.24/- per share (including premium of Rs.14/- per share), which is 2.4 times of the Face Value. At any point of time, there shall be only one denomination for the Equity Shares of our Company, subject to applicable laws.

Terms of Payment: The Applications should be for minimum of 250 Equity Shares and in multiples of 250 Equity Shares thereafter. Entire amount is payable on application.

The amount payable is as under:

Particulars Amount towards share capital

Amount towards Share Premium

Amount Payable

On application Rs.10/- Rs.14/- Rs.24/-

Where an applicant is allotted lesser number of Equity Shares than he / she has applied for, the excess amount paid on application will be refunded to the applicant.

No interest would be payable on application money pending allotment up to 30 days from the date of closure of the issue.

Rights of the Equity Share holders

1. Right to receive dividend, if declared; 2. Right to attend general meeting and exercise voting powers, unless prohibited by law; 3. Right to vote on a poll either in person or by proxy; 4. Right to receive offers for rights Shares and be allotted bonus shares, if announced; 5. Right to receive surplus on liquidation; 6. Right of free transferability; and

- 26 -

7. Such other rights, as may be available to a shareholder of a listed Public Limited Company under the

Companies Act and Memorandum and Articles of Association of the Company. Market Lot and Trading Lot

In terms of Section 68B of the Companies Act, the Equity Shares of our Company shall be allotted only in dematerialized form. As per SEBI Guidelines, the trading in the Equity Shares shall only be in dematerialized form for all investors. Since trading of the Equity Shares is in dematerialized form, the tradable lot shall be one Equity share. Minimum subscription If our Company does not receive the minimum subscription of 90% of the net offer to public on the date of closure of the issue, or if the subscription level falls below 90% after the closure of issue on account of cheques having being returned unpaid or withdrawal of applications, our Company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after our Company becomes liable to pay the amount, our Company shall pay interest as per Section 73 of the Companies Act. 1956. No statement made in this offer document shall contravene any of the provisions of the Companies Act, 1956. Period of Subscription The subscription list for public issue shall remain open for at least 3 working days and not more than 10 working days. Reservations No reservation is proposed for any category of investors in the issue. Basis of Allotment Allotment will be made in consultation with BSE (The Designated Stock Exchange). In the event of over subscription, the allotment will be made on a proportionate basis in marketable lots.

For Net Offer to the Public portion

In the event of public issue of Equity Shares being over-subscribed, the allotment will be on a proportionate basis subject to minimum allotment being equal to the minimum application size of 250 Equity Shares as explained below:

1. A minimum 50% of the net Issue to the public will be made available for allotment in favor of those

individual applicants who have applied for Equity Shares of or for a value of not more than Rs.1,00,000/- This percentage may be increased in consultation with the Designated Stock Exchanges depending on the extent of response to the Issue from investors in this category. In case allotments are made to a lesser extent than 50% because of lower subscription in the above category, the balance Equity Shares would be added to the higher category and allotment made on a proportionate basis as per relevant SEBI Guidelines. The Executive Director / Managing Director of the Designated Stock Exchange along with the Lead Manager and the Registrars to the issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner in accordance with the guidelines.

2. The balance of Net Issue to Public shall be made available to investors including corporate bodies /

institutions and individual applicants who have applied for allotment of Equity Shares for a value of more than Rs.1,00,000/-.

3. The Un-subscribed portion of the net issue to any of the categories specified in 1 or 2 shall be made

available for allotment to applicants in the other category, if so required.

- 27 -

4. Applicants will be categorized according to the number of Equity Shares applied for. 5. The total number of Shares to be allotted to each category as a whole shall be arrived at on a

proportionate basis i.e. the total number of Shares applied for in that category (number of applicants in the category multiplied by the number of Shares applied for) multiplied by the inverse of the over subscription ratio.

6. Number of the Shares to be allotted to the successful allottees shall be arrived at on a proportionate basis

i.e. total number of Shares applied for by each applicant in that category multiplied by the inverse of the over subscription ratio.

7. All the applications where the proportionate allotment works out to less than 250 Equity Shares per

applicant, the allotment shall be made as follows:

a. Each successful applicant shall be allotted a minimum of 250 Equity Shares; and b. The successful applicants out of the total applicants for that category shall be determined by draw of

lots in such a manner that the total number of Shares allotted in that category is equal to the number of Shares worked out as per (6) above.

8. If the proportionate allotment to an applicant works out to a number that is more than 250, but is a

fraction, then for a fraction equal to or higher than 0.50 shall be rounded off to the next integer. If that fraction is lower than 0.50, the fraction shall be ignored.

9. All applicants in such categories shall be allotted Shares arrived at after such rounding off. 10. If the shares, allocated on a proportionate basis to any category is more than the Shares allotted to the

applicants in that category, the balance available Shares for allotment shall be first adjusted against any other category, where the allocated Shares are not sufficient for proportionate allotment to the successful applicants in that category.

11. The balance Shares if any, remaining after such adjustment shall be added to the category comprising

applicants applying for minimum number of shares. 12. As the process of rounding off to the nearest multiple of 1 (one) may result in the actual allotment being

higher than the Shares offered. However, the final allotment shall not exceed 10% of the net offer to public.

13. Allotment to FIIs / MFs / Venture Capital Funds / Foreign Venture Capital Investors / Insurance

Companies would be subject to the limits / restrictions / regulations prescribed by respective regulatory authorities governing them.

Disposal of Applications and Applications Money and Interest in Case of Delay in Dispatch of Allotment Letters / Refund Orders Our Company shall ensure dispatch of allotment advice, refund orders and give credit to the beneficiary account with Depository Participants and submit the documents pertaining to the allotment to the Stock Exchanges within two working days of date of finalization of basis of allotment of Equity Shares. The Company shall ensure dispatch of refund orders by following mode: a) In case of applicants residing at Ahmedabad, Bangalore, Bhubneshwar, Kolkatta, Chandigarh, Chennai,

Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvanthapuram – refund of applications money shall be done through Electronic Clearing Service (ECS) where in the refund amount will be directly credited in the bank account of the investor.

b) In case of applicants residing at places other than those specified in (a) above refund of application money

shall be done through Refund Orders. Refund Orders for Rs.1500/- and above will be dispatched through Registered post only at the Sole or First holders. Refund order for less than Rs.1500/- will be dispatched under certificate of posting, which will be at the risk of sole / First applicant

- 28 -

Adequate fund for dispatch of refund orders will be made available to the Registrar by our Company. Our Company shall use best efforts to ensure that all steps for completion of necessary formalities for listing and commencement of trading at the Stock Exchanges where the Equity Shares are proposed to be listed, are taken within seven working days of finalization of the basis of allotment. Our Company agrees that as far as possible allotment of Equity Shares shall be made within 30 days from the date of closure of public issue. We further agrees that we shall pay interest at 15% per annum, if the allotment letter / refund orders have not been dispatched to the applicant within 30 days from the date of the closure of the issue.

- 29 -

BASIS FOR ISSUE PRICE

QUALITATIVE FACTORS

Our Promoters and top management have several years of experience and expertise in their domain.

The day to day affairs of our Company are looked after by qualified and experienced key personnel from varied areas, under the supervision of Jt.Managing Director.

Our Company has been making profits consistently since last 5 years.

The Profit after tax of our Company has grown from Rs.71.72 Lacs on March 2003 to Rs.295.28 Lacs in

March 2006 at a CAGR of 60.27 %.

The Sales of our Company has grown from Rs.2,471.37 Lacs as on March 2003 to Rs.4,072.49 Lacs as on March 2006 at a CAGR of 18.12 %.

Our Promoters and top management have latest market information and has been continuously updating

the manufacturing capacities over the last few years, so as to keep pace with the development and market requirement in the textile industry.

Our Company has, in the past implemented expansion plans as per the schedule without time or cost

overruns.

Our Company will have benefit of economies of scale with the total installed capacity increasing from 2695 MTS (6475 spindles) to 3520 MTS (9675 Spindles) post expansion.

Strong Customer Relationship: Over a period of time, our Company has built a track record for quality products and timely delivery. Our Company has been able to retain customers and further strengthen the relationship by providing them end-to-end solutions for their requirements. Strategic Sourcing being most important element in the spinning industry, our Company has diversified competencies in this area by maintaining good and cordial relations with the suppliers. We are equipped with latest machines and equipment to scientifically monitor labour productivity. Innovation and Product Excellence: Most of the customers are regular / repeat customers, testifying our product quality and standardization. Good labour relations: Our Company has always maintained cordial relationship with its labour and there has been no labour unrest since inception. Goodwill: Company’s fair business policies and consistent quality have earned significant goodwill from its customers and suppliers although no valuation of goodwill has been obtained by the Company. Forward Integration: Our Company is diversifying into production of ready to wear garment with a capacity of 2.52 Lacs pieces per annum which will boost our revenues and profitability, resulting in enhancing shareholders value.

- 30 -

QUANTITATIVE FACTORS Information presented in this section is derived from the audited financial statements, The adjusted profit for last five years is given hereunder:

Amount in Rs. Lacs Particulars 31/03/06

31/03/05 31/03/04 31/03/03 31/03/02

Adjusted Profit

297.14 273.42 88.81 72.19 91.51

Earnings per Share

Year EPS (Rs) Weight

2003-04 1.01 1 2004-05 3.14 2 2005-06 3.32 3 Weighted Average 2.88

Price Earning Ratio (P/E) in relation to the issue price of Rs.24/- per share

Based on 2005-06 EPS of Rs.3.32 7.23 Based on weighted average EPS of Rs.2.88 8.33

Industry P/E

Particulars P/E Ratio

Highest 10.50 Lowest 4.50 Average 9.80

(Source: Capital Market June 19 – July 2, 2006 )

Return on Net Worth

Year Net Worth Rs. in Lacs

Net Profit Rs. in Lacs

RONW Company

(%)

Weight

1. 2003-04 1011.50 88.02 8.70 1 2. 2004-05 1298.91 274.61 21.14 2 3. 2005-06 1585.21 295.29 18.63 3 Weighted Average RONW 17.81

Minimum RONW required for maintaining pre issue EPS Minimum return on total net-worth needed after issue to maintain, pre-issue EPS of Rs.3.32 is 13.99%

- 31 -

Net Asset Value (NAV) per share

Particulars NAV Company

Rs Net Asset Value as on March 2006 17.81 Net Asset Value after issue 20.30 Issue Price 24.00 The Issue Price of Rs.24/- per Equity Share is determined on the basis of the above ratios, is justified

4. The ratios of some of the companies in the same industry group are as follows:

Company EPS (in Rs.)

P/E Ratio

RONW (%) Book Value (Rs)

APM Industries Ltd 9.40 3.20 12.50 75.00 Deepak Spinners Ltd. 8.50 3.60 10.90 78.90 Hanil Era Textiles Ltd. 3.30 7.6 9.80 33.80 Priyadarshani Spinning Mills Ltd. 3.40 6.40 8.90 39.90 Shree Rajasthan Syntex Ltd. 3.60 6.00 3.30 52.10 (Source: Capital `Market June 19 – July 2, 2006)

The face value of Equity Shares of the our Company is Rs.10/- per share and the Issue Price is Rs.24/- per Equity Share, which is 2.4 times of the face value of the Equity Shares of the Company. However, the data of companies engaged in similar business is mentioned above for comparison. The Lead Manager believes that the Issue Price of Rs.24/- per Equity Share is justified in view of the above qualitative and quantitative parameters. The investors may want to persue the risk factors and the financials of the Company including important profitability and return ratios, as set out in ‘Statement of accounting Ratios’ appearing on Page 97 of the Draft Prospectus to have a more informed view of the investment proposition

- 32 -

STATEMENT OF TAX BENEFITS The Board of Directors Yogindera Worsted Limited Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, District Ludhiana - 141 113, Punjab Sub: Initial Public Offering of Yogindera Worsted Ltd. – Possible tax benefits available to the Company and its shareholders Dear Sirs, We hereby report that the enclosed “Annexure” states the possible tax benefits available to Yogindera Worsted Ltd. (hereinafter referred to as “the Company”) and its shareholders under the current tax laws presently in force. Several of the benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive tax benefits is dependent upon fulfilling conditions prescribed therein. The benefits discussed in the Annexure are not exhaustive. The statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for individual professional tax advice. In view of individual nature of tax consequences and the share offered by the Company, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation on 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 currently carried on by the Company. This report is intended solely for your information and for the inclusion in the Offer Document in connection with the proposed Initial Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent. For M/s Datta Singla &Co. Chartered Accountants Yogesh Monga (Partner) (Membership no. 99813) Place : Chandigarh Date : 25/05/2006

- 33 -

ANNEXURE

As per the existing provisions of the Income Tax Act, 1961 (the Act) and other laws as applicable for the time being in force, the following tax benefits and deductions are and will, inter-alia be available to Yogindera Worsted Limited and its shareholders. Benefits available to the Company Under Indirect Tax laws

A1. Under the Sales Tax Act

1. Under the Punjab General Sales Tax Act, 1948, the Company is exempted from payment of sales tax on its sales. The said benefit is by virtue of exemption granted under Punjab General Sales Tax Act (deferment and exemption) Rules 1991. As per the eligibility certificate No DIC/ LDH /1037-E dtd 03.12.1999 read with exemption certificate No Ludhiana/Exemption/Lud/II/123 dtd 24.04.2000,the said exemption is granted up to the period ending September 9,2006 subject to a limit of Rs.195.94 million.

A2. Under the Customs Tariff

2. In terms of Notification No. 43/2002-CUS dated April 19, 2002, materials imported against Advance License for use in the manufacture of export products are exempted from payment of whole of the customs duty, additional duty, safeguard duty and anti-dumping duty.

3. In terms of Notification No. 55/2003-CUS dated April 1, 2003, capital goods and spares imported against

EPCG license issued under Export Import policy are exempted from payment of customs duty, subject to fulfillment of export obligation.

A3. Benefits under Export Import Policy: 4. Duty-free imports under Advance License Scheme for manufacture of export products. 5. Import of capital goods under Export Promotion Capital Goods scheme (EPCG scheme) at concessional

rate of duty. Benefits available to the Company Under the Income Tax Act, 1961.

1. Under Section 10(34) of the Act, dividend income (whether interim or final) in the hands of the Company as

distributed or paid by any other Company on or after April 1, 2003 is completely exempt from tax in the hands of the Company.

2. As per the provisions of Section 112(1)(b) of the Act, long-term capital gains would be subject to tax at the

rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to Section 112(1)(b), the long term capital gains resulting on transfer of listed securities or units (not covered by section 10(36) and 10(38)), would be subject to tax at the rate of @ 20% with indexation benefits or 10% without indexation benefits (plus applicable surcharge and education cess) as per the option of the assessee.

3. Long term capital gain arising from transfer of an ‘eligible Equity Share’ in a Company Purchased on or after

the 1st day of March, 2003 and before the 1st day of March, 2004 (both days inclusive) and held for a period of 12 months or more is exempt from tax under section 10(36) of the Act.

4. As per the provisions of section 10(38), long term capital gain arising from the sale of Equity Shares in any

Company through a recognized stock exchange or from the sale of units of an Equity oriented mutual fund shall be exempt from Income Tax if such sale takes place after 1st of October 2004 and such sale is subject to Securities Transaction Tax.

- 34 -

5. As per the provisions of Section 111 A, Short Term capital gains arising from the transfer of Equity Shares in any Company through a recognized stock exchange or from the sale of units of Equity-oriented mutual fund shall be subject to tax @ 10% provided such a transaction is entered into after the 1st day of October, 2004 and the transaction is subject to Securities Transaction Tax.

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

Company would be entitled to exemption from tax on gains arising from transfer of the long term capital asset (not covered by Section 10(36) and Section 10 (38)) if such capital gain is invested in any of the long-term specified assets in the manner prescribed in the said section. Where the long-term specified 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 exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset is transferred or converted into money.

7. As per the provisions of Section 54ED of the Act and subject to the conditions specified therein, capital gains

arising from transfer of long term assets, being listed securities or units (not covered by section 10(36) and section 10(38)) shall not be chargeable to tax to the extent such gains are invested in acquiring Equity Shares forming part of an ‘eligible issue of share capital’ in the manner prescribed in the said section.

Benefits available to Resident Shareholders under the Income Tax Act, 1961 1. Under Section 10(34) of the Act, dividend (whether interim or final) declared, distributed or paid by the

Company on or after April 1, 2003 is completely exempt from tax in the hands of the shareholders of the Company.

2. Under section 10(32) of the Act, any income of minor children clubbed with the total income of the parent

under section 64(1A) of the Act, will be exempt from tax to the extent of Rs.1500/- per minor child. 3. As per the provisions of Section 112(1)(b) of the Act, long-term capital gains would be subject to tax at the

rate of 20% (plus applicable surcharge and education cess). However, as per the proviso to Section 112(1)(b), the long term capital gains resulting on transfer of listed securities or units (not covered by sections 10(36) and 10(38), would be subject to tax at the rate of @ 20% with indexation benefits or 10% without indexation benefits (plus applicable surcharge and education cess) as per the option of the assessee.

4. As per the provisions of section 10(38), long term capital gain arising from the sale of Equity Shares in any

Company through a recognized stock exchange or from the sale of units of an Equity oriented mutual fund shall be exempt from Income Tax if such sale takes place after 1st of October 2004 and the sale is subject to Securities Transaction Tax.

5. As per the provisions of Section 111 A, Short Term capital gains arising from the transfer of Equity Shares

in any Company through a recognized stock exchange or from the sale of units of Equity-oriented mutual fund shall be subject to tax @ 10% provided such a transaction is entered into after the 1st day of October, 2004 and the transaction is subject to Securities Transaction Tax.

6. As per the provisions of Section 88E, where the business income of a resident includes profits and gains

from sale of taxable securities, a rebate shall be allowed from the amount of income tax equal to the Securities transaction tax paid on such transactions. However the amount of rebate shall be limited to the amount arrived at by applying the average rate of income tax on such business income.

7. In accordance with and subject to the conditions and to the extent specified in Section 10(36) of the Act, the

shareholders would be entitled to exemption from long term capital gain tax on transfer of their ‘eligible Equity Share’ in the Company purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more.

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

shareholders would be entitled to exemption from tax on gains arising on transfer of their Shares in the Company (not covered by sections 10(36) and 10(38)), if such capital gain is invested in any of the long term specified assets in the manner prescribed in the said section. Where the long-term specified asset is transferred or converted into money at any time within a period of three years from the date of its

- 35 -

acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset is transferred or converted into money.

9. In accordance with and subject to the conditions and to the extent specified the Section 54ED of the Act,

the shareholders would be entitled to exemption from long term capital gain tax on transfer of their assets being listed securities or units (not covered by sections 10(36) and 10(38)), to the extent such capital gain is invested in acquiring Equity Shares forming part of an ‘eligible issue of share capital’ in the manner prescribed in the said section.

10. In case of a shareholder being an individual or a Hindu Undivided Family, in accordance with and subject to

the conditions and to the extent specified in Section 54F of the Act, the shareholder would be entitled to exemption from long term capital gains on the sale of Shares in the Company (not covered by sections 10 (36) and 10 (38)), upon investment of net consideration in purchase /construction of a residential house. If part of net consideration is invested within the prescribed period in a residential house, then such gains would not be chargeable to tax on a proportionate basis. Further, if the 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 shall be charged to tax as long-term capital gains in the year in which such residential house is transferred.

Benefits available to Non-Resident Indian Shareholders under the Income Tax Act, 1961 1. Under Section 10(34) of the Act, dividend (whether interim or final) declared, distributed or paid by the

Company on or after April 1, 2003 is completely exempt from tax in the hands of the shareholders of the Company.

2. In accordance with the provisions of Section 10(32) of the Act, any income of minor children clubbed with

the total income of the parent under Section 64(1A) of the Act will be exempt from tax to the extent of Rs.1,500 per minor child per year.

3. In the case of shareholder being a non-resident Indian and subscribing to Shares in convertible foreign

exchange, in accordance with and subject to the conditions and to the extent specified in Section 115D read with Section 115E of the Act, long term capital gains arising from the transfer of an Indian Company’s Shares (not covered by Sections 10(36) and 10(38)), will be subject to tax at the rate of 10% as increased by a surcharge and education cess at an appropriate rate on the tax so computed, without any indexation benefit but with protection against foreign exchange fluctuation.

4. In case of a shareholder being a non-resident Indian, and subscribing to the share in convertible foreign

exchange in accordance with and subject to the conditions and to the extent specified in Section 115F of the Act, the non resident Indian shareholder would be entitled to exemption from long term capital gains (not covered by sections 10(36) and 10(38)) on the transfer of Shares in the Company upon investment of net consideration in modes as specified in sub-section (1) of Section 115F.

5. In accordance with the provisions of Section 115G of the Act, Non Resident Indians are not obliged to file a

return of income under Section 139(1) of the Act, if their only source of income is income from investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Act.

6. In accordance with the provisions of Section 115H of the Act, when a Non Resident Indian become

assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer along with his return of income for that year under Section 139 of the Act to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money.

7. As per the provisions of section 115 I of the /Act, a Non-Resident Indian may elect not to be governed by the

provisions of Chapter XII-A for any assessment year by furnishing his return of income for that year under Section 139 of the Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act.

- 36 -

8. In accordance with and subject to the conditions and to the extent specified in Section 112(1) (b) of the Act,

tax on long term capital gains arising on sale on listed securities or units not covered by Sections 10(36) and 10(38) will be, at the option of the concerned shareholder, 10% of capital gains (computed without indexation benefits) or 20% of capital gains (computed with indexation benefits) as increased by a surcharge and Education cess at an appropriate rate on the tax so computed in either case.

9. As per the provisions of Section 10(38), long term capital gain arising from the sale of Equity Shares in any

Company through a recognized stock exchange or from the sale of units of an Equity oriented mutual fund shall be exempt from Income Tax if such sale takes place after 1st of October 2004 and such sale is subject to Securities Transaction tax.

10 As per the provisions of Section 111 A, Short Term capital gains arising from the transfer of Equity Shares

in any Company through a recognized stock exchange or from the sale of units of Equity-oriented mutual fund shall be subject to tax @ 10% provided such a transaction is entered into after the 1st day of October, 2004 and the transaction is subject to Securities Transaction Tax.

11. As per the provisions of Section 88E, where the business income of a assessee includes profits and gains

from sale of taxable securities, a rebate shall be allowed from the amount of income tax equal to the Securities transaction tax paid on such transactions. However the amount of rebate shall be limited to the amount arrived at by applying the average rate of income tax on such business income.

12. In accordance with and subject to the conditions and to the extent specified in Section 10(36) of the Act, the

shareholders would be entitled to exemption from long term capital gain tax on transfer of their ‘eligible Equity Shares’ in the Company purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more.

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

shareholders would be entitled to exemption from tax on long term capital gains (not covered by sections 10(36) and 10(38)) arising on transfer of their Shares in the Company if such capital gain is invested in any of the long term specified assets in the manner prescribed in the said section. Where the long-term specified 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 exempted earlier would become chargeable to tax as long term capital gains in the year in which the specified asset is transferred or converted into money.

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

shareholder would be entitled to exemption from tax on long term capital gains (not covered by Sections 10(36) and 10(38)) arising on transfer of their assets being listed securities or units to the extent such capital gain is invested in acquiring Equity Shares forming part of an ‘eligible issue of share capital’ in the manner prescribed in the said section.

15. In case of a shareholder being an individual or a Hindu Undivided Family, in accordance with and subject to

the conditions and to the extent specified in Section 54F of the Act, the shareholder would be entitled to exemption from long term capital gains (not covered by Sections 10(36) and 10(38)) on the sale of Shares in the Company upon investment of net consideration in purchase / construction of a residential house. If part of net consideration is invested within the prescribed period in a residential house, then such gains would not be chargeable to tax on Proportionate basis. Further, if the 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 tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred.

16. As per the provisions of Section 90(2) of the Act, the provisions of the Act would prevail over the provisions

of the tax treaty to the extent they are more beneficial to the Non-Resident.

- 37 -

Benefits available to other Non-residents under the Income Tax Act, 1961 1. Under Section 10(34) of the Act, dividend (whether interim or final) declared, distributed or paid by the

Company on or after April 1, 2003 is completely exempt from tax in the hands of the shareholders of the Company.

2. In accordance with the provisions of Section 10(32) of the Act, any income of minor children clubbed with

the total income of the parent under Section 64(1A) of the Act will be exempt from tax to the extent of Rs.1500 per minor child per year.

3. In accordance with and subject to the conditions and to the extent specified in Section 112(1) (b) of the Act,

tax on long term capital gains arising on sale on listed securities or units before 1st October 2004 will be, at the option of the concerned shareholder, 10% of capital gains (computed without indexation benefits) or 20% of capital gains (computed with indexation benefits) as increased by a surcharge and education cess at an appropriate rate on the tax so computed in either case.

4. As per the provisions of Section 10(38), long term capital gain arising from the sale of Equity Shares in any

Company through a recognized stock exchange or from the sale of units of an Equity oriented mutual fund shall be exempt from Income Tax if such sale takes place after 1st of October 2004 and such sale is subject to Securities Transaction tax.

5. As per the provisions of section 111 A, Short Term capital gains arising from the transfer of Equity Shares in

any Company through a recognized stock exchange or from the sale of units of Equity-oriented mutual fund shall be subject to tax @ 10% provided such a transaction is entered into after the 1st day of October, 2004 and the transaction is subject to Securities Transaction Tax.

6. As per the provisions of section 88E, where the business income of an assessee includes profits and gains

from sale of taxable securities, a rebate shall be allowed from the amount of income tax equal to the Securities transaction tax paid on such transactions. However the amount of rebate shall be limited to the amount arrived at by applying the average rate of income tax on such business income.

7. In accordance with and subject to the conditions and to the extent specified in Section 10(36) of the Act, the

shareholders would be entitled to exemption from long term capital gain tax on transfer of their ‘eligible Equity Share’ in the Company purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more.

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

shareholders would be entitled to exemption from tax on gains arising on transfer of their Shares in the Company (not covered by Sections 10(36) and 10(38)) if such capital gain is invested in any of the long term specified 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 exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset is transferred or converted into money.

9 In accordance with and subject to the conditions and to the extent specified in Section 54ED of the Act, the

shareholders would be entitled to exemption from long term capital gains (not covered by Sections 10(36) and 10(38)) on transfer of their assets being listed securities or units to the extent such capital gain is invested in acquiring Equity Shares forming part of an ‘eligible issue of share capital’ in the manner prescribed in the said section.

10 In case of a shareholder being an individual or a Hindu Undivided Family, in accordance with and subject to

the conditions and to the extent specified in Section 54F of the Act, the shareholder would be entitled to exemption from long term capital gains (not covered by sections 10(36) and 10(38)) on the sale of Shares in the Company upon investment of net consideration in purchase/construction of a residential house. If part of net consideration is invested within the prescribed period in a residential house, then such gains would not be chargeable to tax on a proportionate basis. Further, if the 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

- 38 -

amount of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred.

11. As per the provisions of Section 90(2) of the Act, the provisions of the Act would prevail over the provisions

of the tax treaty to the extent they are more beneficial to the Non Resident. Benefits available to Foreign Institutional Investors (‘FII’) under the Income Tax Act, 1961 1. In case of a shareholder being a Foreign Institutional Investor (FII), in accordance with and subject to the

conditions and to the extent specified in Section 115AD of the Act, tax on long term capital gain (not covered by Sections 10(36) and 10(38)) will be 10% and on short term capital gain will be 30% as increased by a surcharge and education cess at an appropriate rate on the tax so computed in either case. However short term capital gains on sale of Equity Shares of a Company through a recognized stock exchange or a unit of an Equity oriented mutual fund effected on or after 1st October 2004 and subject to Securities transaction tax shall be taxed @ 10% as per the provisions of Section 111A. It is to be noted that the benefits of Indexation and foreign currency fluctuation protection as provided by Section 48 of the Act are not available to FII.

2 As per the provision of Section 90(2) of the Act, the provisions of the Act would prevail over the provisions

of the tax treaty to the extent they are more beneficial to the Non Resident. 3 In accordance with and subject to the conditions and to the extent specified in Section 10(36) of the Act, the

shareholders would be entitled to exemption from long term capital gain tax on transfer of their ‘eligible Equity Share’ in the Company purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more.

4. As per the provisions of Section 10(38), long term capital gain arising from the sale of Equity Shares in any

Company through a recognized stock exchange or from the sale of units of an Equity oriented mutual fund shall be exempt from Income Tax if such sale takes place after 1st of October 2004 and such sale is subject to Securities Transaction tax.

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

from sale of taxable securities, a rebate shall be allowed from the amount of income tax equal to the Securities transaction tax paid on such transactions. However the amount of rebate shall be limited to the amount arrived at by applying the average rate of income tax on such business income.

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

shareholders would be entitled to exemption from tax on long term capital gains (not covered by Sections 10 (36) and 10(38)) arising on transfer of their Shares in the Company if such capital gain is invested in any of the long term specified assets in the manner prescribed in the said section. Where the long term specified assets 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 exempted earlier would become chargeable to tax as long term capital gains in the year in which the long term specified asset is transferred or converted into money.

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

shareholders would be entitled to exemption from long term capital gain tax (not covered by sections 10 (36) and 10(38)) on transfer of their assets being listed securities or units to the extent such capital gain is invested in acquiring Equity Shares forming part of an ‘eligible issue of share capital’ in the manner prescribed in the said section.

- 39 -

Benefits available to Mutual Funds under the Income Tax Act, 1961 In case of a shareholder being a Mutual fund, as per the provisions of Section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorised by the Reserve Bank of India would be exempt from Income Tax, subject to the conditions as the Central Government may by notification in the Official Gazette specify in this behalf. Benefits available to Venture Capital Companies /Funds under the Income Tax Act, 1961

In case of a shareholder being a Venture Capital Company / Fund, as per the provisions of Section 10(23FB) of the Act, any income of Venture Capital Companies / Funds registered with the Securities and Exchange Board of India, would exempt from Income Tax, subject to the conditions specified. Benefits available under the Wealth Tax Act, 1957 1. As per the prevailing provisions of the Act, no Wealth Tax shall be levied on value of Shares of the Company. Benefits available under the Gift Tax Act 1. Gift tax is not livable 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 benefits are as per the current tax laws as amended by the Finance Act, 2006 2. All the above benefits are as per the current tax law and will be available only to the sole / first named

holder in case the Shares are held by joint holders. 3. In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further

subject to any benefits available under the double taxation avoidance agreements, if any, between India and the country in which the non-resident has fiscal domicile.

In view of the individual nature of tax consequences, each investor is advised to consult his / her own tax advisor with respect to specific tax consequences of his / her participation in the scheme. However, a shareholder is advised to consider in his / her / its own case. The tax implications of an investment in the Equity Shares, particularly in view of the fact that certain recently enacted legislations may not have direct legal precedent or may have a different Interpretation on the benefits which an investor can avail.

- 40 -

INDUSTRY OVERVIEW The Indian Economy continues its growth trajectory, with GDP growth at 8.1 % in current fiscal year (up from 7.5% in the previous year) buoyed by a strong industrial and consumer goods sector growth, the FY 06-07 growth is projected at a robust 7.5 – 8 %. The Textile sector, one of the earliest to come into existence in India accounts for 14 % of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture providing direct employment to about 350 Lacs people. Besides this, there are a large number of ancillary industries, which are dependent upon this sector, such as manufacturing various machines, accessories, stores, ancillary items and chemicals. Known globally for its skill and craftsmanship, the Indian textile industry is also one of the largest export earner. Trade restrictions have hitherto kept the Indian textile industry from soaring to the heights it is capable of, but this is expected to change, due to removal of Quota and other trade restrictions. Textile covers the following sub-segments:

Fibre intermediates; P-X, DMT, PTA, MEG, Wood Pulp etc. Fibres: ginning and processing of cotton, manufacture of PFT, NFT Rayon fibres etc. Synthetic fibre / filament processing viz. drawing, texturising, twisting etc. Yarn: spinning cotton and blends on rotors and ring frames Weaving / knitting Processing Distribution and Garmenting

India is globally a significant player in the textile sector and is globally the

Third largest producer of cotton and cellulose fibre / yarn Second largest producer of cotton yarn Largest producer of jute, second largest producer of silk Fifth largest producer of synthetic fibre / yarn

(Source: Wake up call for India’s textile Industry, Report of Expert Committee on Textile Policy, ICAC) Structure of the Textile Industry The industry has a complex structure marked by presence of large scale and small scale production units. The industry is manufacturer driven with spinning having large scale operations and the retailing as the weakest link. From growing own raw material (cotton, jute, silk and wool) to providing value added products (fabrics and garments) to customers, the textile industry covers a wide range of economic activities and results in employment in both organized and unorganized sectors. Capacity The Indian Textile Industry has recorded a significant growth during the last decade. The spindleage increased from 33.15 million as on 31.03.97 to 34.15 million as on 30.11.04 and Rotors from 2.76 Lacs as on 31.03.97 to 3.85 Lacs as on 30.11.04.

The loomage has however, declined from 1.24 Lacs in March 1997 to 0.86 Lacs in November 2004 in the organized sector. The growth of capacity in spinning and weaving sectors of the industry since 1997-98 is below:

- 41 -

Growth in Capacity in the Organized Mill Sector Year Ending No. of Mills Installed Capacity

Spg Comp. Total Spindles (Mn.)

Rotors (‘000)

Looms (‘000)

31-03-1997 1,438 281 1,719 33.15 276 124 31-03-1998 1,504 278 1,782 33.88 313 124 31-03-1999 1,543 281 1,824 34.72 383 123 31-03-2000 1,565 285 1,850 35.10 392 123 31-03-2001 1,565 281 1,846 35.53 394 123 31-03-2002 1,579 281 1,860 35.75 409 123 31-03-2003 1,599 276 1,875 36.10 379 119 31-03-2004 1,564 223 1,787 34.02 383 88 31-03-2005 1,566 223 1,789 34.23 385 86 Source: Ministry of Textiles, annual report 2004-05 Cotton Cotton is one of the major crops cultivated in India. It accounts for more than 75 % of the Total fibre consumption in the spinning mills and 56 % of the total fibre consumption in the Textile Sector. The Twin objective of assuring off-take of the farmers produce at remunerative prices and making available adequate quantity of cotton at reasonable prices to the domestic textile industry are sought to be achieved through timely announcement of the minimum Support Price (MSP) to the farmers and through appropriate export – import intervention as and when necessary. It is the endeavor of the Government to improve the quality of cotton to that of International standards through effective implementation of the Technology Mission on Cotton (TMC)

Cotton/ Man-made Fiber Textile Mill Industry is the single largest organized industry in the country employing nearly 10 Lacs workers. Besides this, there are a large number of ancillary industries dependent on this sector such as those manufacturing various machineries, accessories, stores, ancillary and chemicals. Even on a modest assumption that a worker’s family comprises five people, the direct dependents on the organized textiles mill industry itself work out to about 50 Lacs.

Production of Cloth The data on production of cloth in the mill sector, the handloom sector, hosiery sector and the power loom sector during the last two years and anticipated production for the current year are as follows: Production of Fabrics In Different Sectors

(Mn. Sq. Mtrs.) Fibre

Mill Sector

Handloom Sector Power loom Sector

Hosiery Sector

02-03 03-04 04-05 (A) 02-03 03-04 04-05(A) 02-03 03-04 04-05 (A) 02-03 03-04 04-05 (A) Cotton 1,019 969 932 5,098 4,519 4,499 6,761 6,370 7,488 6,422 6,182 6,636 Blended 263 253 233 118 117 105 4,695 4,688 5,184 80 1,010 819 100% Non Cotton

214 212 206 764 857 689 14,498 15,889 16,131 659 655 738

Total 1,496 1,434 1,371 5,980 5,493 5,293 25,954 26,947 28,803 7,881 7,847 8,193

- 42 -

Production of Fabrics In All Sectors

(Mn, Sq. Mtrs.) Fibre 2002-03 2003-04 2004-05 (A)Cotton 19,300 18,040 19,555Blended 5,876 6,068 6,341100% Non cotton 16,135 17,613 17,764Total 41,311 41,721 43,660Khadi, Wool & Silk 662 662 662Grand Total 41,973 42,383 44,322 Textile Exports The growth of the textile industry has a bearing on the development of the economy, especially exports. Textile products continue to play an important role in the total export basket of the country. For 2004-05 the target for the export of textiles has been fixed at USD 15,160 million, against USD13,500 million set during 2003-04. Sr. No.

Sector Target 04-05

Apr-Sep 2003

Apr-Sep 2004

2004 over 2003

% Increase/ decrease of

(US $)

% target achieved

US$ Rs. US$

Rs. US$ Rs. US$ US$

1. Readymade Garment 6,000 11,591.50 2,491.20 12,652.10 2,779.10 9.2% 11.60% 46.3% 2. Cotton Textiles 4,200 6,604.70 1,419.50 7,568.90 1,662.50 14.6% 17.1% 39.6% 3 Man-made textiles 2,200 3,745.80 805.10 4,509.00 9,900.40 20.4% 23.0% 45.0% 4 Wool & Wollen 400 725.30 155.90 1,051.50 231.00 45.0% 48.2% 57.7% 5 Silk 625 1,059.60 227.70 1,269.10 278.80 19.8% 22.4% 44.6% Total 13,425 23,726.90 5,099.40 27,050.90 5941.60 14.0% 16.5% 44.3% 6 Handicrafts (a+b) 1,400 2,245.10 482.50 1945.50 427.30 -13.3% -11.4% 30.5% a)Carpet

b)Other Handicrafts 600 800

1122.70 1122.40

241.30 241.20

1237.80 707.60

271.90 155.40

10.3% -37.0%

12.7% -35.6%

45.3% 19.5%

7 Coir 85 158.60 34.10 223.10 49.00 40.7% 43.8% 57.6% 8 Jute 250 539.90 116.00 565.60 124.90 5.3% 7.6% 50.0% Total 15,160 26,670.50 5732.00 29,700.10 6,542.00 11.7% 14.1% 43.2% Source : Foreign Trade Statistics of India (PC & C), DGCIS, Kolkata. Textile exports recorded a growth of 15.3% in 2002-2003 and 6.0% in 2003- 2004. During the period April-November 2004, textile exports were USD 8348.5 million, recording a growth of 4.6% as compared to the corresponding period of previous year.

- 43 -

Cost comparisons of various countries Our main competitors in the textile sector include countries like China, Bangladesh, Indonesia, Sri Lanka and Pakistan. Like India, these countries too are cost-effective producers due to the advantage of lower labour costs, which account for a significant portion of the cost of converting fabrics into garments. The major markets for India have been the U.S. and the E.U.

(% of total cost) Brazil China India Italy Korea Turkey USA Packing 1% 1% 1% 0% 1% 1% 0% Labour 5% 4% 6% 30% 20% 7% 25% Power 6% 14% 15% 28% 10% 12% 27% Auxiliary 13% 12% 14% 7% 14% 10% 7% Capital 49% 49% 36% 21% 33% 37% 23% Raw Material 26% 20% 28% 14% 22% 33% 18% Total 100% 100% 100% 100% 100% 100% 100% Index 52 48 56 100 52 60 87 Source: Ministry of Textiles The biggest advantage that India has over western countries is labour, while in comparison with China, the biggest advantage India has is the capital cost. From the last row of the above table, it can be seen that the total production cost of Indian textile product is about 56% of that of Italy (i.e. 56 upon 100) and about 64% (56 upon 87) of that of the US.

Post MFA Global Environment Till 31st December, 1994, the exports of textiles to certain developed countries (e.g. United States of America (USA); Member countries of European Union (EU), Canada) were governed by bilateral textile arrangement entered into between India and these countries under the aegis of the Multi-Fibre Arrangement (MFA), outside the rules of the General Agreement on Tariffs and Trade (GATT). With effect from 1st January, 1995, the quantitative restrictions (import quotas) in the bilateral agreements under the MFA, were taken over by the Agreement on Textiles and Clothing (ATC) contained in the Final Act of the Uruguay Round negotiations of the GATT.

As per ATC, the textile quotas were to be phased out and textile sector fully integrated into WTO by 1st January, 2005. The liberalized trading regime would result in increased international trade in textiles thus providing greater export opportunities; and at the same time expose the domestic industry to import penetration therein. The textile industry will have to improve its efficiency and productivity to meet the emerging global competition, on the export and the domestic fronts.

Implication on Indian Textile Industry India has a very strong and diverse raw material base for manufacturing fibres/yarn from natural (i.e., cotton, wool, silk, jute) to artificial (i.e., synthetic, cellulosic and multiple blend of such fibres/yarn) raw materials. India has competitive advantage in terms of labour cost also. International Textile Manufacturers Federation (ITMF) conducted a comparative manufacturing cost study of 7 countries including India. This study has indicated that Indian industry has competitive advantage in terms of raw material cost and labour cost in manufacture of yarn and fabric. Therefore MFA phase out may not have much adverse impact on domestic textile industry.. Top textile importing countries like USA and the EU are looking towards India for meeting their import requirements. India, according to several recent studies, is going to emerge as alternative source of supply to China. India’s growth in exports will be driven by value added made ups and apparel as India has comparative advantages over its competitors in relation to (i) availability of relatively inexpensive and skilled workforce; (ii) design expertise; (iii) large production base of basic raw material like home grown cotton, yarns and fabrics; and (iv) availability of wide range of textiles.

- 44 -

According to a recent study by CRISIL (commissioned by ICMF), the Indian textiles and apparel industry can achieve a potential size of USD 85 billion by 2010, of which, the domestic market potential would be USD 45 billion and export potential would be USD 40 billion. Nearly 60% of exports would comprise garments. This would create 12 million job opportunities, comprising of 5 million direct jobs in textile industry, and 7 million jobs in allied sectors.

Initiatives in the Recent Past to Grant Impetus to the Textile Industry Announcements in the Union Budget 2006-07: To strengthen domestic textile industry for meeting the growing global competition, the following important announcements have been made in the Union Budget 06-07

Technology Upgradation Fund - The Government has allocated additional Rs.100 crores, making this year’s total allocation Rs.535 crores. TFU schemes to be provided for interest subsidy

Scheme for intregated park have been introduced wherein the Government has allocated Rs.189 crore for the development of 10 parks. The Scheme will encourage new players and entrepreneurs.

Jute Technology mission will be launched soon and the government proposes to establish a National Jute Board for the same.

Reduction in Excise Duty for Man Made Fibres (MMF) from 16% to 8% - It is positive for spinners as they can procure raw material at a cheaper cost. New duty structure has been introduced, as in the former duty structure there use to be an unutilized credit to the extent of Rs.4-6 per kg which was not on favour of the spinners.

Reduction in Import duty on man-made fibres and yarn from 15% to 10%

Reduction in Import duty on raw material from 15 % to 10%. Raw material includes PTA, MEG, DMT etc.

Custom duty on textile machinery – peak rate reduced to 12.5%. Duty on certain machinery & parts reduced to 10 %

Announcement of National Textile Policy: One of the main objectives of the National Textile Policy (NTP-2000) announced in November 2000 is to facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing. The policy endeavours to achieve the target of textile and apparel exports from the present level to USD 50 billion by 2010 of which the share of garments will be USD 25 billion. Technology Upgradation Fund Scheme: In view of the urgent need for stepping up the process of modernization and technology upgradation of the textile industry in India, Ministry of Textiles launched a Technology Upgradation Fund Scheme (TUFS) for the textile and jute industry for a five year time frame from 01.04.1999 to 31.03.2004. The scheme has since been extended till 31.03.2007. The scheme provides 5% interest reimbursement in respect of loans availed there under from the concerned financial institutions for investments in benchmarked technology for the sectors of the Indian textile industry specified there under. An additional option has been given to powerloom units for 20% capital subsidy under Credit Linked Capital Subsidy (CLCS-TUFS) upto a cost of Rs. 100 Lacs in eligible machinery with facility to obtain credit from a credit network that includes all co-operative banks and other genuine non banking financial companies (NBFC) recognized by the Reserve Bank of India. Liberalization of FDI Policy: Government of India has allowed foreign Equity participation upto 100%, through automatic route, in the textile sector with the only exception in knitwear/knitting sector. Export Promotion Capital Goods (EPCG) Scheme: The scheme facilitates import of capital goods at 5% concessional rate of duty with appropriate export obligation. Import of second hand capital goods without any restriction on age is also allowed under the new Foreign Trade Policy as announced on August 31, 2004.

