JK PAPER LIMITED - Securities and Exchange Board … · LETTER OF OFFER Dated July 15, 2011 For Equity Shareholders of the Company only JK PAPER LIMITED Our Company was incorporated

LETTER OF OFFER

Dated July 15, 2011

For Equity Shareholders of the Company only

JK PAPER LIMITED Our Company was incorporated as The Central Pulp Mills Limited on July 4, 1960 under the Companies Act, 1956, as amended in the State of

Maharashtra. For details of changes in the name and registered office of the Company, see History and Certain Corporate Matters on page 91.

Registered Office: P.O. Central Pulp Mills - 394 660, Fort Songadh, District Tapi, Gujarat, India

Corporate Office: Nehru House, 4, Bahadur Shah Zafar Marg, New Delhi 110 002, India

Tel No: (91 11) 3017 9100, Fax No: (91 11) 2373 9475

Contact Person: Mr. Suresh Chander Gupta, Company Secretary and Compliance Officer Email:[email protected], Website: www.jkpaper.com

THE PROMOTER OF OUR COMPANY IS BENGAL & ASSAM COMPANY LIMITED.

FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY ONLY

LETTER OF OFFER

ISSUE OF 5,86,12,454 EQUITY SHARES OF FACE VALUE ` 10 EACH (EQUITY SHARES) OF JK PAPER LIMITED (THE COMPANY OR THE ISSUER) FOR CASH AT A PRICE OF ` 42 EACH (INCLUDING A PREMIUM OF ` 32 EACH) AGGREGATING TO ` 246.17 CRORES BY THE COMPANY TO THE EQUITY SHAREHOLDERS ON RIGHTS BASIS IN THE RATIO OF THREE EQUITY SHARES FOR EVERY FOUR EQUITY SHARES HELD ON THE RECORD DATE, i.e., JULY 27, 2011

(THE ISSUE). THE ISSUE PRICE IS 4.2 TIMES THE FACE VALUE OF THE EQUITY SHARES.

This Letter of Offer may not be sent to any person or any jurisdiction in which it would not be permissible to deliver the Equity Shares and

rights to purchase the Equity Shares, and the Equity Shares and rights to purchase the Equity Shares may not be offered, sold, resold,

transferred or delivered, directly or indirectly, to any such person or in any such jurisdiction. The Equity Shares and rights to purchase the

Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act) or under

any securities law of any state or other jurisdiction of the United States and may not be offered, sold, resold, Allotted, taken up, exercised,

renounced, pledged, transferred or delivered, directly or indirectly, within the United States or to or by U.S. Persons (as defined in

Regulation S under the Securities Act (Regulation S).

The Company is making this Issue on a rights basis to the Equity Shareholders of the Company and will dispatch the Letter of

Offer/Abridged Letter of Offer and Composite Application Form (CAF) to Equity Shareholders who have an Indian address.

GENERAL RISKS

Investments in equity securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk

of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in relation to this Issue. For

taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The Equity

Shares being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (the SEBI) nor does

SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors is invited to the section on Risk Factors on page x.

ISSUERS ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard

to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all

material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are

no other material facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions

or intentions misleading in any material respect.

LISTING

The existing Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (the BSE) and the National Stock Exchange of India Limited (the NSE). The Company has received in-principle approvals from the BSE and the NSE for listing of the Equity Shares pursuant

to letters dated February 16, 2011, and February 23, 2011, respectively. For the purpose of the Issue, the Designated Stock Exchange shall be the

BSE.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

ICICI SECURITIES LIMITED

ICICI Centre

H.T. Parekh Marg

Churchgate, Mumbai 400 020, Maharashtra

Tel: (91 22) 2288 2460 Fax: (91 22) 2282 6580

E-mail: jkpaper.rights @icicisecurities.com

Investor grievance id:

[email protected]

Website: www.icicisecurities.com

Contact Person: Mr. Sumit Agarwal

Registration No: INM000011179

MCS Limited

F-65, Okhla Industrial Area` Phase I, New Delhi 110 020

Tel: (91 11) 4140 6149

Fax: (91 11) 4170 9881

E-mail id: [email protected]

Website: www.mcsdel.com

Contact Person: Mr. S.K. Gupta

Registration No. INR000000056

ISSUE PROGRAMME

ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT

APPLICATION FORMS ISSUE CLOSES ON

August 8, 2011 August 16, 2011 August 23, 2011

TABLE OF CONTENTS

SECTION I - GENERAL ................................................................................................................................ i DEFINITIONS AND ABBREVIATIONS ..................................................................................................... i OVERSEAS SHAREHOLDERS ................................................................................................................... v PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA .................... vii FORWARD LOOKING STATEMENTS .................................................................................................... ix SECTION II - RISK FACTORS ................................................................................................................... x SECTION III - INTRODUCTION ................................................................................................................ 1 SUMMARY OF INDUSTRY OVERVIEW ................................................................................................. 1 SUMMARY OF OUR BUSINESS ................................................................................................................. 4 SUMMARY FINANCIAL INFORMATION ............................................................................................... 9 THE ISSUE ................................................................................................................................................... 15 GENERAL INFORMATION ...................................................................................................................... 16 CAPITAL STRUCTURE ............................................................................................................................. 23 OBJECTS OF THE ISSUE .......................................................................................................................... 35 BASIS FOR ISSUE PRICE .......................................................................................................................... 44 STATEMENT OF GENERAL AND SPECIAL TAX BENEFITS .......................................................... 49 SECTION IV ABOUT THE COMPANY ................................................................................................ 55 INDUSTRY OVERVIEW ............................................................................................................................ 55 OUR BUSINESS ........................................................................................................................................... 66 REGULATIONS AND POLICIES ............................................................................................................. 87 HISTORY AND CERTAIN CORPORATE MATTERS .......................................................................... 91 DIVIDEND POLICY .................................................................................................................................. 103 OUR MANAGEMENT .............................................................................................................................. 104 OUR PROMOTER AND GROUP COMPANIES ................................................................................... 121 RELATED PARTY TRANSACTIONS .................................................................................................... 144 SECTION V FINANCIAL INFORMATION ........................................................................................ 145 FINANCIAL STATEMENTS .................................................................................................................... 145 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS ..................................................................................................................................... 196 FINANCIAL INDEBTEDNESS ................................................................................................................ 217 STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY ......................................... 227 SECTION VI LEGAL AND OTHER INFORMATION ...................................................................... 229 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS............................................. 229 GOVERNMENT AND OTHER APPROVALS ....................................................................................... 263 STATUTORY AND OTHER INFORMATION ...................................................................................... 272 SECTION VII - TERMS OF THE PRESENT ISSUE ............................................................................ 282 SECTION VIII - MAIN PROVISIONS OF ARTICLES OF ASSOCIATION ..................................... 307 SECTION IX OTHER INFORMATION .............................................................................................. 337 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ............................................... 337 DECLARATION ........................................................................................................................................ 339

i

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

All terms defined have the meaning set forth below, unless otherwise specified in the context thereof.

Company Related Terms

Reference to any statutes or regulations shall include any amendments made from time to time.

