Você está na página 1de 356

LETTER OF OFFER

November 25, 2005 For Equity Shareholders of the Company Only

HINDALCO INDUSTRIES LIMITED


Registered Office: Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025, India. We were incorporated on December 15, 1958 as Hindustan Aluminium Corporation Limited under the provisions of the Companies Act, 1956. We changed our name from Hindustan Aluminium Corporation Limited to Hindalco Industries Limited on October 9, 1989. The Registered Office of the Company was shifted from Industry House, 159 Churchgate Reclamation, Mumbai 400 020, India effective September 1, 1970. (For further details see History of the Company and Other Corporate Matters on page 80 of this Letter of Offer.) Tel: +91-22-56626666; Fax: +91-22-24227586/24362516 Contact Person: Mr. Anil Malik, Company Secretary and Compliance Officer E-mail: hilinvestors@adityabirla.com, Website: www.hindalco.com

For private circulation to the Equity Shareholders of the Company only LETTER OF OFFER

FOR PRIVATE CIRCULATION TO THE ORDINARY SHAREHOLDERS OF THE COMPANY ONLY


ISSUE, ON A RIGHTS BASIS OF 231,936,993 EQUITY SHARES WITH A FACE VALUE OF Re. 1 EACH AT A PREMIUM OF Rs. 95 PER EQUITY
SHARE FOR AN AMOUNT AGGREGATING Rs. 22,266 MILLION TO THE EXISTING EQUITY SHAREHOLDERS IN THE RATIO OF ONE EQUITY SHARE FOR EVERY FOUR EXISTING EQUITY SHARES HELD BY THE EXISTING SHAREHOLDERS ON THE RECORD DATE, i.e., NOVEMBER 28, 2005 ON A PARTLY PAID BASIS IN TERMS OF THIS LETTER OF OFFER (ISSUE). THE ISSUE PRICE FOR THE EQUITY SHARES WILL BE PAID IN THREE INSTALLMENTS: 25% OF THE ISSUE PRICE WILL BE PAYABLE ON APPLICATION; 25% OF THE ISSUE PRICE WILL BECOME PAYABLE, AT THE OPTION OF THE COMPANY, BETWEEN 9 AND 12 MONTHS AFTER THE ALLOTMENT DATE; AND 50% OF THE ISSUE PRICE WILL BECOME PAYABLE, AT THE OPTION OF THE COMPANY, BETWEEN 18 AND 24 MONTHS AFTER THE ALLOTMENT DATE. THE TOTAL ISSUE PRICE IS 96 TIMES OF THE FACE VALUE OF THE EQUITY SHARES. FOR MORE DETAILS, SEE TERMS OF THE ISSUE ON PAGE 293 OF THIS LETTER OF OFFER.

GENERAL RISKS
Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to Risk Factors on page vii of this Letter of Offer before making an investment in this Issue.

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 respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this 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 Stock Exchange, Mumbai (Designated Stock Exchange) (BSE) and The National Stock Exchange of India Limited (NSE). The Company has received in-principle approvals from BSE and the NSE for listing the Equity Shares arising from this Issue vide letters dated October 6, 2005 and October 11, 2005 respectively.

LEAD MANAGERS TO THE ISSUE

REGISTRAR TO THE ISSUE

JM Morgan Stanley Private Limited 141 Maker Chambers III Nariman Point, Mumbai 400 021 Tel: (91 22) 5630 3030 Fax: (91 22) 2204 7185 Email: Hindalcorightsissue@ jmmorganstanley.com Website: www.jmmorganstanley.com Contact Person: Mr. Kushal Doshi

DSP Merrill Lynch Limited Mafatlal Centre, 10th Floor Nariman Point, Mumbai 400 021 Tel: (91 22) 5632 8000 Fax: (91 22) 2204 5818 Email:hindalco_rightsissue@ml.com Website: www. dspml.com Contact Person: Mr. Sumedh Jog

Karvy Computershare Private Limited Unit: Hindalco Rights Issue Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034 Tel: (91 40) 2343 1546 Fax: (91 40) 2343 1551 Email: hindalcorights@karvy.com Website: www.karvy.com Contact Person: Mr. Murali Krishna

ISSUE OPENS ON MONDAY, DECEMBER 19, 2005

ISSUE PROGRAMME LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS TUESDAY, JANUARY 3, 2006