- 45 -

Advance Licensing Scheme: With a view to facilitating exports and to access duty free inputs under the scheme, standard input-output norms for about 300 textile and clothing export products have been prescribed and this scheme remains operation. Duty Exemption Pass Book (DEPB) Scheme: DEPB credit rates have been prescribed for 83 textile and clothing products. The nomenclature and rates for DEPB entries pertaining to certain textile products have been rationalized. The DEPB credit rates were reduced by 45% across the board on all textile items on 23.09.2004. While addressing the concerns of certain segments of the trade, the DEPB credit rates were again revised on 30.12.2004 by announcing changes to the extent of 60% reduction in respect of cotton textile items, 30% reduction in blended textile and woollen items and 22.5% reduction in man-made textile and silk items in place of the 45% reduction effected earlier. Duty Drawback Scheme: The exporters are allowed refund of the excise and import duty suffered on inputs of the export products under this Scheme. The Department of Revenue announced revision in All Industry Rates of Duty Drawback (AIR of DBK) on 18.01.2005 and the changes made effective from 19.01.2005. There has been substantial reduction in AIR of DBK in almost all textile export products except certain items of silk and wool sectors. In the revised Drawback Schedule, 165 new entries of textile products have been created in addition to earlier 101 entries. The revised rates have been prescribed on the basis of weight of the export product instead of earlier system based on FOB value of the product. Besides, in respect of apparel items, the drawback rates have also been given on the basis of composition of textiles. SWOT ANALYSIS OF THE INDUSTRY STRENGTHS:

Huge Capacity expansions: The industry has been on a major expansion mode to cater to growing

demands of post quota textile exports markets as well as rising domestic demands. These shall begin contributing to earnings growth in FY 07.

Integrated facilities: The players in the industry are increasingly integrating their manufacturing

facilities to cut down costs and improve efficiency in production, signifying better growth going forward.

Moving up the value chain: Manufacturers are keen on increasing efforts towards moving up from mere processing or spinning units to integrated ‘all-services-providers’, branching out into retailing activities. This ensures market presence and the ability to integrate changing markets dynamics into production facilities.

Cheap raw material and labour force encourages out sourcing: Indian manufacturers can provide

good quality cheap raw cotton in abundant supply as well as inexpensive skilled workforce, which has made it a favourite outsourcing destination for global retailers after China. With export curbs being imposed on the Chinese suppliers, Indian vendors, with their expanded capacities and good client relationship, have ample scope to build on these key strengths.

Brand building and market consciousness: Indian textile manufacturers have increasingly resorted

to strong brand building among their peers in the industry over the past years. Quality enhancement and better service has helped establish a strong brand image and provide improved realization for Indian Companies.

Government support: The industry being a major source for employment generation and export

revenues, it has continuously been a focus of attention for the Indian Government. TUF’s Scheme to enable expansion, efforts to use better quality BT seeds for cotton to improve productivity, thrust on increasing export, relaxing duties on textile machinery, increased allocation in the budget spending, encouraging the man-made fiber segment by reducing excise duties, labour reforms, regularizing unorganized sector etc.

Wide product range and ability to adapt to dynamic market conditions: The garment and textile

industry is prone to changing market dynamics and has to cater to customized needs of customers. Indian companies have superior designing capabilities and a wide product range and are offering value

- 46 -

added services to clients. Designers track changing fashion trends and manufacturers are technologically equipped to provide quick responses to client orders.

WEAKNESSES:

Labour Regulations: Non flexible labour law prevalent in the industry is a hindrance for labour

mobility. This is a major weakness for the Indian Textile Industry.

OPPORTUNITIES:

Post quota market enfolds ample growth opportunity: The abolition of quotas in the international market has expanded the scope for India as a low cost outsourcing destination for the US and EU markets, especially after tariff barriers in Chinese exports.

Growing domestic demand with changing consumer demography: The urban customer in the

Country today has a growing working populace with rising brand consciousness and greater per capita spending ability. With clothing being a necessity, its demand growth curve can only be seen heading northwards.

Export curbs on China: Punitive tariffs on China and Vietnam exercised by the EU and the US on

various categories of textile exports have opened better opportunities to diversify for Indian manufacturers.

Appreciation of Chinese currency: With a double digit economic growth and the Yuan appreciating,

the realization numbers for China are likely to take hit, aided by anti surge measures and competition from China adding to pricing pressure. Even in a scenario where the Rupee appreciates, the magnitude of the impact would be much less for India as it is expected to appreciate less than Yuan.

Efficient manufacturing of world class products: Indian Companies are increasingly investing in

technology and infrastructure capacities to enhance their products mix and cater to world class customer requirement.

Man made fibres emerges as a significant substitute: The synthetic fibre segment currently forms

less than 55% of India’s total textile consumption, diametrically opposite to the world consumption trend. With the anticipated rise in the cotton prices going forward and increasing recognition of Indian companies globally, polyester can be seen as a close substitute for cotton.

THREATS:

China: Though Chinese companies have slowed down their expansion post export curbs on certain

textile items imposed by both US and EU, its large capacities, better infrastructure and faster turnaround time still makes it a threat for Indian export growth.

Greater protection from EU and US round the corner: The US and EU have imposed Quantitative

restrictions on China as per the terms of WTO agreements. Though the same does not apply to India and adverse impact on the textile industry and the resultant social unrest in Us and EU could force them to take some action as this is a highly sensitive issue and could have high political stake. Due to these reasons the US and EU could resort to non tariff barriers to limit imports from India.

Companies may get highly leveraged: The Indian companies are becoming highly geared which

could prove to be their nemesis in cases of any downturn in the Global markets.

- 47 -

BUSINESS OVERVIEW

Our Company is engaged in manufacture of Acrylic & blended Yarns. These yarns are suitable for applications in Apparels, Hosiery, Woollen knitted garment, Furnishing Fabrics and Industrial Fabrics. Ours is the latest Worsted Spinning Mill to produce single and double yarns for hosiery as well as weaving purposes. We offer a large variety of synthetic blended yarns in acrylic, polyester, and chenille for textile end uses and industrial applications. Our Company has installed plant & machineries imported from renowned Textile Machinery Manufacturers like Rieter (Switzerland), Savio (Italy), Mayer & Cie (Germany), Schlafhorst AG & Co. and Truetzschler (Germany) and Elitex (Czechoslovakia). We have also installed plant & machineries purchased from Laxmi Machine Works, Kirloskar Toyoda Textile Machine & Zinser Textile System. In addition to worsted spinning we have a range of fancy yarn machines, we are equipped with 100% yarns / fibers dyeing facilities, manufacturing pre-dyed worsted woollen /acro woollen yarn with 6,040 spindles. Our Company has an existing installed capacity of 2695 MTS (6475 spindles) per annum and planning for further capacity expansion of 825 MTS (i.e. 3200 spindles). The total installed capacity post expansion will be 3520 MTS (9675 spindles) (inclusive of 435 spindles of Fancy chenille yarn) per annum. Our Company also plans to install a unit for manufacture of Ready to wear garment having annual capacity to manufacture 2.52 Lacs pieces. We have continuously expanded and modernized our facilities in line with the Industry trend and technology, supported by term loans from Financial Institutions and Banks under Technology Upgradation Funds Scheme (TUFS) introduced by Government of India. Our Company is exporting yarns and fabrics to countries like Kenya, South Africa, New Jersey, South Africa, United Kingdom, Mauritius, Spain etc. Our foreign customers are in apparel & garment industry, industrial fabrics, furnishing fabrics, towels, Denims etc. At present, our exports are restricted to around 9-10 countries, leaving more scope of penetrating in newer markets and increasing our presence globally. Further, with the phasing out of quota restrictions, we expect to achieve high growth rate in Exports in the coming years. Our Company is closely held, promoted by Shri Jagmohan Lal Gupta, Anil Kumar Gupta and Ajay Kumar Gupta, with Gautam Aggarwal later joining as additional Director, is running a textile unit, manufacturing pre-dyed worsted woollen /acro woollen yarn with 6,475 spindles at Village Lal Kalan, Chandigarh Road, Dist. Ludhiana, Punjab with an existing installed capacity of 2695 MTS per annum. The Company is going in for further expansion in installed capacity by 825 MTS (3200 spindles) making the total installed capacity of 3520 MTS (9675 spindles) (inclusive of 435 spindles of Fancy chenille yarn) per annum and setting up a unit for manufacture of ready to wear garment with annual capacity of 2.52 lacs pieces.

- 48 -

Details of Business of Our Company Location Our project is being set-up at village Lal Kalan, near Neelon Bridge, Chandigarh Road, Tehsil Samrala, Ludhiana, wherein we have land admeasuring about 8.1 acres, which is sufficient for our existing as well as proposed expansion. Building and Civil Works At present, we have total covered area of 86,200 Sq.ft., including production, utilities and administrative blocks. Additional building for production and storage has been envisaged at 42,200 Sq. ft. at an estimated cost of Rs.150.00 Lacs.

Details of Additional Building Sr. No.

PARTICULARS Covered Area (Sq.ft)

Type of Construction Rate/ Sq.ft. (in Rs.)

Amount (Rs. in Lacs)

1 Spinning Shed 18000 ACC Roofing, Cement Plastered Walls, Kota Flooring with Trenches false ceiling

375.00 67.50

2 Garmenting Building (Ground & First Floor)

4200 RCC Roofing, Cement Plastered Walls, Kota Flooring with false ceiling

450.00 18.90

3 Godown 20000 ACC Roofing, Cement Plastered walls, PCC Flooring

275.00 55.00

4 Internal Road Metalic Road 7.805 Architect Fee 0.80

Total 150.00 Plant & Machinery: The additional Plant and Machinery required for the proposed expansion is given in the below mentioned table. The cost of Plant & Machinery includes provision for customs clearing & forwarding charges, expenses towards Freight, Insurance, C.S.T., Excise Duty and Erection Charges etc. The total cost of the plant and machinery including costs of foundation and erection works out to Rs.610.70 Lacs.

DETAILS OF ADDITIONAL PLANT & MACHINERY FOR EXPANSION PROJECT Sr. No. Particulars of Machinery Name of Machinery Supplier Date of Estimated Qty. Amount quotation Prices A IMPORTED

1 Autocorners M/s GreenBank Terotele Mach. Sales Ltd. 23/03/06 33.00 2 69.30

(40 Heads Each) Reconditined Cheshire, England 70000 GB Per Machine 2 Cone to Cone Bulking M/s MOTOCONO S.A., Spain 12/04/06 32.34 1 34.00 (Motocono) (New)

3 Soft Package winder M/s XI'AN YUAN FAR International Trade Co., 25/04/06 12.55 2 26.00

36 Drums Each China

- 49 -

Total-A 129.30 B INDIGENOUS

1 Set of Gill box M/s G.S.P. Engineers, Ludhiana 22/04/06 20.00 2 40.00

2 Ring Frame 400 Spindle M/s Metro Textile Trades, Ludhiana 22/04/06 9.00 8 72.00

3 Two For One Twister M/s Kaavya Industries, Ahmedabad 25/05/06 14.51 4 58.00

192 Drums Each

4 Cheese Wlg. M/s G.S.P. Engineers, Ludhiana 22/04/06 8.00 1 8.00

5 Humdification M/s Texair Systems, Ludhiana 27/04/06 18.32 1 18.00 6 Spinning Accessories Different local Suppliers - 20.00 1 20.00

Total-B 216.00 ADD : for Excise Duty, Sales Tax 44.00 - Freight 7.00 - Packing & Forwarding 7.00 - Erection & Comm. Charge 7.40 - Total-C 65.40

TOTAL ADDITIONAL PLANT & MACHINERY

(A+B+C) 410.70

DETAILS OF ADDITIONAL PLANT & MACHINERY FOR DIVERSIFICATION (GARMENTING) PROJECT Sr. No. Particulars of Machinery Name of Machinery Supplier Date of Estimated Qty. Amount quotation Prices A IMPORTED

1 Universal flat bed hi-speed fully fashioned

Shamikh Textile Machinery. U.K 04/02/06 16.00 1 17.00

knitting machine model MC-748WPJ-GAUGE

8NPI Y.O.M. 1999 GBP 20000

2 Universal flat bed hi-speed fully fashioned

Shamikh Textile Machinery. U.K 04/02/06 8.00 2 17.00

knitting machine model MC-720P J-GAUGE

8NPI Y.O.M. 1999 GBP 10000

3 Shima Seiki flat bed hi-speed fully fashioned

Shamikh Textile Machinery. U.K 04/02/06 16.00 2 34.00

knitting machine model SES 254-GAUGE

10NPI Y.O.M. 1998 GBP 20000 4 Shima Seiki flat bed hi-speed Shamikh Textile Machinery. 04/02/06 20.00 2 42.00

- 50 -

fully fashioned U.K

knitting machine model SES 236-GAUGE

7NPI Y.O.M. 1999 GBP 25000

5 Shima Seiki flat bed hi-speed fully fashioned

Shamikh Textile Machinery. U.K 04/02/06 20.00 2 42.00

knitting machine model SES 236-GAUGE

12NPI Y.O.M. 2000 GBP 25000

6 Doubbled flat bed motorised knitting machines

Shamikh Textile Machinery. U.K 04/02/06 0.48 12 6.00

Model DC-II Guage 10 NPI GBP 600

7 Strap Twin Head knitting machine Guage

Shamikh Textile Machinery. U.K 04/02/06 0.96 1 1.00

10 NPI GBP1200

8 Strap Attaching Machine Shamikh Textile Machinery. U.K 04/02/06 0.96 1 1.00

9 Brother 4 Thread overlocking machine

Shamikh Textile Machinery. U.K 04/02/06 0.40 2 1.00

Model 500-600 Series GBP 500

10 Brother underbed trim plain sewing Machine

Shamikh Textile Machinery. U.K 04/02/06 0.68 2 1.00

Model E-40 GBP 850

11 Comptel garment steam press with built in

Shamikh Textile Machinery. U.K 04/02/06 2.00 2 4.00

vacum and boiler GBP 2500

12 Union special Neck linking Machine

Shamikh Textile Machinery. U.K 04/02/06 0.80 2 2.00

Model KDA 3400 GBP 1000

13 Rimoldi Strap Attaching Machine Shamikh Textile Machinery. U.K 04/02/06 0.96 2 2.00

GBP 1200

14 Brother Button Sew Machine Shamikh Textile Machinery. U.K 04/02/06 0.52 2 1.00

GBP 650

15 Brother Button Hole Machine Shamikh Textile Machinery. U.K 04/02/06 0.80 2 2.00

GBP 1000

16 Eastman Straight Knife Cutter Machine

Shamikh Textile Machinery. U.K 04/02/06 0.36 2 1.00

GBP 450

17 Circular Saw Neck Cutter Machine

Shamikh Textile Machinery. U.K 04/02/06 0.08 2 0.00

GBP 100

- 51 -

Total-A 174.00 B INDIGENOUS

1 Hand Driven Hoseiry Flat Knitting Machine Elex International (Regd.) 20/01/06 0.14 60 8.00

with tuck double jacquard 8-10 Guage 40"

2 8 Guage Linking Machine with stand LMP Machine Exchange 04/02/06 0.35 12 4.00

Total-B 12.00 ADD : for Excise Duty, Sales Tax 2.00 - Freight 4.00 - Packing & Forwarding 4.00 -

Erection & Comm. Charges 4.00 -

Total-C 14.00

TOTAL ADDITIONAL PLANT & MACHINERY

(A+B+C) 200.00

Note : Our Company has not bought or does not propose to buy any second hand plant & Machinery for the

existing project Miscellaneous Fixed Assets A provision of Rs.174.00 Lacs has been made for furniture & fixtures, Computers, electrical panels and cables, office equipments, 1000 KVA Electrical Transformer, 1250 KVA D. G. Set etc. Details of Additional Misc. Fixed Assets Amount (Rs. in Lacs)

Sr. No. Particulars Equipment Suppliers Expansion Diversif-

ication Total 1 Electrical Panels M/s Unix Switchgear 7.00 - 7.00 2 Electrical Cables Lighting From Open Market 40.00 - 40.00 3 Transformer 1000 KVA Kirloskar Power Equipment Ltd, Pune 8.00 - 8.00

4

D.G. Set 1250 KVA Air Compressor (standard make - local purchase) M/s Sudhir Gensets Limited,

62.00

- 62.00

5

Computers on LAN with UPS & Printers and for designing with software To be purchased from open market

-

22.00 22.00 6 Furniture and Fixtures To be purchased from open market - 5.00 5.00 7 Air Conditioning and ducting To be purchased from open market - 15.00 15.00 8 Servo Stabilizer To be purchased from open market - 5.00 5.00

9 Working Station, Stitching station etc. To be purchased from open market

-

10.00 10.00

Total 122.00 52.00 174.00

- 52 -

Pre-Operative Expenses: A provision of Rs.159.00 Lacs has been made under this head for meeting Public Issue expenses and additional power security for 1000 KVA from PSEB

Details of Preliminary & Pre-Operative Expenses

Sr. No. Particulars Amount

(Rs. in Lacs)

1 Additional Power Connection from PSEB

1000 KVA @ Rs. 1500 per KVA 15.00 2 Public Issue Expenses 144.00

Total 159.00 Contingencies: A provision of Rs.55.00 Lacs has been made for contingencies on non-firm costs of building @ 10% and machinery and miscellaneous fixed assets @ 5% to meet any escalation in their costs during implementation period. Details of Contingencies

Amount in Rs. Lacs

@ 10 % On Building and @ 5 % on Machinery & MFA Sr. No. Particulars Non firm cost Expansion Diversification Total

1 Building 150.00 13.00 2.00 15.00

2 Plant & Machinery 610.70 21.00 10.00 31.00 3 Misc. Fixed Assets 174.00 6.00 3.00 9.00

Total 934.70 40.00 15.00 55.00 Margin Money for Working Capital: The working capital requirements of our Company for the financial year 2006-07, post expansion, at 95% capacity utilization, have been estimated at Rs.1932.66 Lacs

The working capital requirement has been based on stock of raw material holding at 1.5 months, stores and consumables for 3 months; work in progress for 0.8 month and finished goods stock for 1 month, along with creditors against sales at 1.75 months.

The net working capital requirement for the years 2007 (post expansion) has been projected at Rs.1932.66 Lacs. The permissible bank finance for the year 2007 has been retained at Rs.775.00 Lacs.

Working Capital Requirement

Amount in Rs. Lacs

Sr. No. Particulars Period

(in Months) 2007 (95%)

Expanded

Project Cost of Production (p.m)

1 Raw Material 1 336.60 2 Stores, Spares & Consumables 1 4.10 3 Repair & Maintenance Expenses 1 2.57 4 Misc. Administration Expenses 1 6.67

- 53 -

5 Salary & Wages 1 21.29 6 Power & Fuel Expenses 1 43.32 Total 414.56 Inventories

7 Raw Material Stocks 1.50 505.00 8 Stores, Spares & Consumables 3 20.00

9 Goods in Process 0.80 311.00

10 Finished Goods 1 518.00 11 Credit Sales 1.75 862.00 12 Other Current Assets 281.66

Gross Working Capital 2497.66 Less:

13 Sundry Creditors for RM & Consumables 1.50 515.00 14 Other Current Liabilities L. S. 50.00

565.00 Net Working Capital Required 1932.66 Less: Estimated Bank Finance. 775.00 Margin Money for Working Capital 1157.66 Less : Margin money already available 707.66

Margin money for working Capital –for the proposed project 450.00

Company intends to raise funds to meet part of its working capital requirements. Company’s working capital requirement arises primarily from inventories, sundry debtors, security deposits and advance income tax. The Company anticipates that the net working capital requirements of the Company, post expansion, have been estimated at Rs.1932.66 Lacs for the year 2006-07 against which permissible bank finance has been estimated at Rs.775.00 Lacs. Technology Our Company has been using proven technology for manufacture worsted yarns, which we propose to continues in future also. We propose to import Autoconers (60 heads each) from GreenBank Terotele Mach. Sales Ltd., Cheshire, England; Cone to cone bulking machine from Motocono, Spain; Soft package winders from XI’AN YUAN FAR International Trade Co. China; Universal flat bed hi-speed fully fashioned knitting machine of different gauges and models, Strap attaching machine, Brother for thread over locking machine, Brother button sew / hole machine, Comptel garment steam press with built in vacuum and boiler, Eastman straight Knife cutter machine and Circular saw Neck Cutter machine from Shamikh Textiles Machinery, U.K MANUFACTURING PROCESS: The sequence of spinning are opening, cleaning, carding, drawing, combing, roving, spinning and plying have remained the same over many decades. However, world wide most of these operations have been refined for high-speed performance and the processes are being controlled by microprocessor-based control to improve the quality.

- 54 -

Fibre Specification DENIER: Usually the actual denier is a little on the finer side i.e. for 1.2 D, it will be 1.16 and for 1.4, it could be 1.35. The tolerance normally is +- 0.05 and C.V.% of denier should be 4 to 5%. Denier specifies the fineness of fiber and in a way controls the spinning limit. Theoretically, in order to form yarn on ring spinning (and also in air jet), there must be minimum of 60 to 62 fibres in the yarn cross section. Therefore, the safe upper spinning limit with different denier is

DENIER COUNT (Ne) 1.0 90 1.2 80 1.4 62 2.0 40 3.0 32

The limit is for 38 mm fiber, rising for longer fibres. Deniers finer than 1.0 are called micro-denier and commercially the finest polyester staple fiber is 0.7 D. Techniques of yarn spinning Wool and man-made staple products are converted to yarn from processed fiber by the spinning process. WORSTED SPINNING is a process suitable for spinning the yarn from textile grade fibres synthetic or natural fiber having longer length i.e. length above 60mm. Worsted Spinning is, thus, suitable for Wool spinning, Polyester spinning, Viscose spinning, Nylon spinning, Acrylic spinning and their blends. In YWL, longer length fiber is used for giving low twist to the yarn resulting in an excellent feel in the ultimate fabric made out of yarn made from Worsted spinning. Worsted spinning yarns are used for suiting, shirting, dress material, upholstery knitting, weaving and blanket industries, as also for hand knitting, sweaters, shawls, mufflers, socks, gloves, pants, coats and other hosiery products. PROCESS: Ours is the latest Worsted Spinning Mill which produces single and double yarns for hosiery as well as weaving purposes. In addition to worsted spinning we have a range of fancy yarn machines and are equipped with 100% yarns / fibers dyeing facilities. Wool top

The wool fibres are mixed and washed to remove the grease to form scoured wool which is then fed into carding machines to obtain sliver. During the carding process, different fibres are blended and properly mixed. The sliver is then processed through pre-gill boxes to make the top. The top is processed through combing machine to remove foreign particles and short fibres. This process is called combing. Simultaneously, the fibres are arranged parallelly which increases yarn strength and quality. The top is then processed through post gill boxes fitted with auto levelers so that tops are of uniform length / evenness. At this stage, the wool top is ready for dyeing and spinning.

Acrylic top

Acrylic fibre is purchased in tow form in continuous fibre which is processed through tow to top convertor to get acrylic top ready for dyeing and spinning.

Dyeing

The woolen / acrylic tops obtained are dyed in dyeing plants under high temperature and pressure. The dyed wool top is passed through defelting Gill Boxes. The dyed wool / acrylic tops are then dried in the washing machines where different lots of same color are blended to form a bigger lot of one color.

- 55 -

Spinning

Dyed wool tops are defelted to put the fibre back into place and are passed through gill boxes and thereafter through combing machine. This process is called re-combing. The tops are then processed through gill boxes to remove short fibres. The wool and acrylic tops are also blended in the required proportion, after which the blended top is fed into the roving machine (rubbing frame). The rovings are then taken to ring spinning frames where the rovings are drafted and twisted to get yarn of required count.

The yarn is then processed through parallel winding machines. We propose to wind part of the yarn directly to TFO and remaining through Cheese Winder (Doubler). The Acro Wool doubled yarn obtained from TFO is first converted into Hank form on the Reeling machines and then bulked in autoclaves. It is again rewound on cones, on the Reeling to Cone machine or is alternatively sold in Hank form itself after making bundles on the Bundling machines.

1. HIGH BULK DYED ACRYLIC YARN:

High bulk dyed acrylic yarn in bigger size lots are only possible on worsted spinning system. In this system Acrylic tow is our raw material, The process starts with dyeing of tow. After dyeing the tow, it is passed through stretch breaker converter which converts this tow into tops. During tow to top conversion 50 % material is made as high bulk and remaining 50% as non-shrinkable material. Both these materials are blended on Re-breaker to produce High Bulk Tops. These tops are further processed through 4 sets of Gill Boxes and the final material is processed through Rubbing Frame/ Roving Frame on FM-8 machine. FM-8 roving is produced which is finally led to Ring Frame to produce single yarn. Ring Frame bobbins are fed on Auto coner to get cones of 2Kg of single knotless yarn. The single yarn is processed on parallel winding machine. The parallel yarn are feeded on Two for One twister (T.F.O) machine, which produces double yarn by twisting two yarns together. From double yarn cones we produce hanks on Reeling machines which are bulked on autoconers. After bulking, the yarn goes to Hank to Cone winding machine to produce final High Bulk yarn on cones. The cones are sent to packing department for packing and onwards dispatch to the market.

2. HIGH BULK DYED ACROWOOL BLENDED YARN: The wool top, being the raw material, purchased from the market is first dyed into desired colours. The dyed wool tops are passed through two gilling process, whereby the wool is ready for blending. Similarly, we produce dyed Acrylic Tops from our tow to top conversion. The dyed wool top and Acrylic top are processed on the Gill boxes as per the blend required for uniform blending. The material is then forwarded to FM-8 machine for producing roving which is fed on Ring Frames to produce single yarn. Ring Frame bobbins are fed to Autoconer to produce cones of 2 kg single knotless yarn. Single yarn is processed on parallel winding machine. The parallel yarn are feeded on Two for One twister (T.F.O) machine, which produces double yarn by twisting two yarns together. Double yarn cones are further processed and hanks are produced on Reeling machines, which are bulk on Autoconers. After bulking the yarn is processed through ‘Hank to Cone Winding Machine’ whereby the final High Bulk yarn is ready for forwarding it to the packing department and onward dispatch to the market

3. CHENILLE YARN: Raw Material for chenille yarn is yarn. Chenille yarn can be produced from acrylic yarn, Polyester yarn, Acrylic yarn, Woollen yarn or any type of blended yarns. Major demand is for Cotton chenille yarn, Viscose chenille yarn, Acrylic chenille yarn, Polyester chenille yarn. For producing above chenille yarn and sometimes we produce these yarns in-house also. Chenille is a process where two yarns are twisted and one or more yarns across these twisted yarns are cut into piles and finally the chenille yarn is produced. The chenille yarn is converted into hanks on Reeling machines. The hanks are then steamed up on auto claves. After steaming these yarns are converted into cones on ‘Hank to cone winding machine’.

- 56 -

4. FANCY POLYSTER YARN, LIKE BUCKLEY YARN

There are six of Fancy twisted machines. On these machines we can produce Thick & Thin yarn, Buckley yarn and other variety of Fancy yarns. The raw material for producing such yarn is ‘roving yarn’. Different effects are produced by using different type of yarns. The yarns are dyed and wind on cones for final market.

5. INJECTED SLUB FANCY YARN One machine for producing injected slub fancy yarn. For producing Injected Slub Fancy Yarn the raw material used is yarn and roving. Two or more yarns are twisted together. Roving is injected intermittently and finally injected slub fancy yarn is produced. These yarns are dyed and converted into final form and supplied to the market.

6. SPACE DYED YARN We have a machine for Space dyeing used for dyeing yarn on hanks upto 8 colors in a single hank. There is a good demand for space dyeing yarn in the market. Cotton yarn, Acrylic yarn, Viscose yarn and Woollen yarn can be dyed through Space dyeing. Depending on the market demand, different types of yarns are manufactured by our Company / directly procured from the market and dyed through space dyeing. The space dyed yarn is then forwarded to the ultimate customers.

- 57 -

PROCESS FLOW CHART:

Raw Material in Tow (Acrylic) form

Dyeing

Hydro - Extractor

Stretch Breaker Convertor

Re - breaker

Gilling

Roving Frame

Ring Frame

Autoconer

Parallel Winding (Cheese Winding)

Two for One

Reeling

Autoclave

Soft package

Packing

Dispatch

- 58 -

Collaborations, any performance guarantee or assistance in marketing by the collaborators Our Company has not entered into collaboration, any performance guarantee or assistance in marketing its products. Infrastructure facilities for raw materials and utilities like water, electricity, etc. Raw Material: The raw materials required for manufacture of worsted woollen yarn are wool fiber or scoured wool, acrylic fiber / tow and dyes & chemicals. The wool fibre is available in the local market. The fine quality of wool mainly used for woollen fabric is imported from Australia. Acrylic Fiber /Tow is indigenously available from various companies such as IPCL, Pasupati Acrylon Limited, J.K. Synthetics etc. Our Company proposes to use 3-denier acrylic tow which is easily available in India. Dyes and chemicals are available indigenously from Sandoz (India) Limited and a number of other manufacturers. Company does not anticipate any difficulty in procuring the raw materials of required quantity and quality. The acrylic / polyester / viscose yarn industry’s profitability is largely dependent on acrylic / polyester / viscose prices and trends in product realization Manpower The manufacturing process requires an appropriate mix of skilled, semi skilled and un-skilled labour, which is available in abundance in Ludhiana. At present there are 116 employees in our Company. The additional manpower requirement for expansion project would be around 108 employees. The total staff category is as under:

Nos. of employees Category Existing Proposed Total

Administrative Staff 16 4 20Factory staff 21 7 28Skilled workers 49 27 76Semi-skilled workers 30 26 56Un-skilled workers 0 44 44

Total 116 108 224 Water Water is required for dyeing plant, humidifier, cooling, boiler and other general purposes. The total requirement of water is estimated at about 200 KL / day. To meet the requirement of water, provision of one tube well (5”bore) has been made in the scheme. Steam Steam requirement for the process is estimated at 1.5 Tonnes / hour. Our Company has a 3 MT Fluidised Bed Boiler to meet the steam requirement for the dyeing plant. This boiler will be sufficient to meet the present as well as the future requirements of the unit. The fuel required for the boiler is Rice Husk, which is easily available in the local market. Power Our present load is 1180 KW. We have made an application for additional load of 500KW. Post expansion the total power load required will be of 1680 KW which will be met through connection from PSEB. Diesel Generation sets are installed as standby arrangements.

- 59 -

Effluent treatment During the process of dyeing, liquid effluents are generated which are required to be treated before disposal. Apart from this, there would be gaseous effluents generated from the husk-fired boiler. For treatment of effluents, YWL has complete effluent disposal mechanism. Additionally it also has pollution control equipments for controlling the level of pollution. The effluent treatment system works as under: The dying process discharges liquid effluents of appx. 300 m3 /day. The colour dyes would be collected in the equalization tank through different drains after screening to prevent foreign materials. The effluents would be kept in the equalization tank for about 6 hours to homogenize all the effluents. An oxygen aerator would be used to keep the tank contents stirred to prevent settling of solids. The effluents would then be shifted to Air floatation clarifier to remove the suspended solids and other impurities. About 40 to 50% reduction is expected to take place in Bio Chemical Oxygen Demand (BOD) level at this stage by physico-chemical process. The treated effluents will go by gravity to aeration tank for further degradation of organic matter. The primary treated effluent is first aerated and agitated continuously in the aeration tank and the activated sludge is formed. Necessary nutrients are provided to maintain healthy multiplication of biomass and level of BOD. In the secondary clarifier, settled activated sludge is removed by gravity and divided into two streams. One stream in the form of return sludge is sent back to aeration tank where it mixes with incoming primary treated effluent. The other stream is excess activated sludge which is taken to the sludge drying beds. The dried sludge is disposed off as manure or land filling material and the percolated liquor from the sludge is sent back to process for treatment. The treated effluent from the secondary clarifier is allowed to be disposed off in the open space available within the premises. As regards gaseous emissions, the fludised bed boiler acquired from cethar vessels limited, which is equipped with dust collector which minimizes the air pollution as per the guidelines of pollution control board. Our Products Our Company is engaged into production of Acrylic and blended yarns which are used by the manufacturers of Apparels, Hosiery, Woollen Knitted Garments, Furnishing Fabrics, Industrial Fabrics, Carpets, Bedding & Upholstery and Blankets etc. The product range of our Company consists of:

1 High Bulk Dyed Acrylic Yarn 2. High Bulk Dyed Acro woollen Blended Yarn 3. Chenille Yarn 4. Fancy Polyester Yarn like Buckley yarn 5. Injected Slub Fancy Yarn 6. Space Dyed Yarn

Our major clients Our Company is supplying its products to branded suppliers, engaged in manufacturing of sweaters and furnishing fabrics in Ludhiana, Panipat and also exporting to various Countries. The yarns made by us are being utilized by the vendors of the brands like Adidas, Ikea, Marks & Spencer, Woolworth in South Africa. We are also exporting to Mauritiues based knitting Company viz. Shibani Knitting Co. Ltd, website- www.shibani.com catering to various up markets brands for Europe and America. Besides, our products are also supplied to local leading hosieries in Ludhiana. Our Company is also supplying Polyester Tops to various units in India such as OCM, Oswal Woolen Mills Limited.

- 60 -

Marketing Strategies: Our Company is supplying to good brands making up market sweaters and furnishing fabrics in Ludhiana, Panipat and also exporting its products to various Countries. The foreign customer of our Company includes vendors of brands like Adidas, Ikea, Marks & Spencer, Woolworth in South Africa. We also export to Shibani Knitting Co. Ltd, based in Mauritius, who cater to various up markets brands for Europe and America. We enjoy good business relations with M/s Crystal Sweaters situated at Hong Kong, (Website – www.Crystalgroup.com) which is one of the biggest vendors to brands like GAP, Wal-Mart, Marks & Spencer etc. Our Company supplies Polyester Tops to units like OCM, OWM and our other products are supplied to local leading hosieries units in Ludhiana. Keeping in view the abolition of quota system, the export potential for Indian textile products has gone up substantially. Moreover, Indian textile industry has comparative advantage in terms of raw-material cost and labour cost in manufacturing of yarns and garments. Considering the advantages, India can be an out-sourcing destination for US and EU markets, especially after barriers in Chinese exports. Our company has strong presence in the international market supported by tested and trusted quality standards being maintained at our unit, as a consequence of which, we have an upper hand over our competitors Ludhiana is the biggest industrial city of North India and also a major hosiery-manufacturing centre with all necessary allied industrial activities upto complete garment fabrication abundantly available in and around the city. Our Company has made arrangements with major end users of synthetic yarns in Ludhiana and is supplying its blends, demand based, through established dealers in the trade. We have already embarked upon focused thrust on exports and have made inroads in the international markets, achieving more than 300 % growth in exports during the last financial year. With the ready acceptance of finished yarns, contacts in hosiery market, and rich experience in the textile industry, the Promoters are confident of successfully managing and marketing the post-expansion production. Competitors: Our Company is manufacturer of acrylic and blended yarn, which is an unorganized segment of Indian Textile Industry. Textile being a global industry, we face competition from various domestic and International manufacturers of acrylic and blended yarn. In our unit, production of yarn is done with latest technology and the yarn produced (i.e. single as well as double yarn) are 100% knotless and auto coned. Our Company is having an edge of quality over other competitors as majority of units are not equipped with splicers on double yarn. For producing high bulk dyed yarn there are few companies which are as under: 1) M/s Oswal Woollen Mills, Ludhiana 2) M/s Vardhman Spinning & General Mills, Ludhiana 3) M/s Sharman Woollen Mills, Ludhiana 4) M/s Ganga Spinning & Weaving Mills, Ludhiana 5) M/s Malwa Cotton & Spinning Mills, Ludhiana 6) M/s Garg Acrylic, Ludhiana 7) M/s Indoworth, Ludhiana 8) M/s East West Spinning Mills, Ludhiana 9) M/s Raghav Woollen Mills, Ludhiana Past Production Figures for the Industry The textile industry is highly fragmented and is dominated by large number of unorganized players. There are no published data available to our company for past production figures, existing installed capacity, past trends and future prospects regarding exports, demand and supply forecasts.

- 61 -

BUSINESS STRATEGY In last two decades, the Multi Fibre Agreement (MFA) governed international trade in textiles and clothing. Post January 2005, the Agreement on Textiles and Clothing to abolish MFA quotas marked a significant turn around in textile trade. In this backdrop, Indian Textile companies have a place to occupy in the global trade. The removal of quota has opened up new avenues and opportunities for further growth. We propose the following strategies for future growth: Continue to build-up a professional organization We have a team of professional to look after various stages of production, commercial and marketing activities of our Company. We believe in transparency, flow of information, commitment to the work among our work force and with our valuable customers, suppliers, government authorities, banks, financial institution etc. Over a period of time, we have been able to build an image that can match with our peers Enhancing customer base Our Company intends to grow business continuously by adding new customer both in domestic as well as in International markets. We plan to do this be leveraging of our marketing skills and relationship and enhancing our customer satisfaction. Improving product portfolio and addition of new products Our Company’s strategy is to focus on fancy yarns and blends of synthetic yarns, to add more value to its products – always pushing up the quality of production, whilst keeping costs at its minimum. Being able to supply customers with the latest technology is an absolute "must", in order to remain in this very competitive market. It created and produced 10 types of fast moving and widely accepted yarns in various blends and counts in the last 2-3 years on industrial scale, exemplifying the promoters’ focus and importance to research and product development. Quality products The products manufactured by our company are widely accepted and admired by the customers for its quality. The standard of the quality will me maintained and the Company shall be deploying better technologies in production as well as in Research and Development. Expansion of the Existing Capacities The project is a part of our business strategy to expand the production capacities and setting up a unit for manufacture of ready to wear garment with annual capacity of manufacturing 2.52 lacs pieces. We also aim to widen the existing product range, which will enable us to meet the growing demands of the existing market Future Outlook The future prospects of our Company are better considering the expected industrial growth of 8% in the textile industry in the Country due to abolition of quota system. This growth rate would require matching capacity Our Company has been expanding production base by undertaking periodical expansion addition in the basic raw material for meeting the increased requirement of the textile industry domestically. Our manufacturing facilities are presently running at optimum capacity. We believe that after the completion of expansion project, we would be in a better position to satisfy the market demand. Further, our company is exporting to around 8-10 countries due to limited resources, while yarn and fabrics from India are exported to around 80 countries from various textile mills of the Country. With the expansion and the proposed project, our Company would be geared to develop new markets and increase presence in the global markets. Demand for Acrylic Yarn in domestic market is expected to increase at a CAGR of 5 %. The increase in demand would be due to:

- 62 -

i. Limited availability of wool; and Fabric made from 100% acrylic yarn has better qualities than blended fabrics.

ii. Increase in export to countries like South Africa, Mauritius, Bangladesh and Europe. iii. Various applications, such as hand knitting, non bulky hosiery and weaving/furnishing to produce items

such as shawls, knitwear, Blankets, carpets, suiting and furnishings. Demand for Polyester Yarn is expected to increase at a CAGR of 7.5 %. The increase in demand would be due to:

i. Suitability for industrial fabrics on account of its high tenacity and strength. ii. Usage in tyre cord and protective airbags in automobiles. iii. Export of value added textile items manufactured from polyester spun yarn.

Capacity & Capacity Utilisation The Licensed and installed capacity and actual production is as under:

Particulars As of 31/03/06 As of 31/03/05 As of 31/03/04 Licensed Capacity (MTS) 3000.00 2000.00 2000.00Installed Capacity (MTS) (As certified by Management)

2200.00 2000.00 2000.00

Actual production (MTS) 1939.78 1912.06 1767.42Capacity utilization (%) 88.17 95.60 88.37

The Projected capacity and capacity utilization for the existing products for the next three years are as follows:

Particulars As of 31/03/07 As of 31/03/08 As of 31/03/09 Licensed Capacity (MTS) 3000.00 3000.00 3000.00Installed Capacity (MTS) 2980.00 2980.00 2980.00Estimated production (MTS) 2682.00 2831.00 2831.00Capacity utilization (%) 90.00 95.00 95.00

Note: The total installed capacity post expansion will be 3520 MTS per annum. Industrial License is not

required for 540 MTS per annum of Polyester Top, being an intermediary product. Accordingly the installed capacity for which Industrial License is required is taken as 2980 MTS. Per annum.

SWOT ANALYSIS Strengths a) The promoters have more than 14 years of experience in the textile industry. b) The promoters have latest market information and technology availability in their unit and have been

continuously updating the manufacturing capacities and capabilities of their unit over the last few years, so as to keep pace with developments and ground market requirements in the textile industry.

c) Our Company has recruited qualified textile engineer with more than 30 years of production experience in

spinning industry. c) The Company has successfully implemented expansion plans in the past without time or cost Overruns /

escalations. Phase I of the Project, already being implemented was appraised by Industrial Development Bank of India Limited and term loan of Rs.425 Lacs already sanctioned.

Weaknesses a) Attention to every minute detail by the Promoters may delay short term focus on the ultimate objective, but on

the other hand this very attitude ensures sustainable quality of the finished products. Opportunities

- 63 -

a) We shall have benefit of economies of scale with the total installed capacity of unit increasing to 9200

Spindles for acrylic and woolen blended yarns after implementation of the expansion project. b) Our Company has built its goodwill and finished products’ acceptability with Ludhiana’s major end users in

fabrication line. c) We are diversifying into production of ready to wear garment with a capacity of 2.52 lacs pieces per annum

which will boost our revenues and profitability, resulting in enhancing shareholders value. Threats a) Any change in Government policies pertaining to textile industry, specifically regarding availability of synthetic

fibres, imports of fibres and man-made yarns and exports may affect the viability of the project. INSURANCE Our Company keeps all immovable and movable properties duly insured with various insurance companies under the following nature of insurance policies:

Machine Breakdown Policy Cash Insurance Policy Fire Declaration Policy Standard Fire and Special Peril Policy Electronic Equipment Insurance Policy Transit Insurance Policy Consequential Loss (Fire) Policy Buglary and House breaking Policy Goods carrying Commercial Vehicle (Open) package Policy Vehicle Insurance Policy (Private Car Package policy / Motor Cycle / Scooter package Policy)

PROPERTY The details of properties acquired by our Company since incorporation are given below: Sr. No

Details of Agreement / Deeds Particulars of the Premises Consideration ( in Rs.)

1 Agreement for purchase of Property entered into between Mr. Abhay Kumar Gupta (The Vendor) and Yogendra Worsted Limited (The Purchaser)

Area 30 Kanal – 17 Marla in village Lal Kalan falling under sub-district Samrala and Registration District – Ludhiana.