Term Description

JK Paper or the Company or

our Company or the

Company or we or us or

our

JK Paper Limited, a public limited company incorporated under the provisions of

the Companies Act, 1956, and our Subsidiaries, unless the context otherwise

requires

Articles/Articles of Association The Articles of Association of our Company, as amended

Auditors The statutory auditors of our Company, Lodha & Co., Chartered Accountants

Corporate Office Nehru House, 4, Bahadur Shah Zafar Marg, New Delhi 110 002, India

Group Companies Includes those companies, firms and ventures disclosed in the section Our

Promoter and Group Companies on page 121, promoted by our Promoter,

irrespective of whether such entities are covered under section 370(1)(B) of the

Companies Act

Investors DEG, FMO and PROPARCO

Listing Agreements The equity listing agreements signed between our Company and the Stock

Exchanges

Memorandum/Memorandum of

Association

The Memorandum of Association of our Company, as amended

Promoter Bengal & Assam Company Limited

Promoter Group Includes such persons and entities constituting our promoter group pursuant to

Regulation 2(1)(zb) of the SEBI ICDR Regulations

Registered Office P.O. Central Pulp Mills - 394 660, Fort Songadh, District Tapi, Gujarat, India

Scheme of Arrangement Scheme of arrangement between our Company, Songadh Infrastructure & Housing

Limited and Jaykaypur Infrastructure & Housing Limited and their respective

shareholders

Subsidiaries

The subsidiaries of our Company, namely Jaykaypur Infrastructure & Housing

Limited and Songadh Infrastructure & Housing Limited

Issue Related Terms

Term Description

Abridged Letter of Offer The abridged letter of offer to be sent to the eligible Equity Shareholders of our

Company with respect to this Issue, in accordance with the SEBI ICDR Regulations

Allot/Allotted/Allotment Unless the context otherwise requires, the allotment of Equity Shares pursuant to

the Issue

Allottees Persons to whom Equity Shares of the Company are issued pursuant to the Issue

Application Money The aggregate amount payable in respect of the Equity Shares applied for in this

Issue at the Issue Price

Application Supported by

Blocked Amount/ASBA

An application, whether physical or electronic, used by an ASBA Applicant to

apply for the Equity Shares in the Issue, together with an authorization to an SCSB

to block the Application Money in the specified bank account maintained with such

SCSB

ASBA Applicants Eligible Equity Shareholders who intend to apply through ASBA and (a) are

holding Equity Shares in dematerialised form as on the Record Date and have

applied for (i) their Rights Entitlement or (ii) their Rights Entitlement and Equity

Shares in addition to their Rights Entitlement, in dematerialised form; (b) have not

renounced their Rights Entitlement in full or in part; (c) are not renouncees; and (d)

are applying through blocking of funds in bank accounts maintained with SCSBs

Bankers to the Issue State Bank of India and Axis Bank Limited

Business Day/ Working Day All days other than a Sunday or a public holiday, on which commercial banks in

New Delhi are open for business

Compliance Officer Mr. Suresh Chander Gupta, Company Secretary

Composite Application

Form/CAF

The form used by an Investor to make an application for Allotment of Equity

Shares in this Issue

Consolidated Certificate In case of holding of Equity Shares in physical form, the Company would issue one

ii

Term Description

certificate for the Equity Share Allotted to one folio

Controlling Branches The branches of the SCSBs which shall co-ordinate with the Lead Manager, the

Registrar to the Issue, and the Stock Exchanges and a list which is available at

http://www.sebi.gov.in/pmd/scsb.html

Designated Branches Such branches of the SCSBs which shall collect application forms used by ASBA

Applicants and a list of which is available at http://www.sebi.gov.in/pmd/scsb.html

Designated Stock Exchange The BSE

Draft Letter of Offer The Draft Letter of Offer dated January 28, 2011 filed with SEBI for its

observations

Equity Shareholder(s) A holder(s) of Equity Shares of our Company

Financial Year/Fiscal The period of 12 months ended March 31 of that particular year, unless otherwise

stated

Investor(s) The Equity Shareholders on the Record Date and the Renouncees

Issue The issue of 5,86,12,454 Equity Shares with a face value of ` 10 each for cash at a price of ` 42 each (including a premium of ` 32 each) aggregating to ` 246.17

crores by the Company to the Equity Shareholders on rights basis in the ratio of

three Equity Shares for every four Equity Shares held on the Record Date

Issue Closing Date August 23, 2011

Issue Opening Date August 8, 2011

Issue Price ` 42 per Equity Share Lead Manager ICICI Securities Limited

Letter of Offer The letter of offer filed with the Stock Exchanges after incorporating observations

received from SEBI on the Draft Letter of Offer

Net Proceeds The Issue Proceeds less the Issue expenses. For further details, please see Objects

of the Issue on page 35

Record Date July 27, 2011

Registrar to the Issue or Registrar MCS Limited

Renouncees Persons who have acquired Rights Entitlements from Equity Shareholders

Rights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to in proportion

to his/her shareholding in the Company on the Record Date

SAF(s) Split Application Form(s)

SCSB(s) The Self Certified Syndicate Banks which are registered with the SEBI under the

SEBI (Bankers to the Issue) Regulations, 1994, and are recognized as such by the

SEBI and offer services of ASBA, including blocking of funds in bank accounts. A

list of such banks are available at http://www.sebi.gov.in/pmd/scsb.pdf

Stock Exchange(s) The BSE and the NSE where the Equity Shares of the Company are presently listed

Industry Related Terms

Term Description

AOX Adsorbable Organic Halides

BDMT Bone Dry Metric Tonne

BDTPA Bone Dry Tonnes Per Annum

BOD Biochemical Oxygen Demand

CFBC Circulating Fluidised Bed Combustion

DCS Distributed Control System

ECF Elementary Chlorine Free

ESP Electro Static Precipitator

IPMA Indian Paper Manufacturers Association

T d s/d Tonnes dry solid per day

TPA Tonnes Per Annum

TTT Time to Temperature

WGGC Wet Ground Calcium Carbonate

P.O.P. Point of purchase

Conventional and General Terms/ Abbreviations

Term Description

A1 rating A1 rating by ICRA Limited indicates the highest-credit-rating quality assigned to

short-term debt instruments. Instruments rated in this category carry the lowest

credit risk in the short term

https://www.sebi.gov.in/pmd/scsb.htmlhttps://www.sebi.gov.in/pmd/scsb.html

iii

Term Description

A-(ind) rating A-(ind) rating by Fitch Ratings denotes expectations of low default risk relative to

other issuers or obligations in the same country. However, changes in

circumstances or economic conditions may affect the capacity for timely repayment

to a greater degree than is the case for financial commitments denoted by a higher

rated category

AGM Annual General Meeting

Air Act The Air (Prevention and Control of Pollution) Act, 1981

AS Accounting Standards, as issued by the ICAI

BSE The Bombay Stock Exchange Limited

CAGR Compounded Annual Growth Rate

CDSL Central Depository Services (India) Limited

CEO Chief Executive Officer

Companies Act The Companies Act, 1956

CRISIL Credit Rating Information Services of India Limited

CRPS Cumulative Redeemable Preference Shares

CSE The Calcutta Stock Exchange Association Limited

DEG DEG - Deutsche Investitions- Und Entwicklungsgesellschaft MBH

DZ Bank DZ Bank AG Deutsche Zentral-Genossenschaftsbank

Depositories Act The Depositories Act, 1996

DP Depository Participant

DSE Designated Stock Exchange

ECS Electronic Clearing Service

EGM Extraordinary General Meeting

EPS Earnings per share

F1(ind) rating F1(ind) rating by Fitch Ratings indicates the strongest capacity for timely payment

of financial commitments relative to other issuers or obligations in the same

country. Under the agencys national rating scale, this rating is assigned to the

lowest default risk relative to others in the same country

FCCB Foreign Currency Convertible Bond

FEMA Foreign Exchange Management Act, 1999

FDI Foreign Direct Investment

FI Financial Institutions

FII(s) Foreign Institutional Investors registered with SEBI under applicable laws

FIPB Foreign Investment Promotion Board

FMO Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V

GDP Gross Domestic Product

GDR Global Depository Receipts

GoI/ Central Government Government of India

HUF Hindu Undivided Family

ICAI The Institute of Chartered Accountants of India

IFSC Indian Financial System Code

I.T. Act, IT Act Income Tax Act, 1961

Indian GAAP The generally accepted accounting principles in India

Indian GAAS The generally accepted accounting standards in India

ITAT Income Tax Appellate Tribunal

MICR Magnetic Ink Character Recognition

MoU Memorandum of Understanding

NAV Net asset value

NEFT National Electronic Fund Transfer

NI Act Negotiable Instruments Act, 1881

NR Non Resident

NRI(s) Non Resident Indian(s)

NSDL National Securities Depository Limited

NSE The National Stock Exchange of India Limited

OCB Overseas Corporate Body

OCCRPS Optionally Convertible Cumulative Redeemable Preference Shares

PAN Permanent Account Number

PROPARCO Socit De Promotion Et De Participation Pour La Coopration Economique

RBI The Reserve Bank of India

RoC Registrar of Companies, Gujarat

Rs. or ` Indian Rupees

RTGS Real time gross settlement

iv

Term Description

SEBI Securities and Exchange Board of India

SEBI Act The Securities and Exchange Board of India Act, 1992

SEBI ICDR Regulations The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

Securities Act The United States Securities Act of 1933

SME Small and Medium Enterprises

STT Securities Transaction Tax

Takeover Code The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

US$ or USD United States Dollar

VSE Vadodara Stock Exchange Limited

Water Act The Water (Prevention and Control of Pollution) Act, 1974

The words and expressions used but not defined herein shall have the same meaning as is assigned to such terms

under the Companies Act, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the

rules and regulations made thereunder.