ISSUE CLOSES ON WEDNESDAY, JANUARY 18, 2006

HINDALCO INDUSTRIES LIMITED TABLE OF CONTENTS


ABBREVIATIONS & TECHNICAL TERMS ........................................................................................... RISK FACTORS ..................................................................................................................................... SUMMARY ........................................................................................................................................... THE ISSUE ........................................................................................................................................... SELECTED FINANCIAL INFORMATION ............................................................................................. GENERAL INFORMATION ................................................................................................................... CAPITAL STRUCTURE ......................................................................................................................... OBJECTS OF THE ISSUE .................................................................................................................... BASIS FOR ISSUE PRICE .................................................................................................................... STATEMENT OF TAX BENEFITS ........................................................................................................ INDUSTRY OVERVIEW ....................................................................................................................... OUR BUSINESS ................................................................................................................................... REGULATIONS AND POLICIES .......................................................................................................... HISTORY OF OUR COMPANY AND OTHER CORPORATE MATTERS ............................................. DIVIDENDS ........................................................................................................................................... MANAGEMENT ................................................................................................................................... PROMOTERS AND PROMOTER GROUP ........................................................................................... GROUP COMPANIES ........................................................................................................................... SUBSIDIARIES ...................................................................................................................................... OUR JOINT VENTURE COMPANIES .................................................................................................. RELATED PARTY TRANSACTIONS .................................................................................................... AUDITORS REPORT ............................................................................................................................. STOCK MARKET DATA FOR EQUITY SHARES OF OUR COMPANY .............................................. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................................................................................. MATERIAL DEVELOPMENTS ............................................................................................................. INFRASTRUCTURE ..............................................................................................................................
i

iii vii 1 5 6 8 15 25 34 37 42 50 77 80 83 84 96 99 106 120 123 126 175

177 202 203

HINDALCO INDUSTRIES LIMITED


DESCRIPTION OF CERTAIN INDEBTEDNESS ................................................................................... OUTSTANDING LITIGATIONS AND DEFAULTS ................................................................................ GOVERNMENT APPROVALS ............................................................................................................. STATUTORY AND OTHER INFORMATION ......................................................................................... TERMS OF THE ISSUE ....................................................................................................................... SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND US GAAP. ........ MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION. ........ MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ................................................... DECLARATION ..................................................................................................................................... 206 208 258 283 293 312 321 334 335

NO OFFER IN THE UNITED STATES


The rights and the shares of the Company have not been and will not be registered under the United States Securities Act of 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 or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act), 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 of America. The offering to which this Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any shares or rights for sale in the United States of America, or the territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or rights. Accordingly, this Letter of Offer should not be forwarded to or transmitted in or into the United States of America at any time. The Company will not accept subscriptions from any person, or his agent, who appears to be, or who the Company has reason to believe is, a resident of the United States of America and to whom an offer, if made, would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. The Company is informed that there is no objection to a United States shareholder selling its rights in India.

ii

HINDALCO INDUSTRIES LIMITED ABBREVIATIONS & TECHNICAL TERMS


In this Letter of Offer, the terms we, us, our, the Company or Hindalco, unless the context otherwise implies, refer to Hindalco Industries Limited. All references to Rs.or INR refer to Rupees, the lawful currency of India, USD or US$ refer to the United States Dollar, the lawful currency of the United States of America, AUD or A$ refer to the Australian Dollar, the lawful currency of Australia. References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words Lakh or Lac mean 100 thousand and the word million means 10 lakh and the word crore means 10 million or 100 lakhs and the word billion means 1,000 million or 100 crores. Any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off.

General Terms and Abbreviations


Act AGM Articles The Companies Act, 1956 and amendments thereto Annual General Meeting Articles of Association of the Company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act Indian Accounting Standard Singhi & Co., having their office at 1-B Old Post Office Street, Kolkata 700 001 Board of Directors of Hindalco Industries Limited Bombay Stock Exchange Limited Share Capital of the Company Central Depository Services (India) Limited Depository Participant means the equity share of the Company having a face value of Re. 1 unless otherwise specified in the context thereof. On August 6, 2005 the shareholders of the Company approved the subdivision of equity shares of the Company from Rs.10 per share to Re. 1 per share. means a holder of Equity Shares Foreign Exchange Management Act, 1999 Financial Institutions Foreign Institutional Investors registered with SEBI under applicable laws Financial Year ending March 31 or December 31, as the case may be Government of India Hindalco Industries Limited, a company incorporated under the Indian Companies Act, 1956 having its registered office at Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025 The Income Tax Act, 1961 and amendments thereto Income Tax Appellate Tribunal
iii