34,70,625/-

2 Agreement for purchase of Property entered into between Mr. Jawahar Lal (The Vendor) and Yogendra Worsted Limited (The Purchaser)

Area 4 Kanal – 17 Marla in village Lal Kalan, H. B. 338 falling under sub-district Samrala and Registration District –Ludhiana

5,45,625/-

3 Agreement for purchase of Property entered into between Mr. Jangi Lal Oswal (The Vendor) and Yogendra Worsted Limited (The Purchaser)

Area 29 Kanal – 3 Marla in village Lal Kalan falling under sub-district Samrala and Registration district – Ludhiana

33,85,000/-

Note:

The occupation of the vendors is not available The land at serial no.3 was agricultural land, which was converted into industrial land by the

authorization of PUDA effective from 21/09/1998. One Acre is equal to 4840 yards or 8 kanals and One Kanal is equal to 20 Marla There is no property acquired by our Company in the last 3 years

- 64 -

KEY INDUSTRY REGULATIONS Policy Initiatives Our Company operates in the textile industry, exclusively in worsted spinning segment. Laws relating to excise, custom, Sales Tax, pollution control, factory and labour related matters etc are applicable to our Company, as they are applicable to all manufacturers. Announcements in the Union Budget 2006-07: To strengthen domestic textile industry for meeting the growing global competition, the following important announcements have been made in the Union Budget 2006-07:

Technology Upgradation Fund - The Government has allocated additional Rs.100 crores, making this year’s total allocation Rs.535 crores. TUF schemes to be provided for interest subsidy

Scheme for Integrated Textile Parks (SITP) have been introduced wherein the Government has allocated Rs.189 crore for the development of 10 parks. The Scheme will encourage new players and entrepreneurs.

Jute Technology mission will be launched soon and the government proposes to establish a National Jute Board for the same.

Reduction in Excise Duty for Man Made Fibres (MMF) from 16% to 8% - Positive for spinners as they can procure raw material at a cheaper cost. New duty structure have been introduced, as in the former duty structure there use to be an unutilized credit to the extent of Rs.4-6 per kg which was not on favour of the spinners.

Reduction in Import duty on man-made fibres and yarn from 15% to 10% Reduction in Import duty on raw material from 15% to 10%. Raw material includes PTA, MEG, DMT etc. Custom duty on textile machinery – peak rate reduced to 12.5%. Duty on certain machinery & parts reduced to 10 % The Cluster development approach will continue, 100 additional cluster at a cost of Rs.50.00 crore will be covered. TUF’s will be extended to the handloom sector to provide interest subsidy on term loans.

Announcement of National Textile Policy: One of the main objectives of the National Textile Policy (NTP-2000) announced in November 2000 is to facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing. The policy endeavours to achieve the target of textile and apparel exports from the present level to USD 50 billion by 2010 of which the share of garments will be USD 25 billion. Technology Upgradation Fund Scheme: In view of the urgent need for stepping up the process of modernization and technology upgradation of the textile industry in India, Ministry of Textiles launched a Technology Upgradation Fund Scheme (TUFS) for the textile and jute industry for a five year time frame from 01.04.1999 to 31.03.2004. The scheme has since been extended till 31.03.2007. The scheme provides 5% interest reimbursement in respect of loans availed there under from the concerned financial institutions for investments in benchmarked technology for the sectors of the Indian textile industry specified there under. An additional option has been given to powerloom units for 20% capital subsidy under Credit Linked Capital Subsidy (CLCS-TUFS) upto a cost of Rs. 100 Lacs in eligible machinery with facility to obtain credit from a credit network that includes all co-operative banks and other genuine non banking financial companies (NBFC) recognized by the Reserve Bank of India. Liberalization of FDI Policy: Government of India has allowed foreign Equity participation upto 100%, through automatic route, in the textile sector.

- 65 -

Export Promotion Capital Goods (EPCG) Scheme: The scheme facilitates import of capital goods at 5% concessional rate of duty with appropriate export obligation. Import of second hand capital goods without any restriction on age is also allowed under the new Foreign Trade Policy as announced on August 31, 2004. Advance Licensing Scheme: With a view to facilitating exports and to access duty free inputs under the scheme, standard input-output norms for about 300 textile and clothing export products have been prescribed and this scheme remains operation. Duty Exemption Pass Book (DEPB) Scheme: DEPB credit rates have been prescribed for 83 textile and clothing products. The nomenclature and rates for DEPB entries pertaining to certain textile products have been rationalized. The DEPB credit rates were reduced by 45% across the board on all textile items on 23.09.2004. While addressing the concerns of certain segments of the trade, the DEPB credit rates were again revised on 30.12.2004 by announcing changes to the extent of 60% reduction in respect of cotton textile items, 30% reduction in blended textile and woolen items and 22.5% reduction in man-made textile and silk items in place of the 45% reduction effected earlier. Duty Drawback Scheme: The exporters are allowed refund of the excise and import duty suffered on inputs of the export products under this Scheme. The Department of Revenue announced revision in All Industry Rates of Duty Drawback (AIR of DBK) on 18.01.2005 and the changes made effective from 19.01.2005. There has been substantial reduction in AIR of DBK in almost all textile export products except certain items of silk and wool sectors. In the revised Drawback Schedule, 165 new entries of textile products have been created in addition to earlier 101 entries. The revised rates have been prescribed on the basis of weight of the export product instead of earlier system based on FOB value of the product. Besides, in respect of apparel items, the drawback rates have also been given on the basis of composition of textiles The Government of India adopted the National Textile Policy in 2000 to harness opportunities for increasing India's share in global trade. The policy aims to increase the value of textile and apparel exports from the current US$ 11 billion to US$ 50 billion by 2010. It also aims to increase cotton productivity by at least 50 per cent and upgrade its quality to international standards. The government is encouraging the establishment of world-class integrated textile complexes and processing units. Rapid implementation of the Textile Upgradation Fund Scheme aimed at providing an impetus to the modernization of textile and jute industries is a priority with the government. A provision of US$ 41 million in 2001-02 and an incentive for modernization is offered by enhancing the depreciation rate of machinery installed under the scheme to 50 per cent per annum.

- 66 -

HISTORY AND CORPORATE STRUCTURE

Our Company ‘Yogindera Worsted Limited’ was incorporated in the year 1997 as a Limited Company and received Certificate of Commencement of Business in 1998. The capacity at the time of 1st Production was 4000 Spindles which we upgraded to 5000 Spindles within one year. The facility was again upgraded to 6040 Spindles besides the addition of 435 Spindles for Fancy Chenille yarns. Our Company is promoted by Mr. Jagmohan Lal Gupta, Mr. Anil Kumar Gupta and Mr. Ajay Kumar Gupta. The promoters are also in the business of Flour Milling since last 35 Years and are already having 2 Nos. Roller Flour Mills situated at Kangra in Himachal Pradesh and in Hoshiarpur in Punjab. Both the units have a capacity of 150 TPD per day. Yogindera Worsted Limited is a most modern integrated spinning unit with hi-tech machinery installed and having in-house dyeing facilities setup in Ludhiana in Assisted Sector with PSIDC, Chandigarh. Most of the yarns viz. Acrylic & Acrylic-Woollen Blended yarns are dyed in Fiber stage itself resulting in very good quality which results to excellent color fastness and single dye lots of the same color for quantity upto 20 Tons, fiber Dyed yarns have better technical parameters. All the yarns manufactured by the Company are cent percent knotless which are manufactured on German Autoconers. At present, our Company is exporting its yarns to countries like South Africa, England, Mauritius, Kenya, Cyprus, Spain, Iran, Jordan etc. and that the yarns have been widely appreciated for its good quality. We also supply our finished products to leading exporters and knitters in the domestic market as well. Besides producing the yarns meant for knitting sector, our Company is also producing various types of Fancy yarn such as Chenille yarn, Slub yarn, Buckley yarn, multi color yarn which is meant for furnishing fabrics and also for high fashion garments. Our Company has recently installed Fancy Twisting machine imported from China wherein different type of fancy yarn are manufactured. The fancy yarn have good market potentials and fetch high price. Our Company is going for additional capacity of 3200 spindles targeted towards producing Acrylic Woollen blended yarn which are higher in value and quality, meant for catering to up market garment producers in India as well as in the export market. With this the total number of spindles (inclusive of 435 fancy spindles) will touch 9675 which is quite big size for worsted spinning since the production per spindle in Worsted sector is less as compared to Cotton sector whereas the cost of the plant is much higher. Forward Integration Our Company is planning to set up a unit for manufacture of ready to wear garments with annual capacity of 2.52 lacs pieces per annum which will boost our revenue and profitability, resulting in enhancing shareholders value. Milestones achieved by the Company: Year Milestones 1997 Incorporation of the Company 1998 Commencement of Commercial Production 1999 Installed Worsted Spinning Unit with 4000 spindles 2001 Capacity increased to 5000 spindles 2004 Capacity further increased to 6040 spindles, besides addition of 435 spindles of Fancy

Chenille Yarns 2006 Installed Imported Fancy Yarns machines and Speciality Dyeing machines

- 67 -

Main objects to be pursued by the Company 1. To carry on the trade business as manufacturers and processors of dealers in distributors, agents, and

sellers, importers and exporters of Hosiery goods knitting yarn, ready made garments and fabrics of all kinds and description.

2. To carry on the business or businesses of worsting, doubling, weaving knitting, combing, manufacturing,

processing or preparing, darning, packing, bleaching, dyeing, colouring, printing, selling and buying, dealing in various fibres like wool, cotton, staple, silk and artificial silk, flex, jute etc. and other man-made synthetic fibres, angora nylon, mohair, polyster and substances including waste, wool, raw wool, wool tops and woolen rags etc.

3. To carry on all or any of the business namely wool merchants, wool combers, worsted spinners, shoddy

spinners, staple spinners, synthetic spinners, top makers, thread and yarn, merchant bleachers, dyers, makers of vitriol bleaching and dyeing materials and to purchase, comb, prepare, spin dye and deal in flax, hemp, jute, cotton, silk and other fibrous substances.

4. To manufacture, export, import, produce or prepare and deal in threads, yarns, wool, clothing, wool waste

and knitwear, shawls, mufflers, socks, jerseys, rayon, staple, tapes and other woven and knitted fabrics and fabricated goods of all description.

Changes in the Memorandum of Association of the Company Since the incorporation of our Company the following changes have taken place in its Memorandum of Association:

Date of Amendment Nature of Amendment 22/08/1988 Increase in the Authorised Share Capital from 10.00 Lacs to 600.00 Lacs 06/07/1999 Increase in the Authorised Share Capital from 600.00 Lacs to 900.00 Lacs 14/12/2005 Replacing of existing Articles of Association by adoption of entire new Articles of

Association 27/01/2006 Amendment to Article no.2, 159(1), 185, 186(2) and 192

Insertion of Article no. 19A, 70A, 94A and 170F. Deletion of Article no. 14A 3 K, 48(4), Increase in the authorized share Capital from 900.00 Lacs to 1600 Lacs.

Subsidiaries of the Issuer Company Our Company does not have any subsidiaries as on date. Shareholders agreements At present there are no shareholding agreements between the Company and any other person Other agreements As on date our Company has not entered into any material contract or agreement, other than those entered into in the ordinary course of business carried on or intended to be carried on by our Company. Strategic Partners As on date our Company has no strategic partners

- 68 -

Financial Collaborators A Financial collaboration agreement was entered on 23.12.1998 between Punjab State Industrial Development Corporation Ltd. (PSIDC) (Corporation) and Mr. Ajay Kumar Gupta, (Collaborator) Promoter and Joint Managing Director of our Company for setting up of a project for manufacture of Pre-dyed Woolen Worsted/ Acrowool Yarn with a capacity of 950 MT per annum in the state of Punjab. The Equity participation by PSIDC was Rs.90.00 Lacs (15%) and that of Mr. Ajay Kumar Gupta and Associates was 510.00 Lacs (85 %) The capital requirement of Company to be arranged by the Board of Directors through loans and other borrowings and/ or in such other manner as may be decided upon. As per the said agreement the Collaborator was bound to purchase the said shareholding of the Corporation in the Company in two equal installments before the expiry of the 3rd and 4th years after the commencement of the commercial production. The 1st and 2nd installments of 4,50,000 Equity Shares of Rs.10/- each had become due for buy-back on 09/09/2002 & 09/09/2003 respectively. The collaborator did not buy back the shares under clause 20-A of the said agreement. In the year 2003 Government of Punjab with a view to assist the collaborators of PSIDC promoted ventures and to amicably settle buy back of PSIDC shareholding in their respective companies, came out with One Time Settlement (OTS) Policy, operational till 31st May 2003. The Collabortor did not opted for the said scheme. Legal notice for non compliance of the Financial Collaboration Agreement was issued by Legal counsel of PSIDC. Later on, the government of Punjab extended the validity of OTS Policy till 30.06.2004 and this time Mr. Ajay Kumar Gupta opted for settlement under the policy and accordingly the legal notice served thereof was not enforced. As per the said policy, the Collaborator is committed to complete the entire buy-back before 30th June, 2007.

Thereafter, the Collaborator Mr. Ajay Kumar Gupta has made payment of Rs.35.00 Lacs to PSIDC vide demand Draft bearing no. 609840 dated 27/03/2006 drawn on Standard Chartered Bank, towards part payment of One Time Settlement Amount in addition to payment of Rs.28.50 Lacs made earlier. The Collaborator has also issued post dated cheques amounting to Rs.1,24,10,341/-, being the balance amount and given an undertaking not to seek transfer of Shares in the names of persons in whose favour transfer is not permitted as per SEBI guidelines during the lock in period even, if the entire payment of One Time Settlement is made.

PSIDC vide its letter bearing ref. No. PSIDC:PD:8936 dated 27th March, 2006 have given its consent to the stipulation of lock-in for a period of one year from the date of allotment on the shareholding of PSIDC in the Company on agreeing to the following conditions by Mr. Ajay Kumar Gupta, the collaborator.

1. That he will not seek further benefits over and above the OTS policy already announced, that may be

announced later on for the other collaborations / units under OTS.

2. That he will not seek transfer of Shares against the amount deposited / already deposited towards buy-back consideration till the entire amount is paid.

Besides the above and notwithstanding anything contained in the aforesaid, in case the entire payment towards buy back of Shares of PSIDC invested in the Company is not received by PSIDC within the stipulated period as per the terms of OTS on account of any reason, including delay in the completion of public issue resulting in extension of lock-in period of Shares beyond the last date of completion of OTS as per the terms of OTS, the OTS shall, stand cancelled automatically and the buy-back will be governed as per the terms of Financial Collaboration Agreement and payments already received shall be adjusted towards the said liability.

Further, in terms of Clause 14 of the Financial Collaboration Agreement dated 23.12.1998, PSIDC has the right to nominate one director so far as it is holding any Shares in the Company.

- 69 -

OUR MANAGEMENT

BOARD OF DIRECTORS Provisions under Articles of Association Under our Articles of Association, the number of Directors shall not be less than three or not more than twelve including the nominated Directors (the ex-office Directors referred to in Article 129) and the Debenture Directors referred to in Article 130.

The following table sets forth details regarding our Board of Directors: Name, Age, Designation, address & Occupation

Date of appointment

Qualification Other Directorship

Mr. Jagmohan Lal Gupta 69 Years Chairman S/o Late Shri Yoginder Pal Gupta Address: C/o Himachal Floor Mills Pvt. Ltd. Tanda Road, Kangra – 176 001, Himachal Pradesh. Occupation: Business

24/09/1997 S.S.C Himachal Flour Mills Pvt. Ltd. Hoshiarpur Roller Flour Mills Pvt. Ltd.

Mr. Anil Kumar Gupta 59 Years Managing Director S/o Late Shri. Yoginder Pal Gupta Address: C/o Hoshiarpur Rollers Floor Mills Pvt. Ltd., Bye Pass, Naloyan, Hoshiarpur -146 001, Punjab. Occupation: Business

24/091997 B.E in Mechanical Engineering

Himachal Flour Mills Pvt. Ltd. Hoshiarpur Roller Flour Mills Pvt. Ltd.

Mr. Ajay Kumar Gupta 40 Years Jt. Managing Director S/o Shri. Jagmohan Lal Gupta Address: C/o Himachal Floor Mills Pvt. Ltd., Tanda Road, Kangra-176 001, Himachal Pradesh. Occupation: Business

24/09/1997 Bachelor of Commerce

Himachal Flour Mills Pvt. Ltd. Hoshiarpur Roller Flour Mills Pvt. Ltd. Brijeshwari Textiles Private Limited

Mr. Gautam Aggarwal 28 Years Executive Director S/o Shri Anil Kumar Gupta Address: C/o Hoshiarpur Rollers Floor Mills Pvt. Ltd., Bye Pass, Naloyan, Hoshiarpur – 146 001, Punjab. Occupation: Business

05/08/2000 Bachelor of Arts

Himachal Flour Mills Pvt. Ltd. Hoshiarpur Roller Flour Mills Pvt. Ltd. Balmukhi Textiles Private Limited

Mr. Ashwani Kumar Gupta 48 Years Director S/o Shri. R.K. Gupta Address: 1044 A, Sector – 2, Panchkula (HR) Occupation: Practicing CA

19/11/2005 B. Com, FCA

Emm Bee Insurance Brokers Ltd. Emm Bee Financial Services Ltd.

- 70 -

Mr. S. M. Ishtiaque 53 Years Director S/o Late Shri. S. Ali Ishtiaque Address: Deptt. Of Textile Technology, Indian Institute of Technology, New Delhi – 110 016 Occupation: Professor –Dept. of Textile Technology

28/12/2005 B. Tech & Ph.D (University of Mechanical & Textile Engineering, Czech Republic)

Avinex Private Limited.

Mr. Deepak K. Gupta 50 Years Director (Works) S/o Shri. R. N. Sahai Address: 58, 2nd Floor, Sant Ishar Singh Nagar, Pokhowal Road, Ludhiana Occupation: Service

19/11/2005 B.Text.Tech from GCTI Kanpur

AVR International – Proprietor

Mr. Yogesh Goel 50 years Nominee Director – PSIDC S/o Late Shri. Braham Sarup Goel Address: H. No. 863, Sector – 2, Panchkula, Haryana. Occupation: Service

17/04/1999 B.E in Chemical Engineering

Nahar Industrial Infrastructure Corporation, Kissan Dudh Udyog Ltd., B K Duplex Boards Ltd., Diamond Agro Ind. Ltd., Milk Specialities Ltd., Industrial Organics Ltd., Capsugel India Ltd., Harman Milkfoods Ltd.

BRIEF PROFILE OF THE DIRECTORS MR. JAGMOHAN LAL GUPTA- Chairman, aged 69 years has a business experience of more than 40 years. He started as a trader in food grains and wholesalers of various products like cement etc. In the year 1954 he set up a rice mill namely M/s Yoginder Pal Mohinder Pal Rice Mills at Gurdaspur, which was the first industrial unit in Gurdaspur District. Thereafter, he had set up a 100 TPD Roller Flour Mill (i.e.Himachal Flour Mill) at Kangra in 1974 in Himachal Pradesh which incidentally was also the first Roller Flour Mill in the state of Himachal Pradesh and at present has annual turnover of around Rs.13.00 crores. MR. ANIL KUMAR GUPTA- Managing Director, aged 59 years is a B.E. in Mechanical Engineering. After completing his education, he had joined the family business of Rice Sheller and Flour Mills in the year 1975. He was instrumental in expanding the capacity of the rice sheller from 1 Ton/hr to 6 Ton/hr. In the year 1981, he set up a 150 TPD Roller Flour Mill at Hoshiarpur namely Hoshiarpur Roller Flour Mills. The present combined turnover of these units is approx. Rs.12.00 Crores. Sh. Anil Kumar Gupta is technically qualified and looks after the policy matters, corporate planning & Management and New project. MR. AJAY KUMAR GUPTA- Jt. Managing Director, aged 39 years is a commerce graduate. He is a young entrepreneur and had joined the family business of Roller Flour Mills at Kangra in 1985. After joining he had expanded the capacity of the mill from 100 TPD to 200 TPD. He has hands on experience in the operations of the Company, as he was associated with the Company since incorporation. He has spearheaded the expansion of capacity undertaken by the Company from time to time. Mr.Ajay Kumar Gupta looks after the day to day corporate affairs, Financial matters and managing the operation of the Company as a whole and is well equipped to handle the same with his business background and rich experience gained in management and expansion of Himachal Roller Flour Mill Pvt. Ltd. MR. GAUTAM AGGARWAL – Executive Director, aged 28 years is an Arts Graduate and joined his family business in 2000. Presently, he is looking after the domestic as well as International Marketing operations of our Company. He has visited many countries for business promotion, attending conference, trade fairs and

- 71 -

exhibitions. With his efforts on the export front, our export turnover has increased from 6.00 lacs US dollars in 2002-03 to 16.00 lacs UD dollars in 2005-06. He is active in the day to day affairs as well as policy matters of our Company. MR. ASHWINI KUMAR GUPTA - aged 48 years is a fellow member of the Institute of Chartered Accountants of India. Mr. Gupta is into practice since last twenty years under the name Ashwani K. Gupta and Associates. He holds Directorship in Emm Bee Insurance Brokers Ltd. and Emm Bee Financial Services Ltd. He is Executive Member of Chandigarh Branch of Northern India Regional Council of ICAI and Aggarwala Sabha, Panchkula. MR. S. M. ISHTIAQUE - aged 53 years is appointed as Additional Director. Mr. Ishtiaque is a B.Tech from Kanpur University and Ph.D from University of Mechanical and Textile Engineering, Czech Republic in 1983. He has published books like (a) Friction Spinning and (b) Economics of open end Rotor Spinning. The Books edited by him includes (a) Trends in Textile Machinery (b) Information Technology in Textile in the New Millennium, 1999. He has completed research projects funded by Ministry of Textiles, Department of Science and Technology, NITRA (Ghaziabad) Mr. Ishtiaque have delivered lectures by invitation in Czech Republic, Italy, Germany, U. K. and USA MR. DEEPAK KUMAR GUPTA – Whole Time Director (Works), aged 50 years is a Bachelor of Textiles (Textile Technology) from Govt. Central Textiles Institute (GCTI), Kanpur with an overall experience of 29 years at various post in textile industry. The Job responsibilities of Mr.Gupta includes but not limited to project planning & commissioning, Procurement of raw material, capital equipment & Stores, production planning, marketing and overall production administration. Mr. Gupta has business insight and deep knowledge of entire spinning & Textile industry. Since 1999, Mr. Gupta acts as advisor and provides consultancy for new as well as running projects of various textiles companies. The projects commissioned under his surveillance and consultancy includes Jindal Cottex – (Expansion in capacity to 12,000 Spindles), Garg Acrylic (Expansion in capacity to 12,000 Spindles.), Demarte Industries (Expansion in capacity to 10,000 Spindles.), Saluja Processors (Expansion in capacity to 16,000 Spindles.), Mukesh Udyog (Expansion Capacity increased to 18,000 Spindles.) Mr. Gupta has held the Executive Directorship of Sportking Synthetics Limited, Ludhiana from 1995 to 1999 and has held various managerial positions. MR. YOGESH GOEL- Nominee Director is 50 years old. Presently he is working in PSIDC as a General Manager (Chemical & Petro Chemical). He has 29 years professional experience at various levels. He started his Professional Career with Pfizer Limited & Shriram Chemical Industries Kota (Rajasthan) as a Graduate Trainee & Shift in charge. He joined PSIDC in November 1978 as Deputy Manager. He is Chairman in Nahar Industrial Infrastructure Corporation Ltd. and Kissan Dudh Udyog Ltd. and holds directorship in Industrial Organics Ltd, Capsugel India Ltd & Milk Specialties Ltd., Diamond Agro Industries Limited B. K. Duplex Ltd. and Harman Milkfoods Ltd., being a nominee of PSIDC Details of Borrowing Powers Article 75 provides that:

Subject to the provisions of Section 292 and 293 of the act and these Article and without prejudice to the other power conferred by these Articles The Director Shall have the powers from time to time at their discretion by a resolution passed at a meeting of the Board, not by the Circular Resolution, to accept deposits from members, either in advance of calls or otherwise and generally raise or borrow or secure the payment of any sum or sums of moneys for the purpose of the company provided that the total amount borrowed at any time together with the moneys already borrowed by the company (apart from temporary loans obtained from the company’s Banners ‘ in the ordinary course of business shall not without the consent of the company in General Meeting, exceed the aggregate of the paid up capital of the Company and its free reserves that is to say reserves not set apart for any specific purpose. Such consent shall be obtained by an ordinary resolution, which shall provide for the total amount upto which moneys may be borrowed by the Board. The expression “Temporary Loans” in this Article means loans repayable on demand or within six months from the date of the loan such as short term such credit arrangement discounting of bills and the issue of other short-term loans of seasonal character but does not include loans raised for the purpose of financing expenditure of a capital nature.

- 72 -

Compensation to Managing Director / Jt. Managing Director / Whole time Directors. At the Annual General Meeting of our Company held on 30/09/2004, Mr. Anil Kumar Gupta was appointed as Managing Director for a period of 5 years effective from 01/04/2004 at a remuneration of Rs.10,000/- per month. At the EGM held on 14/12/2005 salary of Mr. Anil Kumar Gupta was increased to Rs.25,000/- per month, effective from 01/12/2005. The Broad term of apointment of Mr. Anil Kumar Gupta is as under:

Name Mr. Anil Kumar Gupta Designation Managing Director Date of Appointment

01/04/2004

Period 5 years Overall remuneration not to exceed the limits pursuant to provisions of section 269,309, in Schedule XIII to the Companies Act, 1956 Basic Salary Rs.25,000 p.m. Perquisites Medical reimbursement:

For self and family subject to a ceiling of one month salary in a year as per the rules of the Company.

Earned leave: Twenty days in a year to be accumulated up to 240 days. Leaves accumulated and not availed of during his tenure as Managing Director may be allowed to be en-cashed as per the rules of the Company.

Leave Travel Concession:

Actual expenses for self and family, once a year maximum up to one month’s salary in accordance with the rules of the Company.

Club fees: Fees of the clubs subject to a maximum of two clubs. No admission and life membership fee will be paid.

Personal Accident Insurance:

Personal accident insurance of an amount, the annual premium of which does not exceed Rs.4000/-.

The Managing Director shall also be entitled to contribution to Provident Fund, Super annuation Fund, or Annuity Fund which will not be included in the computation of ceiling of perquisites to the extent they are exempted under the Income Tax Act. He shall also be eligible for Gratuity subject to a ceiling of half month salary for each complete year of service as per Rules of the Company.

Telephone Free telephone facility at residence at Company’s expenses subject to the condition that long distance personal calls shall billed by the Company.

Company’s chauffeur driven car

Free of Cost Company’s chauffeur driven car, including maintenance and operations thereof subject to the condition that the use of car for private purpose shall be billed by the Company.

Reimbursement of Bills

Managing Director shall also be entitled for reimbursement of actual entertainment, traveling, boarding and lodging expenses incurred in connection with the Company's business and such other benefits/amenities and other privileges, as may from time to time, be available to other Senior Executives of the Company.

- 73 -

At the Annual General Meeting of our Company held on 30/09/2004, Mr. Ajay Kumar Gupta was appointed as Joint Managing Director for a period of 5 years effective from 01/04/2004 at a remuneration of Rs.10,000/- per month. At the EGM held on 14/12/2005 salary of Mr. Ajay Kumar Gupta was increased to Rs.25,000/- per month, effective from 01/12/2005.

The Broad term of appointment of Mr. Ajay Kumar Gupta is as under:

Name Mr. Ajay Kumar Gupta Designation Joint Managing Director Date of Appointment

01/04/2004

Period 5 years Overall remuneration not to exceed the limits pursuant to provisions of section 269,309, in Schedule XIII to the Companies Act, 1956 Basic Salary Rs.25,000 p.m. Perquisites Medical reimbursement:

For self and family subject to a ceiling of one month salary in a year as per the rules of the Company.

Earned leave: Twenty days in a year, to be accumulated up to 240 days. Leaves accumulated and not availed of during his tenure as Joint Managing Director may be allowed to be en-cashed as per the rules of the Company.

Leave Travel Concession:

Actual expenses for self and family, once a year maximum up to one month’s salary in accordance with the rules of the Company.

Club fees: Fees of the clubs subject to a maximum of two clubs. No admission and life membership fee will be paid.

Personal Accident Insurance:

Personal accident insurance of an amount, the annual premium of which does not exceed Rs.4000/-.

The Joint Managing Director shall also be entitled to contribution to Provident Fund, Super annuation Fund, or Annuity Fund which will not be included in the computation of ceiling of perquisites to the extent they are exempted under the Income Tax Act. He shall also be eligible for Gratuity subject to a ceiling of half month salary for each complete year of service as per Rules of the Company.

Telephone Free telephone facility at residence at Company’s expenses subject to the condition that long distance personal calls shall billed by the Company.

Company’s chauffeur driven car

Free of Cost Company’s chauffeur driven car, including maintenance and operations thereof subject to the condition that the use of car for private purpose shall be billed by the Company.

Reimbursement of Bills

Managing Director shall also be entitled for Reimbursement of actual entertainment, traveling, boarding and lodging expenses incurred in connection with the Company's business and such other benefits/amenities and other privileges, as may from time to time, be available to other Senior Executives of the Company.

- 74 -

At the EGM held on 30th September, 2005 Mr. Gautam Aggarwal was re-appointed as Executive Director of the Company for a period of 5 years, effective from 05/08/2005. Members of the company, at the EGM held on 14/12/2005 increased the remuneration payable to Mr. Gautam Aggarwal from Rs.10,000/- per month to Rs.25,000/- per month, effective from 1st December, 2005.

The Broad term of appointment of Mr. Gautam Aggarwal is as under:

Name Mr. Gautam Aggarwal Designation Executive Director Date of Appointment

05/08/2005

Period 5 years Overall remuneration not to exceed the limits pursuant to provisions of section 269,309, in Schedule XIII to the Companies Act, 1956 Basic Salary Rs.25,000/- per month Perquisites Medical reimbursement:

For self and family subject to a ceiling of one month salary in a year as per the rules of the Company.

Earned leave: Twenty days in a year to be accumulated up to 240 days. Leave accumulated and not availed of during his tenure as Executive Director, may be allowed to be encashed as per the rules of the Company.

Leave Travel Concession:

Actual expenses for self and family, once a year maximum up to one month’s salary in accordance with the rules of the Company.

Club fees: Fees of the clubs subject to a maximum of two clubs. No admission and life membership fee will be paid.

Accident Insurance:

Personal accident insurance of an amount, the annual premium of which does not exceed Rs.4000/-.

The Executive Director shall also be entitled to contribution to Provident Fund, Super annuation Fund, or Annuity Fund which will not be included in the computation of ceiling of perquisites to the extent they are exempted under the Income Tax Act. He shall also be eligible for Gratuity subject to a ceiling of one half month salary for each complete year of service as per Rules of the Company.

Telephone Free telephone facility at residence at Company’s expenses subject to the condition that long distance personal calls shall billed by the Company.

Company’s chauffeur driven car

Free of Cost Company’s chauffeur driven car, including maintenance and operations thereof subject to the condition that the use of car for private purpose shall be billed by the Company.

Reimbursement of Bills

Executive Director shall also be entitled for reimbursement of actual entertainment, traveling, boarding and lodging expenses incurred in connection with the Company's business and such other benefits/amenities and other privileges, as may from time to time, be available to other Senior Executives of the Company.

At the EGM held on 14/12/2005 Mr. D. K. Gupta was appointed as Director- Works of the Company at a remuneration of Rs.1,00,000/- per month.

The Broad term of appointment of Mr. D. K. Gupta is as under:

Name Mr. D.K.Gupta Designation Director- Works Date of Appointment 19/11/2005 Period 3 years Gross remuneration Rs1,00,000/- per month Overall remuneration not to exceed the limits pursuant to provisions of section 269,309, in Schedule XIII to the Companies Act, 1956

- 75 -

COMPLIANCE WITH CORPORATE GOVERNANCE REQUIREMENTS The Provisions of listing agreement to be entered into with the Stock Exchange with regards to Corporate Governance will be applicable to our Company immediately upon listing of Company’s Equity Shares on the Exchange. Our Company undertakes to adopt Corporate Governance Code as per clause 49 of the Listing Agreement to be entered into with the Stock Exchanges prior to listing. We believe in adopting the best Corporate Governance practices, based on the below mentioned principles in order to maintain utmost level of transparency, accountability and ethics in conducting the affairs of the Company:

Recognition of the respective roles and responsibilities of Board and the Management;

Independent verification and assured integrity of financial reporting;

Protection of shareholders’ right and priority of investors relations; and

Timely and accurate disclosure on all material matters concerning operations and performance of the Company.

The Board of Directors comprises of:

Name of the Director Designation Status Mr. Jagmohan Lal Gupta Chairman Non-Executive/Non-independent Mr. Anil Kumar Gupta Managing Director Executive / Non-independent Mr. Ajay Kumar Gupta Jt. Managing Director Executive / Non-independent Mr. Gautam Aggarwal Executive Director Executive / Non-independent Mr. Deepak Kumar Gupta Director (Works) Executive / Non-independent Mr. Yogesh Goel Nominee Director – PSIDC Non-Executive / Independent Mr. Ashwani Kumar Gupta Director Non-Executive / Independent Mr. S. M. Ishtiaque Director Non-Executive / Independent

Details of various committees are as follows: Audit Committee The Audit Committee has been reconstituted by the Board of Directors in their meeting held on 28/12/2005. The Audit Committee comprises following members:

Name of the Director Designation Status Mr. Ashwani Kumar Gupta Chairman Non-Executive / Independent Mr. Yogesh Goel Member Non-Executive / Independent Mr. S. M. Ishtiaque Member Non-Executive / Independent Mr. Ajay Kumar Gupta Permanent Invitee Executive / Non-independent Mr. Jaspal Bansal Permanent Invitee

Terms of Reference Committee shall have the authority to investigate into matters in relation to the items specified in Section 292A of the Companies Act, 1956, the listing agreement or referred to it be the board. It shall have full access to information contained in the records of the Company and seek external professional advice, if necessary. The broad terms of reference of the Audit Committee shall include:

1. To investigate any activity within its terms of reference. 2. To seek information from any employee.

- 76 -

3. To obtain outside legal or professional advice.

4. To secure attendance of outsiders with relevant expertise, if it considers necessary

5. Oversight of the Company’s financial reporting process and the disclosure of its financial information, to ensure that the financial statements are correct, sufficient and credible.

6. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval

for payment for any other services.

7. Reviewing with management the annual financial statements before submission to the Board, focusing primarily on:

i. Any changes in accounting policies and practices. ii. Major accounting entries based on expertise of judgments by management. iii. Qualification in Draft audit report. iv. Significant adjustments arising out of audit v. The going concern assumption vi. Compliance with accounting standards vii. Compliance with Stock Exchange and legal requirements concerning financial statements. viii. Any related party transactions i.e. transactions of the Company of material nature with

promoters of the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of Company at large.

8. Reviewing the adequacy of the Internal Audit function including its structure of the Internal Audit

Department staffing and seniority of the Officials heading the department, reporting structure coverage and frequency of Internal Audit.

9. Discussion with Internal Auditors on any significant findings and follow up thereon.

10. Reviewing the findings of any internal investigations by the internal auditors into matters where there is

suspected fraud or irregularity or a failure of Internal control system of a material nature and reporting the matter to the Board.

11. Discussion with the External Auditor before the audit commences, the nature and scope of audit as well

as to have post audit discussion to ascertain any area of concern.

12. Reviewing the Company’s financial and risk management policies.

13. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors.

14. It shall have discussion with the auditors periodically about internal control system, the scope of audit,

including the observations of the Auditors and review the quarterly, half yearly and annual financial statements before submission to the Board.

15. To review the implementation of the proposed utilization of funds.

16. It shall ensure compliance of internal control system.

17. The Chairman of the Audit Committee shall attend the Annual General Meeting of the Company to

provide any clarification on any matter relating to audit sought by the members of the Company. Frequency of Meetings The Audit committee should meet four times in a year and not more than four months shall elapse between two meetings

- 77 -

Shareholders’ / Investors Grievance Committee: The Shareholders’ / Investors Grievance Committee was constituted in pursuance of the Resolution passed by the Board of Directors at its meeting held on 28/12/2005. The Company have designated personnel to solve investors’ problem along with Company’s Registrars, Intime Spectrum Registry Limited, The Investors Grievance Committee will look into redressal of Shareholder and investor complaints, issue of duplicate/split/consolidated share certificate, allotment and listing of Shares and review of cases for refusal of transfer/ transmission of Shares and reference to statutory and regulatory authorities. Constitution of Shareholders / Investors Grievance Committee: Sr. No Name of the Director Designation Status

1 Mr. Ashwani Kumar Gupta Chairman Non-Executive / Independent 2 Mr. Yogesh Goel Member Non-Executive / Independent 3 Mr. S. M. Ishtiaque Member Non-Executive / Independent 4 Mr. Ajay Kumar Gupta Member Executive / Non-independent

Remuneration Committee The Remuneration Committee was constituted in pursuance of the Resolution passed by the Board of Directors at its meeting held on 28/12/2005 The Committee performs the function of Remuneration Committee as recommended in the listing agreement, entered into with the Stock Exchanges. It determines Company’s policy on specific packages for Executive Directors. Constitution of Remuneration Committee: Sr. No Name of the Director Designation Status

1 Mr. Yogesh Goel Chairman Non-Executive / Independent 2 Mr. Ashwani Kumar Gupta Member Non-Executive / Independent 3 Mr. S. M. Ishtiaque Member Non-Executive / Independent

POLICY ON DISCLOSURE AND INTERNAL PROCEDURE FOR PREVENTION OF INSIDER TRADING Our Company will comply with the provision of SEBI (Prohibition of Insider Trading) Regulations, 1992 after listing of its Equity Shares on Stock Exchange, Mr. Maninder Kanwar, Compliance Officer and Company Secretary is responsible for setting forth policies, procedures, monitoring and adherence to the rules for the preservation of price sensitive information and the implementation of the code of conduct under the overall supervision of the Board. SHAREHOLDING OF DIRECTORS AS 31/03/2006

Sr.No Name of the Director No. of Shares held 1. Mr. Jagmohan Lal Gupta 3,76,757 2. Mr. Anil Kumar Gupta 4,19,645 3. Mr. Ajay Kumar Gupta 2,43,350 4 Mr. Gautam Aggarwal 1,52,160 5 Mr. Yogesh Goel Nil 6. Mr. Deepak Kumar Gupta Nil 7. Mr. Ashwani Kumar Gupta Nil 8. Mr. S. M. Ishtiaque Nil

Total shareholding 11,91,912

- 78 -

INTEREST OF DIRECTORS All the Directors may be deemed to be interested to the extent of sitting fees and other remuneration for the services rendered and the reimbursement of expenses, if any, payable to them under the articles. The Directors may also be deemed to be interested to the extent of: a. The shares, if any held by them or by the relatives or by firms or companies of which any of them is a

partner and a Director / Members respectively. b. The shares, if any, out of the present issue that may be subscribed for and allotted to them or their

relatives or any Company in which they are Directors / Members of the firms in which they are partners c. Transactions, if any, with entities in which Directors are interested have been disclosed as related party

transaction in the Auditors Report. Except as stated above and elsewhere in this Prospectus, the Company has not entered into any contract, agreement or arrangement in which the directors are interested directly or indirectly and no payment have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made. Detail of Payments made to the existing Directors of the Company as on 31/03/2006 (Amount In Rs. Lacs)

Sr. No Name Sitting Fees

Salary / Perquisites Interest

Total

1 Mr. Jagmohan Lal Gupta - - - -2 Mr. Anil Kumar Gupta - 1.80 0.87 2.673 Mr. Ajay Kumar Gupta - 1.80 0.15 1.954 Mr. Gautam Aggarwal - 1.80 0.78 2.585 Mr. Deepak K. Gupta - 8.00 - 8.006 Mr. Yogesh Goel - - - -7 Mr. Ashwani Kumar Gupta - - - -8 Mr. S. M. Ishtiaque - - - -

An amount of Rs.1,47,662/- was paid to Mr.Yogesh Gupta (i.e. Rs.80,000 towards salary & Rs. 67,662/- towards interest), who ceased to be the Director of our Company w.e.f. 19th November, 2005. The Board of Directors, at their meeting held on 15/04/2006 approved the payment of Sitting Fees of Rs.3000/- per Board Meeting to Independent Directors w.e.f 01/04/2006 onwards. Change in the Board of Directors during the last three years: The following changes have taken place in the Board of Directors of the Company during the last three years: Name Date of

Appointment Date of Cessation Reason

Mr. Yogesh Gupta 17/04/1999 19/11/2005 Resigned from the Directorship Mr. Ajay Gupta 06/07/1999 19/11/2005 Resigned from the Directorship Mr. Raghav Aggarwal 01/09/2001 19/11/2005 Resigned from the Directorship Mr. D. K. Gupta 19/11/2005 - Broad basing the Board Mr. Ashwani Kumar Gupta 19/11/2005 - Broad basing the Board Mr. B. S. Narang 19/11/2005 27/01/2006 Resigned from the Directorship Mr. S. M. Ishtiaque 28/12/2005 - Broad basing the Board

- 80 -

KEY MANAGERIAL PERSONNEL As on 31st March 2006, Yogindera Worsted Limited employs 116 personnel in various capacities The key personnel who head business units and management functions possess adequate qualifications and experience in their respective fields. The summarized data on existing key managerial personnel is given below: Sr. No. Name, Age and

Designation Qualification & Experience

Date of Joining

Functional Responsibility

Previous Employment

Annual Salary (Rs. in Lacs)

1. Mr. Jaspal Bansal Age : 47 years General Manager – (Finance & Accounts)

B.Com, FCA (21 years)

11/10/05 In charge of overall finance, accounts and corporate affairs.

Bhushan Steel & Strips Ltd.

Rs.3.00

2. Mr. Maninder Kanwar Age : 27 years Company Secretary

B. Com, ACS, MFC (2 years)

14/01/06 Looking after secretrial, Legal and Company Law matters

Ind-Swift Laboratories Ltd., Chandigarh

Rs.2.16

3. Mr. Rakesh K Verma Age : 38 years Sr.Manager (Production)

MBA (Marketing), Diploma in Textile Technology. (15 years)

23/09/05 In charge of overall production and maintenance

Indoworth (India) Ltd.

Rs.2.19

4 Mr. Prem Basra Age : 37 years Manager (Accounts)

M.Com (17 years)

02/05/05 Incharge of Budgeting and Management information system (MIS)

Nahar Exports Ltd. Ludhiana

Rs.1.62

5 Mr. Sanjeev K Sharma Age : 31 years Officer (A/c & Taxation)

B.Com., Inter C.A (10 years)

01/12/05 Incharge of Taxation, VAT & other matters.

Sportking India Ltd., Ludhiana

Rs.1.80

6 Mr. Mahesh K Joshi Age : 42 years Manager - Marketing

Diploma in Marketing Management (15 years)

02/09/04 Incharge of Domestic Marketing

Goyal Petrofil, Ludhiana

Rs.1.92

- 81 -

Brief profile of Key Managerial Personnel 1 Mr. Jaspal Bansal, 47, General Manager ( Finance & Accounts) is a commerce Graduate and a Fellow

Member of the Institute of Chartered Accountants of India. He has post qualification experience of over 21 years in Corporate finance, Accounts and Taxation. His annual package is Rs.3,00,000/-

2. Mr. Maninder Kanwar, 27 years, Company Secretary is a Commerce graduate and the Associate Member of the Institute of Company Secretaries of India. He has also his Masters in Finance & control from Punjab University, Chandigarh. He has two years experience in Corporate, Secretarial field. His annual package is Rs.2,16,000/-.

3. Mr. Rakesh K Verma, 38 years, Senior Manager (Production) is an MBA (Marketing). He has also done

Diploma in Textile Technology. He has over 15 years of experience. His annual package is Rs.2,19,000/-. 4. Mr. Prem Basra, 37, Manager (Accounts) is Masters of Commerce, having an experience of over 17 years.