Notwithstanding the foregoing, terms in Main Provisions of Articles of Association, Statement of General

and Special Tax Benefits, Regulations and Policies and Financial Statements on pages 307, 49, 87 and

145, respectively, shall have the meanings given to such terms in these respective sections.

v

OVERSEAS SHAREHOLDERS

The distribution of this Letter of Offer and the issue of the Equity Shares on a rights basis to persons in certain

jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into

whose possession this Letter of Offer may come are required to inform themselves about and observe such

restrictions. The Company is making this Issue on a rights basis to the Equity Shareholders of the Company and

will dispatch the Letter of Offer/Abridged Letter of Offer and Composite Application Form (CAF) to Equity

Shareholders who have an Indian address.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for

that purpose, except that the Draft Letter of Offer has been filed with SEBI for observations. Accordingly, the

Equity Shares may not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed

in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction. Receipt of this

Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an

offer and, in those circumstances, this Letter of Offer must be treated as sent for information only and should not

be copied or redistributed. Accordingly, persons receiving a copy of this Letter of Offer should not, in

connection with the issue of the Equity Shares or the Rights Entitlements, distribute or send the same in or into

the United States or any other jurisdiction where to do so would or might contravene local securities laws or

regulations. If this Letter of Offer is received by any person in any such territory, or by their agent or nominee,

they must not seek to subscribe to the Equity Shares or the Rights Entitlements referred to in this Letter of Offer.

Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any

implication that there has been no change in the Companys affairs from the date hereof or that the information

contained herein is correct as at any time subsequent to this date.

NO OFFER IN THE UNITED STATES

The rights and the Equity Shares of the Company have not been and will not be registered under the United

States Securities Act, 1933, as amended (the Securities Act), or any U.S. state securities laws and may not be

offered, sold, resold or otherwise transferred within the United States of America or the territories or

possessions thereof (the United States or U.S.) or to, or for the account or benefit of, U.S. persons (as

defined in Regulation S under the Securities Act (Regulation S)), except in a transaction exempt from the

registration requirements of the Securities Act. The rights referred to in this Letter of Offer are being offered in

India, but not in the United States. The offering to which this Letter of Offer relates is not, and under no

circumstances is to be construed as, an offering of any securities or rights for sale in the United States or as a

solicitation therein of an offer to buy any of the said securities or rights. Accordingly, the Draft Letter of Offer/

Letter of Offer/ Abridged Letter of Offer and the enclosed CAF should not be forwarded to or transmitted in or

into the United States at any time.

Neither the Company nor any person acting on behalf of the Company will accept subscriptions or renunciation

from any person, or the agent of any person, who appears to be, or who the Company or any person acting on

behalf of the Company has reason to believe is, either a U.S. person (as defined in Regulation S) or otherwise

in the United States when the buy order is made. Envelopes containing CAF should not be postmarked in the

United States or otherwise dispatched from the United States or any other jurisdiction where it would be illegal

to make an offer under the Letter of Offer, and all persons subscribing for the Equity Shares and wishing to hold

such Equity Shares in registered form must provide an address for registration of the Equity Shares in India. The

Company is making this issue of Equity Shares on a rights basis to the Equity Shareholders of the Company and

the Letter of Offer/Abridged Letter of Offer and CAF will be dispatched to Equity Shareholders who have an

Indian address. Any person who acquires rights and the Equity Shares will be deemed to have declared,

represented, warranted and agreed, (i) that it is not and that at the time of subscribing for the Equity Shares or

the rights entitlements, it will not be, in the United States when the buy order is made, (ii) it is not a U.S.

person (as defined in Regulation S), and does not have a registered address (and is not otherwise located) in the

United States, and (iii) is authorized to acquire the rights and the Equity Shares in compliance with all

applicable laws and regulations.

The Company reserves the right to treat as invalid any CAF which: (i) does not include the certification set out

in the CAF to the effect that the subscriber is not a U.S. person (as defined in Regulation S), and does not

have a registered address (and is not otherwise located) in the United States and is authorized to acquire the

rights and the Equity Shares in compliance with all applicable laws and regulations; (ii) appears to the Company

vi

or its agents to have been executed in or dispatched from the United States; (iii) where a registered Indian

address is not provided; or (iv) where the Company believes that CAF is incomplete or acceptance of such CAF

may infringe applicable legal or regulatory requirements; and the Company shall not be bound to Allot or issue

any Equity Shares or Rights Entitlement in respect of any such CAF. The Company is informed that there is no

objection to a United States shareholder selling its rights in India. Rights Entitlement may not be transferred or

sold to any U.S. Person.

European Economic Area Restrictions

In relation to each Member State of the European Economic Area which has implemented the Prospectus

Directive (each, a Relevant Member State), an offer of the Equity Shares to the public may not be made in

that Relevant Member State prior to the publication of a prospectus in relation to the Rights Entitlement or the

Equity Shares which has been approved by the competent authority in that Relevant Member State or, where

appropriate, approved in another Relevant Member State and notified to the competent authority in that

Relevant Member State, all in accordance with the Prospectus Directive, except that an offer of Equity Shares or

Rights Entitlement to the public in that Relevant Member State from and including the Relevant Implementation

Date may be made:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized

or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last

Financial Year; (2) a total balance sheet of more than Euro 43,000,000 and (3) an annual net turnover of

more than Euro 50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that no such offer of Equity Shares shall result in the requirement for the publication by the Company

or the Lead Manager pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an offer to the public in relation to any Equity Shares in any

Relevant Member State means the communication in any form and by any means of sufficient information on

the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to purchase or

subscribe the Equity Shares, as the same may be varied in that Member State by any measure implementing the

Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/7

1/EC and includes any relevant implementing measure in each Relevant Member State. In the case of any Rights

Entitlement or Equity Shares being offered to a financial intermediary as that term is used in Article 3(2) of the

Prospectus Directive, such financial intermediary will be deemed to have represented, acknowledged and agreed

that the Rights Entitlement or Equity Shares acquired by them in the Issue have not been acquired on a non-

discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in

circumstances which may give rise to an offer of any Rights Entitlement or Equity Shares acquired by them in

the Issue to the public other than their offer or resale in a Relevant Member State to qualified investors as so

defined who are not financial intermediaries or in circumstances in which the prior consent of the Lead Manager

has been obtained to each such proposed offer or resale.

United Kingdom Restrictions

This Letter of Offer is only being distributed to and is only directed at (i) persons who are outside the United

Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets

Act 2000 (Financial Promotion) Order 2005 (the Order) or (iii) high net worth entities, and other persons to

whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons

together being referred to as relevant persons). The Equity Shares are only available to, and any invitation,

offer or agreement to subscribe, purchase or otherwise acquire such Equity Shares will be engaged in only with,

relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its

contents.

vii

PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Unless stated otherwise, the financial information and data in this Letter of Offer is derived from the Companys

consolidated restated audited financial statements, prepared in accordance with Indian GAAP and SEBI ICDR

Regulations, which are included in this Letter of Offer and set out in the section titled Financial Statements

on page 145. The Fiscal of the Company commences on April 1 of every year and ends on March 31 of the next

year.