AS Auditor Board or Board of Directors BSE Capital or Share Capital CDSL DP Equity Share(s) or Share(s)

Equity Shareholder FEMA FI FII(s) FY / Fiscal GOI Issuer

IT Act ITAT

HINDALCO INDUSTRIES LIMITED


Memorandum Memorandum of Association of the Company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act Memorandum of Understanding Non Banking Finance Company National Industry Classification Non Resident Non Resident Indian(s) National Securities Depository Limited National Stock Exchange of India Limited Overseas Corporate Bodies The Reserve Bank of India Registrar of Companies at Mumbai, Maharashtra located at Hakoba Mill Compound, 2 nd Floor, Dattaram Lad Marg, Kalachowkie, Mumbai 400 033 Securities and Exchange Board of India Securities and Exchange Board of India Act, 1992 and amendments thereto The SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by SEBI on January 19, 2000 read with amendments issued subsequent to that date Secretariat of Industrial Assistance The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as amended to date

MoU NBFC NIC NR NRI(s) NSDL NSE OCB RBI ROC

SEBI SEBI Act, 1992 SEBI DIP Guidelines

SIA Takeover Code

Issue Related Terms and Abbreviations


ABNL Birla Copper CAF CRISIL Company CRU Designated Stock Exchange Draft Letter of Offer Grasim Hindalco IGCL IGFL Indal Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) The copper division of Hindalco Composite Application Form Credit Rating Information Services of India Limited Hindalco Industries Limited The CRU International Limited with its head office at 31 Mount Pleasant, London, WC1X 0AD, UK The designated stock exchange for the Issue shall be BSE Draft letter of offer dated September 23, 2005 filed with SEBI for its comments Grasim Industries Limited Hindalco Industries Limited Indo Gulf Corporation Limited Indo Gulf Fertilisers Limited Indian Aluminium Company, Limited
iv

HINDALCO INDUSTRIES LIMITED


Investor(s) IRIL Issue Shall mean the holder(s) of Equity Shares of the Company as on the Record Date, i.e. November 28, 2005 and Renouncees Indian Rayon And Industries Limited Issue, on a rights basis of 231,936,993 Equity Shares with a face value of Re. 1 each at a premium of Rs. 95 per Equity Share for an amount aggregating Rs. 22,266 million to the existing equity shareholders in the ratio of one Equity Share for every four existing Equity Shares held by the existing shareholders on the record date, i.e., November 28, 2005 on a partly paid basis in terms of this Letter of Offer. January 18, 2006 (Wednesday) December 19, 2005 (Monday) Rs. 96 per Equity Share Karvy Computershare Private Limited Letter of Offer dated November 25, 2005 as filed with the Stock Exchanges after incorporating SEBI comments on the Draft Letter of Offer Dr. K.M. Birla and Birla Group Holdings Private Limited November 28, 2005 Karvy Computershare Private Limited Shall mean the persons who have acquired Rights Entitlements from Equity Shareholders The number of Equity Shares that a shareholder is entitled to in proportion to his/her shareholding in the Company as on the Record Date Shall refer to the BSE and NSE where the Shares of the Company are presently listed Ultra Tech Cement Limited Utkal Alumina International Limited

Issue Closing Date Issue Opening Date Issue Price Karvy Letter of Offer

Promoters Record Date Registrar to the Issue or Registrar Renouncees Rights Entitlement

Stock Exchange(s) UCL Utkal Alumina

Technical and Industry Terms and Abbreviations


AUD/ A$ Cenvat CEPS CESTAT DWT ECB EEPC EPS JFTC LME Modvat MPEB Australian Dollar Central Value Added Tax Cash Earnings Per Share Customs, Excise, Service Tax Appellate Tribunal Deadweight tons External Commercial Borrowings Engineering Export Promotion Council Earnings Per Share Jelly Filled Telecom Cable London Metal Exchange Modified Value Added Tax Madhya Pradesh Electricity Board
v

HINDALCO INDUSTRIES LIMITED


MU MVA MW NAV PAT PBIT SCN Tc/Rc Tpa VSF Million Units Million Volts per Annum Mega Watt Net Asset Value Profit After Tax Profit Before Interest and Tax Show cause notice Treatment and Refining Charges Tons per annum Viscose Staple Fibre

vi

HINDALCO INDUSTRIES LIMITED RISK FACTORS


An investment in Equity Shares involves a high degree of risk. You should carefully consider all the information in this Letter of Offer, including the risks and uncertainties described below, before making an investment in our Equity Shares. If any of the following risks actually occur, our business, results of operations and financial condition could suffer, the price of our Equity Shares could decline, and you may lose all or part of your investment. 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 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 used in this section is derived from our standalone audited financial statements under Indian GAAP as restated. Bracketed numbers indicate losses/ negative figures. In this , section, any conversion from US Dollars to Indian Rupees has been done based on the 12 PM Noon Exchange rate of 1US Dollar = 45.690 Indian Rupees on November 10, 2005 as given by the Federal Reserve Bank of New York Such conversions are for convenience purposes.