His annual package is Rs.1,62,000/- 5. Mr. Sanjeev K. Sharma, 31, Officer (Accounts and Taxation) is commerce Graduate and passed

Intermediate Examination conducted by the Institute of Chartered Accountants of India. He has an experience of 10 years in accounts and taxation related field. His annual package is Rs.1,80,000/-.

6. Mr.Mahesh K. Joshi, 50, Marketing Manager has done Diploma in Marketing Management. He has an

experience of 15 years in marketing field. His annual package is Rs.1,92,000/- All the Key employees are on the pay roll of the Company as permanent Employees. Shareholding of Key Managerial Personnel None of the Key managerial personnel hold any Shares of our Company as on the date of filing of this Draft Prospectus. Bonus or Profit sharing Plan for the key managerial Personnel There is no Bonus or Profit Sharing Plan for the Key Managerial Personnel Change in Key Managerial Personnel during the last one year. The following table describes changes in key personnel in the last 1 year:

Sr. No

Name Designation Date of Joining

Date of Cessation

Remarks

1 Mr. Rakesh Sood General Manager – Finance 25/11/02 08/11/05 Resigned 2 Mr. Shashikant Gaur General Manager –Works. 01/09/99 23/09/05 Resigned 3 Mr. Jaspal Bansal General Manager

(Finance & Accounts) 11/10/05 - Appointed

4 Mr. Maninder Kanwar Company Secretary 14/01/06 - Appointed 5 Mr. Rakesh K. Verma Senior Manager –

(Production) 23/09/05 - Appointed

6 Mr. Sanjeev K. Sharma Officer – Accounts & Taxation

01/12/05 - Appointed

7 Mr. Vineet Singla Company Secretary 15/12/05 14/01/06 Resigned Note: There is no understanding with major shareholder, customers, suppliers or any others pursuant to which

any of the above mentioned personnel have been recruited.

- 82 -

Employees: Currently, 116 employees are working in the organization, including key managerial personnel. Employees Stock Option Scheme / Employees Stock Option Plan to Employees: Presently, the Company does not have Employees Stock Option Scheme / Employees Stock Option Plan for its employees. Payment or benefits to our Officers: Except for the payment of salaries, the Company provides its employees with perquisites such as vehicle and canteen facility. The Company also makes ex-gratia payments to its employees as and when deem fit. Initatives taken by our Company towards human resource development: We are taking following Human Resource Initiatives for our staff and workers.

1. Company has a policy of sending its technical personnel to the different fairs and exhibitions for up gradation of their technical skills so that its persons are conversant with the latest techniques available in the market for cost effectiveness and better productivity. Company has sponsored its key persons to attend the 11th International Exhibition on textile industry at Shanghai, China in 2005 and also ITMA fair held at Birmingham, U. K. in 2003.

2. Company has an ongoing process of training its workers for ‘on the Job training’ to motivate the

workers for better productivity and efficiency.

3. Company has made arrangements for two way transportation of its workers and staff.

4. Company provides refreshments to the workers and staff.

5. Company takes care of any medical help that is required by any of its personnel during duty hours in addition to its contribution to Employees State Insurance Scheme of the Govt.

6. Company has a policy of distributing Gifts and sweets at festive occasion during the year.

7. Company has made arrangements for proper rest room, washing rooms etc and also for its cleanliness.

8. Company has appointed a labour welfare officer to take care the needs of the workers.

- 83 -

OUR PROMOTERS AND THEIR BACKGROUND:

Individual Promoters: The Promoters of our Company are Mr.Jagmohan Lal Gupta, Mr.Anil Kumar Gupta, Mr.Ajay Kumar Gupta, Mr.Gautam Aggarwal, Mrs. Kusum Lata, Mr. Yogesh Gupta, Mrs. Shukla Gupta, Anil Kumar Gupta – HUF and Jagmohan Lal Gupta - HUF

Mr. Jagmohan Lal Gupta Chairman, Mr. Jagmohan Lal Gupta aged 69 years has a business experience of more than 40 years. He started as a trader in food grains and wholesalers of various products like cement etc. In the year 1954 he set up a rice mill namely M/s Yoginder Pal Mohinder Pal Rice Mills at Gurdaspur, which was the first industrial unit in Gurdaspur District. Thereafter, he had set up a 100 TPD Roller Flour Mill (i.e.Himachal Flour Mill ) at Kangra in 1974 in Himachal Pradesh which incidentally was also the first Roller Flour Mill in the state of Himachal Pradesh and at present has a turnover of around Rs.13.00 crores annually. He is socially very active and enjoys a good reputation in the business circle Voter ID Number : HP/03/049/066311 PAN Card : AHQPG 6152 L Driving License Number : DL/N/666/2002-2003 dated 31/10/2002

Mr. Anil Kumar Gupta Managing Director, Mr. Anil Kumar Gupta aged 59 years is a B.E. in Mechanical Engineering. After completing his education, he had joined the family business of Rice Sheller and Flour Mills in the year 1975. He was instrumental in expanding the capacity of the rice sheller from 1 Ton/hr to 6 Ton/hr. In the year 1981, he set up a 150 TPD Roller Flour Mill at Hoshiarpur namely Hoshiarpur Roller Flour Mills. The present combined turnover of these units is approx. Rs.12.00 Crores. Sh. Anil Kumar Gupta is technically qualified and looks after the policy matters, corporate planning & Management and New project. Voter ID Number : Does not have a voter identification card PAN Card : AELPK 0440 H Driving License Number : 18938 dated 24/2/2006

Mr.Ajay Kumar Gupta Jt. Managing Director, Mr. Ajay Kumar Gupta aged 39 years is a commerce graduate. He is a young entrepreneur and had joined the family business of Roller Flour Mills at Kangra in 1985. After joining he had expanded the capacity of the mill from 100 TPD to 200 TPD. It is one of the most efficiently managed unit in Himachal Pradesh and is catering to the entire public distribution needs of the four districts in the state of Himachal Pradesh and the unit is supplying appx.1600 MT of wheat products per month under the PDA system of State Government. He has a hands on experience in the operations of the Company, as he was associated with the Company since incorporation. He has spearheaded the expansion of capacity undertaken by the Company from time to time. Mr. Ajay Kumar Gupta looks after the day to day corporate affairs, Financial matters and managing the operation of the Company as a whole and is well equipped to handle the same with his business background and rich experience gained in management and expansion of Himachal Roller Flour Mill Pvt. Ltd. Voter ID Number : Does not have a voter identification card PAN Card : ACUPG 5784 B Driving License Number : 2707 dated 22/8/1992

- 84 -

Mr.Gautam Agarwal Executive Director, Mr.Gautam Agarwal is 28 years old. He joined his family business in 2000. During his short stint with the Company, he has developed comprehensive knowledge of Yarn Industry. He has been taking active interest in family business since his student life. Presently, he is looking after the domestic as well as International Marketing operations of our Company. He has visited many countries for business promotion and for attending various conference, trade fairs and exhibitions. Voter ID Number : Does not have a voter identification card PAN Card : AASPA 5208 L Driving License Number : 2349 dated 23/8/1995

Mrs. Kusum Lata Mrs. Kusum Lata aged 58 years is wife of Shri. AnilKumar Gupta, Managing Director of the Company. She is an Arts Graduate Voter ID Number : Not available PAN Card : ABQPG 3989 B Driving Licence Number: Not available

Mr. Yogesh Gupta Mr.Yogesh Gupta aged 32 years is the son of Mr. Jagmohan Lal Gupta, Chairman of the Company. He is a commerce graduate and is actively involved in the family business of roller flour mills viz. Himachal Flour Mills (Pvt) Ltd. In Kangra (Himachal Pradesh) Voter ID Number : Not available PAN Card : ACUPG 5781 E Driving Licence Number: Not available

Mrs. Shukla Gupta Mrs. Shukhla Gupta aged 55 years is wife of Mr. Jagmohan Lal Gupta, Chairman of the Company. She is an under graduate and a house wife. Voter ID Number : HP/03/049/066310 PAN Card : AAXPG 2923 P Driving Licence Number: Not Available

N.A

Anil Kumar Gupta – HUF Anil Kumar Gupta – HUF was formed in the year 1971 by Mr. Anil Kumar Gupta, being the karta and Smt. Kusum Lata, Mr. Gautam Aggarwal and Mr. Raghav Aggarwal as its co-parceners. Voter ID Number : Nil PAN Card : AAAHA 9704 N Driving Licence Number: Nil

- 85 -

N.A

Jagmohan Lal Gupta – HUF Jagmohan Lal Gupta was formed in the year 1960 by Mr. Jagmohan Lal Gupta, being the Karta and Mrs. Shukla Gupta, Mr. Ajay Kumar Gupta and Mr. Yogesh Gupta as its co-parceners. Voter ID Number : Nil PAN Card : AAAHJ 4713 R Driving Licence Number: Nil

We confirm that Permanent Account Number, Bank Account Numbers and Passport Numbers of the Promoters have been submitted to BSE at the time of filing of the Draft Prospectus. COMMON PURSUIT Currently there are no common pursuit between our Company and our Promoters and between our Company and any of our group Companies. Interest of Promoters Interest of the promoters in the promotion of the Company The Promoters of the Company are interested in the promotion of the Company to the extent that they are the subscribers to the Memorandum of Association of the Company and have been allotted equity shares as per Memorandum of Association of the Company and any further issue of securities as per provisions of Law. The Promoters promoted the Company in order to persue the objects as detailed in the Memorandum of Association of the Company Except as stated in the “Related Party Disclosure” appearing on page 103 of this Draft Prospectus, all our individual Promoters, who are Directors, may be deemed to be interested to the extent of remuneration and/or reimbursement of expenses payable to them for services rendered to us in accordance with the provision of the Companies Act and in terms of the Article. Further, the Promoters may be deemed to be interested to the extent of Equity Shares that they are holding and to the extent of dividend payable to them and other distributions in respect our individual Promoters hold Shares and other stake in our corporate Promoters and group Companies in addition to other entities and may be deemed to be addition all interested in any agreement or arrangement entered or to be entered into buy our Company with our corporate promoters or group companies or such other entities and dividend payable, if any, to our corporate promoters or group companies or other entities by virtue of their shareholding in our Company. Our Company has not acquired any property within 2 years of the date of this Prospectus wherein the Promoters have any interest.

Except as stated otherwise in this Draft Prospectus, our Company has not entered into any contract, agreement or arrangements during the preceding two years from the date of this Draft Prospectus in which the Directors are directly or indirectly interested and no payments have been made to them in respect of these contracts, agreements or arrangements which are proposed to be made to them

For details of payment or benefits paid to the Promoter, please refer to paragraph “ Compensation to Managing Director / Whole Time Director” in the section titled “Management” beginning on page no. 69 of this Draft Prospectus Related Party Transactions For details of related party transactions, please refer to Annexure XV of the Auditor’s Report appearing on page no. 103 of this Prospectus. Currency of Presentation In this Draft Prospectus, unless the context otherwise requires, all reference to the word “Lakh” or “Lac” means ”One Hundred thousand” and the word “ million” means “Ten Lacs” and the word “Crore” means “Ten million”

- 86 -

and the word “billion” means “One thousand million”. In this Draft Prospectus, any discrepancies in any table between total and the sum of the amounts listed are due to rounding off. Throughout this Draft Prospectus, all figures have been expressed in Lacs of Rupees, except when stated otherwise. All references to "Rupees" and "Rs." are to the legal currency of The Republic India. DIVIDEND POLICY Dividend may be declared at the Annual General Meeting of the shareholders based on a recommendation by our Board of Directors. Our Board of Directors may recommend dividend, at their discretion, to be paid to the members. Generally the factors that may be considered by our Board, but not limited to, before making any recommendation for the dividend includes future expansion plans and capital requirement, profits earned during the financial year, cost of raising funds from alternate sources, liquidity, applicable taxes including tax on dividend, as well as exemption under tax laws available to various categories of investors from time to time and money market conditions.

- 87 -

SECTION –V FINANCIAL STATEMENTS

AUDITORS’ REPORT To The Board of Directors, Yogindera Worsted Limited, Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil - Samrala, District-Ludhiana – 141 113 Dear Sirs A a. We have examined the financial information of Yogindera Worsted Limited (“the Company”) for the five

financial year ended 31st March, 2002, 31st March, 2003, 31st March, 2004, 31st March, 2005 and 31st March, 2006 being the last date to which the account of the Company have been made up and audited by us.

a. In accordance with the requirement of

i. Paragraph B(1) of Part II of schedule II of the companies Act, 1956 (‘the Act’)

ii. The Securities and Exchange Board of India (Disclosure and Investors Protection) Guidelines, 2000 (“the SEBI Guidelines”) issued by the Securities and Exchange Board of India (“SEBI”) on January 19, 2000 in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 and related amendments, and

iii. Our terms of reference with the Company dated 25/05/2006 requesting us to make this report for

the purpose of inclusion in the draft Prospectus to be issued by the company in connection with the Initial Public offer of its Equity Shares. The financial information has been prepared by the company and approved by the Board of Directors of the Company and audited by us.

We report that the restated asets and liabilities of the Company as at 31st March 2002, 31st

March, 2003, 31st March, 2004, 31st March, 2005 and 31st March, 2006 are as set out in “AnnexureI” to this report after making such adjustments / restatements and regroupingas in our opinion are appropriate and are subject to the significant accounting policies as appearing in “Annexure III” and notes to the statements of Assets and Liabilities and Profit and Loss Account appearing in “Annexure IV” to this report.

We report that the restated profits of the company for the financial year ended 31st March, 2002,

31st March, 2003, 31st March, 2004, 31st March, 2005 and 31st March, 2006 ar as set out in “Annexure II” 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 significant Accounting Policies as appearing in “Annexure III and Notes to the statements of Assets and Liabilities and Profit and Loss Account appearing in “Annexure IV” to this report.

B We have examined the following financial information relating to the Company proposed to be included in the Draft Prospectus, as approved by the Board of Directors of the Company and annexed to this report.

i. Statement of Cash Flow as appearing in “Annexure V” to this report;

ii. Statement of Accounting Ratios as appearing in “Annexure VI” to this report;

iii. Statement of Secured loans as appearing in “AnnexureVII” to this report;

- 88 -

iv. Statement of unsecured loans as appearing in “Annexure VIII” to this report;

v. Statement of Debtors including the related party debtors enclosed as “AnnexureIX” to this report;

vi. Statement of Loans and advances as appearing in “Annexure X” to this report;

vii. Statement of Tax Shelter as appearing in “Annexure XI” to this report;

viii. Statement of Dividend as appearing in “Annexure XII” to this report;

ix. Capitalisation statement as appearing in “Annexure XIII to this report;

x. Statement of contingent Liabilities as appearing in “Annexure XIV to this report;

xi. Statement of Related Party Transactions as appearing in “Annexure XV” to this report C a. In our opinion the financial information of the Company as stated in Para A and above read with

significant Accounting Policies enclosed in “Annexure III” to this report, after making adjustments/restatements and regroupings as considered appropriate and subject to certain matters as ststed in the notes to the statements, 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 information and for inclusion in the Draft Prospectus in connection with

the Initial Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent

For Datta Singla & Co. Chartered Accountant Mohit Chawla Partner (Membership no.504889) Place : Chanidgarh Date : 25/05/2006.

- 89 -

FINANCIAL INFORMATION OF YOGINDERA WORSTED LIMITED.

ANNEXURE I

SUMMARY ASSETS AND LIABILITIES, AS RESTATED Amount in Rs. Lacs

Year Ended Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 APPLICATION OF FUNDS Fixed Assets Gross Block 2892.74 2,365.27 2,274.78 2,229.51 1,990.46 Less: Depreciation 730.29 598.22 470.68 347.80 237.82 Net Block 2162.45 1,767.05 1,804.10 1,881.71 1,752.64 Investments 0 0 0 0 0 Current Assets, Loans and Advances Inventories 1099.96 817.60 598.16 387.22 224.83 Sundry Debtors 187.68 244.64 203.58 165.28 171.59 Cash and Bank Balances 173.54 64.97 74.31 54.87* 57.99 Loans and Advances 333.67 268.28 193.91 111.84* 152.68 Total 1794.85 1,395.49 1,069.96 719.21 607.09 Liabilities and Provisions Secured Loans 1570.61 1,128.88 1,250.32 1,221.17 1,172.84 Unsecured Loans 114.65 194.39 165.18 98.59 88.69 Deferred Tax Liability 187.49 141.70 121.12 66.86 0.00 Current liabilities and provisions 499.34 398.66 325.94 287.45 223.29 Total 2372.09 1863.63 1862.56 1674.07 1484.82 Net Worth (A+B+C-D) 1585.21 1298.91 1011.50 926.85 874.91 Represented by Share Capital 890.42 875.42 875.42 875.42 835.02 Share Application Money 0.00 15.00 0.00 0.00 40.40 Reserves and Surplus 711.12 415.84 141.23 53.21 1.55 Miscellaneous Expenditure (16.33) (7.35) (5.15) (1.77) (2.07) Net Worth 1585.21 1298.91 1011.50 926.85 874.91

*Note :Figures relating to Cash and Bank Balances and Loans and Advances for the year ending 31.03.2003 are regrouped and rearrange in accordance with 31.03.2004.

- 90 -

ANNEXURE II

SUMMARY PROFIT & LOSS ACCOUNT, AS RESTATED Amount in Rs. Lacs

Year ended Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02INCOME Sales and Job Charges 4072.50 3,344.51 3,033.80 2,471.37 2422.46

Other Income 37.33 13.46 7.17 6.87 32.35Total Income 4109.83 3,357.97 3,040.97 2,478.24 2,454.80Increase / (Decrease) in stock) 186.87 (42.52) 25.42 153.39 (34.87) 4296.69 3315.45 3066.39 2631.63 2419.94EXPENDITURE Raw Material 2646.99 1,797.94 1657.99 1375.86 1246.41Manufacturing Expenses 353.94 331.94 315.62 276.25 241.56Excise Duty 255.38 243.47 366.65 339.16 330.52Personnel Expenses 81.57 68.46 59.53 55.58 50.77Administrative Expenses 61.11 47.32 43.33 32.11 45.48Selling and Distribution Expenses 195.01 174.62 99.11 73.83 65.71Misc. Expenditure written off 0.65 0.30 0.30 0.30 0.30Repairs and Maintenance 18.78 19.60 20.39 32.15 47.84Total Expenditure 3613.42 2,683.65 2562.91 2185.23 2028.59Net Profit before Interest, Depreciation, Tax and Extraordinary item

683.27 631.80 503.48 446.40 391.35

Interest & Financial Charges 174.55 183.23 224.97 205.67 166.74Depreciation 132.08 127.54 122.87 109.98 102.40Profit Before Tax 376.65 321.03 155.63 130.75 122.21Provision for taxation Income Tax 31.70 25.17 11.89 10.30 8.71 Deferred Tax 45.79 20.58 54.27 46.80 0.00 Fringe Benefit Tax 2.02 0.00 0.00 0.00 0.00Profit after Tax but before Extra-ordinary Items

297.14 275.28 89.48 73.65 113.50

Extraordinary Items 0.00 0.00 0.00 0.00 0.00Profit after Extra-ordinary Items 297.14 275.28 89.48 73.65 113.50Adjustment on account of prior period Expenses including deffered tax

0.00 1.86 0.67 1.46 21.99

Adjusted Profit 297.14 273.42 88.81 72.19 91.51

- 91 -

ANNEXURE III STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 1) Basis for preparation of Financial Statement

The financial statements have been prepared under the historical cost convention in accordance with the generally accepted accounting principles and the provisions of the companies Act. 1956 and on the basis of a going concern.

2) Method of Accounting

The Company follows mercantile method of accounting.

3) Revenue Recognition:

Sales are inclusive of excise duty and Job Work.

4) Inventory

Raw material and finished goods are valued at cost or market price whichever is less; work in progress and other misc. stocks have been valued on estimated basis. However, the company has adopted the practice of providing for excise duty payable on finished goods manufactured but not cleared, aggregating to Rs. 34,57,896/- in accordance with the guidance note on accounting treatment for excise duty issued by the Institute of Chartered Accountants of India & other professional pronouncements. However, the same has no effect on the profits for the year.

5) Depreciation

Depreciation has been provided during the year on straight line method at revised rates, vide Notification GSR no.756 E Dated: 16.12.93, as continuous process plant basis as per schedule XIV to the Companies Act, 1956. The depreciation on additions made during the year have been calculated on monthly basis.

6) Turnover

Sales are inclusive of excise duty and Job Work.

7) Provision for Current and Deferred Tax Provision for Income tax has been made as per Income-tax Act, 1961

In compliance with Accounting Standard (AS-22) relating to “Accounting on Taxes on Income” issued by the Institute of Chartered Accountants of India, the Company has adjusted the deferred tax liability (net) accruing during the year aggregating to Rs. 45.79 lacs has been recognized in the Profit & Loss Account.

8) Previous year figures have been re-grouped and re-arranged, wherever considered necessary. 9) Figures have been taken to nearest rupee.

- 92 -

ANNEXURE IV NOTES ON ACCOUNTS FORMING PART OF BALANCE SHEET & PROFIT & LOSS ACCOUNT AS AT 31.03.2006 1. SIGNIFICANT ACCOUNTING POLICIES:

1. The financial statements have been prepared under the historical cost convention in accordance with the generally accepted accounting principles and the provisions of the companies Act. 1956 and on the basis of a going concern.

2. The Company follows mercantile method of accounting.

3. Depreciation has been provided during the year on straight line method at revised rates, vide

Notification GSR no.756 E Dated: 16.12.93, as continuous process plant basis as per schedule XIV to the Companies Act, 1956. The depreciation on additions made during the year have been calculated on monthly basis.

4. Raw material and finished goods are valued at cost or market price whichever is less; work in progress

and other misc. stocks have been valued on estimated basis. However, the company has adopted the practice of providing for excise duty payable on finished goods manufactured but not cleared, aggregating to Rs. 34,57,896/- in accordance with the guidance note on accounting treatment for excise duty issued by the Institute of Chartered Accountants of India & other professional pronouncements. However, the same has no effect on the profits for the year.

5. Sales are inclusive of excise duty and Job Work.

6. The company has not made any provision for gratuity.

7. Previous year figures have been re-grouped and re-arranged, wherever considered necessary.

8. Figures have been taken nearest to rupee.

2. CONTINGENT LIABILITIES BANK GUARANTEES:

(a) F.L.C. amounting to Rs. Nil (Previous Year Rs Nil)

(b) Claims against the company not acknowledge as debts-NIL.

(c) Bank Guarantees amounting to Rs.1.49 Lacs (Previous Year-Rs.61.25 Lacs).

3. SECURED LOANS

I TERM LOANS

i) Term Loan of Rs. 924.75 lacs (previous year Rs. 652.01 lacs) from IDBI is secured by way of First Charge on all the fixed assets of the Company except specific fixed assets referred at (3-I-ii).

ii) Term Loan of Rs. 58.00 Lacs (previous year Rs. 82.00 lacs) from State Bank of Patiala is secured

by way of First Charge on specific fixed assets of the Company

iii) Demand Loan of Rs. NIL (previous year Rs. 19.74 Lacs) from State Bank of Patiala against fixed deposits of the company.

- 93 -

II WORKING CAPITAL LIMITS

Working Capital Limits {Rs. 587.86 Lacs (previous year Rs. 375.12 lacs)} from State Bank of Patiala is secured by way of first charge on all the current assets of the Company and further secured by way of Second Charge on all the fixed assets of the Company.

4. FIXED ASSETS

Fixed Assets have been stated at original cost less depreciation. 5. CURRENT ASSETS LOANS & ADVANCES

In the opinion of the directors of the Company, the current assets, loans and advances are approximately of the value as stated, if realized in the ordinary course of business.

6. PROFIT & LOSS ACCOUNT (i) Payment has been made to auditors for

31.03.2006 31.03.2005

(i) Statutory audit 1,00,000/- 50,000/- (ii) Tax Audit 50,000/- 30,000/- (iii) Service Tax 18,360/- 8,160/-

a. Provision for Income tax has been made as per Income-tax Act, 1961. b. In compliance with Accounting Standard (AS-22) relating to “Accounting on Taxes on Income” issued

by the Institute of Chartered Accountants of India, the Company has adjusted the deferred tax liability (net) accruing during the year aggregating to Rs. 45.79 lacs has been recognized in the Profit & Loss Account.

7. Additional information pursuant to the provision of Paragraph 3,4C and 4D of Part II of Schedule

VI of Companies Act, 1956 are as under: A. a) Licensed and installed capacity and actual production:

As at 31.03.06 As at 31.03.05

b) Licensed capacity 3000.00 2000.00

c) Installed Capacity: 2200.00 2000.00

(As certified by the management being a technical mater) d) Actual Production 1939.787 1912.06 B. Quantitative details of raw material consumption PARTICULARS UNIT 2005-06 2004-05 TOW MTS. 1942.07 1664.17 OTHERS MTS. 373.29 408.51

- 94 -

C. Particulars in respect of opening stock, production, sales and closing stock of finished goods

(In MTS)

Particulars Opening Stock Production Sales/Issue Closing Stock Acrylic Yarn 121.396

(119.821) 1855.851

(1542.023) 1812.835

(1540.449) 164.412

(121.396) Chennile Yarn 2.256

(17.678)

83.936 (54.064)

77.854 (69.486)

8.338 (2.256)

D. Raw material consumed

Value 2005-06 Value 2004-05 (Rs.In Lacs) (%) (Rs.In Lacs) (%)

1) Imported 60.15 2.27% 89.40 4.96% 2) Indigenous 2586.83 97.73% 1714.00 95.04%

(Rs. In Lacs) 2005-06 2004-05

8 (A) CIF Value of Import 131.94 89.40 (B) Expenditure in Foreign Currency Travelling Expenses 0.90 3.03

(C) Remittances in Foreign Currency (Including Import Of Machinery) 114.92 102.16

(D) Earnings in Foreign Currency 515.74 770.05 E. Earning Per Share

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares during the year. The weighted average numbers of equity shares outstanding during the year are adjusted for share issued during the year.

F. Segment Reporting There is not more than one reportable segment; hence information as per AS 17 is not required to be disclosed.

G. Related Party Disclosures

Related party disclosures as required under Accounting Standard on “Related Party Disclosures” issued by the Institute of Chartered Accountants of India are given below :-

a) Relationship

i) Subsidiary Companies

NIL ii) Joint Ventures and Associates NIL iii) Key Management Personnel (Managing Director/Whole-time directors) Sh. Ajay Gupta Sh. Anil Gupta Sh. D.K. Gupta Sh. Gautam Aggarwal

- 95 -

Relative of the Key Management Personnel

Smt. Garima Aggarwal Sh. Raghav Aggarwal Smt. Kusum Lata Smt.Shakuntla Devi Sh. Rishi Aggarwal Sh. Yogesh Gupta

Entities over which key management personnel/their relatives are able to exercise significant influence

M/s Himachal Flour Mills Pvt. Ltd. M/s Hoshiarpur Roller Flour Mills Pvt. Ltd. M/s Brijeshwari Textiles Pvt.Ltd

M/s Balmukhi Textiles Pvt.Ltd b) The following transactions were carried out with related parties in the ordinary course of

business. i) Subsidiary Companies, Joint Ventures and associates NIL ii) Key Management Personnel and their relatives

Sr.No. Particulars Amount (Rs. in lacs) i. Remuneration 14.20 ii. Purchase - iii. Sales - iv. Other Services - v. Balance at the end of the year

--Deposits Received 21.99

- 96 -

ANNEXURE V STATEMENT OF CASH FLOW, AS RESTATED

Amount in Rs. Lacs Particulars Year ended

31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 A CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and extraordinary items 376.65 321.03 155.63 130.75 122.21 Adjustment for : - Depreciation 132.08 127.54 122.87 109.98 102.40 - Interest Expenditure 174.55 183.23 224.97 205.67 166.74 - Interest Income (5.10) (4.68) (5.43) (5.97) (4.00) - (Profit) / Loss on sale of fixed assets 0.00 0.00 0.00 0.00 0.00 - Deferred Revenue Expenditure 0.00 0.00 0.00 0.00 0.00 - Excess provision of earlier years written back 0.00 0.00 0.00 0.00 0.00 - Misc. Expenditure W/Off 0.65 0.30 0.30 0.30 0.30 Operating Profits before Working Capital 678.82 627.42 498.35 440.72 387.65 Changes Adjustment for : - (Increase)/Decrease in Inventories (282.36) (219.44) (210.94) (162.38) 48.87 - (Increase)/Decrease in Sundry Debtors 56.96 (41.06) (38.30) 6.31 (84.72) - (Increase)/Decrease in Loans and Advances (65.39) (74.37) (82.07) 40.83 8.11 - Increase / (Decrease) in Current Liabilities 92.13 59.44 36.89 62.58 (16.73) - Income Tax paid (27.03) (12.55) (11.76) (10.65) 0.00 - Misc.Expenditure (9.63) (2.50) (3.67) 0.00 0.00 Cash Generated from Operations (A) 443.51 336.94 188.50 377.41 343.18 B CASH FLOW FROM INVESTING ACTIVITIES - Purchase of Fixed Assets (528.17) (90.49) (46.76) (239.05) (125.09) - Sale / (Purchase) of Investments 0.00 0.00 0.00 0.00 0.00 - Sale of Fixed Assets 0.70 0.00 1.50 0.00 7.67 - Interest Received 5.10 4.68 5.43 5.97 4.00 Net cash used in Investing Activities (B) (522.37) (85.82) (39.83) (233.08) (113.42) C CASH FLOW FROM FINANCING ACTIVITIES - Proceeds from Long Term Borrowings (Net) 228.99 (100.24) (103.03) 82.02 (118.56) - Proceeds from Short Term Borrowings (Net) 212.73 (21.20) 132.18 (33.70) 14.48 - Repayment of Unsecured Loans (79.74) 29.21 66.59 9.90 27.45 - Increase in Share capital 15.00 0.00 0.00 0.00 0.00 - Increase in Share Premium 0.00 0.00 0.00 0.00 0.00 - Receipt of share application money (15.00) 15.00 0.00 0.00 40.40 - Payment of Interest (174.55) (183.23) (224.97) (205.67) (166.74) Net cash from Financing Activities (C) 187.44 (260.46) (129.24) (147.44) (202.96) D Net Increase / (Decrease) in Cash & Cash 108.57 (9.34) 19.43 (3.11) 26.80 Equivalent (A) + (B) + (C) = (D) Opening Balance of Cash & Cash Equivalent 64.97 74.31 54.87 57.99 31.19 Closing Balance of Cash & Cash Equivalent 173.54 64.97 74.31 54.87 57.99

- 97 -

ANNEXURE VI STATEMENT OF ACCOUNTING RATIOS

Year ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 Earning Per Share (Rs.) 3.32 3.14 1.01 0.82 1.36

Net Asset value per Share (Rs.) 17.81 14.84 11.55 10.59 10.48

Return on Net Worth % 18.63 21.14 8.70 7.74 12.97

Weighted Average Number of Equity Shares outstanding at the end of the year

8902569 8754213 8754213 8754213 8350213

Formula: Earning per Share = Net Profit after Tax No. of Equity Shares Net Asset Value per Share = Net Worth No. of Equity Shares Return on Net Worth = Net Profit after Tax Net worth

ANNEXURE VII STATEMENT OF SECURED LOANS

Amount in Rs. Lacs Year ended Particulars

31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 Term Loan

From Financial Institutions 924.75 671.76 756.00 850.00 875.00

From Banks 58.00 82.00 98.00 107.03 0.00

Working Capital facility

From Banks 587.85 375.12 396.32 264.14 297.84

Total Secured Loans 1570.60 1128.88 1250.32 1221.17 1172.84

- 98 -

Principal terms of loans and assets charged as securities The Company has been sanctioned various credit facilities by the banks from time to time. The status of these credit facilities as on 31st March, 2006 is as under:

Amount in Rs. Lacs Credit Facility Sanctio

ned Amount

Outstanding as on 31/03/06

Rate of Interest (%)

Security offered Repayment Schedule / Remarks

TERM LOAN FACILITY Industrial Development Bank of India SOC 72-73, Sector 17-B, Chandigarh Loan agreement and Deed of Hypothication both dated 27/08/98.

800.00

427.69

14.00

Secured against the whole of movable properties of the Company including its movable plant & Machinery spares, tools & accessories and other movables (save & Except book debts)

On our request IDBI restructured the term loan vide letter ref. no.85/DA3(240) dated 27/08/04 whereby the amount of instalments are kept lower in the initial quarters and increases gradually. The number of quarterly instalments remaining unchanged. (i.e. 28 quarterly instalments of different amounts as mentioned in the aforesaid letter)

Industrial Development Bank of India IDBI Tower, Cuffee Parade, Colaba, Mumbai. Loan agreement and deed of Hypothication both dated 09/07/99

150.00

75.56

14.00

Secured against whole of the movable property of the Company and mortgage of title deeds in respect of all the immovable properties of our company situated at village Lal Kalan, Ludhiana.

On our request IDBI restructured the term loan vide letter ref. no.85/DA3(240) dated 27/08/04 whereby the amount of instalments are kept lower in the initial quarters and increases gradually. The number of quarterly instalments remaining unchanged. (i.e. 28 quarterly instalments of different amounts as mentioned in the aforesaid letter)

- 99 -

Industrial Development Bank of India SOC 72-73, Sector 17-B, Chandigarh Loan agreement and Deed of Hypothication both dated 30/04/05

425.00

421.50

11.50

Secured against the whole of the movable property of the Company and mortgage of title deeds, created in favour of IDBI, in respect of immovable properties situated at village Lal Kalan, Ludhiana.

Repayable in 60 monthly instalments of different amounts as per the sanctioned letter.

State Bank of Patiala Commercial Branch, Aarti Complex, Nr. Vishwakarma Chowk, Miller Ganj, Ludhiana. Loan agreement and Deed of Hypothication both dated 12/10/02

128.00

58.00

14.25

Secured against first charge by Hypothecation of Specific Machinery purchased / to be purchased out of the said term loan. The loan agreement was modified on 16/11/04 whereby the term loan was further secured by way of first pari-passu charge on the immovable property of the Company vide decleration and undertaking dated 10/11/04 and memorandum of Entry dated 10/11/04

Repayable in 20 quarterly instalments of different amounts as per the sanctioned letter.

Total (A) 1503.00 982.75 WORKING CAPITAL FACILITY

State Bank of Patiala Overseas Branch, Miller Ganj, Ludhiana

Fund based limits

587.85 8.50 Secured by way of First charge on all the current assets of the Company and further secured by way of second charge on all the fixed assets of the Company

Repayment on demand as stipulated by the bank.

Total (B) 587.85 Grand Total (A + B) 1570.60

- 100 -

ANNEXURE VIII STATEMENT OF UNSECURED LOANS as on 31/03/2006

Amount in Rs. Lacs Year ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 Due From Directors/Relatives/firms in which directors Are interested

57.35 134.16 114.91 62.90 55.90

Others 57.30 60.23 50.27 35.69 32.79 Total 114.65 194.39 165.18 98.59 88.69

ANNEXURE IX STATEMENT OF DEBTORS

Amount in Rs. Lacs Year ended

Age-wise break-up 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 More than Six Months 35.40 6.98 25.52 5.71 5.71Less than Six Months 152.28 237.66 178.06 159.57 165.88Total 187.68 244.64 203.58 165.28 171.59

ANNEXURE X

STATEMENT OF LOANS AND ADVANCES (Unsecured, Considered Good)

Amount in Rs. Lacs Year ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 Advances recoverable in cash or kind or value to be received

214.62 190.78 159.04 69.56 101.91

Deposits with Government Authorities 90.41 63.44 33.13 31.14 42.06Tax deducted at source 2.64 3.06 1.74 1.14 2.71Advance Income Tax / Fringe Benefit Tax 26.00 11.00 - 10.00 6.00Total 333.67 268.28 193.91 111.84 152.68

- 101 -

ANNEXURE XI

STATEMENT OF TAX SHELTERS Amount in Rs. Lacs

Year ended Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 Profit/(Loss) before Tax 376.65 321.03 155.63 130.75 122.21Actual Rate of Tax (%) 33.66 36.59 35.88 36.75 35.70 Tax at Actual Rate on Profits Adjustments 126.78 117.47 55.83 48.05 43.63 Permanent Differences Deduction u/s 80 M/ 10(34) 0 0 0 0 0 Profit on Sale of Assets 0 0 0 0 0 Expenses Disallowed 0.13 0.19 0 0.07 0.40 Others 0 0 0 0 0 Total Permanent Difference (A) 0.13 0.19 0 0.07 0.40 Timing Differences Difference between Book Depreciation and tax Depreciation

29.49 (57.37) (94.85) (126.32) (164.18)

Unabsorbed Depreciation (372.00) (263.85) (60.78) (4.50) 41.56 Total Timing Difference (B) (342.51) (321.22) (155.64) (130.82) (122.61) Net Adjustment (A+B) (342.39) (321.03) (155.64) (130.75) (122.21) Tax Expense/(Saving) there-on (115.25) (117.47) (55.83) (48.05) (43.63) Tax Payable 11.53 (0) (0) 0 0 Taxable Income As Per MAT 376.65 321.03 155.63 130.75 122.21 Tax as per MAT 31.70 25.17 11.89 10.30 8.71 Tax as per Summary Profit and Loss Account as restated

31.70 27.03 12.55 11.76 10.65

ANNEXURE XII STATEMENT ON DIVDEND

Amount in Rs. Lacs Year Ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02Paid up Share Capital 890.42 875.42 875.42 875.42 835.02Face Value per Share (Rs.) 10 10 10 10 10

Proposed Dividend 0 0 0 0 0Corporate Dividend Tax 0 0 0 0 0Rate of Dividend 0 0 0 0 0

- 102 -

ANNEXURE XIII CAPITALIZATION STATEMENT TO CONSOLIDATED ACCOUNTS

(Amount in Rs. Lacs)

Particulars Pre-Issue Post IssueDEBTS Long Term Debt 714.63 642.38Long Term Debt, Payable within one year 268.12 268.12Working Capital Loan 587.85 625.00Short Term Debt - -Total Debt 1,570.60 1535.50SHAREHOLDERS’ FUNDS Share Capital 890.42 1490.42Share Premium Account - 840.00General Reserve - -Profit & Loss Account 711.12 869.82Total Shareholders’ Funds 1,601.54 3200.24

Long Term Debt to Equity 0.44 0.20

ANNEXURE XIV STATEMENT OF CONTINGENT LIABILITY

Amount in Rs. Lacs Year Ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02Bank Guarantee 1.49 61.25 61.25 61.25 61.25Bills discounted with Banks 0 0 0 0 0Letter of Credit 0 0 0 0 23.34Taxation matters in respect of which appeals / show cause notices are pending.

b. Income tax c. Sales Tax d. Excise & Customs

000

000

0 0 0

000

000

Total contingent liability 1.49 61.25 61.25 61.25 84.59

- 103 -

ANNEXURE XV RELATED PARTY DISCLOSURES Transaction with related party are identified by the management in accordance with Accounting Standard 18“ Related Party Disclosure” issued by The Institute of Chartered Accountants of India, is as follows: Related Party Transactions: List of Related Parties Relationship Name of the Related Party Subsidaries The Company has no Subsidaries

Hoshiarpur Rollers Flour Mills Private Ltd Himachal Flour Mills Private Ltd Brijeshwari Textiles Pvt. Ltd

Group Companies / Firms

Balmukhi Textiles Pvt. Ltd Mr. Jagmohan Lal Gupta Mr. Anil Kumar Gupta Mr. Ajay Kumar Gupta

Key Managerial Persons

Mr. Gautam Aggarwal Anil Kumar Gupta - HUF Associate Jagmohan Lal Gupta – HUF Mr.Yogesh Gupta Smt.Kusum Lata Sh.Rishi Aggarwal Mr.Raghav Aggarwal Smt.Shakuntla Devi

Relative of Directors

Smt.Garima Aggarwal Transactions with related Parties

Amount in Rs. Lacs Name of Related Party Nature of

Relationship Nature of Transaction

31/03/06 31/03/05 31/03/04 31/03/03 31/03/02

Himachal Flour Mills Pvt. Ltd Group Company Deposit recd due at end of year

1.86 9.50 7.00 9.50 1.86

Anil Kumar Gupta Managing Director

Salary, Interest paymentand deposit recd at end of year

12.51 7.25 6.37 4.20 1.20

Ajay Kumar Gupta Jt. Managing Director

Salary, Interest paymentand deposit recd at end of year

2.59 2.28 2.12 2.70 1.20

Gautam Aggarwal Executive Director

Salary, Interest paymentand deposit recd at end of year

7.41 7.55 7.22 5.20 1.20

Yogesh Gupta Associate Salary, Interest paymentand deposit recd at end of year

8.16 6.39 5.62 3.70 1.20

Shakuntla Devi Relative Deposit recd due at end of year

11.97 11.97 0 0 0

Garima Aggarwal Relative Deposit recd due at end of year

0.80 0.80 0 0 0

Jagmohan Lal Gupta Chairman Deposit recd due at end of year

0 2.90 0 0 0

Kusum Lata Relative Deposit recd due at end of year

0.78 0 0 0 0

Rishi Aggarwal Relative Deposit recd due at end of year

4.34 0 0 0 0

- 104 -

OUR GROUP COMPANIES

1. HOSHIARPUR ROLLER FLOUR MILLS PVT. LTD. Hoshiarpur Roller Flour Mills Pvt. Ltd. was incorporated on 30/06/1997 (Company registration no.16-20150) with the main object of carrying out to establish, install, acquire, own, take on lease and carry on the business of Rice Shellers, sela plant, Rice grains, flour mills and Roller Flour Mills, vegetable Oils Extraction plants and to store, buy, sell, import, export, act as commission agents, or deal in food grains of all kinds, rice, cereals, edible oils and other products of similar description. The Company was promoted by Mr Anil Kumar Gupta and Mr. Gautam Aggrawal. The Registered Office of the Company is situated at Naloyan Bye pass, Hoshiarpur – 146 001, Punjab. Board of Directors comprises of Mr. Jagmohan Lal Gupta, Mr. Anil Kumar Gupta, Mr. Ajay Kumar Gupta, Mr.Rishi Aggarwal, Mr.Yogesh Gupta, Mr. Gautam Aggarwal, Smt. Kusum Aggarwal Share Holding Pattern: The Company’s authorised capital is Rs.25.00 Lacs divided into 25,000 Equity Shares of Rs.100/- each and the issued, subscribed and paid-up capital of the Company is Rs.25.00 Lacs. The shareholding pattern is as under: Sr. No. Name of Shareholder No. of Equity

Shares held% Holding

1 Mr. Jagmohan Lal Gupta 5,000 20.00 2 Mr. Anil Kumar Gupta 3,500 14.00 3 Mr. Ajay Kumar Gupta 3,000 12.00 4 Mr. Yogesh Gupta 2,000 8.00 5 Mr. Gautam Aggarwal 3,000 12.00 6 Mr. Kusum lata 3,500 14.00 7 Mr. Rishi Aggarwal 5,000 20.00

Total 25,000 100.00 FINANCIAL PERFORMANCE

Amount in Rs. Lacs Particulars 31/03/03

31/03/04 31/03/05

Total Income 778.51 973.51 923.49 Profit After Taxation 1.44 1.97 2.02 Equity Share Capital 25.00 25.00 25.00 Reserves (Excluding Revaluation Reserves)

10.45 12.42 14.43

Net Worth 34.69 36.74 38.88 EPS 5.76 7.87 8.07 There are no defaults in meeting any statutory/ bank/ institutional dues. No proceedings have been initiated for economic offences against this Company, or its promoters and directors. The Company has not been declared as a sick Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995 and is not under winding up and has also not made a loss in the immediately preceding year, i.e. 2004-2005.