The Company is an Indian listed company and prepares its financial statements in accordance with Indian

GAAP and the Companies Act. There are changes in description and classification of certain amounts in the

presentation of the financial information included in this Letter of Offer if compared to the presentation and

disclosures we have reported as a listed company in India. Neither the information set forth in our financial

statements nor the format in which it is presented should be viewed as comparable to information prepared in

accordance with IFRS or U.S. GAAP or any accounting principles other than Indian GAAP. We prepare our

financial statements in accordance with Indian GAAP and Indian GAAS. Indian GAAP differs significantly in

certain respects from IFRS and U.S. GAAP.

In this Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are

due to rounding-off, and unless otherwise specified, all financial numbers in parenthesis represent negative

figures. Any percentage amounts, as set forth in the sections titled Risk Factors, Our Business,

Managements Discussion and Analysis of Financial Condition and Results of Operations on pages x, 66

and 196, respectively, and elsewhere in this Letter of Offer, unless otherwise indicated, have been prepared on

the basis of the financial statements included in this Letter of Offer.

For definitions, see Definitions and Abbreviations on page i. All references to India contained in this Letter

of Offer are to the Republic of India, all references to the US or the U.S. or the USA or the U.S.A or

the United States are to the United States of America, and all references to the UK or the U.K. are to the

United Kingdom.

Currency and Units of Presentation

Except where specified, in this Letter of Offer, all figures have been expressed in crores.

All references to Rupees, INR or Rs. or ` are to Indian Rupees, the official currency of the Republic of India, all references to US$ or USD are to United States Dollars, the official currency of the United States

of America, all references to GBP or are to Great Britain Pounds, the official currency of the United

Kingdom, all references to EUR or are to the official currency of the European Union, and all references

to SEK are to Swedish Krona, the official currency of the Sweden.

Industry and Market Data

Unless stated otherwise, industry, demographic and market data used in this Letter of Offer has been obtained

from industry publications, data on websites maintained by private and public entities, data appearing in reports

by market research firms and other publicly available information. These resources generally state that the

information contained 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.

Neither we nor the Lead Manager have independently verified this data and neither we nor the Lead Manager

make any representation regarding the accuracy of such data. Accordingly, applicants should not place undue

reliance on this information.

Certain information in Industry Overview has been obtained from CRISIL Limited which has issued the

following disclaimer:

CRISIL Limited has used due care and caution in preparing this report. Information has been obtained by

CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy

or completeness of any information and is not responsible for any errors or omissions or for the results obtained

from the use of such information. No part of the report may be published/reproduced in any form without

CRISILs prior written approval. CRISIL is not liable for investment decisions which may be based on the

viii

views expressed in the report. CRISIL Research operates independently of, and does not have access to

information obtained by CRISILs Rating Division, which may, in its regular operations, obtain information of a

confidential nature that is not available to CRISIL Research.

Exchange Rates

The exchange rates of the respective foreign currencies as on June 30, 2011, March 31, 2011, and March 31,

2010 are provided below:

Currency Exchange rate into ` as on

June 30, 2011

Exchange rate into ` as on

March 31, 2011

Exchange rate into ` as

on March 31, 2010

USD 44.72 44.65 45.14

EUR 64.79 63.24 60.56

GBP 71.96 71.93 68.03

Yen 0.56 0.54 0.48

SEK 7.17 7.17 6.20 Source:www.rbi.org.in, www.oanda.com (for SEK data)

http://www.oanda.com/

ix

FORWARD LOOKING STATEMENTS

Our Company has included statements in this Letter of Offer which contain words or phrases such as aim, is

likely to result, believe, expect, will continue, anticipate, estimate, intend, plan, contemplate,

seek to, future, objective, goal, project, potential, will pursue and similar expressions or

variations of such expressions, that are forward looking statements.

All forward looking statements, whether made by the Company or any third party, are subject to risks,

uncertainties and assumptions about our Company that could cause actual results to differ materially from those

contemplated by the relevant forward-looking statement. 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, the following:

cost or availability of raw materials;

our Companys ability to successfully implement its strategy, its growth and expansion plans and technological changes;

ability to obtain financing to expand our business;

inability to generate sufficient cash flow or secure sufficient credit to simultaneously fund our operations, finance capital expenditures, and satisfy other obligations;

loss of or shutdown of operations at any of our manufacturing facilities;

general political economic and business conditions in India and other countries;

performance of the Indian debt and equity markets;

our exposure to market risks;

occurrence of natural calamities or natural disasters affecting the areas in which our Company has operations;

changes in laws and regulations that apply to companies in India; and

changes in the foreign exchange control regulations in India.

For a further discussion of factors that could cause the Companys actual results to differ, see Risk Factors,

Our Business and Managements Discussion and Analysis of Financial Condition and Results of

Operations on pages x, 66 and 196, respectively. By their nature, certain market risk disclosures are only

estimates and could be materially different from what actually occurs in the future. As a result, actual future

gains or losses could materially differ from those that have been estimated. Neither our Company nor the Lead

Manager nor any of its respective affiliates or advisors 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 the SEBI / Stock

Exchanges requirements, our Company and the Lead Manager will ensure that applicants are informed of

material developments until the time of the grant of listing and trading permission by the Stock Exchanges.

x

SECTION II - RISK FACTORS

An investment in equity securities involves a high degree of risk and investors should not invest any funds in this

Issue unless they can afford to take the risk of losing all or a part of their investment. You should carefully

consider all of the information in this Letter of Offer, including the risks and uncertainties described below,

before making an investment. To obtain a complete understanding, you should read this section in conjunction

with Our Business and Managements Discussion and Analysis of Financial Condition and Results of

Operation on pages 66 and 196, respectively, as well as the other financial and statistical information

contained in this Letter of Offer. In making an investment decision, prospective investor must rely on their own

examination of our Company and terms of the Issue, including the merits and risk involved. If any of the

following risks actually occur, our business, financial condition, results of operations and prospects could

suffer, the trading price of our Equity Shares could decline and you may lose all or part of your investment. The

risk and uncertainties described below are not the only risks that we currently face. Additional risk and

uncertainties not presently known to us or that we currently believe to be immaterial may also have an adverse

effect on our business, results of operations and financial condition. You should also pay particular attention to

the fact that we are governed in India by a legal and regulatory environment which in some material respects

may be different from that which prevails in other countries.

This Letter of Offer also contains forward-looking statements that involve risks and uncertainties. Our

Companys actual results could differ materially from those anticipated in these forward-looking statements as

a result of certain factors, including the considerations described below and elsewhere in this Letter of Offer.

The financial and other implications of material impact of risks concerned, wherever quantifiable, have been

disclosed in the risk factors mentioned below. However there are a few risk factors where the impact is not

quantifiable and hence the same has not been disclosed in such risk factors.

Unless otherwise stated, the financial information of our Company used in this section is derived from our

audited consolidated financial statements, as restated.

Internal Risk Factors

1. Changes in the cost or availability of raw materials and energy could affect our profitability.

We rely significantly on certain raw materials (principally bamboo, wood, industrial chemicals and pulp)

and energy sources (principally water and electricity) for the manufacture of our products. In Fiscal 2011

and Fiscal 2010, raw materials comprised approximately 26.72% and 25.55% of our net sales.

We procure a significant portion of our bamboo / pulp wood from forest land allotted to us by the various

state governments, through long term agreements wherein quantity and price are fixed on an annual basis.