Internal Risk Factors


Our major capital projects may not be completed, in the timeframe or at cost levels originally anticipated, and may not achieve the intended economic results. We currently plan to expand our existing facilities and construct new alumina and aluminium plants as detailed in Objects of the Issue. We may also acquire additional copper mines as and when suitable opportunities are identified. These projects and any other future projects could be delayed by failure to receive regulatory approvals or to obtain sufficient funding, due to technical difficulties, human resource, technological or other resource constraints, or for other unforeseen reasons, events or circumstances. These projects may incur significant cost overruns and may not be completed on time or at all. In addition, some of our projects for which the proceeds of the Issue are proposed to be utilized involve significant land acquisitions which remain to be completed. For instance, we have identified certain proposed sites/ village areas that form part of the area to be acquired for our Aditya greenfield projects. Any difficulties in acquiring such land free from encumbrances and with clear title, or at all, may adversely affect the implementation of these projects. Further, we are yet to place orders for certain plant and machinery in relation to our projects. Any difficulties in obtaining timely supply of such plant and machinery may adversely affect the implementation of these projects. Kindly refer to the section titled Objects of the Issue for the percentage of the plant and machinery for which orders are yet to be placed. Our decision to undertake, continue and reconfigure any of these projects will be based on assumptions of future demand for our products which may not materialize. We expect that a significant portion of the additional production would be sold in the international market, where the selling prices might be lower than the domestic market. In addition, as a consequence of project delays, cost overruns, changes or lack of demand for our products or for other reasons, we may not achieve the economic benefits expected of these projects and our failure to obtain expected economic benefits from these projects could adversely affect our business, financial condition and results of operations. Our group companies may be engaged in the business of supplying certain materials which could be used as inputs in these projects and may supply such inputs for the purpose of the proposed projects. Moreover, the current strong commodity cycle and the large number of projects being developed in the aluminium and copper industry have increased the demand for skilled personnel. If we are unable to attract personnel with sufficient skills or successfully train our own personnel, we may not be able to effectively develop and manage these projects which may adversely affect our business, financial condition and results of operations. We may change our business plan and consequently our fund requirements may change. The use of proceeds of the Issue have been determined based on internal estimates of our Management. In view of the highly competitive and dynamic nature of the industry in which we operate, we may have to revise our business plan from time to time and consequently our fund requirement may also change. This may include rescheduling of our capital expenditure programmes and increase or decrease the capital expenditure for a particular purpose vis--vis current plans at the discretion of our Management. While these decisions would be taken in the best interest of the Company, we may not be able to achieve the same results as we expect in case we are required to reschedule any of our capital expenditure programmes.
vii

HINDALCO INDUSTRIES LIMITED


If investors who are issued partly paid shares do not pay the amount payable on calls, the amount raised through the Issue will be lower than the proposed Issue size of Rs. 22,266 million. As per the terms of the Issue, the issue proceeds would be raised in three steps, first 25% of the Issue price would be payable on application, next 25% of the Issue price would be called within 9 to 12 months from the date of allotment and the final 50% of the Issue price would be called between 12 to 24 months from the date of allotment. If any of the calls remain unpaid, the amount raised through the Issue may be lower than the proposed Issue size of Rs. 22,266 million and may require us to take steps for forfeiture of the shares. Based on our cash flow position at that point in time, we may have to raise alternate source of funds or finance the projects from our internal accruals if substantial number of shareholders decide not to pay their calls. We cannot assure you that we will have sufficient cash flows or will be able to obtain financing on favourable terms or at all. If adequate funding is not available, our ability to continue to grow our business could be adversely affected. Our anticipated capital expenditure and other corporate needs are substantial and we may not be able to obtain sufficient funding for these requirements, which could limit our ability to grow our business. We plan to expand the capacity of and improve the operating efficiencies of our alumina, aluminium and copper plants, and acquire additional copper mines as and when suitable opportunities are identified. These plans, which include the projects covered under the section Objects of the Issue, require substantial additional funding to meet capital expenditures and working capital requirements to be spent over a number of years. We have historically relied on a combination of cash flows from operations and debt financing to fund our capital expenditures and corporate requirements. Our future cash flows from operations depends on our results of operations, which are subject to a number of risks and uncertainties including: 1. 2. 3. our future results of operations, and cash flows including the future market prices of our products and our ability to grow our business; the cost of financing and the condition of financial markets, which are also influenced by changes in monetary policy of the Indian government with respect to interest rates and lending practices; and obtaining regulatory and other corporate approvals required to access domestic or international financing or to undertake any project involving significant capital investment.