- 105 -

2. HIMACHAL FLOUR MILLS PVT. LTD. Himachal Flour Mills Private Limited was incorporated under the Companies Act, 1956 vide Certificate of Incorporation no 06-20228 dated 14/07/1997 with Registrar of Companies, Punjab, H.P & Chandigarh, with the main object, of carrying out, to establish, install acquire, own, take on lease and carry on the business of Rice Shellers, sela plant, Rice grains, floor mills and Roller Flour Mills, vegetable Oils Extraction plants and to store, buy, sell, import, export, act as commission agents, or deal in food grains of all kinds, rice, cereals, edible oils and other products of similar description The Registered Office of the Company is situated at Tanda Road, Kangra – 176 001, Himachal Pradesh. The Company was promoted by Mr. Jagmohan Lal Gupta, Mr. Ajay Kumar Gupta, Anil Kumar Gupta, Mr. Yogesh Gupta, Mr.Gautam Aggarwal and Smt. Shukla Gupta. The Board of Directors of the Company includes Mr. Jagmohan Lal Gupta, Mr. Ajay Kumar Gupta, Anil Kumar Gupta, Mr. Yogesh Gupta, Mr.Gautam Aggarwal and Smt. Shukla Gupta. Share Holding Pattern: The Company’s authorised capital is Rs.25.00 Lacs divided into 25,000 Equity Shares of Rs.100/- each and the issued, subscribed and paid-up capital of the Company is Rs.25.00 Lacs. The shareholding pattern of the Company is as under:

Sr.No. Name of Shareholder No. of Equity Shares held

% Holding

1. Mr. Jagmohan Lal Gupta 3,750 15.00 2. Mr. Shukla Gupta 2,500 10.00 3. Mr. Yogesh Gupta 2,500 10.00 4. Mr. Ajay Kumar Gupta 2,500 10.00 5. Mr. Jagmohan Lal Gupta

Karta of Yoginder Pal (HUF) 2,500 10.00

6. Mr. Anil Kumar Gupta 6,250 25.00 7. Mr. Gautam Aggarwal 5,000 20.00 Total 25,000 100.00

FINANCIAL PERFORMANCE

Amount in Rs. Lacs Particulars 31/03/03 31/03/04 31/03/05 Turnover 735.66 1167.03 1138.34 Profit After Taxation 0.50 4.04 2.91 Share Capital 25.00 25.00 25.00 Reserves (excluding revaluation reserves)

8,50 12.54 15.45

Net Worth 33.42 37.47 40.38 EPS (Rs.) 2.01 16.17 11.65

There are no defaults in meeting any statutory/ bank/ institutional dues. No proceedings have been initiated for economic offences against this Company, or its promoters and directors. The Company has not been declared as a sick Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995 and is not under winding up and has also not made a loss in the immediately preceding year, i.e., 2004-2005.

- 106 -

3 BRIJESHWARI TEXTILES PRIVATE LIMITED Brijeshwari Textiles Private Limited was incorporated under the Companies Act, 1956 on 7th September 2005 with the Registrar of Companies, N.C.T of Delhi & Haryana. The registered office of the Company is situated at E-67, Masjid Moth, GK III, New Delhi. The Company was incorporated by Mr. Brij Mohan Aggarwal and Mr. Manish Aggarwal. Brief Profile of Promoters: Mr. Brij Mohan Aggarwal, aged 46 years is a commerce graduate having experience of over 10 years in the manufacturing and marketing of yarns and textile products Mr. Manish Aggarwal, aged 40 years is a commerce graduate having experience of over 10 years in manufacturing and trading of Dinner sets, fancy items and other accessories in plastic Industry. The Board of Directors of the Company comprises of Mr. Brij Mohan Aggarwal, Mr. Manish Aggarwal and Mr.Ajay Kumar Gupta, Share holding pattern is as under:

Sr. No.

Name Of Shareholder Nos. of Shares Held. % to Total Share Capital

1 Mr. Brij Mohan Aggarwal, 5,500 4.98 2 Mr. Manish Aggarwal, 5,000 4.52 3 Mr. Ajay Kumar Gupta 30,000 27.15 4 Purshottam Financers (P) Ltd. 20,000 18.10 5 RAB Marketing (P) Ltd. 30,000 27.15 6 Sarauchi Financiers (P) Ltd. 20,000 18.10

Total 1,10,500 100.00 Brief Financial Performance: The Company was incorporated in September 2005. Provisional Balance Sheet and Profit & Loss Account for the period from the date of incorporation till 31/03/2006 is as under: Particulars Amount

(In Rs. Lacs) Turnover Nil Net profit / (Loss) (0.07) Authorised Equity share capital 25.00 Paid-up and subscribed 11.05 Share application money 8.25 Reserves and Surplus - Earning Per Share - Net Worth 19.23

There are no defaults in meeting any statutory/ bank/ institutional dues. No proceedings have been initiated for economic offence against the Company, its Promoters and Directors. The Company has not been declared as a sick Company within the meaning of the sick Industrial Companies (Special Provision) Act, 1995 or is not under winding up.

- 107 -

4. BALMUKHI TEXTILES PRIVATE LIMITED Balmukhi Textiles Private Limited was incorporated under the Companies Act, 1956 with the Registrar of Companies N.C.T of Delhi & Haryana vide Certificate of Incorporation No. 55-140440, dated 7th September 2005. The registered office of the Company is situated at E-67, Masjid Moth, Greater Kailash III, New Delhi.

The Company was promoted by Mr. Brij Mohan Aggarwal and Mr. Naval Kishore Aggarwal. Brief profile of Promoters: Mr. Brij Mohan Aggarwal, aged 46 years is a commerce graduate having experience of over 10 years in the manufacturing and marketing of yarns and textile products. Mr. Naval Kishore Aggarwal, aged 65 years is an Intermediate. He was Commercial and Marketing Executive for over 23 years and had served Ganga Steels Ltd., Ramsarup Electricals Ltd., and Kanohar Electricals (P) Ltd. in his capacity as General Administration and Advisor. The Board of Directors of the Company comprises Mr. Brij Mohan Aggarwal, Mr. Naval Kishore Aggarwal and Mr.Gautam Aggarwal. Shareholding pattern is as under: Sr.

No. Name of Shareholder Number of

Shares Held% age of

Share holding 1. Mr. Brij Mohan Aggarwal 5,000 8.33 2. Mr. Naval Kishore Aggarwal 5,000 8.33 3. Mr. Gautam Aggarwal 50,000 83.34

Total 60,000 100.00 Financial Performance: The Company was incorporated in September 2005. Provisional Balance Sheet and Profit & Loss Account for the period from the date of incorporation till 31/03/2006 is as under: Particulars Amount

(In Rs. Lacs) Turnover Nil Net profit / (Loss) (0.06) Authorised Equity share capital 25.00 Paid-up and subscribed 6.00 Share Application Money 14.00 Reserves and Surplus - Earning Per Share - Net Worth 19.94

There are no defaults in meeting any statutory/ bank/ institutional dues. No proceedings have been initiated for economic offence against the Company, its Promoters and Directors. The Company has not been declared as a Sick Company within the meaning of the sick Industrial Companies (Special Provision) Act, 1995 or is not under winding up. We hereby confirm that the Permanent Account Number (“PAN”), Bank Account Number, Company registration numbers and the address of the Registrar of Companies where these companies are registered have been submitted to the Stock Exchanges, on which we propose to list our Equity Shares at the time of filing of this Draft Prospectus.

- 108 -

Other relevant details about Group Companies: a. Neither of the Companies are listed on any Stock Exchange, nor have they made any public / right issue in

the last three years. b. Promoters of our Company had not disassociated themselves from any of the companies / firms during

preceding three years. c. There are no sales or purchase between Companies in the promoter group, wherein such sale or purchases

exceeds in value in the aggregate 10% of the total sales or purchases of the issuer Company. Pending litigations against Group Companies, its Directors There are no pending litigations by or against our Group Companies, its Promoters & Directors. Companies for which an application has been made for striking off name There are no companies associated with Yogindera Worsted Limited, and its Directors, for which an application has been made with the Registrar of Companies for striking off the names of those companies. Changes in accounting policies during preceeding three years The change in accounting policies, if any, during preceding three years are disclosed as part of the Auditors Report.

- 109 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS AS REFLECTED IN THE RESTATED FINANCIAL STATEMENTS: You should read the following discussion and analysis of our Company’s financial condition and results of operations with our financial statements included in this Draft Prospectus. You should also read the section titled “ Risk Factors” beginning on page no. v of this Draft Prospectus, which enumerate factors and contingencies that could impact our financial condition and result of operations. The Following discussion relates to Yogindera Worsted Limited on a standalone basis, and unless otherwise stated, is based on our financial statements, which have been prepared in accordance with Indian GAPP, the accounting standards and other applicable provisions of the Companies Act, 1956 and the SEBI Guidelines. Our fiscal year ends on March 31 of each year so all reference to a particular fiscal year are to the twelve months ended March of that year. OVERVIEW Our Company was incorporated on 24th September, 1997 under the Companies Act, 1956, with the Registrar of Companies, Punjab, H. P. & Chandigarh, with the main object of Worsted Spinning for domestic and International market. The Promoters of our Company are Mr. Jagmohanlal Gupta, Mr. Anil Kumar Gupta, Mr. Ajay Kumar Gupta, Mr. Gautam Aggarwal, Mrs. Kusum Lata, Mr Yogesh Gupta, Mrs. Shukla Gupta, Anil Kumar Gupta – HUF and Jagmohan Lal Gupta – HUF. Our Company is presently engaged in the manufacturing of Acrylic and blended yarns. The capacity at the time of initial production was 4000 spindle which was upgraded to 5000 spindles with in one year. The facility was again upgraded to 6040 spindles besides the addition of 435 spindles for fancy chenille yarn. The project was appraised for 19.00 crores at the time of incorporation. Our’s is a most modern integrated spinning unit having in-house dying facility, set up at with latest hi tech machinery, installed in assisted sector with PSIDC, Chandigarh. Most of the Acrylic and Acrylic-Woollen Blended Yarns are dyed in fiber stage itself resulting in very good quality which results into excellent color fastness. A single dye lots of the same color can range upto 20 tones. Fiber dyed yarns have better technical parameters. All the different types of yarns manufactured on German Autoconers are 100% knot less. The products manufactured by our Company are exported to various countries such as south Africa, England, Mauritius, kenya, Cyprus, Spain, Iran, Jordan etc. and also supplied to leading knitters in the domestic market in India. Our yarns have been widely appreciated and accepted for their good quality. Besides producing the yarns meant for knitting sector, we also produce different types of Fancy yarn such as chenille yarn, Slub yarn, Buckley Yarn, Multi color yarn meant for furnishing fabrics and also for high fashion garments, Our Company has recently installed Fancy Twisting machine imported from China in which various types of fancy yarn of high value addition are being made. The Company is enhancing its capacity by addition of 3200 spindles targeted towards producing Acrylic Woollen Blended yarn which will cater up market garment producers in India as well as in the export market. With this the total number of spindles (including fancy spindles) will touch 9675 which is quite a big size for worsted spinning since the production per spindle in Worsted sector is less as compared to Cotton sector whereas the cost of the plant is much higher. The products manufactured by our company are domestically utilized by manufacturers of top brands of Sweater and furnishing fabrics in Ludhiana and Panipat. Our yarns are also utilized by vendors of top brands like Adidas, Ikea, Market & Spencer, Woolworth etc. We also export our products to M/s Shibani Knitting Co. Ltd. based in Mauritius and M/s Crystal Sweaters, based in Hongkong. M/s.Shibani Knitting Co. Ltd cater the requirement of upcoming brands of Europe and America whereas M/s Crystal Sweaters being one of the biggest supplier to brands like GAP, Walmart, Marks & spencer etc.

- 110 -

The Company is also supplying Polyester Tops to various unit in India which are OCM & OWM etc. Significant developments subsequent to the last financial year Our Company has successfully implemented the modernization project at a cost of Rs.513.75 Lacs which was financed by a corporate loan of Rs.425 Lacs by Industrial Development Bank of India Limited and internal accruals of Rs.88.75 Lacs, The commercial production has already started. The Directors of our Company confirm that in their opinion, except as stated otherwise in this draft Prospectus, no circumstances have arised since the date of the last financial statement as disclosed in this draft Prospectus, which materially and adversely affect or are likely to affect the trading or profitability, or the value of our assets, or our ability to pay our liabilities within the next twelve months. Factors that may affect our Operations Our financial condition and results of operations are affected by numerous factors including the following: General economic and business conditions: the demand for our products is dependent on general economic conditions in India, South Africa, England, Mauritius, Kenya, Cyprus, Spain, Iran, Jordan where our customers are primarily located. Our manufacturing operations, which are currently in India, will be affected by changes in business conditions in these countries Changes in economic policies and the political situation in India could adversely affect the fortunes of the industry. The development of any industry depends upon the positive and progressive attitude of the Government towards the concerned Industry and that Textile Industry is no exception. Any changes in economic policies by Government of India towards the industry could adversely affect the fortunes of the Industry. Keeping in view of the above our Company’s business, its market price and liquidity of Equity Shares, may be affected by interest rates, changes in Government policy, taxation, social & civil unrest, political, economic or other developments in or affecting India, as the case may be. Market Demand: The demand for our products are from the manufacturers of knitted fabrics, industrial fabrics, Furnishing Fabrics. We have expanded our customer base in domestic as well as global market. The prospect and earning growth of the customers and industries we serve will have an impact on our ability to generate sales. Competition: Selling prices of our product may be affected if competition intensifies. Further, as a result of increased capacity of yarn, adoption of aggressive pricing strategies by our competitors in order to gain market share of new competitors entering the markets, may adversely affect our operations and financial results. Raw Material Prices: Raw Material constitutes a major portion of our total expenses. Our key raw material is acrylic yarn, the prices of which is dependent upon the market condition. With the use of effective raw material procurement policy, we should be able to mitigate Price fluctuations.

- 111 -

SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED

Amount in Rs. Lacs Year Ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02 APPLICATION OF FUNDS Fixed Assets Gross Block 2892.74 2,365.27 2,274.78 2,229.51 1,990.46 Less: Depreciation 730.29 598.22 470.68 347.80 237.82 Net Block 2162.45 1,767.05 1,804.10 1,881.71 1,752.64 Investments 0 0 0 0 0 Current Assets, Loans and Advances Inventories 1099.96 817.60 598.16 387.22 224.83 Sundry Debtors 187.68 244.64 203.58 165.28 171.59 Cash and Bank Balances 173.54 64.97 74.31 54.87* 57.99 Loans and Advances 333.67 268.28 193.91 111.84* 152.68 Total 1794.85 1,395.49 1,069.96 719.21 607.09 Liabilities and Provisions Secured Loans 1570.61 1,128.88 1,250.32 1,221.17 1,172.84 Unsecured Loans 114.65 194.39 165.18 98.59 88.69 Deferred Tax Liability 187.49 141.70 121.12 66.86 0.00 Current liabilities and provisions 499.34 398.66 325.94 287.45 223.29 Total 2372.09 1863.63 1862.56 1674.07 1484.82 Net Worth (A+B+C-D) 1585.21 1298.91 1011.50 926.85 874.91 Represented by Share Capital 890.42 875.42 875.42 875.42 835.02 Share Application Money 0.00 15.00 0.00 0.00 40.40 Reserves and Surplus 711.12 415.84 141.23 53.21 1.55 Miscellaneous Expenditure (16.33) (7.35) (5.15) (1.77) (2.07) Net Worth 1585.21 1298.91 1011.50 926.85 874.91

*Note :Figures relating to Cash and Bank Balances and Loans and Advances for the year ending 31.03.2003 are regrouped and rearrange in accordance with 31.03.2004.

- 112 -

SUMMARY OF PROFIT & LOSS ACCOUNT, AS RESTATED

Amount in Rs. Lacs Year ended

Particulars 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02INCOME Sales and Job Charges 4072.50 3,344.51 3,033.80 2,471.37 2422.46

Other Income 37.33 13.46 7.17 6.87 32.35Total Income 4109.83 3,357.97 3,040.97 2,478.24 2,454.80Increase / (Decrease) in stock) 186.87 (42.52) 25.42 153.39 (34.87) 4296.69 3315.45 3066.39 2631.63 2419.94EXPENDITURE Raw Material 2646.99 1,797.94 1657.99 1375.86 1246.41Manufacturing Expenses 353.94 331.94 315.62 276.25 241.56Excise Duty 255.38 243.47 366.65 339.16 330.52Personnel Expenses 81.57 68.46 59.53 55.58 50.77Administrative Expenses 61.11 47.32 43.33 32.11 45.48Selling and Distribution Expenses 195.01 174.62 99.11 73.83 65.71Misc. Expenditure written off 0.65 0.30 0.30 0.30 0.30Repairs and Maintenance 18.78 19.60 20.39 32.15 47.84Total Expenditure 3613.42 2,683.65 2562.91 2185.23 2028.59Net Profit before Interest, Depreciation, Tax and Extraordinary item

683.27 631.80 503.48 446.40 391.35

Interest & Financial Charges 174.55 183.23 224.97 205.67 166.74Depreciation 132.08 127.54 122.87 109.98 102.40Profit Before Tax 376.65 321.03 155.63 130.75 122.21Provision for taxation Income Tax 31.70 25.17 11.89 10.30 8.71 Deferred Tax 45.79 20.58 54.27 46.80 0.00 Fringe Benefit Tax 2.02 0.00 0.00 0.00 0.00Profit after Tax but before Extra-ordinary Items

297.14 275.28 89.48 73.65 113.50

Extraordinary Items 0.00 0.00 0.00 0.00 0.00Profit after Extra-ordinary Items 297.14 275.28 89.48 73.65 113.50Adjustment on account of prior period Expenses including deffered tax

0.00 1.86 0.67 1.46 21.99

Adjusted Profit 297.14 273.42 88.81 72.19 91.51

- 113 -

Discussion on Results of Operations. Comparison of Performance and Analysis of Developments for Financial year ended 31st March 2006 vis-à-vis 31st March 2005 Major Events The Company has successfully implemented Phase-1 of the expansion cum moderation plant at a cost of Rs.513.75 Lacs which was finaced by a corporate loan of Rs.425 Lacs by IDBI and internal accruals of Rs.88.75 Lacs, which has already started its commercial production and we are making now new products with high value addition. Net Sales Our Company achieved net sales of Rs.4,072.50 Lacs for year ended 31st March, 2006 as against Rs.3,344.51 Lacs for year ended 31st March 2005. The Increase in sales was on account of optimum utilization of production capacities and diversification into products with more value addition Other Income Other income increased from 0.40% of net sales (Rs.13.46 Lacs) in 2004 to 0.91% of net sales (Rs.37.33 lacs) in 2005 Interest Interest cost for the year ended March 2006 stood at 4.28% of net sales as compared to 5.48% for the same period as on March 2005. Depreciation Depreciation cost decreased from 3.81% (Rs.127.54 Lacs) of net sales as on March 2005 to 3.24 % (Rs.132.08 Lacs) of Net Sales as on March 2006. Adjusted Profit Adjusted profit stood at Rs.297.14 Lacs for the year ended 31st March, 2006 (7.29% of net sales) as compared to Rs.273.42 Lacs (8.18% of net sales) for the previous year ended 31st March, 2005. Inventory Inventories as on 31st March, 2006 stood at Rs.1099.96 Lacs as against Rs.817.60 Lacs as on 31st March 2005. Sales are higher in the fourth quarter as compared to the other quarters. Accordingly inventories are higher as on 31st March, 2006 as compared to 31st March, 2005. Sundry Debtors Sundry debtors stood at Rs.187.68 Lacs as on 31st March, 2006 as compared to Rs.244.64 Lacs as on 31st March 2005. Loans & Advances As on 31st March 2006, loans and advances stood at Rs.333.67 Lacs as against Rs.268.28 Lacs as on 31st March 2005. Secured Loans The Secured Loans as on 31st March 2006 stood at Rs.1570.61 Lacs as compared to Rs.1128.88 Lacs as on 31st March 2005. Unsecured Loans

- 114 -

The Unsecured Loans as on 31st March 2006 stood at Rs.114.65 Lacs as compared to Rs.194.39 Lacs as on 31st March 2005. Current Liabilities & Provisions Current liabilities and provisions stood at Rs.499.34 Lacs as on 31s t March, 2006 as compared to Rs.398.66 Lacs as on 31st March 2005. Comparison of Performance and Analysis of Developments for Financial year ended 31st March 2005 vis-à-vis 31st March 2004 Sales Our Company achieved Net sales of Rs.3344.52 Lacs during the year ended 31st, March 2005, as against Rs.3033.80 Lacs during the corresponding period in pervious year; The Company achieved a growth of 10.24% due to its continuous marketing efforts and widening of export mix. Other Income Other income stood at increased from 0.23% of net sales in 2004 to 0.40% of net sales in 2005. Total Expenditure Total expenditure for year ended March 2005 stood at 81.50% of the net sales as compared to 83.63% over corresponding period in previous year. The Company has been able to reduce its expenditure by more than 2% with better productivity and efficient management. Interest The Company could reduce its financial cost from Rs.224.98 Lacs to 183.23 Lacs with better financial and inventory management. Interest cost for the year ended March 2005 stood at 5.48% of net sales as compared to 7.40% over the same period as on March 2004. Depreciation Depreciation cost decreased from 4.05% (Rs.122.87 Lacs) of net sales as on March 2004 to 3.84% (Rs.127.54 Lacs) of net sales as on March 2005. Adjusted Profit Our Company reported adjusted profit of Rs.273.42 Lacs (8.18% of net sales), recording a growth of 312.06 % over previous year’s adjusted profit of 88.81 Lacs (2.93% of net sales). The significant improvement in profitability was achieved by effective control over the cost reductions, widening of procurement channels and client base in new markets. Inventory Inventory as on 31st March 2005 stood at Rs.817.60 Lacs as compared to Rs.598.16 Lacs as on 31st March 2004. The growth in exports achieved by the Company necessitated carrying over some inventory at the year end. Sundry Debtors The Sundry Debtors as on 31st March 2005 stood at Rs.244.64 Lacs as compared to the previous year’s Rs.203.58 Lacs. Loans & Advances Loans & Advances during the year were Rs.268.28 Lacs as compared to Rs.193.91 Lacs as in previous year. Secured Loans

- 115 -

The Secured Loans as on 31st March 2005 were Rs.1128.88 Lacs as compared to Rs.1250.32 Lacs in previous year. The decrease is on account of repayment of Term loans during the year. Unsecured Loans The Unsecured Loans as on 31st March 2005 were Rs.194.39 Lacs as compared to Rs.165.18 Lacs in previous year, Current Liabilities & Provisions The Current Liabilities & Provisions as on 31st March, 2005 were Rs.398.66 Lacs as compared to Rs.325.94 as on 31st March 2004. On account of increase in overall business of the Company, the overall expenditure in the operations of the Company increased. This necessitated an increase in the working capital requirements which were partly financed by negotiating better credit terms from the venders. Comparison of Performance and Analysis of Developments for Financial year ended 31st March 2004 vis-à-vis 31st March 2003 Major Events The Company started its export marketing more aggressively and penetrated into the market in other countries like South Africa, Mauritious, U.K. Hong Kong and Kenya. Sales The Company reported Ne t sales of Rs.3033.80 Lacs during the year 2004, recording a growth of 22 .75% over sales of Rs.2471.37 Lacs during the corresponding period in pervious year; result of intensive marketing efforts & widening of export mix. Other Income Percentage of other income decreased from 0.28% of net sales in 2003 to 0.24% of net sales in 2004. Total Expenditure Total expenditure for year ended March 2004 stood at 83.63% of the net sales as compared to 82.20% as on March 2003. The marginal increase in expenditure was due to focus on widening the export mix by identifying more and more products, clients and market. Interest Interest cost for the year ended March 2004 stood at 7.40% of net sales as compared to 8.32% of net sales over the same period as on March 2003. Depreciation During the year, depreciation decreased from Rs.4.45 Lacs as on March 2003 to Rs.4.05 Lacs as on March 2004. Adjusted profit Our Company reported adjusted profit of Rs 88.81 Lacs (2.93% of net sales) as of 31st March, 2004 as compared to Rs.72.19 Lacs (2.92% of Net sales) for the previous year ended 31st March, 2003. Inventory The inventory stood at Rs.598.16 Lacs as on 31st March 2004 as compared to Rs.387.22 Lacs as on 31st March 2003.

- 116 -

Sundry Debtors The Sundry Debtors as on 31st March 2004 stood at Rs.203.58 Lacs as compared to the previous year’s Rs.165.28 Lacs, an increase of 23.17%, on account of increase in exports. Loans & Advances Loans & Advances as on 31st March 2004 were Rs.193.91 Lacs as compared to Rs.120.82 Lacs in previous year, due to the export incentives receivable. Secured Loans The Secured Loans as on 31st March 2004 were Rs.1250.32 Lacs as compared to Rs.1221.17 Lacs in previous year., due to encasement of working capital limits as required for working of the Company . Unsecured Loans The Unsecured Loans stood at Rs.165.18 Lacs as on 31st March 2004 as compared to Rs.98.59 Lacs in previous year. This was due to increased requirement of working capital on account of increase in exports which has funded through unsecured loans. Current Liabilities & Provisions The Current Liabilities & Provisions were reported at Rs.325.94 Lacs as on 31st March 2004 as compared to Rs.287.45 in previous year. This was mainly on account of increase in overall business of the Company. INFORMATION REQUIRED AS PER CLAUSE 6.10.5.5 OF SEBI DIP GUILDELINES a) Unusual or infrequent events or transactions:

There have been no events to the best of our knowledge, which may be called "unusual" or "infrequent" b) Significant Economic changes that materially affected or are likely to affect income from

continuing operations: Government’s focus on Textile Industry will have major bearing on the companies involved in Textile Sector. Any major changes in policies of the Government would have the significant impact on the profitability of our Company. Except the above, there are no significant economic changes that may materially affect or likely to affect income from continuing operations.

c) Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations: Apart from the risks as beginning on page v under heading “Risk Factors” in this Draft Prospectus, there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

d) Future changes in relationship between costs and revenues, in case of events such as future increase in sales volume, introduction of new products or services or increased sales prices

Our raw material to total expenses has marginally increased from 73.94% in FY 2002 to 77.58% in FY2006. At the same time, Raw material cost to Total income has increased from 52.89% in FY 2002 to 60.41% in FY 2006. However personnel expenses have also decreased marginally from 2.10 % in FY 2002 to 2.00 % in FY2006. Further, the fixed cost of material and operating expenses would decline due to substantial expansion of capacity under the proposed project.

e) The extent to which material increases in net sales or revenue are due to increased sales

- 117 -

volume, introduction of new products or services or increased sales prices:

The increase in turnover is mainly on account of successful completion of expansion project and corresponding increase in production capacity besides better realization per unit.

f) Total turnover of each major industry segment in which the Company operated: Our Company is operating only in one segment namely Textile and the total turnover reported by our Company is from textile segment only.

g) Status of any publicly announced new products or business segment:

Our Company has not announced any new products or business segment. However, we are proposing to set up a unit for manufacture of Ready to wear garment with capacity of 2.52 Lacs pieces per annum.

h) The extent to which business is seasonal:

The business of our Company is not seasonal in nature. Since most of the finished products of our Company are used in manufacture of winter garments, consequently, demand for our finished goods are sluggish during Jan – March quarter.

i) Any significant dependence on a single or few suppliers or customers: In order to maintain consistency in quality of yarn and to avail economies of large scale, our Company prefers buying the major raw material viz. acrylic tow from few specified supplier. However, the basic raw material can also be procured from other suppliers also. Our Company has customers in domestic as well as global market and hence there is not much dependence on few customers.

j) Competitive Conditions Our Company faces competition from large and integrated players. Our Company is medium in size as compared with other market players.

- 118 -

SECTION VI – LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS Except as stated herein, there is no outstanding or pending litigations, suits, criminal or civil prosecutions, proceeding initiated for offence (irrespective of whether specified in paragraph (I) of Part I of Schedule XIII of the Companies Act) or litigation for tax liabilities against our Company, our directors, our Promoters or companies promoted by our Promoters or group companies, that would have a material impact on the business of the Company and there are no defaults, non payment or over dues of statutory dues, institutional/ bank dues that would have a material adverse effect on the business other than unclaimed liabilities by our Company or our Directors, our Promoters or Companies promoted by our promoters. Further, the Directors, Promoters or Group Companies have not been declared as willful defaulter by Reserve Bank of India, and also have not been debarred from dealing in securities and /or accessing the capital markets by SEBI and no disciplinary action has been taken against them by SEBI or any stock exchanges. Further, except as stated herein, there are no cases of litigations, defaults, etc. in respect of companies/ firms/ventures with which the Promoters were associated in the past but are no longer associated, in respect of which the name(s) of the Promoters continues to be associated with those litigation(s). Outstanding litigation, defaults etc involving our Company, our Directors and past cases in which penalties imposed. Cases filed by our Company Civil Cases: There are no civil cases filed by our Company

Criminal Cases:

Yogendera Worsted Ltd. V/s Umen Knitwears Pvt. Ltd Case Under Section 138 of Negotiable Instrument Act, Case no. 141/2 (2004) Our Company had a business transaction with the accused Company. The accused Company was liable to pay Rs.2,31,000/- towards settlement of account and issued cheque bearing no. 170164 dated 10.07.2004 for Rs.2,31,000/-(Rupees Two Lacs Thirty One Thousand only) drawn on PNB at RCC branch, Ludhiana. The said cheque was dishonored and the complainant issued a registered notice on 30th July 2004. Being aggrieved by the act of the accused Company, our Company has filed the criminal Compliant against Umen Knitwears Pvt. Ltd in the Hon’ble Court of Judicial Magistrate Ist Class, Samrala. The next date of hearing is 17th August, 2006.

Cases filed against our Company

There are no Civil or Criminal cases filed against our Company, our Promoters, our Directors and group Companies.

Sales Tax Cases A notice in Form ST XIV under Section 11 of Punjab General Sales Tax Act, 1948 was issued to our

Company regarding incorrect filing of return for the period 1999 - 2000. In response to the said notice Shri. Sunil Kapoor, Attorney on behalf of our Company was present for hearing on 02.05.2002. The tax paid by our Company was deficient by Rs.3,162/- and penalty @ Rs 2000/- U/s 10 (7) and @ Rs. 1000/- U/s 23 of the Punjab General Sales Tax Act, 1948 was imposed on our Company. Accordingly the Company was required to issue T.D.N. and Challan Form for Rs. 6,162/-. Thereafter the Assessment Order as on 02/05/2002 was issued.

- 119 -

Following are the name(s) of small scale undertakings and other creditors to whom the issuer Company owes a sum of Rs.1 lakh which is outstanding for more than 30 days.

Small Scale Industries

S.No Name of the Creditors (Rs. In Lacs)

1 Sant Dyeing & Manufacturing Co. 8.55

Total (A) 8.55

Other Creditors 1 Thaper Textiles (P) Ltd. 2.01

2 The Art Zone 1.04

Total (B) 3.05

Total (A) + (B) = (C) 11.60

- 120 -

GOVERNMENT APPROVALS Our Company has received all the necessary consents, licenses, permissions and approvals from the Government and various Government agencies, to undertake the present as well as the proposed activities. No further approvals from any statutory body are required to be obtained by the Company to undertake the present and proposed activities, except the pending approval as mentioned under this heading. We have received the following Government and / or statutory approvals / licenses/ permissions. Incorporation 1. Certificate of Incorporation issued by Registrar of Companies, Punjab, Himachal Pradesh & Chandigarh

bearing number 16-20489 of 1997 dated September 24, 1997. 2. Certificate for Commencement of Business issued by Register of companies, Punjab, Himachal Pradesh &

Chandigarh, dated October 07, 1997. Tax 3. Our Company’s PAN (Permanent Account Number) issued by Office of Income Tax is AAA CY 0944L. 4. Our Company’s TAN (Tax deduction account number) issued by Office of Income Tax is JLDY00059D 5. Our Company’s TIN (Certificate of Registration under Punjab Value Added Tax Act, 2005) number issued

by the Office of Asst. Excise & Taxation Commissioner is 03351079325. 6. Our Company’s Service Tax Registration Number (Under Section 69 of the Finance Act, 1994 issued by

Superintendent of Central Excise, Services Tax Cell is STC/RV/Div-III/GTA/101/05-06. 7. Our Company was granted registration under Central Sales Tax (Registration & Turnover) Rules, 1957 and

Punjab General Sales Tax Act bearing registration no. 51630216 effective from 12.05.1998. The sales tax registration was altered and the Company was allotted TIN no. 03351079325 under Punjab Value Added Tax Ordinance 2005 to be effective from 01.04.2005, wide its letter dated 10.01.2005

8. Our Company’s Central Excise Registration number issued by Superintendent, Central Excise Range VIII,

Ludhiana II is AAACY 0944L/XM/001. Industrial / Labour 9. Certificate of Registration bearing no. LDH/Y-15/353 issued by the Directorate of Factories – Punjab. 10. The Employees’ State Insurance Act, 1948 became applicable to our Company from 01.06.2005 and got

the registration of employees and factories/ establishment under section 2(12) /1(5) of the said act with effect from 02.06.2005 having Code no.12/44136/14.

11. Certificate of Registration bearing no. PB/LD/19453 dated 29/12/1999 issued by the Employees provident

Fund Organisation, Sub Regional Office. 12. Our Company have taken advance permission /approval of Factory map of the Factory under the Factories

Act, 1948 and the Punjab Factory Rules, 1952 vide letter bearing no. 4047 from the Director of Factories, Punjab.

13. Registration of Boiler under Indian Boilers Act, 1923 bearing no. PL-4004 dated 26/01/2006 issued by the

Director of Boilers, Punjab. The said registration is valid up to 25/01/2007 and to be renewed yearly under Section 8 of the Indian Boilers Act, 1923.

14. Permission for Collection and storage of hazardous wastes bearing no. HMC/LDH-III/2004-2006/R-1951

dated 31/05/2004 issued by the Punjab Pollution Control Board, Patiala. The said permission is valid up to 30/05/2006, to be renewed on a yearly basis.

- 121 -

15. Consent under Section 21 of the Air (Prevention & Control of Pollution) Act, 1981 for operating an industrial

Plant to discharge the emission arising out of the premises, received vide consent no. Ludhiana-II/APC/ECD/2001-2014/F-1109 dated 01/06/2001 from the Punjab Pollution Control Board. The consent is valid till 31/05/2014.

16. Revised Consent to operate an Industrial Plant under Section 21of the Air (Prevention & Control of

Pollution) Act, 1981 received vide letter bearing reference No. LDH-III/APC/2006/R-1507 dated 27/03/2006 from the Punjab Pollution Control Board. The said consent is valid up to 31/03/2007

17. Consent under Section 25 / 26 of the Water (Prevention & Control of Pollution) Act, 1974 for discharge of

effluents arising out of the premises, received vide consent no. LDH-II/WPC/2001-2014/F-1412 dated 22/08/2001 from the Punjab Pollution Control Board. The Consent is valid till 31/05/2014.

18. Revised consent under section 25 / 26 of the Water (Prevention & Control of Pollution) Act, 1974 for

discharge of effluent(s) arising out Company premises vide Letter bearing ref. No. LDH-III/WPC/2006/R-2180 dated 27/03/2006. The said consent is valid up to 31/03/2007

19. Permission received from Punjab State Electricity Board vide letter ref. no. 17898/CHD-32 dated

30/08/2000 for installation and use of two Diesel Generating Set of 2 X 400 KVA Capacity ( Kirloskar make, 11000 volts, 1500 RPM).

20. Letter bearing ref. no. 1437/ASO/PRC dated 21/03/2002 received from Power Regulation and Control

Department, Patiala for use of electricity load equivalent to 871 KW in the peak hours. 21. Clearance Certificate ( no objection) for release of additional power load of 498 KW received vide letter

bearing ref. No. CME/EE-L/F.No.211 dated 27/03/2006 from Punjab Pollution Control Board. 22. Permission received vide letter of Punjab State Electricity Board for extension of load from 900 KW to 1180

KW. Other Registrations: 23. Certificate of Importer – Exporter Code (IEC) from JT. Director General of Foreign Trade Office, Ludhiana,

bearing number 3098003162 dated July 10, 1998 for the then registered office 14 - C, Convent Road, Saraba Nagar, Ludhiana, Punjab. The Certificate was renewed for the change in registered office to VPO, Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, District Ludhiana, Punjab on May 02, 2000.

24. Registration certificate bearing no. SR/MFG/6003/2000-2001 dated 20/02/2001 issued by The Synthetic &

Rayon Textiles Export Promotion Council. The said registration is valid up to 31/03/2011. Customs Act: 25. The Company has the registration under CUSTOMS (Import of Goods at Concessional Rate of Duty for

Manufacture of Excisable Goods) Rules 1996 wide certificate no. 13 / Import/ Yoginder/ LDH-III/02 dated 24.01.2003. The exemption will be valid till the holder carries on the activity for the purpose of which the certificate has been issued or till holder surrenders the certificate, which ever is earlier. The exemption is valid only for the premise and purpose specified as below:

Name and address of the Importer-manufacturer

M/s Yogindera Worsted Ltd., Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, District Ludhiana.

Nature & Description of excisable goods manufactured from the imported goods

100% Acrylic Worsted Dyed Yarn

Lab Dye Preparation Machines Nature and Description of excisable goods manufactured from the Lab Yarn Dyeing Machines

- 122 -

Lab Dyeing Machine Yarn Drying Machine Lab Infra Red Drying Machine Color Matching Computer Drawing in Machine Rectilinear Combs Roving Frame/ Automatic Rubbing Frame Gill Boxes Ring Frames Automatic Cone Winding Machine Digital Electronic Frequency Inverters Finishing Oil Metering Pumps with relevant Fees System Auto Control Tube Humidification Plant Carding Sets for use in woolen Textile Machinery Relax Drum/ Conveyor Drying Machine: (a) Drying Range (b) Drum Dryer HTHP Hosiery Yarn Dyeing Machine

imported goods.

Soft Package Winders 26. The EPCG License The Export Promotion Capital Goods Scheme (more popularly known as the EPCG

scheme ) is a scheme whereby any person in India may import machinery and equipment at concession or nil import duties provided he undertakes that he will export goods within the specified period of a certain minimum amount.

The Company in pursuant to the said scheme has from time to time taken several licenses for the import of different machineries. On completion the export obligation the licenses have been redeemed. There is only one license bearing EPCG LICENCE No. 3030001139 dated 02.08.2005 is pending to be redeemed, though the export obligation under the said license has been met.

27 Our Company is entitled to exemption from Punjab General Sales Tax from 10.09.1999 to 09.09.2006

subject to maximum amount of Rs.1959.43 Lacs for the manufacturing of WORSTED YARN. The exemption was granted wide certificate no. DIC/LDH/II/1037-E dated 03.12.1999. The certificate was amended and the exemption was extended from production of Worsted Yarn to ALL KIND OF YARNS. Our Company was intimated of the change by letter dated 10.11.2000 from the Department of Industries, Ludhiana The amendment was in pursuance to alteration in letter of intent (under department of Industrial Policy and Promotion) no. LI7 (98) dated 06.01.1998.

With the applicability of Punjab VAT, Our Company has also filed an application for issuance of

Entitlement Certificate in Form VAT (D&E)-I for the purpose to replace the exemption Certificate, which was issued under the Punjab General Sales Tax with a certificate under Punjab Value Added Tax Ordinance, 2005.

INVESTMENT APPROVALS As per Notification No. FEMA/20/2000-RB dated May 3, 2000, as amended from time to time, under automatic route of the Reserve Bank our Company is not required to make an application for Issue of Equity Shares to NRIs / FIIs with repatriation benefits. However, the allotment / transfer of the Equity Shares to NRIs / FIIs shall be subject to the prevailing RBI Guidelines. Sale proceeds of such investments in Equity Shares will be allowed to be repatriated along with the income thereon subject to the permission of the RBI and subject to the Indian tax laws and regulations and any other applicable laws. The Company through its lead managers has already informed Reserve Bank of India vide letter bearing ref. no. IBG/RB/RBI/YWL/047/2006 dated 27/06/2006 regarding the proposed Initial Public Offer by the Company

- 123 -

LICENSES AND APPROVALS FOR THE EXISTING AND EXPANSION PROJECT

Sr. No

Particulars Registration No.

Issuing Authority

Issue Date Remarks

1 Industrial License from SIA as per Industrial (Development and Regulation) Act (*)

DIL: 90 (2005) Dept. of Industry Policy & Promotion,

Secretariat for Industrial

Assistance

11/11/2005 The Industrial License was granted for effecting the substantial expansion. The expanded installed capacity shall be as specified: For the manufacture of All kinds of Yarns: Existing Cap : 2,000 MT Additional Cap : 1,000 MT Annual Capacity after expansion : 3,000 MT

(*) Disclaimer Statement forming part of Industrial Licence granted by Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, Secretariat of Industrial Assistance, New Delhi. “A Licence has been obtained from the Central Government for the manufacture of item(s) mentioned below, of which a copy is open to public inspection at the Head Office of the Company. It must be distinctly understood that, in granting this Licence, the Government of India do not take any responsibility for the financial soundness of this undertaking or for the correctness of any of the statements made or opinions expressed in this regard to it.” Item of Manufacture --------------------------- ALL KINDS OF YARN

2 NOC from Punjab Pollution Control Board for Expansion project

CMC/EE-L/F.No.211/16648

Punjab Pollution Control Board

Patiala

21/11/2005 Valid for a period of 1 year from the date of its issue or till the commissioning of the industry , whichever is earlier. NOC given for the expansion of the industry in its existing premises for the production of Worsted Yarn totaling to 3000 MTPA (Without dyeing process)

3 Air (Prevention & Control of Pollution) Act, 1974 U/s 21 to operate an industrial plant to discharge the emissions arising out of the premises

N.A. Punjab Pollution Control Board,

Patiala

Application made as on 10/02/2006

As per the NOC obtained from the pollution department, our Company is required to obtain consent of the Pollution Board under this Act at least two months before the commissioning of the industry. The application for the approval was made and consent received vide letter ref. no. CMC/EE-L/FNo. 211/ 3654 dated 27/03/2006.

4 Water (Prevention & Control of Pollution) Act, 1974 u/s 25 & 26 of the Act for discharge of effluents arising out of the premises

N.A. Punjab Pollution Control Board,

Patiala

Application made as on 10.02.2006

As per the NOC obtained from the pollution department, our Company is required to obtain consent of the Pollution Board under this Act at least two months before the commissioning of the industry. The application for the approval was made and consent received vide letter ref. no. CME/EE-L/F.No.211/ 3651 dated 27/3/2006

- 124 -

5 NOC for the power extended load consumption for further load of 500 KW

V:M:P. PUDA/LDH/52

11

Punjab Urban Development

Authority

28.07.2005

--NA--

6 Permission from Electricity Board for increased load due to enhanced Capacity

N.A. Punjab State Electricity Board

Demand Notice granting the approval obtained as on 25.1.2006

Application for extension of electricity load from 1180 KW to 1678 KW for the purpose of the expansion project was made on 12.01.2006 and Demand Notice granting the approval obtained as on 25.1.2006

7 Registration under Factories Act for Expansion

N.A. Director of Factories, Punjab

Application to be made

--NA--

- 125 -

SECTION VII - OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the issue and details of the resolution passed for the issue.