However, such supply by the relevant state governments is subject to numerous conditions including

achieving certain production targets and lifting the bamboo/ pulp wood within the periods specified. In the

event we are unable to comply with these conditions, the relevant state governments may terminate the

allotment of such lands to us or may impose penalties. Further, as a result of flowering and illegal felling of

bamboo in forest land allocated to us by the state government of Gujarat, we anticipate that only 15-20% of

our bamboo requirement would be met by such land allotted to us after Fiscal 2012. We have not entered

into any formal arrangements or commitments for the supply of our remaining bamboo/ pulp wood

requirements and procure such requirement from local farmers and the open market. In addition, due to

complicated land ownership structures, we may not be able to procure land within adequate time, or at all,

to plantation of bamboo/ pulp wood for captive requirements. Further, as a result of increase in prices of

bamboo, we use hardwood to cater our raw material requirements, as an alternative to bamboo. We may not

be able to procure adequate quantity of hardwood at a commercially acceptable price, or at all. Any

unavailability of hardwood at a competitive cost and timely manner would have a material adverse effect on

our business, operations and financial condition.

A significant portion of our raw material requirements is met by imports. For Fiscal 2011 and Fiscal 2010,

40.19% and 39.59%, respectively, of the raw materials consumed by us were imported. For Fiscal 2011 and

Fiscal 2010, 18.57% and 20.42%, respectively, of the pulp consumed by us were imported. Pulp of different

varieties are imported from countries such as Indonesia, Sweden, Finland and USA, for manufacturing high

strength virgin packaging board. In addition, availability of pulp in the international markets affects prices

of pulp. Events in past such as earthquake in Chile, a major supplier of pulp, and increase in demand of

pulp in China, led to increase in price of pulp internationally. Raw material prices will change based on

xi

worldwide supply and demand and there is no assurance that we will be able to procure our requirements

from suppliers at reasonable costs and in a timely manner. For trends in relation to raw material prices, see

Industry Overview on page 55.

Further, factors such as inclement weather and heavy monsoons may delay or disrupt the harvest of

hardwood or bamboo for the particular crop period, leading to unavailability of raw materials. Also, some

of our customers may have businesses which may be seasonal in nature and a downturn in demand for our

products by such customers could reduce our revenues during such periods.

We procure our entire industrial chemicals required for our operations from the open market on a spot basis,

and consequently are affected by variations in price of such industrial chemicals. Any adverse variation in

price of industrial chemicals may adversely affect our raw material costs. Further, we may not be able to

pass increased cost for industrial chemicals to our customers.

To meet our power requirements, while we own and operate thermal captive power plants, energy costs

may fluctuate significantly due to increase in coal/lignite prices or decreased production capacity. Further,

during Fiscal 2011, we purchased approximately 36.33% of our coal requirements for Unit JKPM from

open market. For Unit CPM, we purchased our entire requirement of lignite from open market and 39.99%

of our coal requirements from the open market, during Fiscal 2011. Coal prices have fluctuated

dramatically in the past and may continue to fluctuate in the future. Any inability to source our coal

requirements at a competitive cost and in a timely manner would have a material adverse affect on our

business, operations and financial condition.

We may not be able to pass increased cost for raw materials or energy to our customers if the market or

existing agreements with our customers do not allow us to raise the prices of our finished products. Even if

we are able to pass through increased cost of raw materials or energy, the resulting increase in the selling

prices for our products could reduce the volume of products we sell and decrease our revenues. While we

may try, from time to time, to hedge against increase in prices of raw materials, we may not be successful in

doing so. Any failure of our suppliers to deliver the raw materials or coal in the necessary quantities or to

adhere to delivery schedules or specified quality standards and technical specifications would adversely

affect our production processes and our ability to manufacture our products on time and at the desired level

of quality, which could have a material adverse effect on our business, financial condition and results of

operations.

2. Outbreaks of diseases can significantly affect availability of raw materials for our products.

Outbreak of diseases can significantly affect availability of raw materials for our products. From time to

time, there have been outbreaks of certain diseases in plants, such as gall disease on eucalyptus trees in the

Fiscal 2007, which led to damage of saplings and adversely affected growth of eucalyptus plant. As a result

of outbreak of gall disease, farmers were reluctant to plant eucalyptus, leading to significant reduction in

rate of increase of acreage of eucalyptus in the states of Andhra Pradesh and Odisha. Damage to existing

eucalyptus plants and reluctance to plant new eucalyptus led to reduction in availability of raw materials

required to manufacture paper and paper products. Outbreak of any such disease in future can adversely

affect availability of raw materials, affect our plantation initiative and lead to waste of cost incurred in

plantation.

3. The segments of the paper industry in which we operate are highly competitive and increased competition could reduce our sales and profitability.

We compete in different markets within the paper industry on the basis of the quality of our products,

customer service, product development activities, price, and distribution. All of our markets are highly

competitive. Factors affecting our competitive success include, among other things, price, availability of

products, brand recognition, customer service, ease of use, and reliability. Our competitors vary in size, and

may have greater financial, marketing, personnel and other resources than us and certain of our competitors

have a longer history of established businesses and reputations in the Indian paper and packaging board

market as compared with us. Competitive conditions in some of our segments have caused us to incur lower

net selling prices and reduced gross margins and net earnings. These conditions may continue indefinitely.

Changes in the identity, ownership structure, and strategic goals of our competitors and the emergence of

new competitors in our target markets may impact our financial performance. New competitors may include

xii

foreign-based companies and commodity-based domestic producers who could enter our specialty markets.

In addition to competition with different players in the paper industry, industrial paper products compete

with products such as polymers, wood and steel for packaging. The writing and printing paper faces limited

substitution threat from the increased tendency of storage of data in soft form, which may affect demand of

our writing and printing paper products.

4. Any inability to raise adequate financing to fund the expansion and upgrading of our facilities may have a material adverse effect on our business, prospects, financial condition and results of operations.

We will need significant additional capital to finance our business and in particular, our plans for expansion

of Unit JKPM. Our expansion of Unit JKPM requires capital expenditure of an aggregate amount of

approximately ` 1,653.37 crores, which we intend to finance through a combination of equity capital, debt, internal accruals and equity linked securities. Further, we may intend to expand in our coated paper and

packaging board segments in future. The expansion and upgradation of our facilities require significant

capital expenditure. Our ability to finance our capital expenditure plans is subject to a number of risks,

contingencies and other factors, some of which are beyond our control, including borrowing or lending

restrictions imposed by applicable government regulations and general economic and capital market

conditions. We cannot assure you that we will be able to obtain sufficient funds to meet our capital

expenditure requirements and on terms acceptable to us, or at all.

While in the past, we have been able to finance our projects on competitive terms due in part to our

Company achieving a favorable credit rating, there can be no assurance that we will achieve such financing

in a timely manner and on favorable terms, or at all, or maintain a favorable credit rating. ICRA Limited has

assigned a credit rating of A1 to our ` 40 crore commercial paper programme. Additionally, Fitch Ratings has assigned a credit rating of A-(ind) to secured term loans availed by us, and A-(ind)/F1(ind) to

working capital loans availed by us. Future debt financing, if available, may result in increased finance

charges, increased financial leverage, decreased income available to fund further acquisition and expansions

and the imposition of restrictive covenants on our business and operations. In addition, future debt

financing may limit our ability to withstand competitive pressures and render us more vulnerable to

economic downturns. If we fail to generate or obtain sufficient additional capital in the future, we could be

forced to reduce or delay the planned expansion projects or other capital expenditures.

In addition, domestic funds may not be available or be available to us on unattractive terms, which may

require us to seek funding internationally, resulting in unattractive terms and conditions and exposure to

higher interest rates and foreign exchange risks. If the funding requirements of a particular expansion

project increase, we will need to look for additional sources of finance, which may not be readily available,

or may not be available on attractive terms, which may have an adverse effect on the profitability of that

project. We may face cost overruns during the expansion of our facilities, which may require us to revise

our cost estimates. Any significant change in the estimated funding requirements and development costs of

the facilities may have an adverse effect on our cash flows, financial condition and results of operations.

Our business, financial condition, results of operations and prospects may be adversely affected by any

delay or failure to successfully commission these projects.