We cannot assure you that we will have sufficient cash flows or will be able to obtain financing on favourable terms or at all. If adequate funding is not available, our ability to continue to grow our business could be adversely affected. Our copper smelters have experienced technical difficulties in the recent past, which has impacted the operational performance and profitability of our copper business. Our copper smelter I at Dahej with a capacity of 180,000 metric tpa experienced temporary shutdowns due to furnace related issues while our copper smelter II with a capacity of 70,000 metric tpa experienced lower utilization due to refractory life stabilisation issues which impacted production. Furthermore, our newly commissioned copper smelter III is in the process of being ramped up. The shortfall in production due to the shut downs in our copper smelters I and II resulted in revenue and contribution loss, which along with expenses relating to the ramp up phase of our smelter III and high backwardation prevailing throughout the period impacted our results adversely. We expect these issues to continue into the near short term and the ramping-up of our copper smelter III will also continue, which may affect our profitability in the short term. We cannot assure you that these technical difficulties will not recur in the future. A significant portion of our energy requirements are met by our own power plants and any disruption to these operations could increase our production costs. We require a substantial amount of electricity for our aluminium and copper production and energy costs represent a significant portion of the production costs for our operations. We source almost all the electricity requirements for our smelters at Renukoot, Hirakud and Dahej from our own power plants at competitive costs. If these power plants are not able to supply the requisite electricity for any reason, we would need to rely on the state electricity board as an alternative source. The state electricity board may not be able to consistently meet our requirements and, if for any reason such electricity is not available, we may need to shut down our plant until an adequate
viii

HINDALCO INDUSTRIES LIMITED


supply of electricity is restored. The cost of such purchased power would be significantly higher thereby adversely impacting our cost of production and profitability. Any interruption in the supply of electricity to our aluminium smelter lasting longer than six hours can cause substantial damage to our smelter. Pots are used in the process of transforming alumina into primary aluminum. Pots will cool off if they are deprived of electricity for six consecutive hours, which could cause the molten aluminium in the pot to solidify. Interruptions of electricity supply can also result in production shutdowns, increased costs associated with restarting production and the loss of production in progress. Historically we have experienced significant power interruption and cannot assure that same may not recur in future. Furthermore, most of these dedicated power plants are dependent on coal as a raw material. Renusagar has long-term agreements in place with two suppliers for its coal supply, Hirakud operates its own coal mines, but Dahej relies on tender based contracts from time to time to procure its coal requirements. If for any reason, we are unable to procure sufficient coal of requisite quantity and quality, and at reasonable prices in the future, it could materially disrupt our supply of power or increase our power costs. If we are unable to obtain a steady supply of copper concentrate at reasonable costs, our results of operations may be affected. We produce copper from copper concentrate. For fiscal 2005, we procured 76% of our copper concentrate from long-term suppliers, 13% from spot purchases and 10% from our mines in Australia. In general, long-term supply contracts run for a period of three to five years, and are renewable at the end of the period. The quantity of supply for each year is fixed for the contract period and terms such as TcRc and freight differential are negotiated each year based on prevailing market conditions. If these contracts cannot be renewed on time or on terms favourable to us, our results of operations could be adversely impacted. In certain contracts, each party has an option to decline to purchase or deliver, as the case may be, the contracted copper concentrate for any particular year. If such terms are invoked by our suppliers and if we are unable to source copper concentrate from alternate sources on time and on terms favourable to us, our results of operations could be adversely impacted. Of the two copper mines owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited through its 100% holding in Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, Nifty had estimated proven and probable copper ore reserves of 34.59 million metric tons, while Mt. Gordon had estimated proven and probable copper ore reserves of only 2.30 million metric tons as of March 31, 2005. Extended supply from these mines will depend on the success of any future exploration programs. Moreover, the copper sulphide mine at Nifty is still at a developmental stage and efforts of our subsidiary Birla Nifty Pty Limited to extract copper ore may not be successful. If we do not purchase additional mines for sourcing copper concentrate, we will have to rely more heavily on copper concentrate supplied by external parties. We cannot assure you that we will be able to find sources for our copper concentrate requirements on time, having requisite quality or on commercially viable terms, or at all. If we are unable to obtain a steady supply of bauxite at reasonable costs, our results of operations may be affected. We produce alumina from bauxite. Our current level of alumina production depends to a large extent on the consistency of the supply of good quality bauxite. A reduction in the quantities of bauxite would reduce the amount of alumina which we can produce. We obtain our bauxite from two major sources: our own mines and third party suppliers, which primarily consist of independent mines. Each of these sourcing methods exposes us to risks relating to security of supply or cost. A steady supply of bauxite from these sources is contingent upon geological and economic uncertainties, and renewal of our mining leases. If the quality of bauxite deteriorates in our existing mines, our production cost may increase, thereby adversely impacting our results of operations. We are in the process of acquiring leases for some of the new bauxite mines required for our expansion projects. Any delay or inability in obtaining the requisite leases will impact these expansion plans and the operating costs of these facilities. Further, we cannot assure you that any bauxite that we may extract from these new mines will be of good quality. We may not be able to renew the purchase contracts for the bauxite we acquire from third party sources at reasonable prices or at all. If we are unable to obtain a steady supply of requisite quality bauxite at competitive prices, our results of operations will be adversely affected.
ix