Pursuant to Section 81(1) and (1A) of the Companies Act, 1956, the present issue has been authorized by a Special Resolution passed at the Extra Ordinary General Meeting of the shareholders of the Company held on 27/01/2006 and resolution passed by the Board of Directors of the Company at their meeting held on 07/12/2005.

Prohibition by SEBI

The Company, its Directors, Promoters, the group companies, companies promoted by or Promoters and companies or entities with which the Company’s Directors are associated as directors have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI. The listing of any securities of the Company has never been refused at anytime by any of the stock exchange(s) in India. The Company, it’s Promoters, their relatives, group companies and associate companies have not been detained as willful defaulters by RBI/government authorities and there are no violations of securities laws committed by them in the past or pending against them.

Eligibility of the Issuer Company to enter the Capital Market According to clause 2.2.1 of the SEBI (Disclosure & Investor Protection) Guidelines, 2000 and amendments thereof, an unlisted Company shall make a Initial Public Offer of Equity Shares or any security convertible into Equity Shares at a later date subject to the following: 1. The Company has Net Tangible Assets worth of above Rs.300.00 Lacs in each of the preceding 3 full years

(each of 12 months) of which not more than 50% is held in monetary assets; 2. It has a track record of Distributable Profits in terms of Section 205 of the Companies Act, 1956 for at least

three (3) out of immediately preceding five (5) years; 3. It has a pre-issue Net-worth of not less than Rs.100 Lacs in each of the proceeding three (3) full years (of

12 months each); 4. In case the Company has changed its name within the last one year, atleast 50% of the revenues for the

preceding 1 full year is earned by the Company from the activity suggested by the new name; and 5. The aggregate of the proposed issue and all previous issues made in the same financial year in terms of

size (i.e. offer through offer document + firm allotment + promoters’ contribution through offer document), does not exceed five (5) times its pre-issue net worth as per the audited balance sheet of the last financial year)

Amount in Rs. Lacs

Year ended Particulars 31/03/02 31/03/03 31/03/04 31/03/05 31/03/06

Equity Share Capital 835.02 875.42 875.42 875.42 890.42Share Application Money 40.40 0.00 0.00 15.00 0.00Reserves 1.55 53.20 141.22 415.83 711.12Total 876.97 928.62 1016.64 1306.26 1601.54Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Less: Misc. Exp. 2.07 1.77 5.14 7.34 16.33Net Worth 874.91 926.86 1011.50 1298.91 1585.21Source: Audited Annual Accounts of the Company for the respective Financial Years The Company has a track record of distributable profits in terms of Section 205 of the Companies Act, for at least three (3) out of immediately preceding five(5) years

- 126 -

Amount in Rs. Lacs Year ended Particulars

31/03/02 31/03/03 31/03/04 31/03/05 31/03/06 * Distributable Profit after tax. 113.50 73.65 89.48 275.28 297.14 * The Distributable profits of our Company are as per Section 205 of the Companies Act,1956 and have been calculated from the audited financial statements of the respective years before making adjustments for restatement of financial statements. For details on calculation of adjusted Profit after tax, please refer to the auditors report under the heading ‘Financial Information’ The Company has net tangible assets of at least Rs.300.00 Lacs in each of the preceding 3 full years (of 12 months each) of which not more then 50% is held in monetary assets:

Amount in Rs. Lacs Particulars For the year ended 31/03/02 31/03/03 31/03/04 31/03/05 31/03/06 Fixed Assets (Net) 1752.64 1881.71 1804.10 1767.05 2162.45Current Assets, Loans & Advances 607.09 719.21 1069.96 1395.49 1794.85Trade Investments 0 0 0 0 0Less : Current Liabilities & Provisions

223.29 287.45 325.94 398.66 499.34

Net Tangible Assets 2136.44 2313.47 2548.12 2763.88 3457.96 Net tangible assets are defined as the sum of fixed assets(including capital work in progress and excluding revaluation reserves, if any), trade investments, current assets (excluding deferred tax assets) less current liabilities (excluding deferred tax liabilities and secured as well as unsecured long term liabilities) Our Company has not changed its name in the past one year. The issue size ( i.e. offer through offer document + firm allotment + promoters’ contribution through offer document), does not exceed five (5) times its pre-issue net worth as per last available audited accounts, either at the time of filing of Prospectus with SEBI or at the time of Opening of the issue. The working is as under :

Amount in Rs. Lacs a). Proposed Issue Size

1440.00

b) All previous issues made in the same financial year in terms of size (i.e. offer through offer document + firm allotment + Promoters’ contribution through the offer document)

Nil

c) Aggregate of (a) &( b). 1440.00 d) Pre-Issue Net worth as per the audited balance sheet of the last financial

year i.e. March 31, 2006 1585.21

e) Five (5) times of (d) 7926.05

- 127 -

DISCLAIMER CLAUSES SEBI DISCLAIMER CLAUSE

“IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THIS DRAFT 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 PROSPECTUS. LEAD MERCHANT BANKER M/S. KHANDWALA SECURITIES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURES AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY AND THE OFFEROR IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT PROSPECTUS, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER, M/S. KHANDWALA SECURITIES LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 10/07/2006 IN ACCORDANCE WITH SEBI (MERCHANT BANKERS) REGULATION 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 PROSPECTUS PERTAINING TO THE SAID ISSUE.

ii. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, IT’S

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 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; AND

c. THE DISCLOSURES MADE IN THE DRAFT PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO

ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE.

d. BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT PROSPECTUS ARE

REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID. e. WE HAVE SATISFIED OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFILL

THEIR UNDERWRITING COMMITMENTS THE FILING OF THE DRAFT PROSPECTUS DOES NOT, HOWEVER ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956, OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT

- 128 -

ANY POINT OF TIME, WITH THE LEAD MERCHANT BANKER FOR ANY IRREGULARITIES OR LAPSES IN THE DRAFT PROSPECTUS. DISCLAIMER FROM THE ISSUER AND THE LEAD MANAGER

Investors may note that Yogindera Worsted Limited and Khandwala Securities Limited accepts no responsibility for the statements made otherwise than in the Draft Prospectus or in the advertisement or any other material issued by or at the instance of the issuer and that any one, placing reliance on any other source of information, would be doing so at his own risk. All information will be made available by the Lead Managers and the Company, to the public and investors at large and no selective or additional information would be available for a section of the investor in any manner whatsoever including at road shows, presentations, in research or sales reports or elsewhere.

CAUTION Our Company, our Directors and the Lead Managers accept no responsibility for statements made otherwise than in this Prospectus or in the advertisements or any other material issued by or at our instance and that anyone placing reliance on any other source of information, including our company’s website, would be doing so at his or her own risk. The Lead Managers accepts no responsibility, save to the limited extent as provided in the Memorandum of Understanding entered into between the Lead Managers and our Company. All information shall be made available by our company, the Lead Managers to the public and the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentation, in research or sales reports, at collection centres or elsewhere DISCLAIMER IN RESPECT OF JURISDICTION This issue is made in India to persons resident in India (including Indian nationals resident in India who are majors, Hindu Undivided Families, companies, corporate bodies and societies registered under the applicable laws in India and authorized 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), Trusts registered under the Societies Registration Act, 1860, or any other Trust law and who are authorized under their constitution to hold and invest in shares) and to NRIs, FIIs, Venture Capital and Foreign Venture Capital Investors Registered with SEBI. This Draft Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to Shares issued hereby in any other jurisdiction to any person to whom it is unlawful to make an Issue or invitation in such jurisdiction. Any person into whose possession this Draft Prospectus comes is required to inform himself about and to observe any such restrictions. Any dispute arising out of this Offer will be subject to the jurisdiction of appropriate court(s) in Ludhiana, Punjab India only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Draft Prospectus has been submitted to and has been filed the SEBI for its observations. SEBI vide its letter dated DD/MM/YYYY given its observations thereon. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and this Draft Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of Draft Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of our Company since the date hereof or that the information contained herein is correct as of any time subsequent to this date.

DISCLAIMER CLAUSE OF BOMBAY STOCK EXCHANGES LIMITED

As required, a copy of this Draft Prospectus has been submitted to Bombay Stock Exchange Limited (BSE). BSE has given vide its letter dated DD/MM/YYYY, permission to this Company to use the Exchange’s name in this Draft Prospectus as one of the stock exchange on which the Company’s securities are proposed to be listed. Exchange has scrutinized this Draft Prospectus for their limited internal purpose of deciding on the matter of granting the aforesaid permission to Company. The exchange does not in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Prospectus or warrant that the

- 129 -

Company’s securities will be listed or will continue to be listed on the Exchange, or take any responsibility for the financial or other soundness of Company, its promoters, its management or any scheme or project of Company. It should not, for any reason be deemed or construed that this Draft Prospectus has been cleared or approved by the exchange. Every person who desires to apply for or otherwise acquires any securities of this issuer may do so pursuant to an independent inquiry or any investigation and analysis and shall not have any claim against the exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

FILING

1. A copy of this Draft Prospectus along with the documents required to be filed under Section 60 of the Act having attached thereto, shall be delivered for registration to the Registrar of Companies - Punjab, H.P. & Chandigarh having office at Kothi No. 286, Defence Colony, Jalandhar – 144 001.

2. A copy of this Draft Prospectus has been filed with SEBI at Mittal Court, "A" Wing, Nariman Point,

Mumbai - 400 021.

3. A Copy of this Draft Prospectus has been filed with SEBI at 5th Floor, Bank of Baroda Bilding, 16, Sansad Marg, New Delhi 110 001.

4. A copy of the Draft Prospectus has been filed with Bombay Stock Exchange Limited, Phiroze

Jeejeebhoy Tower, Dalal Street, Mumbai (Designated Stock Exchange). LISTING: Initial listing application has been made to Bombay Stock Exchange Limited (BSE), the designated stock exchange for permission to deal in and for an official quotation of the Equity Shares of the Company being offered in terms of this Draft Prospectus as well as the existing Shares of the Company. In case the permissions to deal in and for an official quotation of the Equity Shares is not granted by BSE, the Company shall forthwith repay, without interest, all moneys received from the applicants in pursuance of this Draft Prospectus. If such money is not repaid within 8 days after the Company becomes liable to repay it, then the Company and every director of the Company who is an officer in default shall, on and from expiry of 8 days, be jointly and severally liable to repay that money with interest as prescribed under Section 73(2) of the Companies Act, 1956. The Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at BSE are taken within seven working days of finalization and adoption of the Basis of Allotment for the Issue. IMPERSONATION: Attention of the applicants is specifically drawn to the provisions of sub-section 91) of Section 68A of the Companies Act, 1956 which is reproduced below: “Any person who: a) makes in a fictitious name, an application to a Company for acquiring or subscribing for, any

Shares therein, or b) Otherwise induces a Company to allot, or register any transfer of Shares therein to him, or any other

person in a fictitious name,

shall be punishable with imprisonment for a term which may extend to five years.”

- 130 -

CONSENTS: Necessary Consents for the issue have been obtained from the following

1. Directors of the Company 2. Bankers to the Company 3. Auditors of the Company 4. Legal Advisors 5. Lead Managers to the Issue 6. Registrar to the Issue 7. Company Secretary and Compliance Officer 8. Bankers to the Issue

The said consents would be filed along with a copy of Prospectus with the Registrar of Companies Punjab, H.P. & Chandigarh, Jalandhar as required under Section 60 of the Companies Act and such consents have not been withdrawn up to the time of delivery of this Prospectus for registration with the Registrar of Companies Punjab, H.P. & Chandigarh, Jalandhar. EXPERT OPINION OBTAINED, IF ANY The Company has not obtained any expert opinion ISSUE EXPENSES:

The expenses of the Issue payable by the Company inclusive of the brokerage, fees payable to the Lead Manager to the Issue, Registrar to the Issue, Legal Advisors, Stamp Duty, printing, publication, advertising and distribution expenses, bank charges, listing fees, and other miscellaneous expenses will be met out of the proceeds of the present issue. DETAILS OF ESTIMATED FEES / EXPENSES PAYABLE

Expenses Amounts (Rs. In Lacs)

Amount as % of total issue expenses

Amount as % of total issue size

Fees to the intermediaries 31.97 22.22 2.22

Advertising & Marketing expenses

40.03 27.78 2.78

Printing, Stationary, Dispatch 43.92 30.56 3.05

Brokerage (1.25% of issue size)

18.00 12.50 1.25

Miscellaneous Expenses 10.08 6.94 0.70 Total 144.00 100.00 10.00 Fees payable is as per the Memorandum of Understanding signed with the Lead Managers and Registrar to the issue are as per the engagement letter signed with the Legal Advisor, form part of the Material Contracts and are available for inspection at the Registered office of the Company at Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, District Ludhiana, Punjab, between 11.00 a.m to 3.00 p.m. on any working day, excluding Saturday and Sunday from the date of the Prospectus till the ate of closing of the issue. The fees payable to the Registrar to the Issue will be as per the Memorandum of Understanding between Registrar to the Issue and our Company dated 2 8 t h J a n u a r y 2 0 0 6 , a copy of which is available for inspection at t h e registered office of the Company between 11.00 a.m. to 3.00 p.m. on any working day, excluding Saturday and Sunday from the date of the Draft Prospectus to until the date of closing of the issue. The Registrar to the issue will be reimbursed with all relevant out-of-pocket expenses such as cost of stationery, postage, stamp duty, communication expenses, etc as per the MOU. Adequate funds will be provided to the

- 131 -

Registrar to the Issue to enable them to send refund orders/ letter(s) of allotment/share certificate(s) by registered post. UNDERWRITING COMMISSION, BROKERAGE AND SELLING COMMISSION The Issue is not Underwritten hence no underwriting commission is given. However Brokerage for the Issue will be paid not more than @ 1.25% of the Issue Price of the Equity Shares by Yogindera Worsted Limited on the basis of the allotments made against the applications bearing the stamp of a member of any recognized Stock Exchange in India in the ‘Broker’ column. Brokerage at the same rate will also be payable to the Bankers to the Issue in respect of the allotments made against applications procured by them provided the respective forms of application bear their respective stamp in the Broker column. In case of tampering or over-stamping of Brokers’/ Agents’ codes on the application form, the Company’s decision to pay brokerage in this respect will be final and no further correspondence will be entertained in this matter. PREVIOUS RIGHTS AND PUBLIC ISSUES IN THE LAST FIVE YEARS Our Company has not made any public issue of Equity Shares since Incorporation. ISSUE OF SHARES OTHERWISE THAN FOR CASH The Company has not issued any Equity Shares for consideration other than cash since incorporation. COMMISSION AND BROKERAGE ON PREVIOUS ISSUE The Company has not made any public issue of Equity Shares since incorporation; hence there is no commission or brokerage payable on previous issues. PARTICULARS IN REGARDS TO THE ISSUER COMPANY AND OTHER LISTED COMPANIES UNDER THE SAME MANAGEMENT WITHIN THE MEANING SECTION 370 (1) (B) OF THE COMPANIES ACT, 1956, WHICH MADE ANY CAPITAL ISSUE DURING THE LAST THREE YEARS. There have been no capital issues during last 3 years beither by the Company, or any other listed Company under the same management within the meaning of Section 370 (1) (B) of the Companies Act, 1956 during the last three years. PROMISE VIS-A-VIS PERFORMANCE The Company has not made any public issue of Equity share since inception. There are no group companies, which have made any public issues.

LISTED VENTURES OF PROMOTERS There are no listed ventures of promoters. OUTSTANDING DEBENTURES OR BONDS AND REDEEMABLE PREFERENCE SHARES AND OTHER INSTRUMENTS ISSUED AND OUTSTANDING AS ON THE DATE OF DRAFT PROSPECTUS AND TERMS OF ISSUE. There are no outstanding debentures or bonds or redeemable preference Shares and other instruments of the Company as on the date of filing of this Prospectus. STOCK MARKET DATA This being an initial public offering of our Company, no stock market data is available

- 132 -

INVESTORS’ GRIEVANCES REDRESSAL MECHANISM The Company will settle investor grievances expeditiously and satisfactorily. The agreement between the Company and the Registrar will provide for retention of records with the Registrar for a period of one year from the last date of dispatch of Letters of Allotment / Share Certificate / Refund Orders to enable the investors to approach the Registrar 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 of Shares applied for, amount paid on application, depository participant and the bank branch / collection center where the application was submitted. SR. No

Nature of Complaint Time Table

1 Non-receipt of refund Within 7 days of receipt of complaint subject to production of satisfactory evidence

2 Change of Address Notification Within 7 days of receipt of information

3 Any other complaint in relation to Public Issue

Within 7 days of receipt of complaint with all relevant details

Disposal of Investor Grievances The average time required by the Company / Registrar for the redressal of routine investor grievances shall be seven working days from the date of receipt of the complaint. In case of non-routine complaints and where external agencies are involved, the Company / Registrar would strive to redress these complaints as expeditiously as possible. Investors can also contact the Compliance Officer for any investor grievances.. The Company have appointed Mr. Maninder Kanwar as Company Secretary and Compliance Officer who will directly deal with SEBI officials with respect to implementation / compliance of various laws, rules, regulations and other directives issued by SEBI and matters related to investors complaints. Mr. Maninder Kanwar Company Secretary & Compliance Officer: Yogindera Worsted Limited Village Lal Kalan, Near Neelon Bridge, Chandigarh Road, Tehsil Samrala, Ludhiana – 141 113, Punjab. INDIA Tel.No:+ 91-161- 2834324,325,326 Fax: +91-161-2834000 Website: www.yoginderaworsted.com E-mail: maninder.kanwar@yoginderaworsted.com CHANGE, IF ANY, IN THE AUDITORS DURING LAST THREE YEARS, AND REASONS, THEREOF. There has been change in the Auditors of the Company during the past three years. CAPITALIZATION OF RESERVES AND PROFITS DURING LAST FIVE YEARS There has not been any capitalisation of reserves or profits during the last five years. REVALUATION OF ASSETS, IF ANY DURING LAST FIVE YEARS There has not been any revaluation of Assets during the last five years.

- 133 -

SECTION VIII - OFFERING INFORMATION TERMS OF THE ISSUE: Ranking of Equity shares The Equity Shares to be issued shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari-passu with the existing Equity Shares of the Company in all respects except the lock-in provisions applicable as per SEBI Guidelines in respect of existing Equity Shares as mentioned in the “Notes to Capital Structure”. The allottees of the Equity Shares under this Issue will be entitled to dividends, voting rights and other corporate benefits, if any, declared by the Company after the date of allotment. Mode of payment of dividend The Company shall pay dividend to its shareholders as per the provisions of the Companies Act 1956. Face value and issue price per share The Equity Shares having a face value of Rs.10/- each are being offered in terms of this Draft Prospectus at a price of Rs.24/- per share (including a Premium Rs.14/- per share). At any given point of time, there shall be only one denomination of the Equity Shares of the Company, subject to applicable laws. Rights of the Equity Shareholders Subject to the applicable laws, rules, regulations and guidelines and the Article of Association, the Equity Shareholders shall have the following rights:

1. Right to receive dividend, if declared; 2. Right to attend general meeting and exercise voting powers, unless prohibited by law;

3. Right to vote on a poll either in personally or by proxy;

4. Right to receive offers for rights Shares and be allotted bonus shares, if announced;

5. Right to receive surplus on liquidation;

6. Right of free transferability; and

7. Such other rights, as may be available to a shareholder of a listed Public Limited Company under the

Companies Act and Memorandum and Articles of Association of the Company. For further details on the main provisions of the Company's Articles of Association dealing with voting rights, dividend, forfeiture and lien, transfer and transmission and/or consolidation/ splitting, please refer to “Main Provisions of Articles of Association of the Company" beginning on page 146 of this Draft Prospectus. Market Lot and Trading Lot In terms of Section 68B of the Companies Act, the Equity Shares of the Company shall be allotted only in dematerialized form. As per SEBI Guidelines, the trading in the Equity Shares of the Company shall only be in dematerialised form. Since trading in the Equity Shares is in dematerialised mode, the t r a d a b l e l o t i s O n e Equity Shares. Allotment of Equity Shares through this issue will be done only in electronic form in multiples of 1 (one) Equity Share subject to a minimum a llotment of 2 5 0 Equity Shares.

- 134 -

Nomination facility to the investor In accordance with Section 109A of the Companies Act, the sole or first applicant, along with other joint applicants, may nominate any one person in whom, in the event of the death of sole applicant or in case of joint applicants, death of all the applicants, as the case may be, the Equity Shares transferred/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 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 our Registered Office or to the Registrar and Transfer Agents 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 the 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, the 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, the 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. Note: Since the allotment of Equity Shares in the Issue will be made only in dematerialized mode there is no need to make a separate nomination with the Company. Nominations registered with respective depository participant of the applicant would prevail. If the investor wants to change the nomination, they are requested to inform their respective depository participant Minimum subscription If the Company does not receive the minimum subscription of 90% of the net offer to public on the date of closure of the issue, or if the subscription level falls below 90% after the closure of issue on account of cheques having being returned unpaid or withdrawal of applications, the Company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the Company becomes liable to pay the amount, the Company shall pay interest as per Section 73 of the Companies Act. Withdrawal of the Issue The Company in consultation with the Lead Manager reserves the right not to proceed with the issue any time after the Opening Date but before allotment without assigning any reason thereof. Arrangements for disposal of odd lots The Equity Shares of the Company will be listed / traded in dematerialized form only and therefore the marketable lot is 1 share. Therefore, there is no possibility of any odd lots. Subscription by Non Residents/ NRIs/ FIIs/ Foreign Venture Capital Fund registered with SEBI / Multilateral and Bilateral Development Financial Institutions As per the current provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, there exists a general permission for the NRIs/ FIIs/ Foreign Venture Capital Funds registered with SEBI/ Multilateral and Bilateral Development Financial Institutions to invest in Shares of an Indian Company by way of subscription in a public issue. However, such investments would be subject to other investment restrictions under RBI and/or SEBI regulations as may be applicable to such investors. Based on the above provisions, it will not be necessary for the

- 135 -

investors to seek separate permission from the FIPB/ RBI for this specific purpose. However, It is to be distinctly understood that there is no reservation for non-residents, NRIs, FIIs and Foreign Venture Capital Funds registered with SEBI and Multilateral and Bilateral Development Financial Institutions and all applicants will be treated on the same basis with other categories for the purpose of allocation.

As per the policy of RBI, Overseas Corporate Bodies cannot participate in this Issue.

The above information is given for the benefit of the investors. We, the Lead Manager are not liable for any amendments or modification or changes in applicable laws or regulations, which may happen after the date of this Draft Prospectus. Investor are advised to make their independent investigations and ensure that the number of Equity Shares not exceed the applicable limits under applicable laws or regulations.

Restrictions, if any on transfer and transmission of shares/ debentures and on their consolidation / splitting. For details in respect of any restrictions, if any, on transfer and transmission of Shares and on their consolidation/splitting, please refer to the heading ‘Main Provisions of Articles of Association beginning on page no 146 of this Draft Prospectus.

- 136 -

ISSUE PROCEDURE Advertisement regarding Issue Price and Draft Prospectus The Company will issue a statutory advertisement after the filing the Draft Prospectus with the RoC. This advertisement in addition to the information that has to be set out in the statutory advertisement shall indicate the Issue Price along with a table showing the number of Equity Shares and the amount payable by an investor. PROCEDURE FOR APPLICATION AND MODE OF PAYMENT Availability of Draft Prospectus and Application Forms The Memorandum Form 2A containing the salient features of the Draft Prospectus together with Application Forms and copies of the Draft Prospectus may be obtained from the Registered Office of the Company, Lead Managers to the Issue, Registrar to the Issue and at the collection centers of the Bankers to the Issue, as mentioned on the Application Form. NOTE ON CASH PAYMENT (SECTION 269 SS) Having regard to the provisions of Section 269 (SS) of the Income Tax Act, 1961, subscriptions against applications for securities should not be effected in cash and must be effected only by 'Account Payee' cheques or 'Account Payee' bank Drafts, if the amount payable is Rs.20,000/- or more. In case payment is effected in contravention of this provision, the application is liable to be rejected. Application may be made by

1. Indian Nationals resident of India who are Adult Individuals in single name or joint names (not more than three)

2. Hindu Undivided Families (HUF) through the Karta of the (HUF) (Application by HUF would be given the

same treatment as that to applications by individuals)

3. Companies, Bodies Corporate and Societies registered under the applicable laws in India and authorized to invest in the Shares.

4. Indian Mutual Funds registered with SEBI

5. Indian Financial Institutions & Banks

6. Venture Capital Funds / Foreign Venture Capital investors registered with SEBI

7. State Industrial Development Corporation

8. Insurance Companies registered with Insurance Regulatory and Development Authority;

9. Provident Funds with minimum corpus of Rs.25 crore and who are authorised under their constitution to

hold and invest in Equity shares.

10. Pension Funds with minimum corpus of Rs.25 crore and who are authorised under their constitution to hold and invest in Equity shares.

11. Trusts which are registered under the Societies Registration Act, 1860 or any other trust law and are

authorized under its constitution to hold and invest in Shares subject to provisions of Section 3A of the Bank Nationalisation Act.

12. Commercial Banks and Regional Rural Banks. Co-operative Banks may also apply subject to permission

from Reserve Bank of India

- 137 -

13. Permanent and Regular employees of the Company

14. Non-Resident Indians (NRIs) and on a repatriable / non-repatriable basis

15. Foreign Institutional Investors (FIIs) registered with SEBI

16. Scientific and / or Industrial Research Organisations, which are authorised to invest in the Equity shares

17. Multilateral and bilateral development financial institutions. Applications cannot be made by

a. Minors b. Foreign Nationals (except NRIs)

c. Overseas Corporate Bodies (OCBs)

d. Partnership firms or their nominees

One single application can be made only for the number of Equity Shares that are being offered to each respective category. Application by Hindu Undivided Family (HUF’s) Application may be made by Hindu Undivided Family (HUF) through the Karta of the HUF and will be treated at par with individual application. A. GENERAL INSTRUCTIONS

a. Applications must be made in the prescribed application form and completed in Full in BLOCK LETTERS in English as per the instructions contained herein and in the application form and are liable to be rejected if not so made.

b. The application for Equity Shares should be for a minimum of 250 Equity Shares and in multiples of 250

Shares thereafter. An applicant can make an application only for a maximum number of Equity Shares that are offered in the respective category.

c. Thumb impressions and signatures other than in English/ Hindi or any other language specified in the 8th

Schedule to the Constitution of India, must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under his/ her official seal.

d. Bank Account and Depositary Details of Applicant: The name of the Applicant’s Bank, type of account and account number, Depository Participant’s name,

Depository Participant’s Identification (DP ID), and the beneficiary number provided by the Depository Participant must be filled in the Application Form. This is required for the applicants’ own safety and these details will be printed on the refund orders, if any. Applications without these details would be treated as incomplete and are liable to be rejected.

e. Applications under Power of Attorney or by Limited Companies: In the case of applications under Power of Attorney or by Companies, Bodies Corporate, Societies

registered under the applicable laws, trustees of the trust, Provident Fund, Super Annuation Fund, Gratuity Fund, a certified true copy of the Power of Attorney or the relevant authority, as the case may be, must be lodged separately at the office of the Registrar to the issue simultaneously with the submission of the application form, indicating the serial number of the application form and the name of the Bank and the branch office where the application is submitted.

- 138 -

f. PAN / GIR Number

Where an application is for a total value of Rs.50,000/- or more, the applicant or in case of applications in joint names, each of the applicants should mention his/ her/ their Permanent Account number (PAN) allotted under Income Tax Act, 1961 or where the same has not been allotted, the GIR Number and the IT Circle/ Ward/ District should be mentioned. In case where neither the PAN nor the GIR Number has been allotted, or the applicant is not assessed to Income Tax, the appropriate box provided for the purpose in the application form must be ticked. Applications without this will be considered incomplete and are liable to be rejected. A copy of the PAN Card or the PAN Allotment Letter is required to be submitted with the application form. Application Form without this information or document shall be consider incomplete and are liable to be rejected.

g. Joint application in case of Individuals

Applications can be in single or joint names (not more than three). In the case of joint applications, all payments will be made out in favor of the first applicant. All communications will be addressed to the first named applicant whose name appears in the Application form at the address mentioned therein.

h. Application may be made by Hindu Undivided Families (HUF) through the Karta of the (HUF) and will be treated at par with individual applications.

i. Multiple Applications:

An applicant should submit only one application (and not more than one) for the total number of Equity

Shares required. Two or more applications in single and /or joint names will be deemed to be multiple applications if the sole and /or first applicant is one and the same. However, employees may apply in the public offer.

In case of applications by Mutual Funds, a separate application must be made in respect of each scheme

of an Indian Mutual Fund registered with SEBI and such applications will not be treated as multiple applications, provided that the applications made by the Asset Management Company/Trustees/ Custodian clearly indicate their intention as to the scheme for which the application has been made. Application made by permanent/regular employees of the Company both under the reserved category for employees as well as in the net public offer shall not be treated as multiple applications.

The Company reserves the right to accept or reject, in its absolute discretion, any or all-multiple

applications. A separate single cheque /Draft must acCompany each application form. j. Stock invest Investors will not have the facility of applying through stock invest instrument, as RBI has withdrawn the

Stock invest Scheme, vide Notification no. BOD.NO.FSC.BC.42/24.47.001/2003-04 dated 05th November 2003.

k. Investment Limits for Mutual Funds / Venture Capital Funds

No Mutual Fund scheme shall invest more than 10% of its Net Asset Value in the 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 Fund. No Mutual fund should own more than10% of any Company’s paid up capital carrying voting rights.

Applications made by Asset Management Companies or Custodians of a Mutual Fund shall clearly

indicate the name of the concerned scheme for which application is being made. The SEBI (Venture Capital) Regulations 1996 and the SEBI (Foreign Venture Capital) Regulations 2000

prescribe Investment restriction on Venture Capital Fund and Foreign Venture Capital Investors registered with SEBI, Accordingly holding by any Venture Capital Fund and Foreign Venture Capital Investor should not exceed 25% of the corpus of Venture Capital Fund and Foreign Venture Capital

- 139 -

Investor. Equity Shares allotted to Venture Capital Funds and Foreign Venture Capital Investor through this Issue shall be locked in for a period of 1 year.

Note:

• Applicants are requested to write their names and application serial number on the reverse of the instruments by which the payments are being made to avoid misuse of instruments submitted along with the applications for Equity Shares.

• Application by NRIs on non-repatriation basis can be made using the Form meant for Public out of the

funds held in Non Resident (Ordinary) Account (NRO). The relevant bank certificate must acCompany such forms. Such applications will be treated on par with the applications made by the public.

• For further instructions, please read the Application Form carefully.

B. PAYMENT INSTRUCTION ( For Resident Investors )

1. Payment may be made by way of cash or cheque / demand Draft (money / postal order will not be

accepted) drawn on any bank, including a co-operative bank which is situated at and is a member or sub-member of a banker’s clearing house located at a place where the application form is submitted, i.e. at designated collection centers.

2. Outstation cheques / demand Drafts drawn on banks not participating in the clearing process will not be

accepted. 3. All cheques / demand Drafts acCompanying the application forms should be payable in the name of

“Yogendera Worsted Limited – Public Issue” and crossed “ A/c Payee only” 4. The application shall be made only by way of cash / cheque / demand Draft. However, if the amount

payable on application is Rs.20,000/- or more, such payment must be effected only by way of an account payee cheque or bank Draft in terms of Section 269 SS of the Income Tax Act, 1961. Otherwise the application may be rejected and application money refunded without any interest

C. PAYMENT INSTRUCTIONS (For NRI’s / FII’s on a repatriable basis) Application made by NRIs 1. Application should be made only on the prescribed application form

• In Single or joint names (not more than three) • In the name of individuals, societies and by Non- Resident individuals of Indian nationality/ origin and

NOT in the names of minors, firms, partnerships, foreign nationals or their nominees. A certificate in the prescribed form OAC/ OAC-1 issued by Overseas Auditor/Chartered Accountant/Certified Public Accountant must acCompany applications by societies.

• With remittances from abroad for the amount payable on application per share through approved

banking channels or out of funds held in Non-Resident External (NRE)/Foreign Currency Non Resident (FCNR) accounts maintained with banks authorized to deal in foreign exchange in India, along with the certificate from the bank issuing the Draft confirming that the Draft has been issued by debit to NRE/FCNR account.

2. Application for the NRI Category can be obtained from the registered office of the Company, as mentioned

on the front cover page of this Draft Prospectus. 3. The allotment of Equity Shares to Non-Resident Indians shall be subject to RBI approval or any other

requisite authority as may be necessary under the existing Exchange Control Regulation. The sale

- 140 -

proceeds of such investment in Equity Shares by NRIs will be allowed to be repatriated along with the income thereon, subject to instructions from RBI then in force and subject to Indian Tax Laws, provided that the investments are made by inward remittance from abroad through approved banking channels or out of funds held in NRE/FCNR accounts maintained with a bank in India

4. Refund / dividend and other distributions, if any, will be payable in Indian Rupees only and net of bank

charges/commission. In case of applicants who remit their application money from funds held in NRE / FCNR accounts, such payments shall be credited to their respective NRE / FCNR accounts (details of which shall be furnished in the space provided for this purpose in the Application Form), under intimation to them. In case of applicants who remit their money through Indian Rupee Drafts from abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as maybe permitted by RBI at the exchange rate prevailing at the time of remittance and will be dispatched by registered post, or if the applicants so desire, will be credited to their NRE/FCNR accounts, details of which are to be furnished in the space provided for this purpose in the Application Form. The Company will not be responsible for loss, if any, incurred by the applicant on account of conversion of Foreign Currency into Indian Rupees and vice versa.

5. Application in this category cannot be made out of NRO accounts and such applications would be rejected.

Applications out of NRO accounts can, however, be made in the category of Resident Indian public. 6. All Cheques /bank Drafts acCompanying the Application Form must be made payable to “Yogindera

Worsted Limited – Public Issue- NRI” crossed “Account payee only”. For further instructions please read the Application Form carefully. FOR FURTHER INSTRUCTIONS REGARDING APPLICATIONS FOR THE EQUITY SHARES, INVESTORS ARE REQUESTED TO READ THE APPLICATION FORM CAREFULLY. SUBMISSION OF COMPLETE APPLICATION FORMS: All applications duly completed and accompanied by cash/ cheques/ demand Drafts shall be submitted at the branches of the Bankers to the Issue (listed in the Application Form) before the closure of the Issue. Applications should NOT be sent at the Company’s and the Lead Managers offices. For investors residing at places where the Bankers to the Issue’s collection centers are not located, application Forms along with Bank Drafts payable at Mumbai can also be sent by registered post with acknowledgement due to the Registrars to the issue, Intime Spectrum Registry Limited at their address mentioned on the front cover page, so that the same can be received before the closure of the subscription list. No separate receipts will be issued for the application money. However, the Bankers to the Issue or their approved collecting branches receiving the duly completed application form will acknowledge receipt of the application by stamping and returning to the applicant the acknowledgement slip at the bottom of each application form. Applications shall deem to have been received by the Company only when submitted to the Bankers to the Issue at their designated branches or on receipt by the Registrars as detailed above and not otherwise. For further instructions, please read the application form carefully. ACCEPTANCE OF APPLICATIONS The Company reserves the right to accept or reject, any application, in whole or in part, without assigning any reason therefore in case of Qualified Institutional Buyers. In case of Non-Institutional Investors and Retail Individual Investors, Permanent Employees, the Company has a right to reject bids based on technical grounds. If the application is rejected in full, Consequent refunds shall be made by cheque or pay order or Draft and will be sent by Registered/Speed Post to the applicant's address at the applicant's risk.

- 141 -

Grounds for Technical Rejections Applicants are advised to note that applications are liable to be rejected among others on the following technical grounds:

1. Amount paid does not tally with the number of Equity Shares applied for; 2. Age of first applicant is not given; 3. Application by minor; 4. Copy of PAN or GIR number not given if application is for Rs. 50,000/- or more; 5. Application for Equity Shares which are not in multiples of 250; 6. Multiple applications; 7. In case of application under Power of Attorney or by limited companies, corporate, trust etc., relevant

documents are not submitted; 8. Signature of the sole and/or joint applicants missing 9. Application form does not have Applicant’s depository account details ; 10. Application Forms are not delivered by the applicant within the time prescribed as per the Application

Form, Issue Opening Date advertisement and this Draft Prospectus and as per the instructions in this Draft Prospectus and Application Form; or

11. Applications by Overseas Corporate Bodies.

Applications Which Are Not Complete In Every Respect Or Are In Contravention Of Any Provisions / Instructions Contained In This Draft Prospectus Or In The Memorandum Containing Salient Features Of Draft Prospectus Are Liable To Be Rejected.

- 142 -

BASIS OF ALLOTMENT In the event of Public issue of Equity Shares being over-subscribed, the allotment will be on a proportionate basis, and the basis of allotment will be finalized in accordance with the SEBI Guldelines and in consultation with BSE (The Designated Stock Exchange). The Executive Director / Managing Director of BSE along with the lead managers and the Registrar to the issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner in accordance with the following guidelines: 1. Proportionate Allotment Procedure Allotment shall be on proportionate basis within the specified categories, rounded off to the nearest integer subject to a minimum allotment being equal to the minimum application size i.e. 250 Equity Shares If the proportionate allotment to an applicant works out to a number that is more than 250 Equity Shares but is a fraction, then, for a fraction equal to or higher that 0.50 shall be rounded off to the next integer. If that fraction is lesser that 0.50 the fraction shall be ignored. All applications in such categories shall be allotted Shares arrived at after such rounding off. 2. Reservation for Retail Individual Investors The above proportionate allotment of Equity Shares in an issue that is oversubscribed shall be subject to the reservation for Retails individual investors as described below: a. A minimum 50% of the net Issue to the public will be made available for allotment in favour of those

individual applicants who have applied for Equity Shares of or for a value of not more than Rs.1,00,000/-. This percentage may be increased in consultation with the Designated Stock Exchanges depending on the extent of response to the Issue from investors in this category.

b. The balance Net offer of Equity Shares to the public shall be made available for allotment to :

i.Individual applicants other that retail individual investors and

ii.Other investors including corporate bodies/institutions and individual irrespective of the number of Equity Shares applied for.

c. The Un-subscribed portion of the net offer to any of the categories specified in a or b shall be made available

for allotment to applicants in the other category, if so required. The drawal of lots (where required) to finalize the basis of allotment, shall be done in the presence of a public representative on the Governing Board of BSE ( designated stock exchange) The basis of allotment shall be signed as correct by the Executive Director / Managing Director of BSE (Designated Stock Exchange and the public representative in addition to the lead Managers and the Registrar to the issue. LETTER OF ALLOTMENT /REFUND ORDERS The Company shall give credit to the Beneficiary account with Depository Participants within two (2) working days of finalisation of the basis of allotment of Equity shares. The Company shall dispatch refund orders, if any, of value up to Rs.1500/- by ‘Under Certificate of Posting’ and will dispatch refund orders above Rs.1500/- if any, by ‘Registered Post’ at the sole or first applicants sole risk. The Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at the stock exchanges mentioned above are taken within 7 working days of finalisation of the basis of Allotment for the issue. In accordance with the Companies Act, the requirement of the Stock Exchange and the SEBI Guidelines, the Company further undertakes that :

- 143 -

1. Allotment of Equity Shares will be made within 30 days from the Issue closing date 2. Dispatch of refund orders will be done within 30 days from the issue closing date

3. The Company shall pay interest @ 15% per annum if the allotment has not been made and the

refund orders are not dispatched to the investors within 30 days from the date of closure of the issue.

The Company shall provide adequate finds required for dispatch of refund orders or allotment advice to the Registrar to the issue. Refunds will be made through Electronic Clearing Service (ECS) in selected locations and through refund orders drawn on the bank(s) appointed by the Company, as refund bankers. Such instrument will be payable at par at the places where application are accepted. Bank charges, if any, for encashing such cheques or pay orders will be payable by the applicants. DESPATCH OF REFUND ORDERS The Company shall ensure dispatch of refund orders by following mode: a) In case of applicants residing at Ahmedabad, Bangalore, Bhubneshwar, Kolkatta, Chandigarh, Chennai,

Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvanthapuram – refund of applications money shall be done through Electronic Clearing Service (ECS) where in the refund amount will be directly credited in the bank account of the investor.

b) In case of applicants residing at places other than those specified in (a) above refund of application money

shall be done through Refund Orders. Refund Orders for Rs.1500/- and above will be dispatched through Registered post only at the Sole or First holders. Refund order for less than Rs.1500/- will be dispatched ‘Under Certificate of Posting’, which will be at the risk of sole / First applicant

Adequate fund for dispatch of refund orders will be made available to the Registrar by our Company. INTEREST IN CASE OF DELAY IN DISPATCH OF ALLOTMENT LETTERS / REFUND ORDERS: The Company agrees that as far as possible allotment of securities offered to the public shall be made within 30 days of the closure of public issue. The Company further agrees that it shall pay interest @15% per annum if the allotment letters/ refund orders have not been dispatched to the applicants (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) within 30 days from the date of the closure of the issue. However applications received after the closure of issue in fulfillment of underwriting obligations to meet the minimum subscription requirement, shall not be entitled for the said interest.” ACCESS TO THE FUNDS: Subscription received against this issue would be kept in a separate bank account and the Company will not have access to these funds so collected until it has received approval for allotment from BSE and listing and trading permission is received from BSE where listing is proposed in terms of this Draft Prospectus.

EQUITY SHARE IN DEMATERIALISED FORM WITH NSDL OR CDSL As per the provisions of Section 68B of the Companies Act, 1956, the Equity Share of the Company can be held in a dematerialized form, (i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through electronic mode). Successful allottees in this issue will be compulsorily allotted Equity Shares in dematerialized form. In this context, two tripartite agreements have been signed between the Company, the Registrar and the Depositories:

- 144 -

a. An agreement dated 08/12/2006 between Yogindera Worsted Limited, NSDL and Intime Spectrum Registry Limited; and

b. An agreement dated DD/MM/YYYY between the Yogindera Worsted Limited, CDSL and Intime Spectrum

Registry Limited.

All investors can seek allotment only in dematerialized mode. However an investor shall have an option to hold the Shares in Physical form or demat form. After the allotment in the proposed issue, allottees may request their respective DP for rematerialization of Shares if they wish to hold Shares in physical form. Applications without relevant details of his or her depository account are liable to be rejected. The ISIN No. granted to the Equity Shares of the Company is ISIN INE264H01019 1. An applicant applying for Shares must have at least one beneficiary account with any of the Depository

Participants (DPs) of NSDL or of CDSL, registered with SEBI, prior to making the application. 2. The applicant must necessarily fill in the details (including the beneficiary account no. and Depository

Participant’s ID no.) in the application form.

3. Equity Shares allotted to an applicant in the electronic form will be credited directly to the respective beneficiary accounts (with the DP)

4. Names in the share application form should be identical to those appearing in the account details in the

depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the depository

5. The Registrar to this Issue will directly send non-transferable allotment letters/refund orders to the

applicant.

6. If incomplete/incorrect details are given under the heading ‘Request for Shares in electronic form’ in the application form, it is liable to rejected.

7. The applicant is responsible for the correctness of the applicant’s demographic details given in the

application form vis- à-vis those with his/her Depository Participant.

8. 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 the Equity Shares of the Company are proposed to be listed are connected to NSDL and CDSL.