5. We have incurred significant indebtedness and intend to incur additional substantial borrowings in connection with the expansion of our facilities. The indebtedness incurred and the conditions and

restrictions imposed by our financing arrangements could adversely impact our ability to pay dividends,

conduct our business operations and we may not be able to meet our obligations under these debt

financing arrangements.

As of March 31, 2011, we had total outstanding indebtedness of ` 538.36 crores. Our debt-to-equity ratio as at March 31, 2011 was 0.92:1. For further details regarding our indebtedness, see Financial Statements

and Financial Indebtedness on pages 145 and 217, respectively. We expect to incur substantial

additional indebtedness in order to finance the expansion of our manufacturing facilities. The indebtedness

incurred and expected to be incurred and the restrictions imposed on us by our current or future loan

arrangements could adversely impact our ability to conduct our business operations and result in other

significant adverse consequences, including, but not limited to, the following:

xiii

we may be required to dedicate a significant portion of our cash flow towards repayment of our existing debt, which will reduce the availability of cash flow to fund working capital, capital

expenditures, acquisitions and other general corporate requirements;

we may also be required to maintain certain specified financial ratios;

our ability to obtain additional financing through debt or equity instruments in the future may be impaired;

we may be required to obtain approval from our lenders regarding, among other things, expansion, our incurrence of additional indebtedness and the disposition of assets and we cannot assure you that we

will receive such approvals in a timely manner or at all;

we may not be able to declare or pay any dividend to our shareholders if we are in default of the terms and conditions of loan agreements;

increase our vulnerability to general adverse economic, industry and competitive conditions; and

it could limit our flexibility in planning for, or reacting to, changes in our business and the industry.

Additionally, ` 39.88 crores of our secured loans and ` 28.84 crores of our unsecured loans, aggregating to ` 68.72 crores, as on March 31, 2011, may be recalled by the lenders at any time. For details, see Financial Indebtedness on page 217. Our ability to meet our debt service obligations and to repay our

outstanding borrowings will depend primarily upon the cash flow generated by our business over time, as

well as our ability to tap the capital markets as a source of capital.

Some of our financing documents require us to comply with certain information and financial covenants.

Further, we are required to obtain consent of certain lenders for undertaking certain actions such as change

in capital structure and issue of further securities.

We cannot assure you that we will generate sufficient cash to enable us to service our existing or future

borrowings, comply with covenants or fund other liquidity needs. If we fail to meet our debt service

obligations or financial covenants required under the financing documents, the relevant lenders could

declare us to be in default under the terms of our borrowings, accelerate the maturity of our obligations or

take over the financed project. Further, a default by us under the terms of any financing document may also

constitute a cross-default under other financing documents, which may individually or in aggregate, have a

material and adverse effect on our results of operations and financial position. We cannot assure you that, in

the event of any such acceleration, we will have sufficient resources to repay these borrowings. Failure to

meet our obligations under the debt financing arrangements could have a material adverse effect on our

cash flows, business and results of operations.

Future debt financing, if available, may result in increased finance charges, increased financial leverage,

decreased income available to fund further acquisitions and expansions, decreased working capital and the

imposition of restrictive covenants on our business and operations. Our planned and any proposed future

expansions may be materially and adversely affected if we are unable to obtain funding for such capital

expenditures on satisfactory terms, or at all, including as a result of any of our existing facilities becoming

repayable before its due date.

6. Orders placed by customers may be delayed, modified, cancelled or not fully paid for by our customers, which may have an adverse effect on our business, financial condition and results of operations.

We may encounter problems in executing the orders in relation to our products, or executing it on a timely

basis. Moreover, factors beyond our control or the control of our customers may postpone the delivery of

such products or cause its cancellation, including delays or failure to obtain necessary permits,

authorizations, permissions and other types of difficulties or obstructions. Due to the possibility of

cancellations or changes in scope and schedule of delivery of such products, resulting from our customers

discretion or problems we encounter in the delivery of such products or reasons outside our control or the

control of our customers, we cannot predict with certainty when, if or to what extent we may be able to

deliver the orders placed. Additionally, delays in the delivery of such products can lead to customers

delaying or refusing to pay the amount, in part or full, that we expect to be paid in respect of such products.

xiv

In addition, even where a delivery proceeds as scheduled, it is possible that the contracting parties may

default or otherwise fail to pay amounts owed. While we have not yet experienced any material delay,

reduction in scope, cancellation, execution difficulty, payment postponement or payment default with

regard to the orders placed with us, or disputes with customers in respect of any of the foregoing, any such

adverse event in the future could materially harm our cash flow position and income.

In relation to our paper products, our five largest customers contributed approximately 22.11% and 22.92%

of our Companys net sales for Fiscal 2011 and for Fiscal 2010, respectively. Additionally, in relation to our

virgin packaging board products, our five largest customers contributed approximately 10.38% and 9.31%

of our Companys net sales for Fiscal 2011 and Fiscal 2010, respectively. Any delay, modification,

cancellation of order by our large customers may have material adverse effect on our financial condition

and results of operations.

Further, we operate in highly competitive markets in relation to our products where it is difficult to predict

whether and when we will receive such awards. As a result, our results of operations can fluctuate from

quarter to quarter and year to year depending on whether and when such orders are awarded to us and the

commencement and progress of work under the orders placed.

7. We may be unable to generate sufficient cash flow or secure sufficient credit to simultaneously fund our operations, finance capital expenditures, and satisfy other obligations.

Our business is capital intensive and requires significant expenditures for equipment maintenance and new

or enhanced equipment for environmental compliance matters, and to support our business strategies. We

expect to meet all of our near-and longer-term cash needs from a combination of operating cash flows, cash

and cash equivalents, our existing credit facilities or other bank lines of credit, and other long-term debt. If

we are unable to generate sufficient cash flow from these sources or if we are unable to secure needed credit

due to our performance or tighter credit markets, we could be unable to meet our near-and longer-term cash

needs.

8. We intend to increase our pulp manufacturing capacity and paper manufacturing capacity at Unit JKPM to 2,15,000 BDTPA and 1,65,000 TPA, respectively. We may not be granted approval to manufacture

pulp by more than 2,00,000 BDTPA and paper by more than 1,50,000 TPA, or be able to comply with the

terms and conditions of any approval relating to proposed expansion at Unit JKPM, which could have a

material adverse effect on our ability to expand our business.

We propose to expand our manufacturing capacity at Unit JKPM by way of, among others, (i) installation

of a new or augmented fibre line with a capacity to produce approximately 2,15,000 BDTPA of pulp; and

(ii) installation of new paper machine with a capacity to produce of 1,65,000 TPA of woodfree copy paper.

We intend to part finance this proposed expansion through Net Proceeds of the Issue. In terms of letter

dated April 20, 2011, the MoEF, subject to compliance with certain terms and conditions, granted approval

for, among others, increase in production capacity of pulp at Unit JKPM to 2,00,000 BDTPA (MoEF

Approval). Further, the Industrial Promotion and Investment Corporation of Orissa Limited, Government

of Odisha (IPICOL) has granted in principle approval for setting up of a new pulp mill of 2,00,000

BDTPA and a paper plant of 1,50,000 TPA, subject to certain conditions. Our Company is in the process of

evaluating the approvals received and considering to apply for enhancing capacity to produce pulp and

paper of quantities more than 2,00,000 BDTPA and 1,50,000 TPA, respectively, at Unit JKPM

However, we may not be granted such approvals. In case we do not receive such approvals or if we face any

delays in receiving such approvals, we would not be able to utilize our installed capacity of pulp and paper

production completely, consequently limiting our production and sale of pulp and paper. Our inability to

use machineries to its full capacity and achieving limited production would limit our return on investments,

delaying recovery of costs incurred in proposed expansion, and have an adverse impact on our profitability,

result of operations and trading price of Equity Shares.