HINDALCO INDUSTRIES LIMITED


Any inability to procure surface rights or any defect in leasehold title could affect our ability to mine. When we receive mining lease rights for a new mine, surface rights of the land are acquired subsequently and in parts, based on the mining plan. Surface rights are necessary for us to mine from the land. We only acquire entire surface rights at the outset in exceptional cases, typically when there is a large reserve. We apply for additional surface rights as and when we reach an agreement with the landowner. We are also required to pay for the reforestation and re-vegetation of nearby degraded forest land and non-mineral bearing areas where our mining takes place in designated forest land. We expect to be able to continue to obtain additional surface rights in the future in due course but our inability to obtain surface rights could negatively affect our financial condition and results of operations. We conduct a significant part of our mining operations on properties that we lease. Our right to mine some of our reserves may be materially adversely affected by defects in title or boundaries. In order to obtain leases or mining contracts to conduct our mining operations on property where these defects exist, we may in the future have to incur unanticipated costs, which could adversely affect our profitability. We are dependent upon external suppliers to meet a certain portion of our caustic soda requirements. Caustic soda is a key raw material used to dissolve the bauxite in the alumina refining process. Import of caustic soda was stopped in fiscal 2005 due to very high international prices and anti-dumping duty on caustic soda. While we currently source a majority of our requirements for caustic soda from our subsidiary, Bihar Caustic and Chemicals Limited with the balance being sourced from local suppliers, our caustic soda prices can still be affected as these producers can raise their prices for caustic soda. Continuing increases in caustic soda prices may have an adverse effect on our business and results of operations. Our operations are reliant on the timely supply of raw materials and products to our plants and transportation of our products from our plants to our customers, which are subject to uncertainties and risks. We depend on various forms of transport, such as seaborne freight, rail and trucking to receive raw materials used in production and to deliver our products from our manufacturing facilities to our customers. These transportation facilities may not adequately support our operations due to traffic congestion and unavailability of railway wagons or trucks. Further, disruptions of transportation services because of weather-related problems, strikes, lock-outs, inadequacies in the road infrastructure and port facilities, or other events could impair our ability to source raw materials and components and our ability to supply our products to our customers. We can provide no assurance that such disruptions will not occur in the future. In addition, significant increases in transportation cost may adversely impact our financial results. Changes in technology may render our current technologies obsolete or require us to make substantial capital investments. The industry in which we operate is subject to significant changes in technology. To maintain the competitiveness of our business, we need to keep pace with technological developments and changing standards. If we are unable to adequately respond to the technological changes and the technologies currently employed by us become obsolete, our business, financial condition and results of operations may be materially and adversely affected. In addition, the cost of implementing new technologies and upgrading our plants to keep pace with technological developments may be significant and may adversely affect our results of operations. The heavy equipment we operate is subject to operational hazards. Our production processes depend on heavy equipment which are potentially hazardous. Any significant accident caused by such equipment could interrupt our operations and result in legal and regulatory liabilities. Insurance coverage related to accidents resulting from the proper or improper use of such equipment may be inadequate to offset losses arising from claims related to such accidents. Moreover, any equipment involved in an accident or malfunction may be damaged or destroyed thereby adversely impacting our financial condition or results of operations. Deliveries under our copper sales agreements can be suspended or cancelled by our customers in certain cases. Under each of our copper sales agreements, we or our customers may suspend or cancel delivery of copper during a period of force majeure. Events of force majeure under these agreements include acts of nature, labour
x