9. Trading in the Equity Shares of the Company would be in dematerialized form only for all investors.

10. Investors are advised to instruct their Depository Participants to accept the Equity Shares that may be

allocated to them pursuant to this Issue. UNDERTAKING BY THE COMPANY Our Company undertakes: 1. that the complaints received in respect of the Issue shall be attended to by the Company expeditiously

and satisfactorily; 2. that all steps for completion of the necessary formalities for listing and commencement of trading on

BSE where the Equity Shares are to be listed are taken within seven working days of finalization of the basis of allotment;

3. that the funds required for dispatch of refund orders / allotment letters/ Certificates by registered post

shall be made available to the Registrar to the Issue by the Company; 4. that where refunds are made through Electronic Transfer Services, a suitable communication shall be

sent to the applicant within 30 days or 15 days of closure of the issue, as the case may be, giving

- 145 -

details of the bank account where refunds is credited along with amount. 5. that the funds required for dispatch of refund order / allotment letters / Certificate by registered post

shall be made available to the Registrar to the issue by the Company. 6. that the certificates for Equity Shares / refund orders to non-resident Indian applicants shall be

dispatched within specified time; 7. that no further issue of Equity Shares shall be made till the Equity Shares offered through this Draft

Prospectus are listed or till the application moneys are refunded on account of non-listing, under-subscription, etc.

8. that the Company has not made any earlier public issue of Equity Shares through Prospectus. 9. that any given time, there shall be only one denomination of the Shares of the Company and that the

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

10. that all information shall be made available by the lead manager and the issuer to the public and

investors at large and no selective or additional information would be available for a section of the investor in any manner whatsoever including at the road show, presentations in research and sales report, etc.

UTILISATION OF ISSUE PROCEEDS The Board of Directors of our Company states that:

a. All monies received out of this issue of Shares to public shall be transferred to a separate bank account

other than the bank account referred to in sub-section (3) of section 73 of the Act; b. Details of all monies utilized out of the issue referred to in sub-item (a) shall be disclosed under an

appropriate separate head in the Balance Sheet of the Company indicating the purpose for which such monies had been utilized;

c. Details of all unutilized monies out of the issue of shares, if any, referred to in sub-item (a) shall be disclosed under an appropriate separate head in the Balance Sheet of the Company indicating the form in which such unutilized monies have been invested;

d. The utilization of monies received under promoter’s contribution and reservations shall be disclosed under an appropriate head in the Balance Sheet of the Company indicating the purpose for which such monies have been utilized; and

The Company undertakes that it shall not access the money raised in the issue till finalization of basis of allotment or completion of offer formalities.

- 146 -

SECTION IX – DISCRIPTION OF EQUITY SHARES AND TERMS OF ARTICLES OF ASSOCIATION

The Authorised Share Capital of the Company is Rs.16,00,00,000/- (Rupees Sixteen Crore only) divided into 1,60,00,000 (One Lacs Sixty Thousand ) Equity Shares Rs.10/- (Rupees Ten) each.

Pursuant to Schedule II of the Companies Act, 1956 and the SEBI Guidelines, the main provisions of the Articles of Association of our Company are detailed below:

Dematerialization / Re-materialization Of Securities Article 19.A provides that:

1. Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize / rematerialize its securities and to offer securities in a dematerialized form pursuant to the Depositories Act.

2. Every person subscribing to securities offered by the Company shall have the option to receive security

certificates or to hold the securities with a depository. Such a person who is the beneficial owner of the securities can at any time opt out of a depository, if permitted by the law, in respect of any security in the manner provided by the Depositories Act, and the Company shall, in the manner and within the time prescribed, issue to the beneficial owner the required Certificates of Securities. If a person opts to hold his security with a depository, the Company shall intimate such depository the details of allotment of the security, and on receipt of the information, the depository shall enter in its record the name of the allottee as the beneficial owner of the security.

3. All securities held by a depository shall be dematerialized and shall be in fungible form. No certificate

shall be issued for the securities held by the Depositories. Nothing contained in Sections 153 1 53A. 1538, 187B, 187C and 372A of the Act shall apply to a depository in respect of the securities I'\ed by it on behalf of the beneficial owners.

4.

(a) Notwithstanding anything to the contrary contained in the Act or these Articles, a depository snail be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of the beneficial owner.

(b) Save as otherwise provided in (a) above, the depository as the registered owner of the

securities shall not have any voting rights or any other rights in respect of the securities held by it.

(c) Every person holding securities of the Company and whose name is entered as the

beneficial owner in the records of the depository shall be deemed to be a member of the Company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a depository.

5. Every depository shall furnish to the Company information about the transfer of securities in the name

of the beneficial owners at such intervals and in such manner as may be specified by the bye-laws and the Company in that behalf.

6. Notwithstanding anything in the Act or these Articles to the contrary, where securities are held in a

depository, the records of the beneficial ownership may be served by such depository on the Company by means of electronic mode or by delivery of floppies or discs.

7. Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of securities

affected by a transferor and transferee both of whom are entered as beneficial owners in the records of a depository.

- 147 -

8. Notwithstanding anything in the Act or these Articles, where securities are dealt with by a depository, the Company shall intimate the details thereof to the depository immediately on allotment of such securities.

9. Nothing contained in Section 83 of the Act or these Articles regarding the necessity of having distinctive

numbers for securities issued by the Company shall apply to securities held with a depository.

10. The Register and Index of beneficial owners maintained by a depository under the Depositories Act shall be deemed to be the Register and Index of Members and Security holders for the purposes of these Articles.

Calls Article 20 provides that:

The board of Directors may from time to time (by a resolution passed at the meeting of Board and not by Circular Resolution) but subject to the condition herein after mentioned, make such calls as they think fit upon the member in respect of all monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium fixed times and each member shall pay the amount of every call so made of him to the persons and at the times appointed by the Directors. A call may be made payable by installments.

The Call shall not exceed 1/4th of the nominal value of the shares.

Article 21 provides that: Where any calls are made on the shares, such calls be made on a uniform basis on all shares falling under the same class. For the purpose of the Article, shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class.

Article 22 provides that:

At Least 30 day’s notice of every call otherwise than on allotment shall be given specifying the time of payment and if payable to any person other than the company the name of the person to whom the call shall be paid, provided that before the time for payment of such call the Directors may be notice writing to the members revoke the same.

Article 23 provides that:

A call shall be deemed to have been made at the time when the resolution the Board of Directors authorizing such call was passed any may be payable by those members whose appear on the Register of member on such date, or, at the discretion of the directors on such subsequent as shall be fixed by the Directors.

Article 24 provides that:

The Directors may from time to time, at their discretion extend such time as to all or any of members who on account of their residence (s) being at a distance or other cause, the Directors may deem entitled to such extension but no member shall be entitled to such extension as of right save as matter of grace a favour.

Article 25 provides that:

If by the terms of issue of any share, any amount is made payable at any fixed time or by installments at fixed times (whether on account of the capital 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 directors and of which due notice has been given and all the provisions herein contained In respect of calls shall relate to such amount or installment accordingly.

- 148 -

Article 26 provides that: If the sum payable in respect of any allotment/call or installment be not paid on or before the day appointed for payment thereof, the holder for the time being or allotters of the shares In respect of which an allotment/call the same at such rate as the Directors may determine from the day appointed for the payment thereof to the time of actual payment but the Directors, may waive payment of such interest wholly or in part.

Article 27 provides that:

Neither a judgement nor a decree in favour of the company for calls or other moneys due in respect of any shares nor any part payment or satisfaction there under nor the receipt by the company of a portion or any money which shall from time to time be due from any member in respect of any shares either by way of principal or interest nor any indulgence granted by the company in respect of the payment of any money shall preclude the forfeiture of such shares as hereinafter provided.

Article 28 provides that:

Subject to the provisions of the Act and these Articles, on the trial or hearing of any action or suit brought by the company against any member or his legal representative for the recovery of any money claimed to be due to the company in respect of any shares it shall be sufficient to prove that the name of the member in respect of whose shares money is sought to be recovered appears entered on the Register of Members as the holder of shares in respect of which money is sought to be recovered that the resolution making the call is duly recorded in the minute book, and that notice of such call was posted to the member or his representative in pursuance of these presents; and it shall not be necessary to prove the appointment of the Directors who made such call nor that the meeting at which any call was made was duly convened or constituted nor any other after whatsoever but the proof of the matters aforesaid shall be conclusive evidence of the debt.

Article 29 provides that:

The Directors may, if they think fit, receive from any member willing to advance the same, all or any part of the moneys due upon the shares held by him beyond the sums actually called for and upon the moneys so paid in advance or so much thereof as from time to time exceeds the amounts 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 such sum in advance and the Directors agree upon and the company may at any time repay the amount so advanced either by agreement with the member or otherwise un giving to such member three months notice in writing, No. Member paying any sum in advance shall be entitled to participate in profit or divide or to voting rights in respect of the moneys so paid by him until the same would, but for such payment, become presently payable.

Forfeiture, Surrender And Lien Article 30 provides that:

If any member fails to pay the whole or any allotment money or call or installment or any money due in respect to any shares either by way of principal or interest on or before the day appointed for the payment of the same, the Directors may at any time thereafter during such time as the allotment money or call or installments or any part thereafter and other moneys remain unpaid or a judgment or decree in respect thereof, remain unsatisfied in whole or in part, serve a notice on such member or on the person (if any) entitled to the share by transmission requiring him to pay such allotment call for installment or such part thereof or other moneys as remain unpaid together with any interest that may have accrued and all expensed (legal or otherwise) that may have been incurred by the company by reason of such non payment.

Article 31 provides that:

The notice shall name a day (not being less than30 days from the date of the notice) on or before which and the place or places on or at which such allotment money or call installment or such part thereof and other

- 149 -

moneys as aforesaid and such interest and expenses as aforesaid are to be paid, and if payable to any person other than the company, the person to whom such payment is to be made. The notice shall also state that in the event of non-payment at or before the time and (if payable to any person other than the company) at the place appointed, the shares in respect of which the allotment or call was made or installment is payable will be liable to be forfeited.

Article 32 provides that:

If the requirement of any such notice as aforesaid shall not be complied with any of the shares in respect of which such notice has been given may at any time thereafter but before payment of all allotment money calls or installments, interests and expenses and other moneys due in respect thereof be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

Article 33 provides that:

When any share shall have been so forfeited, an entry of the forfeiture with the date thereof shall be made in the Register of Members in whose name it stood immediately prior to be forfeiture but no forfeiture shall be, in any manner, invalidated by any omission or neglect to give such notice or to make any entry as aforesaid.

Article 34 provides that:

Any share so forfeited shall be deemed to be the property of the company and may be sold, re-allotted or otherwise disposed of either to the original holder thereof or to any other person upon such terms and in such manner as the Board shall think fit.

Article 35 provides that:

The Directors may at any time before any share so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon 1 such conditions as they think fit.

Article 36 provides that:

Any member whose shares have been forfeited shall notwithstanding the t forfeiture, be liable to pay and shall forth with pay to the company all allotment money or call, installments, interest, expenses and other moneys owing J upon or in respect of such shares at the time of the forfeiture together with interest thereon from tine of the forfeiture until payment at such rate as the Directors may determine and the Directors may enforce the payment of the whole or a portion thereof as if it were a new call made at the date of the forfeiture but shall not be under any obligation to do so.

Article 37 provides that:

The forfeiture of share shall involve extinction at the time of forfeiture of all interest in all claims and demands against the company, in respect of the share and all other rights incidental to the share, except only such of those rights as by these presents are expressly saved.

Article 38 provides that:

The Directors may subject to the provisions of the Act, accept a surrender of any share from or by any member desirous of surrendering the share on such terms as they think fit.

Article 39 provides that:

The company shall have no lien on its fully paid shares. In the case of partly paid up shares the company shall have a first and paramount lien on such: shares registered in the name of each member, whether solely or jointly with other and upon the proceeds sale thereof for moneys called or payable a fixed time in respect of such shares and whether held solely or jointly with any other person and whether the period for the payment, fulfillment or discharge thereof shall have actually arrived or not and no equitable interest in

- 150 -

any share shall be created except upon the footing and condition that Article 14 is to have full effect. Any such lien shall extend to all dividends and bonuses from time to time declared in respect of such shares. 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.

Article 40 provides that:

For the purpose of enforcing such lien the Directors may sell the shares subject thereto in such manner as they shall think fit, but no sale shall be made until such period as aforesaid shall have arrived and until notice in writing of the intention to sell such shares shall have been served on such member or the person (if any) entitled by transmission to the shares and default shall have been made by him in payment, fulfillment or discharge of such debts, liabilities or engagements for 7 days after such notice.

Article 41 provides that:

The net proceeds of any such sale payment of the costs of such sale shall be applied in or towards the satisfaction of such debts, liabilities or engagements of such member and the residue, (if any), shall subject to a like lien for sums not presently payable as existed upon the shares before the sale be paid to such member or the person (if any) entitled by transmission to the shares so sold.

Article 42 provides that:

A certificate in writing under the hand of two Directors that the call in respect of a share was made and notice thereof given and default in payment of the call was made and that the forfeiture of the share was made by a resolution of the Directors to that effect shall be conclusive evidence of the facts stated therein as against all persons entitled to such share.

Article 43 provides that:

Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers hereinabove given the Board may appoint some person to execute an instrument or transfer of the shares sold and cause the purchaser’s name to be entered in the Register of members in respect of shares sold and the company may receive the consideration, if any, give for the share on any sale, re-allotment or other disposition thereof and the person to whom such share is sold, re-allotted or disposed of may be registered as the holder of the share and he shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings with reference to the forfeiture, sale, re-allotment or other disposal of the share 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.

Article 44 provides that:

Upon any sale, re-allotment or other disposal under the provisions of the preceding Article, the certificate or certificates originally issued in respect of the relevant shares shall (unless the same shall on demand by the company have been previously surrendered to it by the defaulting Member) stand cancelled and become null and void and of no effect, and the Directors shall be entitled to issue a new certificate or certificates in respect of the said shares to the person or persons entitled thereto.

Transfer And Transmission Of Shares Article 45 provides that:

The Company shall keep a book to be called the “Register of Transfers” and therein shall be fairly and distinctly entered the particulars or every transfer or transmission of any share.

Article 46 provides that:

The Company shall keep a book to be called the “Register of Renewed and Duplicate Certificates” and therein shall be fairly entered the particulars of the issue of renewed and duplicate certificates in exchange

- 151 -

for those which are sub divided or consolidated or in replacement of those which are defaced, torn or old, decrepit, whom out or rendered useless.

Article 47provides that:

The instrument of transfer of any share shall be in writing and all 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 transfers of shares and the registration thereof.

Article 48.provides that:

1 An application for the registration of a transfer of the shares in the Company may be made either by the transferor or the transferee.

2. Where the application is made by the transferor and related to partly pay shares the transfer shall not be registered unless the Company gives notice of the application to the transferee and the transferee makes no objection t the transfer within two weeks from the receipt of notice.

3. For the purpose of Clause (2) above the notice to the transferee shall b deemed to have been duly given if it is dispatched by pre-paid registered’ post to the transferee at the address given in the instrument of transfer an, shall be deemed to have been duly delivered at the time at which it would, have been delivered in the ordinary course of post.

Article 49 provides that:

Every such instrument of transfer shall be signed by the transferor are transferee and the transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register of Member in respect thereof.

Article 50A provides that:

The company shall not register a transfer of shares in the Company unless a proper instrument of transfer duly stamped and executed by or on behalf c the transferee and by or on behalf of the transferee, and specifying the name address and occupation, if any, of the transferee, has been delivered to the Company within the prescribed period along with the certificate relation the shares or if no such share certificate is in existence, along with the letting of allotment of the shares. Provided that whereon an application in writer made to the Company by the transferee and bearing the stamp required fl an instrument of transfer, it is proved to the satisfaction to the Board (Directors that the instrument of transfer signed or on behalf of the transferee has been lost, the Company may register the transfer on such terms as t indemnity as the Board thinks fit. Provided further that nothing in this Article shall prejudice any power of the Company to register as shareholder and person to whom the right to any shares in the company has been transmitter by operation of law.

Article 50B provides that:

Before registering any transfer tendered for registration, the company may if it so think fit, give notice by letter in the ordinary course to the registered holder that such transfer deed has been lodged and that unless objection is taken, the transfer will be registered and if such registered holder fails to lodge an objection in writing at the office of the Company within four weeks from the posting of such notice to him, he shall be deemed to have admitted the validity of the said transfer.

Article 51provides that: The board may, subject to the right of appeal conferred by Section 111 of the Companies Act, 1956, decline to register:

a. the transfer of share not being a fully paid share, to a person of whom they do not approve; or

b. Any transfer of share on which the Company has a lien, provided that the registration of transfer shall, not be refused on the ground of transferor being either alone or jointly with any person or person Indebted to the .9 Company any account except a lien.

- 152 -

c. The Company shall comply with provisions of Section 22 A of Securities Contracts (Regulations) Act, 1956, as regard to free transferability and registration of transfer of shares/debentures.

Article 52 provides that: If the company refuse to register the transfer of any shares or transmission of any right therein the company shall within two months from the date on I which the instrument of transfer or intimation of transmission was lodged with the company, send notice of refusal to the transferee & transferor or the person giving intimation of the transmission, as the case may be, and thereupon the provisions of Section 111 of the Act or any statutory modification thereof for the time being in force shall apply.

Article 53 provides that:

A transfer of a share in the company of a deceased member thereof made by his legal representative shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer.

Article 54 provides that:

The instrument of transfer shall after registration be retained by the company and shall remain in its custody. All instruments of transfer, which the Directors may decline to register, shall on demand be returned to person depositing the same. The directors may cause to be destroyed all transfer deeds lying with the company for a period of ten years or more.

Article 55 provides that:

The directors shall have power, on giving not less than seven days previous notice by advertisement as required by Section 454 of the Act to close the transfer books of the company, the Register of Members or the Register of Debenture-holders at such time or times and for such period or periods of time not exceeding in the whole 45 days in each year but not exceeding 30 days at a time as may seem expedient to the Board.

Article 56 provides that:

The executors of administrators or the holder of a Succession Certificate in respect of the estate of a deceased member (not being one of two or more joint holders) shall be the only person recognized by the company as having an title to the shares registered in the name of such member and the company shall not be bound to recognize such executors or administrators unless such executors or administrators shall have first obtained Probate or Letters of Administration or Succession Certificate as the case may be, from a Competent Court in India, provided that in any case where the Directors in their absolute discretion think fit, the Directors may dispense with the production of Probate or Letters of Administration or Succession Certificate and under the provision of Article 57, register the name of any person who claims to be absolutely entitled to the shares standing in the name of a deceased member, as a member.

Article 57 provides that:

Subject to the provisions contained in article 51 & 52 hereof, any person, becoming entitled to a share in consequence of the death, lunacy of insolvency of any member, upon producing proper evidence of the grant of Probate or letters of Administration or Succession Certificate or such other evidence that he sustains the character in respect of which he proposes to act under this clause or of his title to the shares as the Board thinks sufficient, may, with the consent of the Board (which shall not be under any obligation’ to give), be registered as member in respect of such shares, or may subject to the regulations as to transfer herein before contained, transfer such shares. The clause is herein referred to as the transmission clause.

Article 58 provides that:

- 153 -

Subject to the provisions of the Act and these Articles, the Directors shall have the same rights to refuse to register as member a person entitled by transmission to any shares or his nominee as if he were the transferee named in an ordinary transfer presented for registration.

Article 59 provides that:

A person entitled to a share by transmission shall, subject to the rights of the Directors to retain such Dividends or money as hereinafter provided, be entitled to receive, and may give a discharge for any dividends or other moneys payable in respect of the share.

Article 60 provides that:

Every transmission of a share shall be verified in such manner as the directors may require and the company may refuse to register any such transmission until the same to be so verified or until or unless an indemnity be given to the company with regard to such registration which the Directors at their discretion shall consider sufficient, provided nevertheless that there may not be any obligation on the company or the Directors to accept any indemnity.

Article 61 provides that:

The company shall not charge any fee on registration of transfer or transmission.

Article 62 provides that:

The company shall incur no liability or responsibility whatsoever in consequence of its registering or giving effect to any transfer or shares made, or purporting to be made by any apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of person having or claiming any equitable right, or interest title to or in the said shares notwithstanding that the company may have had notice of each equitable right, title or interest or may have received a notice prohibiting registration of such transfer any may have entered such notice or referred such notice thereto in any book of the company and the Company shall not be bound or required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or interest or be under any liability whatsoever for refusing or neglecting so to do though it may have been entered or referrer’ to in some book of the Company. The Company shall nevertheless be at liberty to regard and attend to any such notice and give effect there to, if the Directors shall so think fit.

Modification/ Variation Of Rights Article 73A provides that:

If at any time the share capital is divided into different classes the rights attached to any class of shares (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of Sections 106 and 107 of the Act, be modified, commuted, affected, abrogated or varied (whether or not the company is being wound up) with the consent in writing of the holders of not less than three forth of the issue shares of that class or with the sanction of special resolution passed at a separate meeting of the holders of the class of shares and all the provisions hereinafter contained as to General Meeting shall mutates mutandis apply to every such Meeting.

Borrowing Powers Article 75 provides that:

Subject to the provisions of Section 292 and 293 of the act and these Article and without prejudice to the other power conferred by these Articles The Director Shall have the powers from time to time at their discretion by a resolution passed at a meeting of the Board, not by the Circular Resolution, to accept deposits from members, either in advance of calls or otherwise and generally raise or borrow or secure the payment of any sum or sums of moneys for the purpose of the company provided that the total amount borrowed at any time together with the moneys already borrowed by the company (apart from temporary loans obtained from the company’s Banners ‘ in the ordinary course of business shall not without the consent of the company in General Meeting, exceed the aggregate of the paid up capital of the Company

- 154 -

and its free reserves that is to say reserves not set apart for any specific purpose. Such consent shall be obtained by an ordinary resolution, which shall provide for the total amount upto which moneys may be borrowed by the Board. The expression “Temporary Loans” in this Article means loans repayable on demand or within six months from the date of the loan such as short term such credit arrangement discounting of bills and the issue of other short-term loans of seasonal character but does not include loans raised for the purpose of financing expenditure of a capital nature.

Article 76 provides that:

Subject to the provisions of the Act, and these Articles the Directors may, by resolution passed at the meeting of the Board and not by resolution: -” by circular, raise and secure the payment of such sum or sums in such manner and upon such terms and conditions in all respect as they think fit and in particular by the issue of bonds, perpetual or redeemable debentures or debenture stock or other securities issued or to be issued by the company shall be under the control of the directors who may issue them upon such terms and conditions and in such manner and for such consideration as they shall consider to be for the benefit of the Company.

Article 77 provides that:

Any bonds, debentures, debenture-stock or other securities issued or to be issued by the company shall be under the control of the Directors who may -issue them upon such terms and conditions and in such manner and for such consideration as they shall consider being for the benefit of the Company.

Article 77A provides that:

Save as provided in Section 108 of the Act, no transfer of debentures shall be registered unless a proper instrument of transfer duly stamped & executed by the transferor and transferee has been delivered to the Company together with the certificate or certificates of debentures, bonds, if the Board refuse to register the transfer notice of the refusal.

Article 78 provides that:

Debentures, debenture-stock, bonds or other securities may be made assignable free from any equities between the company and the person to whom the same may be issued.

Article 79provides that:

Subject to the provisions of the Act and these Articles, any bonds, debentures, debenture-stock or other securities may be issued at a discount, premium or otherwise and with any special privilege and conditions as to redemption, surrender, drawings, allotment of shares, attending (but not voting) at general meetings, appointment of Directors and otherwise. Provided that debentures with the sanction of the Company in General Meeting.

Article 80 provides that:

If any uncalled capital of the company is included in or charged by way of any mortgage or other security by the Directors, the Directors shall subject the provisions of the Act and the Articles; make calls on the members in respect of such uncalled capital in trust for the person in whose favour such mortgage or security is executed.

Article 81 provides that:

Subject to the provisions of the Act and these Articles, if the Directors or any of them or any other person shall incur or be about to incur any liability whether as principal or surety for the payment 0, any sum primarily due from the company, the Directors may execute or cause to be executed any mortgage, charge or security of, on over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the Directors or any other person so becoming liable as aforesaid from any loss in respect of such liability.

- 155 -

Article 82 provides that: The Board shall cause a proper Register to be kept in accordance with the provisions of Section 143 of the Act of all mortgages, debentures and charges specifically affecting the property of the company including all floating charges on the undertaking or any property of the company and shall cause the requirements of Section 118,125and 127 to 144 (both inclusive) of the Act in that behalf to be duly complied with (within the time prescribed by the said sections or such extensions thereof as may be permitted by the Court of the Register of Companies) so far as they are to be complied with by the company. The company shall, if at any time, it issues debentures, keep a register and index of Debentures holders in accordance with Section 152 of the Act.

General Meetings Article 83 provides that:

The statutory meeting of the company shall be held at such place and time (not less than one month nor more than six months from the date on which the company is entitled to commence business) as the Directors determine, and in connection therewith, the Directors shall comply with the provisions of Section 165 of the Act.

Article 84 provides that:

1. The Company shall in addition to any other meetings hold a general meeting (herein called an “Annual General Meeting”) at the intervals and in accordance with the provisions herein specified. The company shall hold its first Annual General Meeting within eighteen moths from the date of the incorporation of the company and if such General Meeting is held within such period it shall not be necessary for the company to hold any Annual General Meeting in the year of its incorporation or in the following year, but subject to the aforesaid provisions as the Annual meeting shall be so held at least once in every calendar year and within six months after the expiry of each financial year and that not more than fifteen months shall elapse between the date of one Annual General Meeting and the next. Provided however, that, if the Registrar of Companies shall have for any special reason extended the time within which any Annual General Meeting shall be held by a further period not exceeding three months, the Annual General Meeting may be held within the additional time allowed by the Registrar.

2. Every Annual General Meeting shall be called for at a time during business hours and on such day (not being a public holiday) as the Directors may from time to time determine and it shall be held either at the Registered f Office of the Company or at some other place within the city, town or village in which the Registered Office of the Company is situated. The company \ may by a resolution passed at one Annual General Meeting, fix the time for f its subsequent Annual General Meeting. The notice calling the meeting shall specify it as the Annual General Meeting.

Article 85 provides that:

All general meetings other than annual general meetings shall be called extra ordinary general meetings. Article 86 provides that:

The Board of Directors may call an extra-ordinary general meeting whenever they think fit. Article 87provides that:

1) The Board of Directors shall, on requisition of such number of members of the company shall hold, in regard to any matter at the date of deposit of the requisition, not less than one tenth of such of the paid up capital of the company upon which all calls or other moneys then due shall have been paid as at that date carries the right of voting in regard to the matter, forthwith proceed duly to call an Extra-ordinary General Meeting of the company and the provisions of Section 169 of the Act (including the provision below) shall be applicable.

2) The requisition shall set out the matter for the consideration of which the meeting is to be called, shall be signed by requisitionsits, and shall be deposited at the Registered Office of the Company.

- 156 -

3) The requisition may consist of several documents of like form, each signed by one or more requisitionsits.

4) Where two or more distinct matters are specified in the requisition, the provision of clause (1) above shall apply separately in regard to each matter and the requisition shall accordingly be valid only in respect of those matters in regard to which the condition specified in that clause is fulfilled.

5) If the Board of Directors does not, within twenty-one days from the date of the deposit of the valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of these matters on a day not later than forty-five days from the date of the deposit of the requisition, the meeting may be called by the requisitionsits themselves or by such of the requisitionsits as represent either a majority in the value of paid up share capital held by all of them or not less than one-tenth of such of the paid-up share capital of the company as is referred to in clause (1) above whichever is less.

6) A meeting called under clause (5) above by requisitionsits or any of them shall be called in the same manner similar as that in which meetings are to be called by the Board, but shall not be held after the expiration of three months from the date of the deposit of the requisition.

7) Any reasonable expenses incurred by the requisitionsits by reason of the failure of the Board duly to call meeting shall be repaid to the requisitionsits by the company; and any sum so repaid shall be retained by the company; out of any sums due or to become due from the company by way of fees or other remuneration for their services to such of the Directors as were in default.

Article 88 provides that:

1) A general meeting of the company may be called by giving not less than twenty-one days notice in writing.

2) However, a general meeting may be called after giving shorter notice than twenty one days if the consent is accorded thereof;

I. In the case of an Annual General Meeting by all the members entitled to vote thereto; and (ii) In the case of any other meeting by members of the company holding no less than 95 per cent of such part of the paid up share capital of the company’ as gives a right to vote at that meeting.

Article 89 provides that:

1) Every notice of a meeting of members of the company shall specify the r place and date and hour of the meeting, and shall contain a statement of the business to be transacted thereat.

2) In every notice there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself and that a proxy need not be a member of the company.

Article 90 provides that:

1) In the case of an Annual General Meeting all business to be transacted at the meeting shall be deemed specially, with the exception of business relating to:

I. The consideration of the Accounts, Balance Sheet and Profit and Loss Account and the Report of the Board of Directors and the Auditors;

II. The declaration of dividend;

III. The appointment of Directors in the place of those retiring;

IV. The appointment of and the fixing of the remuneration of the Auditors.

2) In the case of any other meeting all business shall be deemed special. 3) Where any item of business to be transacted at the meeting is deemed to be special as aforesaid there

shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business including in particular, the nature of the concern or interest if any, therein of every Director and of the Manager. Provided that where any item of special business as aforesaid to be transacted at meeting of the company relates to, or effects, any other company the extent of the share holding interest of any in that other company of every Director and the Manager of the company shall

- 157 -

also be set out in the explanatory statement, if the extent of such share holding interest is not less than 20 per cent of the paid up share capital of that other company.

4) Where any item of business to be transacted at the meeting of the company consists of according the approval of the meeting to any document, the time and place where the document can be inspected shall be specified in the explanatory statement.

Article 91 provides that:

Notice of every meeting shall be given to every member of the company in any manner authorised by Sub-Sections (1) to (4) of Section 53 of the Act and by these Articles. It shall be given to the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of the representative of the deceased or assignees of the insolvent or by any like description, at the address, if any in India supplied for the purpose by the person claiming to be so entitled, or until such an address has been so supplied, by giving the notice in any manner in which it might have been given if the death or insolvency had not occurred. Provided that where notice of a meeting is given by advertising the same in a newspaper circulating in the neighborhood of the registered office of the Company as provided for in Sub Section (3) of Section 53 of the Act, the explanatory statement need not be annexed to the notice as required by Section 173 of the said Act, but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the Company.

Article 92 provides that:

Notice of every meeting of the Company and every other communication relating o any General Meeting of the Company which any member of the Company is entitled to have sent to him, shall be given to the Auditor or Auditors for the time being of the Company, in the manner authorised by Section 53 of the Act; as in the case of any members of the Company.

Article 93 provides that:

The accidental omission to give notice of any meeting to or the non-receipt of any notice by any member or other person to whom it should be given shall not invalidate the proceedings at the Meeting or the Resolution passed thereat.

Article 94 provides that:

1) Where, by any provision contained in the Act or in these Articles, Special Notice is required or any resolution notice 01 the intention to move the resolution shall be given to the company not less than fourteen days before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and the day of the meeting.

2) The Company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as is given notice of the meeting or if that is not practicable, shall give them notice thereof, either by advertisement in newspaper having an appropriate circulation or in any other mode allowed by I these Articles, not less than seven days before the meeting.

Proceedings At General Meetings Article 95 provides that:

Five members entitled to vote and present in person shall be a quorum for a General Meeting and no business shall be transacted at any General Meeting unless the quorum requisite be present at the commencement of the business.

Article 96 provides that:

If within half an hour after the time appointed for the holding of a General Meeting a quorum be not present the meeting if convened on the requisition of shareholders shall be dissolved and in every other case shall stand adjourned to the same day in the next week or if that day is a public holiday until the next succeeding day which is not a public holiday at the same time and place or to such other day, time and place as the

- 158 -

Directors may by notice to the shareholders appoint. If at such adjourned meeting a quorum is not present within half an hour, those members present shall be a quorum and may transact the business for which the meeting was called.

Article 97 provides that:

No business shall be transacted at any adjourned meeting other than the business, which might have been transacted at the meeting from which the adjournment took place.

Article 98 provides that:

The Chairman of the Board of Directors shall be entitled to take the Chair at every General Meeting. If there be no Chairman or if at any meeting he is not present within 15 minutes after the time appointed for holding such meeting or is unwilling to act, the Directors present may choose a Chairman and in default of their doing so, the members present shall choose one of their members to be the Chairman of the meeting.

Article 99 provides that:

1) No business shall be discussed at any General Meeting except the election of a Chairman whilst the Chair is vacant.

2) If a poll is demanded on the election of the Chairman it shall be taken forthwith in accordance with the provisions of the Act and these Articles, the Chairman so elected on a show of hands will exercise all the powers of the Chairman under the Act and these Articles.

3) If some other person is elected Chairman as a result of the poll he shall be Chairman for the rest of the meeting.

Article 100 provides that:

The Chairman with the consent of any meeting at which a quorum is present may adjourn any meeting from time to time and from place to place in the city or the town or village in which the Registered Office of the company is situated.

Article 101 provides that:

When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of adjournment or of the business to be transacted at an adjourned meeting.

Article 102 provides that:

At any General Meeting, a resolution put to vote of the meeting shall, unless poll is (before or on the declaration of the result of the show of hands) deemed to be decided on a show of hands and unless a poll is so demanded, a declaration by the Chairman that a resolution has been carried, either unanimously or by a particular majority and an entry to that effect in the books containing the minutes of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.

Article 103 provides that:

Before or on the declaration of the result of the voting on any resolution or a show of hands, a poll may be ordered to be taken by the Chairman of his own motion and shall be ordered to be taken by him on demand made in that behalf by at least members having the right to vote on the resolution and present in person or by proxy or by a duly constituted attorney in case the member is a company or a corporation either registered in India or aboard or by any member present in person or by proxy and having not less than one tenth of the total voting power in respect of the resolution or by any member or members present in person or by proxy and holding shares in the Company, conferring a right to vote on the resolution being shares on which a aggregate sum has been paid up which is not less than one tenth of the total sum paid up on all the shares conferring that right. The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

- 159 -

Article 104 provides that:

A poll demanded on any question (other than the election of the Chairman or on a question of adjournment, which shall be taken forthwith) shall be taken at such place in the city, town or village in which the registered office of the company is situated and at such time not being later than forty eight hours from the time when the demand was made, as the Chairman may direct. Subject to the provisions of the Act, the Chairman of the meeting shall have power to regulate the manner in which a poll shall be taken, including I the power to take the poll by open voting or by secret ballot and either at once I or after the interval or adjournment or otherwise and the result of the poll shall be deemed to be decision of the meeting on the resolution on which the poll was taken.

Article 105 provides that:

When a poll is to be taken, the Chairman of the meeting shall appoint two scrutinizers to scrutinize votes given on the poll and to report thereon to him. The Chairman shall have the power, at any time before the result of the poll is declared, to remove a scrutinizer from office and to fill vacancies in the office of scrutinizers arising from such removal or from any other cause. Of the two scrutinizers appointed under this Article, one shall always be a member (not being an officer or employee of the company) present at the meeting provided such a member is available and willing to be appointed.

Article 106 provides that:

The demand for a poll shall not prevent the continuance of meeting for transaction of any business other than the question for which poll has been demanded.

Article 107 provides that:

In case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place, or at which the poll is demanded shall be entitled to a casting vote in addition to his own vote or votes which he may be entitled as a member.

Article 108 provides that:

At every Annual General Meeting of the company there shall be laid on the table the Directors Report and audited Statement of Accounts, Auditor’s Report (if not already incorporated in the audited accounts), the Proxy Register with proxies and the Register of Directors and Managing Director’s or Manager’s holding maintained under Section 307 of the Act. The Auditors Report shall be read before the Company in General Meeting and shall be open to inspection by any member of the company.

Article 109 provides that:

A copy of each of the following resolutions (together with a copy of statement of material facts annexed under section 173 to the notice of the meeting in which such resolution has been passed) or agreement shall, within thirty days after the passing or making thereof, be printed or type written and duly certified under the signature of an officer of the company and filed with the Registrar: a. Special Resolutions;

b. resolutions, which have been agreed to by all the members of the company but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;

c. resolutions of the Board or agreements relating to the appointment, reappointment or renewal of the appointment or variation of the terms of appointment of a Managing Director;

d. resolutions or agreements which have been agreed by all the members or any class of shareholders but which if not so agreed to, would not have been effective for purpose unless they had been passed by some particular majority or otherwise in some particular manner and all resolutions or agreements

- 160 -

which effectively bind all the members or any class of shareholders though not agreed to by all those members;

e. resolutions requiring the company to be wound up voluntarily passed in pursuance of sub-section (1) of Section 484 of the Act;

f. resolution passed by the company according consent to the exercise by its Board of Directors of the powers under clause (a), clause (d) and clause (e) of sub-section (1) of Section 293 of the Act; and (g) resolution passed by the company approving the appointment of sole selling agents under Section 224 of the Act.

A copy of every resolution, which has the effect of altering the Article of Association of the company and a copy of every agreement referred to in the above sub-clauses (c) and (d) shall be embodied in and annexed to every copy of the Article issued after the passing of the resolution or the making of the Agreement.

Article 110 provides that: The company shall cause minutes of all proceedings of every General Meeting to be kept in accordance with the provisions of Section 193 of the Act, by making, within thirty days of the conclusion of such meeting, entries thereof in books kept for that purpose with their pages consecutively numbered. Each page of every such book shall be initialed or signed and the last page of the record of proceedings of each meeting in such book shall be dated and signed by the Chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that Chairman within that period, by a Director duly authorised by the Board for that purpose. In no case the minutes of the proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise. Any such minutes kept as aforesaid, shall be evidence of the proceedings recorded therein.

Article 111 provides that:

The books containing the aforesaid minutes shall be kept at the Registered Office and be open during business hours for the inspection of any member without charge subject to such reasonable restrictions as the Company may by these Articles or in general meeting impose in accordance with section 196 of the Act. Any member shall be entitled to be furnished within seven days after he has made a request in that behalf to the company with a copy of the minutes on payment of thirty-seven paise of every one hundred words or fractional part thereof required to be copied.

Article 112 provides that:

No report of the proceedings of any General Meeting of the company shall be circulated or advertised at the expense of the company unless it includes the matters required by these Articles or Section 193 of the Act to be contained in the minutes of the proceedings of such meeting.

DIRECTORS

Article 128 provides that: Unless otherwise determined by Special Resolution, the number of Directors shall not be less than three and more than twelve, including the Nominated Directors (the ex-office Director referred to in Article 129) and the Debenture Director referred to in Article 130.

The persons hereinafter named shall be the first Directors of Company

1) Jagmohan Lal Gupta 2) Ajay Kumar Gupta 3) Anil Kumar Gupta 4) Kusum Lata

- 161 -

Article 129 provides that:

Notwithstanding anything to the contrary contained in these Articles, so long as any moneys remain by the Company to the Industrial Development Bank of India (IDBI/Industrial Finance Corporation of India (IFCI), The Industrial Credit and Investment Corporation of India Limited (ICICI), and Life Insurance Corporation of India (LIC) or to any other Finance Corporation or Credit Corporation of to any other Financing Company or Body out of any loans granted by them to the Company or so long as IDBI, IFCI, ICICI, LIC and Unit Trust of India (UTI) or any other Financing or Credit Corporation or any other Financing Company or Body is hereinafter in this Article referred to as “The Corporation” continue to hold debentures in the Company by direct subscription or private placement, or so long as the Corporation holds share in the Company as a result of the underwriting or direct subscription or as any liability of the Company arising out of any guarantee furnished by the Corporation on behalf of the Company remains outstanding, the Corporation shall have a right to appoint from time to time any person or persons as Director or Director, whole time or non-whole time (which Director or Directors is/are hereinafter referred to as “Nominee Directors”) on the Board of the Company and to remove from such office any person or persons so appointed and to appoint any person in his or their place. The Board of Directors of the Company shall have no power to remove from office the Nominee Director/s. At the option of the Corporation such nominee Director/s shall not be required to hold any share qualifications in the company. Also at the option of the Corporation such Nominee Director/s shall not be liable to retirement by rotation of Directors. Subject as aforesaid, the Nominee Director/s shall be entitled to the same rights and privileges and be subject to the same obligations as any other Director of the Company. The Nominee directors so appointed shall hold the said office only so long as any money remain owing- by the Company to the Corporation or so long as the Corporation holds Debentures in the Company as a result of direct subscription of private placement or so long as the Corporation holds shares in the Company as a result of under-writing or direct subscription or the liability of the Company arising out of any guarantee is outstanding and the Nominee Director/s so appointed in exercise of the said power shall ipso facto vacate such office immediately, the moneys owing by the Company to the Corporation paid off or On the Corporation ceasing to hold Debentures/Shares in the Company arising out of any guarantee furnished by the Corporation. The Nominee Director/s appointed under this Article shall be entitled to receive all notices of and all General Meetings, Boards Meetings and of the Meetings of the Committee of which the Nominee Directors is/are member/s as also the minutes of such meetings.

The Corporation shall also be entitled to receive all such notices and minutes. The company shall pay to the Nominee Director/s sitting fees and expenses, which the other Director/s of the Company are entitled, but if any other fees, commission. Money’s or remuneration in any form is payable to the Directors of the Company, the fees, commission, moneys and remuneration in relation to such Nominee Director/s shall accrue to the Corporation and same shall accordingly be paid by the Company directly to the Corporation. Any expenses that may be incurred by the Corporation on such Nominee Director/ s in connection with their appointment or directorship shall also be paid or reimbursed by the Company to the Corporation or as the case may be to such Nominee Director/s.

Provided that if any such Nominee Director/s is an officer of the Corporation, the sitting fees in relation to such Nominee Directors shall also accrue to the Corporation and the same shall accordingly be paid by the Company directly to the Corporation. In the event of the Nominee Director/s being appointed as whole time Director/s such Nominee Director/s shall exercise such powers and duties and have such rights as are usually exercise or available to a whole time Director in the management of the affairs of the Company. Such Nominee Director/s shall be entitled to receive such remuneration fees commission and moneys as may be approved by the Corporation.

Article 130 provides that: Any Trust Deed for securing debentures or debenture stock may so arranged, provide for the appointment from time to time by the trustees thereof or by the holders of the debentures or debenture stock of some person to be a Director of the Company and may empower such trustees or holders of debentures or debenture-stock from time to time to remove any Director so appointed. The Director appointed under this Article is herein referred to as the “Debenture Director” and the term “Debenture Director” means the Director for the time being in office under this Article. The Debenture Director shall not be bound to hold any

- 162 -

qualification shares and shall not be liable to retire by rotation, or, subject to the provisions of the Act, to be removed by the Company. The Trust Deed may contain such ancillary provisions as may be arranged between the Company and the. Trustees and all such provisions shall have effect notwithstanding any of the other provisions herein contained.

Article 131 provides that:

The Board of Directors of the Company or the Collaborator as the case may be appoint an Alternate Director to act for a Director (here-in-after called “the Original Director) during his absence for a period of not less than three months from the State in which the meting of the Board of Directors are ordinarily held and such appointment shall have effect and such appointee, whilst he holds office as an Alternate Director shall be entitled to notice of meeting of the Directors and to attend and vote thereat accordingly. The Alternate Director appointed under this Article shall vacate office as and when the original Director returns. If the term of office of the original Director is determined before he returns, any provision in the Act or in these Articles for the automatic re-appointment of retiring Director in default of another appointment shall apply to the original Director and not the Alternate Director.

Article 132 provides that:

Subject to the provision of Sections 262 (2) and 283 (1) and other applicable provisions (if any) of the Act, any casual vacancy occurring in the office of a Director whose period of office is liable to determine by retirement by rotation may be filled up by the Directors at a meeting of the Board. Any person so appointed shall hold office only upto the date upto which the Director in whose place he is appointed would have held office, if the vacancy had not occurred.