Further, the MoEF Approval requires us to comply with certain terms and conditions, such as, earmarking a

portion of total capital cost for environment protection measures, installation of a state of art disc filter to

recover and recycle the water, installation of ESP to CFBC boilers to achieve low particulate emission,

limiting water requirement after expansion to 31,960 KLD, installation of oxygen delignification plant and

maintaining low AOX levels, development of green belt in 33% of the total land all along the boundary

wall and earmarking 5% of total cost towards enterprise social commitment. The approval from IPICOL

xv

also requires us to comply with certain terms and conditions, such as, clearance of dues of water resources

department before taking up expansion activity; obtaining no objection certificate from Orrisa State

Pollution Control Board, setting up a paper park and submitting a separate proposal for allotment of 150

acres of government land contiguous to the plant for setting up Agro Economic Research Centre at

Rayagada. Further, under the IPICOL approval, the Government of Odisha, has not assured any raw

material linkage.

We may not be in a position to comply with conditions of aforesaid approvals and may require further

approvals from the MoEF and/or Government of Odisha, for obtaining relaxation or revision in such

conditions. Our inability to comply with any of the terms and conditions of the approvals from MoEF and

IPICOL may lead to revocation of such approval, which may negatively affect our ability to produce pulp

and paper at Unit JKPM. Further, we may become subject to fines and penalties under the applicable laws.

This may have a material adverse impact on our production, sales, revenue, profitability and results of

operations.

Further, while we have received in principle from Government of Odisha, we still await its final approval.

We cannot assure you that we will be granted such approval in a timely manner, or at all. Further, we may

not be in a position to comply with the terms and conditions of any additional approval, if granted. In case

we do not receive such approval, or are unable to comply with the terms and conditions of such approval,

we may not be able to proceed with our proposed expansion at Unit JKPM, and we would be unable to use

Net Proceeds as described in this Letter of Offer, which may have a material adverse effect on our business,

results of operations and financial condition.

9. The Appraisal Report specifies certain risks in relation to our proposed expansion and development plan for the Unit JKPM.

The expansion and development plan of our Unit JKPM has been appraised by Poyry Management

Consulting Oy. The Appraisal Report sets forth certain risks in relation to our proposed expansion and

development plan for the Unit JKPM, including:

Market risks such as increase in local and international competition that may impact sales volumes as well as sales prices.

As significant part of the machinery required for the proposed expansion would be imported and quoted in foreign currency, we may not be able to hedge against increase in our costs as a result of

depreciation of Rupee.

Volatility in steel prices may affect our civil costs. Further, we may be required to incur additional costs as a result of inaccurate estimates or increase in civil, construction costs and other costs

during the expansion period.

Contracts entered into for the proposed expansion are on fixed price basis and we may not be in a position to negotiate the price or take benefit of a low cost alternative that may emerge in future.

Delayed start up would create additional costs due to interest during construction.

In the event a new capacity is built in the same region by our competitor(s), raw material costs may rise and we may not be able to procure raw materials, including wood and water, at commercially

acceptable price or quantity, or at all. Further, availability of water may be limited in case of

insufficient monsoon.

In case any of the above risks materializes, we may not be able to successfully implement our proposed

expansion and development plan for our Unit JKPM or may not be able to achieve expected benefits out of

it, leading to unproductive expenditure of capital and resources. Any delays in the scheduled completion of

of our proposed expansion and development plan for the Unit JKPM, along with any of the risks mentioned

above, may result in lower returns on capital or reduced earnings which may have an adverse impact on our

business, results of operations and financial condition.

10. Capacity additions by other players could lead to temporary supply side and pricing pressures for a short term.

With the steady growth in domestic consumption, many players in the industry have expanded their

capacities during past few years, specifically in the copier paper segment. For instance, Ballarpur Industries

Limited and ITC Limited have undertaken capacity additions in the years 2009 and 2010. While we are a

market leader in the branded copier paper segment in India where we had a market share of approximately

xvi

28.8%, as per CRISIL Research Paper Annual Review, November 2010, and we believe that demand

growth could meet the extra capacity additions, bunching of these capacities may result in temporary supply

side and pricing pressures in near term. This may impact our selling prices of our products and

consequently our profitability as well. See, Industry Overview, on page 55.

11. An inability to manage our growth may disrupt our business and reduce our profitability.

We have experienced year-on-year growth in our income from own manufacturing operations (gross sales)

of approximately 11.06% in Fiscal 2011. Our growth will place significant demands on us and require us to

continuously evolve and improve our operational, financial and internal controls across our organisation. In

particular, continued expansion increases the challenges involved in:

maintaining high levels of customer satisfaction;

recruiting, training and retaining sufficient skilled management, technical and marketing personnel;

adhering to health, safety and environment and quality and process execution standards that meet customer expectations;

preserving a uniform culture, values and work environment in operations; and

developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal systems.

Any inability to manage our growth may have an adverse effect on our business, results of operations and

financial condition.

12. Our business requires the services of third parties, including technology licensors, suppliers and sub-contractors, which entail certain risks.

Our business generally requires the services of third parties, including technology licensors, contractors and

suppliers of labour, materials and equipment. For instance, for our manufacturing units, we enter into

annual maintenance contracts with third party service providers in relation to DCS system of pulp mill,

DCS system recovery boiler and maintenance and repairing of electronic instruments. As on June 30, 2011,

we have 53 third-party service providers for the Unit JKPM and 62 third-party service providers for the

Unit CPM. The timing and quality of completion of our products depends on the availability and skill of

such third parties, as well as contingencies affecting them, including labour and raw material shortages and

industrial action, such as strikes and lock-outs. We cannot assure you that skilled third parties will continue

to be available at reasonable rates and will be able to provide their support in the areas in which we conduct

our business. As a result, any delay in this respect could adversely affect our ability to continue to operate

our manufacturing facility optimally and have an adverse effect on our business, financial condition and

result of operations.

There is also a risk that we may have disputes with our sub-contractors arising from, among other things,

the quality and timeliness of work performed by the sub-contractor, customer concerns about the sub-

contractor, or our failure to extend existing orders or issue new orders under a sub-contract. In addition, if

any of our sub-contractors fail to deliver on a timely basis the agreed-upon supplies and/or perform the

agreed-upon services, our ability to manufacture our products may be jeopardized. Consequently, we would

have to seek remedies from our suppliers, sub-contractors or technology licensors, as the case may be,

should any product liability claim be made by our customers against us. In case of any such claim against

us, even if it is not proven, our reputation may suffer and our business may be materially and adversely

affected. We cannot assure you that claims of such nature will not be brought against us, which could have

a material adverse effect on our reputation, business and financial performance.

13. Our business is dependent on our manufacturing facilities. The loss of or shutdown of operations at any of our manufacturing facilities may have a material adverse effect on our business, financial condition

and results of operations.

Our manufacturing facilities at Songadh, Gujarat and Jaykaypur, Odisha are subject to operating risks, such

as the breakdown or failure of equipment, power supply or processes, performance below expected levels of

output or efficiency, obsolescence, labour disputes, continued availability of services of our external

contractors, earthquakes and other natural disasters, industrial accidents and the need to comply with the

directives of relevant government authorities. The occurrence of any of these risks could significantly affect

our operating results. Although we take precautions to minimize the risk of any significant operational

xvii

problems at our facilities, including insurance coverage, our business, financial condition and results of

operations may be adversely affected by any disruption of operations at our facilities, including due to any

of the factors mentioned above.

14. If we have any operational problems at any of our facilities, it could have a material adverse effect on our business and results of operations.

Our manufacturing and distribution warehouses may suffer loss or damage due to fire, flood, terrorism,

mechanical failure, or other natural or man-made events. If any of these facilities were to experience a loss

or damage, it could disrupt our operations, delay production, delay or reduce shipments, reduce revenue,

and result in significant expenses to repair or replace the facility. These expenses and losses may not be

adequately covered by property or business insurance. Even if covered by insurance, our inability to deliver

our products to customers, even on a short-term basis, may cause us to lose market share on a more

permanent basis, which could have a material adverse effect on our business and results of operations.