HINDALCO INDUSTRIES LIMITED


strikes, fires, floods, wars, transportation delays, government actions or other events that are beyond the control of the parties. Any suspension or cancellation by our customers of deliveries under our copper or other sales contracts that are not replaced by deliveries under new contracts or sales on the spot market would reduce our cash flow and could adversely affect our financial condition and results of operations. Our business may be affected by planned and unplanned outages and other material disruptions. Industrial disruptions, work stoppages, refurbishments, installation of new plants, geotechnical issues, accidents or sustained bad weather at our operations can result in production losses and delays in delivery of products, which may adversely affect our profitability. Production may fall below historic or estimated levels as a result of unplanned outages. Our insurance does not cover all of the risks we face, and the occurrence of events that are not covered by our insurance could cause us losses, which if significant, could adversely affect our financial condition. We are not fully insured against all potential hazards incidental to our business. For example, we maintain limited cover against business interruption risks. The occurrence of events that are not fully insured could require us to pay for any repairs and damage claims, which could have a material adverse effect on results of our operations and our financial condition. Our business depends on the continuing employment of the management team, and skilled personnel and our ability to retain and attract talented personnel. We are dependent on our management team and our ability to meet future business challenges depends on their continuation and our ability to attract and recruit talented and skilled personnel. We face strong competition in recruiting and retaining skilled and professionally qualified staff. The loss of key personnel or any inability to manage the attrition levels in different employee categories may materially and adversely impact our business, our ability to grow and our control over various business functions. Our copper hedging activities may not achieve the intended results and may adversely affect our results of operations and financial condition. From time to time, we hedge exposures of our copper business to LME price fluctuations. Nonetheless, we cannot assure that our commodity hedging activities will adequately protect us from price fluctuations. Further, our hedging may at times limit our ability to benefit from favourable price movements. If we are unable to manage our growth, our business could be disrupted. Growing our business through capacity expansions and acquisitions of copper mines is a key component of our strategy to realize our vision of attaining global size and to further improve our cost competitiveness in the global aluminium industry, and to reduce costs in our copper business. In order to achieve such future growth, we need to effectively manage our expansion projects, accurately assess new markets, attract new customers, obtain sufficient financing, control our input costs, maintain sufficient operational and financial controls and make additional capital investments to take advantage of anticipated market conditions. We expect our growth to place significant demands on our management and other resources. Any inability to manage our growth could have an adverse effect on our business, financial condition and results of operations. The Equity Shares will be partially paid until anytime between 18 and 24 months after the Allotment Date at the option of the Company The Equity Shares are being issued on a partly paid basis. The Issuer Price will be paid in installments as follows: (i) 25% of the Issue Price including share premium will be payable on application; (ii) a further 25% of the Issue Price including share premium will become payable, at the option of the Company, between 9 and 12 months after the Allotment Date; and (iii) the remaining 50% of the Issue Price including share premium will become payable, at the option of the Company, between 18 and 24 months after the Allotment Date (such additional payments as set forth in (ii) and (iii) above, the Additional Payments). The price movements of partly paid shares may be greater in percentage terms than price movements if the Equity Shares were fully paid. Investors in the rights offering will be required to pay the Additional Payments when due, even if, at that time, the market price of the Equity Shares is less than the Issue Price. If the holder fails to pay the Additional Payments with any interest that may have accrued thereon after notice has been delivered by the Company, then any shares in respect of which such notice has been given may, at any time thereafter before payment of the Additional Payments and
xi