Article 133 provides that:

Subject to the provisions of Section 260 and the other applicable provisions (if any) of the Act the Directors shall have power at any time and from time to time to appoint a person or persons as Additional Director or Directors. The Additional Director shall hold office till the date of the next following Annual General Meeting but shall be eligible for re-appointment.

Article 134 provides that:

A Director of the Company shall not be bound to hold any qualification shares.

Article 135 provides that:

1) The remuneration of a Director for his services shall be the sum of Rs.5,000/- (Rupees Five thousand) for each meeting of the Board or one or more committees of the Board attended by him or such lesser amount as the Board of Directors may agree to pay to the attending Directors from time to time. Subject to the limitations provided by the Act, such additional remuneration as may be fixed by the Directors may be paid to anyone or more of the Directors for services rendered by him or them and the Directors shall be paid further remuneration (if any) as the Company in General Meeting shall from time to time determine, and such further remuneration shall be divided among the Directors in such proportion and manner as the Directors may from time to time determine, and in default of such determination, equally. Such remuneration and/or additional remuneration may be by way of fixed sum or commission as laid down in Sections 309, 349, 350 and 351 and Schedule X III of the Companies Act, 1956 on net profits or by participation in profits or by any or all of these modes.

2) The Directors may, subject as aforesaid, allow and pay to any Director who Is not a bonafide resident of the place where a meeting is held and who shall come to such place for the purpose of attending a meeting his actual expenditure for traveling, boarding, lodging and other expenses, in addition 10 his fee for attending such meeting as above specified.

3) Subject to title provisions of Sections 309 and 310 of the Act, if any Director, being willing, shall be called upon to perform extra services or to make any special exertion in going or residing out of the place where he normally resides or otherwise for any of the purposes of the Company, the Company shall, subject as aforesaid remunerate such Director or where he is more than one such Director to all of them together either by a fixed sum or by a percentage of profits or otherwise as may be determined

- 163 -

by the Directors and such remuneration may be either in addition to or in substitution for the remuneration above provided.

Article 136 provides that:

The continuing Directors may act notwithstanding any vacancy in their body; but so that subject to the provisions of the Act if the number falls below the minimum number above fixed and notwithstanding the absence of a quorum, the Directors may act for the purposes of filling up vacancies or for summoning a General Meeting of the Company.

Article 137 provides that: 1) Subject to the provisions of Section 283 (2) of the Act, the office of a Director shall become vacant if:

a) he is found to be of unsound mind by a Court of competent jurisdiction: or c (b) he applies to be adjudicated an insolvent: or (c) he is adjudged an insolvent: or

b) he fails to pay any call made on him in respect of shares of the Company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has by notification in the Official Gazette, removed the disqualification incurred by such failure: or

c) any office or place of profit under the company or any subsidiary thereof is held by him in contravention of Section 314 of the Act: or

d) he absents himself from three consecutive meetings of the Board of Directors or from all meetings of the Board of Directors for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board of Directors: or3

e) he becomes disqualified by an order of the Court under Section 203 of the Act: or

f) he is removed in pursuance of Section 284 of the Act: or

g) he (whether by himself or by any person for his benefit or on his account) or any firm in which he is a partner or any private company of which he is a Director, accepts a loan, or any guarantee or security for a loan, from the Company in contravention of Section 295 of the Act: or

h) he acts in contravention of Section 299 of the Act and by virtue of such contravention shall have been deemed to have vacated office: or

i) he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months: or

j) he having been appointed a Director by virtue of his holding any office or other employment in the Company ceases to hold such office or other employment in the Company.

2) Subject to the provisions of the Act, a Director may resign his office at any time by notice in writing addressed to the Company or to the Board of Directors.

Article 138 provides that:

1) Subject to the provisions of sub-clauses (2), (3), (4) and (5) of this Article and the restrictions imposed by

Article 145 and the other Articles hereof and the observance and fulfillment thereof, no Director shall be disqualified by his office from contracting with the Company for any purpose and in any capacity whatsoever including either as vendor, purchaser, agent, broker or otherwise, nor shall any other contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested, be avoided nor shall any Director, so contracting or being so interested be liable to account to

- 164 -

the Company of any profit realized by any such contract or arrangement by reason only of such of Director holding office, (or of the fiduciary relation thereby established, but it is hereby declared that) the nature of his interest must be disclosed by him as provided by sub-clauses (2), (3) and (4) hereof.

2) Every Director who is any way whether directly or indirectly concerned or interested in any contract or arrangement or proposed contract or arrangement entered into or to be entered into by or on behalf of the company shall disclose the nature of his concern or interest at meeting of the Board of Directors or as provided in clause (4) thereof.

3) a) In the case of a proposed contract or arrangement, the disclosure required to be made by a

Director under sub-clause (2) above shall be made at the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration or if the Director was not at the date of the meeting concerned or interested, the Director concerned shall take reasonable steps to secure that it is brought up and read at the first meeting of the Board after it is given.

b) In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the Director becomes concerned or interested in the contract or arrangement.

4) For the purpose of this Article, a General Notice is to be given to the Board of Directors by a Director to the effect that he is a Director or member of a specified body corporate or is a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may after the date of the notice, be entered into with the body corporate or firm shall be deemed to be sufficient disclosure of his concern or interest in relation to any contract or arrangement so made. Any such general notice shall expire at the end of the financial year at a time by a fresh notice given in the last month of the financial year, which it would have otherwise expired. The general notice aforesaid and any renewal thereof shall be given at a meeting of the Board of Directors or the Director concerned shall take reasonable steps to secure that is brought up and read in the first meeting of the Board after it is given.

5) An interested Director shall not take any part in the discussions of or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, directly or indirectly concerned or interested in the contract or arrangement; nor shall his presence count for the purpose of forming a quorum at the time of any such discussions or vote, and if he does vote, his vote shall be void;

Provided that this prohibition shall not apply;

I. To any contract of Indemnity against any loss which the Director or anyone or more of them may suffer by reason of becoming or being sureties or a surety for the company;

II. To any contract or arrangement entered into with a public company or a private company which is a subsidiary of a public company in which the interest of the Director consists solely in his being a Director of such company and the holder of not more than shares of such number or value therein as is requisite to qualify him for appointment as Director thereof he having been nominated as such Director by the Company or in his being a member holding not more than two per cent of the paid up share capital of such Company whichever is greater.

III. Incase a notification is issued under sub-section (3) of Section 300 of the Act to the extent specified in the notification.

Article 139 provides that:

1) The company shall keep one or more Registers in accordance with Section 01 of the Act In which, shall be entered separately particulars of all contracts or arrangement to which Section 297 or Section 299 of the Act applies including the following particulars to the extent they are applicable in each case, namely: a) the date of the contract or arrangement;

b) the name of the parties thereto;

c) the principal terms and conditions thereof;

- 165 -

d) in the case of a contract to which Section 297 of the Act applies or in the case of a contract or arrangement to which sub-section (2) of Section 299 of the Act applies, the date on which it was placed before the Board;

e) the name of the Directors voting for and against the contract or arrangement and the names of those remaining neutral.

2) Particulars of every such contract or arrangement to which Section 297 of the Act or as the case may be, sub-section 299 of the Act applies, shall be entered in the relevant register aforesaid; a) in the case of a contract or arrangement requiring the Board’s approval, within seven days

(exclusive of public holidays) of the meeting of the Board at which the contract or arrangement is approved;

b) in the case of any other contract or arrangement, within seven days of the receipt at Registered Office of the Company of the particulars or such other contact or arrangement or within thirty days of the date of such other contract or arrangement whichever is later, and the Register shall be placed before the next meeting of the Board and shall be signed by all the Directors present at the meeting.

3). The Register aforesaid shall also specify, in relation to such Director of the Company, the name of the firms and bodies corporate of which notice has been given by him under sub-section (3) of Section 299 of the Act. (4) Nothing in the foregoing sub-clauses (1), (2) and (3) shall apply to any contract or arrangement for the sale, purchase or supply of any goods, materials and services, if the value of such goods and materials or the cost of such services does not exceed Five thousand rupees in the aggregate in any year. The registers as aforesaid shall be kept at the Registered Office of the Company and they shall be open to inspection at such office and extracts may be taken from any of them and the copies thereof may be required by any member of the company to the same extent in the same manner and on payment of the same fee as in the case of the Register of Members.

Article 140 provides that:

A Director of this Company may be, or become a Director of any Company promoted by this Company, or in which it may be interested as a vendor, member or otherwise and subject to the provisions of the Act and these Articles, no such Director shall be accountable for any benefits received as a Director or member of such company.

Article 141 provides that:

A Director, Managing Director or Secretary of the Company shall within twenty one days of his appointment to or relinquishment of his office as Director, Managing Director, Manager or Secretary in any other body corporate disclose to the Company the particulars relating to his office in the other body corporate which are required to be specified under Section 303 (1) of the Act. The Company shall enter the aforesaid particulars in a register kept for that purpose in conformity with Section 303 (2) of the Act.

Article 142 provides that:

A Director or Manager shall give notice in writing to the Company of his holding of shares and debentures of the Company or its subsidiary, together with such particulars as may be necessary to enable the Company to comply with the provisions of Section 307. If such notice be not given at a meeting of the Board, the Director or Manager shall take all reasonable steps to secure that it is brought up and read at the meeting of the Board next after it is given. The Company shall enter particulars of a Director’s and Manager’s holding of shares and debentures as aforesaid in a register kept for that purpose in conformity with Section 307 of the Act.

Article 143 provides that:.

1) Except with the consent of the Company accorded by a special resolution a) no Director of the Company shall hold any office or place of profit; and

- 166 -

b) No partner or relative of such a Director, no firm in which such a Director, or relative is a partner, no private company of which such a Director is a Director or member, & no Director, or Manager of such a private company shall hold any office or place of profit carrying to total monthly remuneration of three thousand or more, as may be prescribed under Section 314 (1) of the Act:

except that of Managing Director, Banker, or Trustee for the holders of Debentures of the company

(i) under the company; or

(ii) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place of profit is paid over to the company or its holding company;

Provided that it shall be sufficient if the special resolution according the consent of the company is passed at the General Meeting of the company held for the first time after the holding of such office or place of profit.

Provided further that where a relative of a Director or firm in which such relative is a partner, is appointed to an office or place of profit under the company or a subsidiary thereof without the knowledge or the Director, the consent of the company may be obtained either in the General Meeting aforesaid or within three months from the date of the appointment, whichever is later.

Explanation: For the purpose of this clause a special resolution according consent shall be necessary for every appointment in the first instance to an office or place or profit on a higher remuneration not covered by the special resolution except where an appointment on a time scale has already been approved by the special resolution.

2) Nothing in the clause (1) above shall apply where a relative of a Director or a firm in which such relative is a partner hold any office or place or profit under the company or a subsidiary thereof having been appointed to such office or place of profit before such Director becomes a Director of the company.

3) Notwithstanding anything contained in clause (1) above; a) no partner or relative of a director or manager,

b) no firm in which such director or manager or relative or either, he is partner,

c) no private company of which such director or manager, or relative or either is a director or member shall hold any office or place or profit in the company which carries a total monthly remuneration of not less than six thousand rupees or as may be prescribed U/s 314 (IB) of the Act, except with the prior consent of the company by a special resolution and the approval of the Central Government;

4) if any office or place of profit is held in contravention of the provisions of clause (I) above, the director, partner, relative, firm or private company concerned shall be deemed to have vacated his or its office as such on and from the date next following the date of the General Meeting or the company referred to in the first provision or, as the case may be, the date of the expiry of the period of three months, referred to in the second proviso to that clause, and shall also be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place or profit. The Company shall not waive recovery of any sum refundable to it under this clause unless permitted to do so by the Central Government;

5) Every individual, firm, private company or other body corporate proposed to be appointed to any office or place of profit to which this article applies shall, before or at the time of such appointment, declare in writing whether he or it is or is not connected with a Director of the company in any of the ways referred to in clause (1) hereof;

6) If any office or place of profit referred to in clause (3) is held, without the prior consent of the company by a special resolution and the approval of Central Government, the partner, relative, firm or private

- 167 -

company appointed to such office or place of profit shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him on and from the date on which the office was so held by him;

7) The company shall not waive the recovery of any sum refundable to it under clause (6) unless permitted to do so by the Central Government;

8) Any office or place shall be deemed to be an office of profit under the company within the meaning of this Article; a) in case the office or place is held by a Director and the Director holding it obtains from the company

anything by way of remuneration over and above the remuneration to which he is entitled as such Director, whether as salary, fees, commission perquisites, the right to occupy free of rent any premises as a place of residence or otherwise.

b) in case the office or place is held by an individual other than a Director or by any firm, private company or other body corporate the individual, firm, private company or body corporate holding it, obtains from the company anything by way of remuneration, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence or otherwise.

Article 144 provides that:

The company shall observe the restrictions imposed on in regard to the granting of loans to Directors and other persons as provided in Section 295 and other applicable provisions, if any, of the Act.

Article 145 provides that:

1) Except with the consent of the Board of Directors of the company, a Director of the company or his relative, a firm, in which such a Director or relative is a partner, any other partner in such a firm, or private Company 0f which the Director is a member or Director shall not enter into any contract with the company (a) for the sale, purchase or supply of any goods, materials on service or (b) for underwriting the subscription of shares in, or debenture: of the company.

2) Nothing contained in the foregoing clause (i) shall affect;

a) The purchase of goods and materials from the company, or the sale of goods and materials to the company, by the Director, relative, firm, partner or private company as aforesaid for cash at the prevailing market price; or

b) (b) Any contract or contracts between the company on one side and any such Director, relative, firm, partner or private company on the other for the sale, purchase or supply of any goods, materials and services in which either the company or the Director, relative, firm, partner or private company as the case may be, regularly trades or does business.

Provided that for the purpose of clause (b) above such contracts do relate to goods and services the value of which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract contracts.

3) Notwithstanding anything contained in sub-clauses (1) and (2) above Director, relative, firm, partner or private company as aforesaid may circumstances of urgent necessity, enter, without obtaining the consent of the Board into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised of the period of the contract; but in such a case, the consent of the Board shall be obtained at a meeting held within three months from the date on which the contract was entered into.

4) Every consent of the Board required under this Article shall be accorded by a resolution passed at a meeting of the Board and not otherwise, and the consent of the Board required under clause (i) above shall not be deemed to have been given within the meaning of the clause unless the consent is

- 168 -

accorded before the contract is entered into or within three months of the date on which it was entered into.

5) If consent is not so accorded to any contract under this Article anything done in pursuance of the contract shall be voidable at the option of the Board.

6) The Director so contracting or being so interested shall not be liable to the company for any profit realised on any such contract or the fiduciary relation thereby established.

Retirement And Rotation Of Directors Article 146 provides that:

1) Not less than two-third of the total number of Directors of the company shall be persons whose period of office is liable to determination by retirement of Directors by rotation, and save as otherwise expressly provided in the act and these articles, be appointed by the company in General Meeting.

2) The remaining Directors shall be appointed in accordance with the provisions of these Articles and particularly in accordance with the provisions of Articles 129,130 and 173.

3) At the first Annual General Meeting of the company and every subsequent Annual General Meeting one-third of such of the Directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then, the number nearest to one third shall retire from office.

Article 147 provides that:

Subject to the provisions of the Act and these Articles, the Directors to retire by rotation under the foregoing Articles at every Annual General Meeting shall be those who have been longest in office since their last appointment but as between persons Who become Directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lots. Subject to the provisions of the act, a rotating Director shall remain in office until the conclusion of the meeting at which his re-appointment is decided or his successor is appointed.

Article 148 provides that:

Subject to the provisions of the Act and these Articles, a retiring Director shall be eligible for re-appointment. Article 149 provides that:

The company, at the Annual General Meeting at which a Director retires in manner aforesaid, may fill up the vacated office by electing the retiring Director or some person thereto.

Article 150 provides that:

1) If the place of the retiring Director or Directors in not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the next succeeding day which is not a public holiday, at the same time and place.

2) If at the adjourned meeting also, the place of the retiring Director or Directors is not filled up and the meeting also has not expressly resolved not to fill the vacancy, the retiring Director, Directors shall be deemed to have been reappointed at the adjourned meeting unless: a) at that meeting or at the previous meeting a resolution for the re- appointment of such Director or

Directors has been put to the meeting and lost; b) the retiring Director or Directors has or have by a notice in writing addressed to the company or its

Board of Directors, expressed his or their unwillingness to be so re-appointed; c) he is or they are not qualified or is or are disqualified for appointment; d) a resolution, whether special or ordinary is required for his or their appointment or reappointment by

virtue of any provisions of the Act;

- 169 -

e) Article 152 or sub-section (2) of Section 263 of the Act is applicable to the case. f) Retirement by rotation of whole time directors shall not affect their continuity as whole time directors

so long as they are reappointed immediately. Article 151 provides that:

1) Subject to the provisions of the Act and these Articles any person who is not a Retiring Director shall be eligible for appointment to the office of Director at any General Meeting if he or some member intending to propose him has at least fourteen clear days before the meeting left at the Registered Office of the Company a notice in writing under his hand signifying his candidature for the office of Director or the intention of such member to propose him as a candidate for that office as the case may be, along with a deposit of Rupees Five Hundred which shall be refunded to such person or as the case may be to such member, if the person succeeds in getting elected as a Director.

2) Every person (other than a Director retiring by rotation or otherwise or a person who has left at the office of the company a notice under sub-clause (1) of this Article or Section 257 signifying his candidature for the office of Director) proposed as a candidate for the office of a Director shall sign and file with the company his consent in writing to act as a Director if appointed.

3) On receipt of the notice referred to in this Article, the Company shall inform its members of the candidature of that person as a candidate Director or the intention of a Member to propose such person as a candidate for the office, by serving individual notices on Members not less than seven days before the meeting provided that it shall not be necessary for the company to serve individual notices upon the members if the company advertise such candidature or intention, not less than seven days before the meeting in at least two newspapers circulating in the city, town or village in which the Registered Office of the Company is situated, of which one is published in the English language and the other in the regional language.

4) A person other than; a) a Director re-appointed after retirement by rotation immediately on the expiry of the term of his

office ;or b) an additional or alternate Director or a person filling a casual vacancy in the office of a Director

or re-appointed as Additional or Alternate Dire immediately on the expiry of his term of office; or c) a person named as a Director of the company under these Articles first registered shall not act

as a Director of the company unless he within thirty days of appointment signed and filed with the Registrar consent in writing to act as such Director.

Article 152 provides that:

At a General Meeting of the company, a motion shall not be made for appointment of two more persons as Directors of the company by a single resolution unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it. A resolution m in contravention of these Articles shall be void whether or not objection was taken at the time of its being so moved; provide that where a resolution so moved is passed, no provision for the automatic re-appointment of retiring Director by virtue of these Articles or the Act in default of another appointment apply.

Article 153 provides that: 1) Subject to the provisions of Section 284 of the, Act, these Articles and the Collaboration Agreement, the

Company may, by ordinary resolution, remove any Director other than the Directors nominated by PAIC before the expiration of his period of office and may appoint another person in his place. The person so appointed shall be subject to retirement, at the same time and in the same manner, as the Director in whose place he is appointed.

2) Special notice as provided by Article 94 and Section 190 of the Act shall be given of any resolution to remove a Director under this Article or to appoint some other person in place of a Director so removed at the meeting at which he is removed.

3) receipt of any such resolution to remove a Director under this Article, the Company shall forthwith send a copy thereof to the Director concerned, and the Director (whether or not he is a member of the Company) shall be entitled to be heard on the resolution at the meeting.

4) Where notice is given of a resolution to remove a Director under this Article and the Director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the

- 170 -

representation is received by it too late for it to do so (a) in the notice of the resolution given to the members of the company state the fact of the representation having been made; and (b) send a copy of the representation to every member of the company and if a copy of representation is not set as aforesaid because it was received too late of the company’s default, the Director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting; Provided that copies of the representations need not be sent or read out at the meeting if on the application either of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights conferred by this sub clause are being abused to secure needless publicity for defamatory matter.

5) A vacancy created by the removal of a Director under this Article may, if he had been appointed by the company in General Meeting or by the Board in pursuance of Article 132 or Section 262 of the Act be filled by the appointment of another Director in his place by the meeting at which he is removed, provided special Notice of intended appointment has been given under sub clause (2) hereof. A Director so appointed shall hold office until the date upto which his predecessor would have held office it he had not been removed as aforesaid.

6) If the vacancy is not filled under sub-clause (5) it may be filled as a casual vacancy in accordance with provisions (in so far as they are applicable) of Article 132 or Section 262 of the Act and all the provisions of that section shall apply accordingly.

7) A Director who has been removed from office under this Article shall not be appointed as Additional Director by the Board of Directors.

8) Nothing contained in this Article shall be taken: (a) as depriving a person removed thereunder of any compensation or damages payable to him in

respect of the termination of his appointment as Director or of any appointment termination with that as Director; or

(b) as derogating from any power to remove a Director which may exist apart from this article.

Powers of Directors Article 168 provides that:

1) Subject to the provisions of the Act and these Articles, the Board of Directors of the company shall be entitled to exercise all such powers and to do .all such acts and things as the company is authorised to exercise and do; provided that the Board shall not exercise any power or do any act or things which is direct or required whether by the Act or any other law or by the Memorandum or these Articles or otherwise to be exercised or done by the company In general meeting, provided further that in exercising any such power or doing any such act or things the Board shall be subject to the provisions contained in that behalf in the Memorandum or in these articles or in any regulations not inconsistent therewith duly made thereunder including resolutions made by the company in general meeting.

2) No regulations made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.

Article 169 provides that:

The Board of Directors shall not, except with the consent of the company in general meeting: 1) sell lease or otherwise dispose of the whole or substantially the whole of the undertaking of the

company, or where the company owns more than one undertaking, of the whole or substantially the whole of any such undertaking;

2) remit or give time for the payment of any debt due by a Director; 3) create any sole selling agency for sale of its products; 4) invest otherwise than in trust securities, the amount of compensation received by the company in

respect of the compulsory acquisition of any such undertaking as is referred to in Sub-Clause (a) above or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time;

5) borrow moneys in excess of the limits provided in Article 75; 6) contribute to charitable and other funds not directly relating to the business of the company or the

welfare of its employees, any amount the aggregate of which will, in any financial year, exceed twenty five thousand rupees or five per cent of its average net profit determined in accordance with the

- 171 -

provisions of Sections 349 and 350 of the Act, during the three financial years immediately preceding, whichever is greater.

Article 170 provides that:

1) Without derogating from the powers vested In the Board of Directors under these Articles the Board shall exercise the following powers on behalf of the company and shall do so only by means of resolutions passed at meetings of the Board:

a) The power to make calls on shares in respect of money unpaid on their shares; b) The power to issue debenture; c) The power to borrow moneys otherwise than on debentures; d) the power to invest the funds of the company; e) the power to make loans. f) The power to authorize the buy-back referred to in the first provision in Section 77A(2)(b)

Provided that the Board may by a resolution passed at a meeting delegate to any committee of Directors or the Managing Director or any other Principal Officer of the company or to a principal officer of any of it branch offices, the powers specified in sub clauses (c), (d) and (e) of this clause to the extent specified below on such conditions as the Board may prescribe.

2) Every resolution delegating the power referred to in sub-clause (1) (c) shall specify the total amount outstanding at anyone time upto which moneys may be borrowed by the delegate. Provided. however, that where the company has an arrangement with its bankers for the borrowing of moneys by way of overDraft, cash credit or otherwise, the actual day to day operation of the overDraft, cash credit or other account by means of which the arrangement is made or availed of, shall not require the sanction of the Board.

3) Every resolution delegating the power referred to in sub-clause (1) (d) shall specify the total amount upto which the funds may be invested and the nature of the investments which may be made by the delegate.

4) Every resolution delegating the power referred to in sub-clause (1) (e) shall specify the total amount upto which loans may be made by the delegate, the purpose for which the loans may be made and the maximum amount of loan which may be made.

5) Nothing contained in this Article shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on exercise by the Board of any of the powers referred to in sub-clauses (a), (b), (c), (d) and (e) of clause (1) above.

Article 171 provides that:

Without prejudice to the powers conferred by Articles 75 and 168 and so as not in any way to limit or restrict those powers, and without prejudice to the other powers conferred by these Articles, but subject to the restrictions contained in Articles 169 and 170, it is hereby declared that the Directors shall have the following powers, that is to say, power 1) To pay all costs charges and expenses preliminary and incidental to the promotion, establishment, and

registration of the company. 2) To pay and charge to the capital of the company any commission or interest lawfully payable thereat

under the provisions of Section 76 and 208 respectively of the Act and Articles 15 and 181. 3) Subject to the provisions of the Act and these Articles to purchase or otherwise acquire for the company

any property, rights or privileges which the company is authorised to acquire, at or for such price or consideration and generally on such terms and conditions as they may think fit; and in any such purchase or other acquisition to accept title as the Directors may believe or may be advised to be reasonably satisfactory.

4) At their discretion and subject to the provisions of the Act, to pay for any property or rights acquired by, or services rendered to the company, either wholly or partly in cash, or in shares, bonds, debentures, debenture-stock, mortgage or other securities of the company, and any such shares may be issued either as full paid up or with such amount credited as paid up thereon as may be agreed upon; and any such bonds, debenture-stock, mortgage or other securities may be either specifically charged upon all or any part or the property or the company and its uncalled capital or not so charged.

5) To insure and keep insured against loss or damage by fire or otherwise for such period and to such extent as they may think proper all or an Y1’Yc1rt of the building, machinery, goods, produce and other

- 172 -

movable property of the company either separately or conjointly: also to insure all or any portion of the goods, produce, machinery and other articles imported or exported by the company and to sell assign, surrender or discontinue any policies of assurance effected in pursuance of this power.

6) To open accounts with any bank or bankers or with any company or firm and to pay money in to and draw money from any such account from time to time as the Directors may think fit.

7) To secure the fulfillment of any contracts or engagements entered into by the company by Mortgage or Charge of all or any of the property of the company and its uncalled capital for the being or un such other manner as they think fit.

8) To attach to any shares to be issued as the consideration or part of the consideration for any contract with or property acquired by the company or in payment of services rendered to the company, such condition as to the transfer thereof as they think fit.

9) To accept from any member on such terms and conditions as shall be agreed a surrender of his shares or stock or any part thereof so far as may be permissible by law.

10) To appoint any person (whether incorporated or not) to accept and hold in trust for the company any property belonging to the company or in which it is interested, or for any other purposes, and to execute and do all such deeds and things as may be requisite in relation to any such trust and or provided for the remuneration of such trustee or trustees.

11) To institute, conduct, defend, compound or abandon any legal proceedings by or against the company or its offices, or otherwise, concerning the affairs of the company and so to compound and allow time for payment or satisfaction of any debt, due or of any claims or demands by or against the company.

12) To refer any claim or demand by or against the company or any difference to arbitration and observe and perform any awards made thereon.

13) To act on behalf of the company in all matters relating to bankrupts and insolvents. 14) To make and give receipts, releases and other charges for moneys payable to the company and for the

claims and demands of the company. 15) To determine from time to time who shall be entitled to sign on the company’s behalf bills, notes,

receipts, acceptances, endorsements, cheques, dividend warrants, releases, contracts and documents and to give the necessary authority for such purposes.

16) Subject to the provisions of the Act and these Articles to invest and deal with any moneys of the company not immediately required for the purposes thereof upon such security and other investments (not being shares of this company) or without security and in such manner as they may think fit, and from time to time very or release such investments shall be made and held by the company in its own name.

17) To execute in the name and on behalf of the company in favour of any Director or other person who may incur or be about to incur any personal liability whether as principal or as surety for the benefit of the company, such mortgage of the company’s property (present and future) as they think fit, and any such mortgage may contain a power or sale and such other powers, provisions and agreements as shall be agreed on.

18) To distribute by way of bonus amongst the staff of the company, a part of the profits of the company, and to give to any officer or other person employed by the company a commission on the profits of any particular business or transaction and to charge such bonus or commission as part of the working expenses of the company.

19) Subject to the provisions of the Act, to give to any officer or other person employed by the company an interest in any particular business or transaction by way of a share in the general profit of the company, and such share or profits shall be treated as a part of the working expenses of the company.

20) To provide for the welfare of employees or ex-employees of the company and its Directors or Ex-Directors and the wives, widows and families and the dependants of connections of such persons, by building of houses, dwellings or quarters or by grant of money, pensions, gratuities, allowances, bonus, profit sharing bonus or benefits or any other payments of by creating and from time to time subscribing or contributing to provident and other funds, profit sharing or other schemes or trusts and by providing or subscribing or contributing towards places of instruction and recreation, hospitals and dispensaries, medical other attendances and other forms of assistance, welfare or relief’s as the Directors shall thinks fit and to subscribe or contribute or otherwise to assist or to guarantee money to charitable, benevolent, religious, scientific, national, public or any other institution’s objects or purpose for any exhibition.

21) Before recommending any dividend to set aside out of the profits of the company such as they may think proper for depreciation or to a Depreciation fund, Insurance Fund, General Reserve Fund, Sinking Fund or any special or other fund or funds or account or accounts to meeting contingencies, or to pay Redeemable Preference Shares, debentures or debenture stock or special dividends, and for equalizing dividends, and for repairing, improving and maintaining any part of the property of the

- 173 -

company, and/or for such purposes (including the purposes referred to in the last two preceding sub- clauses) as the Directors may, in their absolute discretion think conducive to the interests of the company and to invest the several sums, to set aside or as much thereof as are required to be invested upon such investments (subject to the restrictions imposed by the Act) as the Directors may think tit, and from time to time to deal with and vary any such investment and dispose of and apply and expend all or any part thereof for the benefit of the company, in such manner and for such purposes as the Directors (subject to such restrictions as aforesaid) in their absolute discretion think conducive to the interests of the company notwithstanding that the matters to which the Directors apply or upon which they expend the same or any part thereof may be matters to or upon which the capital or moneys of the company might rightly be applied or expended and to divide the Reserve, General Reserve, or the Reserve Fund into such special funds as the Directors may think fit, and to employ the assets constituting all or any of the above funds or accounts, including the Depreciation Fund appropriated out of net profit, in the business of the company or in the purchase or repayment 0 Redeemable preference shares, debentures or debenture stock and that without being bound to keep the same separate from the other assets and without being bound, to allow or pay interest on the same with power however to the Directors at their discretion to pay or allow to the credit of such fun interest at such rate as the Directors may think proper.

22) Subject to the provisions of the Act, to appoint and at their discretion remove or suspend such managers, secretaries, officers, clerks, agents an employees for permanent, temporary or special services as they may from time to time think fit, and to determine their powers and duties and fix the salaries or emoluments and require security in such instances and to such amounts as they may think fit, and also without prejudice as aforesaid, fro; time to time to provide for the management and transaction of the affairs the company in any specified locality in India or elsewhere in such manner, as they think fit and the provisions contained in sub clauses (24), (25), (26) and (27) following shall be without prejudice so the general powers conferred by this sub-clause.

23) To comply with the requirements of the any local law which in their opinion it shall in the interest of company be necessary or expedient to comply with.

24) From time to time and any time to establish any Local Board for managing of the affairs of the company in any specified locality in India or elsewhere and to appoint any persons to be members of any Local Board, or at managers or agents, and to fix their remuneration.

25) Subject to the provisions of Section 292 of the Act and Article 170 from tin to time and at any time to delegate to any such local Board or any member or members thereof, any managers or agents so appointed, any of the power authorities and discretion for the time being vested in the Board of Director and to authorise the members for the time being of any such Local Board any of them to fill up any vacancies, and any such appointment of delegate under sub-clause be subject to such conditions as the Board of Director may think fit and the Board of Directors may at any time remove any person so appointed and may annul or vary any such delegation.

26) At any time and from time to time by power of attorney to appoint, Co person or persons to be the attorney or attorneys of the company, for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board of Directors under these preset and excluding the powers which may be exercised only by the Board Directors at a meeting of the Board under the Act or these Articles or by Company in General Meeting) and for such period and subject to such conditions as the Board of the Directors may from time to time think fit c any such appointment may (if the Board of Directors think fit) be made in favour of the members or any of the members of any Local Board, established as aforesaid or in favour of any company or the members, directors, nominees or managers of any company, or firm or otherwise in favour of any body of persons whether nominated directly, or indirectly by the Board of Direct and any such power of attorney may contain powers enabling any s delegate or attorney as aforesaid to sub-delegate all or any of the power and authorities for the time being vested in them.

27) Subject to the provisions of the Act and these Articles, to delegate the powers, authorities and discretions vested in the Directors to any person firm, company or fluctuating body of persons as aforesaid.

28) Subject to the provisions of the Act and these Articles or in relation to any the matters aforesaid or otherwise for the purpose of the company, to enter into all such negotiations and contracts and rescind and vary all such contracts and execute and do all such acts, deeds and things in the name and on behalf of the company as they may consider expedient for or in relation to any of the matters aforesaid or otherwise for the purpose of the company.

29) subject to the provisions of Foreign Exchange Management Act, 1999, rules made thereunder, RBI directions and all other applicable enactments, rules, circulars etc, the company may undertake and

- 174 -

enter into Foreign Exchange Transactions in all its legal forms, to transact derivative products including currency options, swaps to convert rupee liabilities into foreign currency liabilities, to hedge currency and interest rate risks / fluctuations in respect of any export & import contracts, foreign currency loans and other foreign currency matters as may be permitted by the Reserve Bank of India from time to time.

Managing Director, Or Wholetime Director Or Wholetime Directors Article 172 provides that:

a. Subject to the provisions of Section 269, 316, 317, schedule XIII and other applicable provisions of the Companies Act, 1956, the company may from time to time appoint reappoint one its director as Managing Director of the company for a maximum period of 5 years and such appointment shall be approved by the shareholders by way of ordinary resolution in the General Meeting on such terms and conditions as may be recommended by the Board of Directors as provided further that the Board of Directors shall have authority to revise the remuneration and other terms and conditions of appointment of the Managing Director during the tenure of his appointment without referring to the General Meeting.

b. Subject to the provisions of Section 269, schedule XIII and other applicable provisions of the Companies Act, 1956, the company may from time to time appoint f reappoint one or more of its directors as whole time director(s) of the company for a maximum period of 5 years and such appointment shall be approved by the shareholders by way of ordinary resolution n the General Meeting on such terms and conditions, as may be recommended by the Board of Directors and provided further that the Board of Directors shall have authority to revise the remuneration and other terms and conditions of appointment of such whole time director(s) during the tenure of his appointment without referring to the General Meeting.

c. The whole time Director or Directors, so appointed shall carry out such functions and have such powers as may be entrusted and / or delegated to him or them by the Board of Directors in consultation with the Managing Director. The whole time Director or Directors shall work under the supervision and control of Managing Director.

Article 173 provides that:

The Managing Director be a Whole time Director of the company. A Managing Director so appointed shall not while holding the office be subject to retirement by rotation but he shall be taken into account in determining the number of Directors to retire by rotation

Article 174 provides that:

The remuneration of the Managing Director or Managing Directors or whole time Director or whole time Directors (subject to the provisions of Section 309 and other applicable provisions of the Act and of these Articles and of any contract between him and them and the company) shall be in accordance with the terms of his or their contract with the company.

Article 175 provides that:

Subject to provisions of the Act and to the terms of any Resolution of the company in General Meeting of any Resolution of the Board the Managing Director shall have effective control of the day to day management of the company under the superintendence, control or direction of the Board, he may, subject to the approval of the Board have power to do all acts, matters and things deemed necessary, power or expedient for carrying on the business and concern of the company, including power to appoint, suspend and dismiss officers, staff and workmen of the company and to exercise such powers as are delegated to him by the Board or as may be detailed in the agreement between him and the company in such matters as incurring capital and revenue expenditure on behalf of the company, entering into contracts, taking suitable legal actions, operating on bank accounts, making investment and other subjects.

Capitalization Article 194 provides that:

1) Any General Meeting may resolve that any amount standing to the credit of the Share Premium Account or the Capital Redemption Reserve Account or any moneys, investments or other assets

- 175 -

forming part of the undivided profits (including profits or surplus moneys) arising from the realization and where permitted by law from the appreciating in value of any capital assets of the company standing to the credit of in value of any capital assets of the company standing to the credit of the general Reserve, or any Reserve Fund or any other fund of the company or in the hands of the company and available for dividend be capitalized: -

a) By the issue and distribution as fully paid up shares of the Company; or

b) By crediting shares of the company, which may have been issued and are credited as partly paid up with the whole or any part of the sum remaining unpaid thereon.

Provided that any amount standing the credit of the Share premium Account or the Capital redemption Reserve Account shall be applied only in crediting the payment of capital on shares of the company to be issued to members (as herein provided) as fully paid bonus shares.

2) Such issues and distribution under (1) (a) above and such payment to the credit of unpaid share capital under (1) (b) above shall be made to, among and in favour of the members or any class of them or any of them entitled thereto in accordance with their respective rights and interest and in proportion to the amount of the capital paid up on the shares held by them respectively in respect of which such distribution under ( 1) (a) or payment under (1) (b) above shall be made on the footing that such members become entitled thereto as capital:

3) The Directors shall give effect to any such resolution and apply such Portion of the profits. General Reserve or Reserve Fund or any; other Fund or account as aforesaid as may be required for the purpose of making payment in full for the shares of the company so distributed under (1) (a) above or (as the case may be) for the purpose of paying in whole or in part the amount remaining unpaid on the shares which may have been issued and are not fully paid under (1) (b) above, provided that no such distribution or payment shall be made unless recommended by the Directors and if so recommended such distribution and payment shall be accepted by such members as aforesaid in full satisfaction of their interest in the said capitalized sum.

4) For the purpose of giving effect to any such resolution the Directors may settle any difficulty which may arise in regard to the distribution or payment as aforesaid as they think expedient and in particular they may issue as fractional certificates and may fix the value of distribution of specific assets and may determine that cash payment be made to any members on the footing of the value so fixed and may vest any such cash or shares in trustees upon such trusts for the persons entitled thereto as may seem expedient to the Directors and generally may make such agreement for the acceptance, allotment and sale of such shares and fractional certificates as they may think fit.

5) Subject to the provisions of the Act and these Articles, in cases where some of the shares of the company are fully paid and others are partly paid, only such capitalization may be effected by the distribution of further shares in respect of the fully paid shares and by crediting the partly paid shares with the whole or part of the unpaid liability thereof but so that as between the holders of the fully paid shares, and they partly paid shares the sums so applied on the payment of such further shares and in the extinguishments or diminution of the liability of the partly paid shares shall be so applied prorate in proportion to the amount then already paid or credited as paid on the existing fully paid shares respectively.

6) When deemed requisite a proper contract shall be in accordance with the Act and the Board may appoint any person to sign such contract on behalf of the members entitled as aforesaid and such appointment shall be effective.

- 176 -

SECTION X - OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The following Contracts and agreements referred to in para ‘A’ below (not being contracts entered into in the ordinary course of business carried out or intended to be carried on by the Company or contract entered into more than two years before the date of this Draft Prospectus) which are / or may be deemed material, have been entered into by the Company. Copies of these contracts together with copies of the documents referred to in para ‘B’ below all of which have been attached to the copy of this Prospectus and which have been delivered to the ROC for registration and may be inspected at the Registered Office of the Company between 11.00 a.m. and 1.00 p.m. on any working day from the date of this Draft Prospectus until the closing of the subscription list . A. MATERIAL CONTRACTS

a. Memorandum of Understanding (MOU) dated 03/02/2006 between the Company and Khandwala

Securities Limited, for this Public Issue.

b. Memorandum of Understanding dated 28/01/2006 between the Company and Intime Spectrum Registry Limited, Registrar to this Public Issue.

c. Copy of tripartite agreement dated 08/12/2005 between NSDL, the Company and Intime Spectrum

Registry Limited.

d. Copy of tripartite agreement dated DD/MM/YYYY between CDSL, the Company and Intime Spectrum Registry Limited.

e. Copies of Quotations for Plant & Machinery.

B. DOCUMENTS FOR INSPECTION

a. Copy of Memorandum and Articles of Association of the Company as amended from time to time. b. Certificate of Incorporation dated 24/09/1997 and Certificate of Commencement of Business dated

07/10/1997 received from the Registrar of Companies, Punjab, H.P & Chandigarh, Jallandhar

c. Copy of the Special Resolution passed U/s 81(1A) of the Companies Act, 1956 on 27/01/2006 at the Extra ordinary General Meeting of the Company authorizing the present issue of Equity shares.

d. Copies of Members Resolution passed at the EGM held on 14/12/2005 for revision in salary payable to

Mr. Anil Kumar Gupta – Managing Director

e. Copies of Members Resolution passed at the EGM held on 14/12/2005 for revision in salary payable to Mr. Ajay Kumar Gupta – Jt. Managing Director

f. Copy of Members Resolution passed at the EGM held on 14/12/2005 for revision in salary payable to

Mr. Gautam Agarwal – Executive Director

g. Copies of Annual Report of Yogendra Worsted Ltd. for the year ended 31/03/2002, 31/03/2003, 31/03/2004, 31/03/2005 and 31/03/2006.

h. Letter from the Bombay Stock Exchange dated DD/MM/YYYY granting permission to use their names

in the Draft Prospectus and application made to the Stock Exchange for listing of Equity Shares issued through this Prospectus.

i. Auditors report on Financials dated 25/05/2006 and copies of the Annual Report mentioned in the

report

- 177 -

j. Statutory Auditors Report on Tax Benefit dated 25/05/2006

k. Consent letters from Directors of the Company, Registrar to the Issue, Lead Mangers to the Issue, Auditors, Banker to the Company, Bankers to the Issue, Company Secretary & Compliance officer to act in their respective capacities and for inclusion of their names in the Draft Prospectus.

l. Power of Attorney(s) executed by the Directors for signing and making corrections in the Draft

Prospectus on their behalf.

m. Due Diligence certificate dated 10/07/2006 issued by Lead managers to the issue Khandwala Securities Ltd.

n. Due Diligence certificate dated 10/07/2006 issued by Corporate Professionals – Legal Advisors to the

issue.

o. SEBI observation letter no._____________ dated DD/MM/YYYY and replied filed by the lead managers dated DD/MM/YYYY

p. Copy of resolution dated 27/01/2006 for increase in authorized share capital of the Company.

q. Copy of Resolution under Section 293(1)(a) and 293(1)(d) of the Companies Act 1956, passed at the

EGM of the Company held on 15/03/2005

r. Copy of Financial Collaboration Agreement entered on 23/12/1998 between Punjab State Induustrial Development Corporation Ltd. (PSIDC) (Corporation) and Mr. Ajay Kumar Gupta (Collaborator)

- 178 -

DECLARATION

This is to confirm that all the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government have been complied with and no statement made in this Draft Prospectus shall contravene any of the provisions of the Companies Act, 1956 and rules made there under. All the legal requirements connected with this 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. We the Directors of Yogindera Worsted Limited hereby declare and confirm that no information /material likely to have a bearing on the decision of the investor in respect of the Equity Shares issued in terms of this Draft Prospectus have been suppressed / withheld and / or incorporated in a manner that would amount to misstatement / misrepresentation. SIGNED BY ALL THE DIRECTORS Mr. Jagmohan Lal Gupta * Chairman Mr. Anil Kumar Gupta Managinhg Director Mr. Ajay Kumar Gupta Jt. Managing Director Mr. Gautam Aggarwal Executive Director Mr. Yogesh Goel * Nominee Director – PSIDC Mr. Deepak Kumar Gupta * Director (Works) Mr. Ashwini Kumar Gupta * Director Mr. S M Ishitiaque * Director * Through Their Constituted Attorney Mr. Ajay Gupta Place: Ludhiana Date : 13/07/06