15. We require a number of approvals, licenses, registrations and permits for our business, and the failure to obtain or renew them in a timely manner may adversely affect our operations.

Our business is subject to extensive government regulation. To conduct our business we must obtain

various approvals, licenses, registrations and permits.

Set forth below are the approvals for which we are required to apply for, to conduct our business and

operations. While we would apply for the requisite approvals at the appropriate time, we may not be

granted the requisite approvals in a timely manner, or at all, creating an impediment to conduct our business

and operations. Further, we may not be able to comply with terms and conditions of approvals obtained,

thereby attracting fines, penalties and adverse regulatory actions.

S.

No.

Approvals to be applied for

1. Approval from MoEF for production of pulp exceeding 2,00,000 BDTPA.

2. Approval from Government of Odisha for production of pulp exceeding 2,00,000 BDTPA and for production

of paper exceeding 1,50,000 TPA.

Set forth below are approvals for which we have applied for, but have not received. We may not be granted

the requisite approvals in a timely manner, or at all, creating an impediment to conduct our business and

operations. Further, we may not be able to comply with terms and conditions of approvals obtained, thereby

attracting fines, penalties and adverse regulatory actions.

S.

No.

Approvals applied for

In relation to the Issue

1. Pursuant to a letter dated July 4, 2011, our Company has applied to the RBI for seeking approval for

renunciation of rights entitlement in the Issue by a shareholder of our Company (a) resident in India, in favour

of any person resident outside India (other than OCBs); (b) resident outside India (other than OCBs), in favour

of any person resident in India; and (c) resident outside India (other than OCBs), in favour of any other person

resident outside India (other than OCBs).

Unit CPM

1. Letter dated November 28, 2008 to the Principal Secretary, Irrigation Department, Gujarat and letter dated

December 21, 2008 to the government of Gujarat, regarding extension of net of use facility for water charges

and water reservation charges to the Company after December 31, 2008 up to the year 2016.

Unit JKPM

1. Combined application for establishment of industries in relation to the proposed expansion, dated May 21,

2010, made to the state government of Odisha, under the Orissa Industries (Facilitation) Act, 2004. This

includes clearance for investment in plant and machinery, approval of building and land use plan, and approval

under pollution control regulations. The Company has received in principle approval.

2. Application (no. JKPW/WO/345/2010) dated January 29, 2010 to the Joint Chief Controller of Explosives in

relation to renewal of license (no. S/HO/OR/03/39 (S21725)) for storage of liquid oxygen in tanks in

Companys premises under the provisions of Indian Explosives Act and the Static and Mobile Pressure Vessels

(Unfired) Rules, 1981.

3. Application dated November 3, 2009 to the Joint Chief Controller of Explosives for renewal of license (no.

P/HQ/OR/15/27 (P-34)) for storage of LDO in tanks.

4. Letter dated July 26, 2010 to the Joint Chief Controller of Explosives regarding renewal of license (no.

P/EC/OR/14/54(P44037)) for petrol and HSD storage/dispensing pump.

xviii

S.

No.

Approvals applied for

5. Application dated October 18, 2010, to the Director of Factories and Boilers, government of Odisha, for

renewal of license to work a factory (no. RG-20) dated January 25, 2010, under Rule 7 of the Orissa Factories

Rules, 1950, for the period from January 1, 2011 to December 31, 2015.

6. Application dated August 9, 2010, to the Deputy Controller of Explosives, for renewal of license (no.

G/EC/OR/06/200 (G8167) for storage of nitrogen cylinders (100 nos.), for a period from October 1, 2010 to

September 30, 2013.

7. Application (no. JKPW/CTS/08.04.B/96/2010) dated December 28, 2010, made to the State Pollution Control

Board, Orissa, in relation to renewal of consent order no. 2/ WPC dated December 19, 2006, under Section

25/26 of the Water Act, for continuing discharge of trade effluent for the period from April 1, 2011 to March

31, 2016.

8. Application (no. JKPW/CTS/08.04.B/95/2010) dated December 28, 2010, made to the State Pollution Control

Board, Orissa, in relation to renewal of consent order no. 2/APC dated December 19, 2006, under Section 21

of the Air Act, for continuation of emission for the period from April 1, 2011 to March 31, 2016.

9. Application dated January 19, 2011, made to the Joint Chief Controller of Explosives, Rourkela, in relation to

renewal of license for storage of LDO in tanks (50 KL).

10. Application dated May 28, 2011, made to Joint Director of Factories and Boilers, Government of Odisha, for

certificate in relation to boiler numbers OR- 160, OR- 532 and OR - 340.

Pursuant to a letter dated July 4, 2011, our Company has applied to the RBI for seeking approval for

renunciation of rights entitlement in the Issue by a shareholder of our Company (a) resident in India, in

favour of any person resident outside India (other than OCBs); (b) resident outside India (other than OCBs),

in favour of any person resident in India; and (c) resident outside India (other than OCBs), in favour of any

other person resident outside India (other than OCBs). We cannot assure you that RBI would grant such

approval. In case such approval is not granted, our shareholders resident in India may not be able to

renounce their rights entitlement in the Issue in favour of any person resident outside India (other than

OCBs). Further, our shareholders resident outside India (other than OCBs), may not be able to renounce

their rights entitlement in favour of any person resident in India, and our shareholders resident outside India

(other than OCBs), may not be able to renounce their rights entitlement in favour of any other person

resident outside India (other than OCBs).

For more information, see Government and Other Approvals on page 263. Further, some of these

approvals are subject to certain conditions, the non-fulfillment of which may result in revocation of such

approvals.

Even after we have obtained the required licenses, permits and approvals, our operations are subject to

continued review and the governing regulations may change. Further, certain of our contractors and other

counter-parties are required to obtain approvals, licenses, registrations and permits with respect to the

services they provide to us. We cannot assure you that such contractors or counterparties have obtained and

will maintain the validity of such approvals, licenses, registrations and permits. We cannot assure you that

we or any other party will be able to obtain or comply with all necessary licenses, permits and approvals

required for our business in a timely manner to allow for the uninterrupted construction or operation of our

facilities, or at all.

Furthermore, our government approvals and licenses, including environmental approvals are subject to

numerous conditions, some of which are onerous and require us to incur substantial expenditure,

specifically with respect to compliance with environmental laws. We cannot assure you that the approvals,

licenses, registrations and permits issued to us would not be suspended or revoked in the event of non-

compliance or alleged non-compliance with any terms or conditions thereof, or pursuant to any regulatory

action. If we fail to comply with all applicable regulations or if the regulations governing our business or

their implementation change, we may incur increased costs, be subject to penalties or suffer a disruption in

our operations, any of which could materially and adversely affect our business and results of operations.

Any failure to renew the approvals that have expired or apply for and obtain the required approvals,

licenses, registrations or permits, or any suspension or revocation of any of the approvals, licenses,

registrations and permits that have been or may be issued to us, may adversely affect our operations.

16. We have experienced negative cash flows in the past which could adversely affect our financial condition and the trading price of our Equity Shares.

We have recently experienced negative cash flows (on consolidated basis) as set forth in the table below:

xix

(In ` crores) Particulars Fiscal 2011 Fiscal 2010 Fiscal 2009

Net cash from / (used in)

operating activities

273.92 243.80 202.77

Net cash from / (used in)

investing activities

(143.95) (66.03) (25.18)

Net cash from / (used in)

financing activities

(106.81) (204.05) (146.87)

Increase / (decrease) in cash and

cash equivalents

23.16 (26.28) 30.72

Cash and cash equivalents at the

beginning of the year

7.94 34.22 3.50

Cash and cash equivalents as at

the end of the year

31.10 7.94 34.22

Our negative cash flows (on standalone basis) are as set forth in the table below:

(In ` crores) Particulars Fiscal 2011 Fiscal 2010 Fiscal 2009

Net cash from / (used in)

operating act