HINDALCO INDUSTRIES LIMITED


interest and expenses due in respect thereof, be forfeited by resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and actually paid before the forfeiture. Notwithstanding such forfeiture, a person whose shares have been forfeited shall remain liable to pay to the Company the Additional Payments and interest and expenses owing upon or in respect of such shares at the date of forfeiture with interest thereon from the date of forfeiture until payment at such rate not exceeding nine percent per annum as the Directors may determine. For more information, see Terms of the Issue on page 293 and Main Provisions of the Articles of Association on page 321 of this Letter of Offer. Partly paid shares will not be traded for a period of approximately 45 days from the issue of the Call Money Notice. The Company will fix a record date to determine the list of shareholders to whom the Call Money Notice would be sent for each Call. As per the present regulatory framework, trading of our partly paid Equity Shares is expected to be suspended for a period of approximately 45 days, starting five days prior to such record date for the Call concerned. The process of corporate action for credit of fully paid shares to the demat account of the shareholder may take about two weeks from the date of payment of the amount payable on Call. During this period shareholders who pay the amount payable on Call for the partly paid shares will not be able to trade in those shares. For more details see Procedure For Calls on page 294 of this Letter of Offer. If investors do not pay the amount payable on calls, trading in those shares will be discontinued and such shares will be liable for forfeiture by the Company. Once the amount payable on calls is duly made, such shares will be listed and tradeable with a separate ISIN No. from the date of listing of such shares and up to five days prior to the record date for the next call, if applicable. However, if the amount due on calls is not paid, these shares will be liable for forfeiture by the Company in accordance with its Articles of Association. Since trading of the partly paid shares would be suspended five days prior to the record date for the concerned call, the partly paid shares would cease to trade from such date and there would be no market for the same. For more details see Procedure For Calls on page 294 and Main Provisions of Our Articles of Association on page 321 of this Letter of Offer. Birla Group Holdings Private Limited, one of our Promoters has incurred losses in the last three years. Birla Group Holdings Private Limited, one of our Promoters has incurred losses in recent years, as set forth in the table below. Please refer to the chapter on Promoters and Promoter Group on page 96 of this Letter of Offer: Company 2003 Birla Group Holdings Private Limited (Rs. in millions) (28.45) Year Ended March 31 2004 (15.80) 2005 (10.30) September 30, 2005 (8.93)

Certain of our subsidiaries and joint venture companies have incurred losses in the last three years. Certain of our subsidiaries and joint venture companies have incurred losses in recent years, as set forth in the tables below. Please refer to the chapter on Subsidiaries on page 106 and Our Joint Venture Companies on page 120 of this Letter of Offer: Company 2003 Birla Maroochydore Pty. Ltd. (in AUD) Birla Mineral Resources Pty. Ltd. (AUD in millions) Birla Mt. Gordon Pty. Ltd. (AUD in millions) Birla Nifty Pty. Ltd. (AUD in thousands) Indian Aluminium Company Ltd. (Rs. in millions) Indal Exports Ltd. (Rs. in thousands) Idea Cellular Ltd. (Rs. in millions)
* Profit before tax
1

Year Ended March 31 2004 (70,914) (16.74) (6.54) 34.93


1

September 2005 30, 2005 (51,738)* 0.14* (14.44)* 1.58* (6.17) (14) 210.29

1,186.30 (263) (1,598.08)

(126,282) 3.54 (30.09) (20.70) (15.45) (18) 260.53

1,321.53 (19) (2,069.12)

From January 1, 2003 upto March 31, 2004

xii

HINDALCO INDUSTRIES LIMITED


The accounts of certain of our subsidiaries, for the six-month period ended September 30, 2005, are unaudited. The stand-alone accounts of Birla Mineral Resources Pty. Ltd, Birla Maroochydore Pty. Ltd., Birla Mt. Gordon Pty. Ltd., Birla Nifty Pty. Ltd, and Birla Resources Pty. Ltd. for the six-month period ended September 30, 2005 are unaudited. We are involved in several litigation proceedings and we cannot assure you that we will prevail in these actions. There are outstanding litigations against us, our directors, our Promoters and group companies. We are defendants in legal proceedings incidental to our business and operations. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. Should any new developments arise, such as a change in Indian law or rulings against us by appellate courts or tribunals, we may need to make provisions in our financial statements, which could adversely impact our business results. Furthermore, if significant claims are determined against us and we are required to pay all or a portion of the disputed amounts, it could have a material adverse effect on our business and profitability. Material Litigations relating to the Company, the Promoters, the Directors, group companies and joint venture companies A) Against the Company

There are approximately 25 criminal cases filed against us, two of which have also been filed against our director Mr. S.S. Kothari as occupier of factory. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are about approximately 141 labour related cases filed against us for claims aggregating approximately Rs. 40.32 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are about approximately 57 civil cases filed against us for claims aggregating approximately Rs. 351.4 million. We have also received six demand notices for an amount aggregating to Rs. 32.1 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 30 income tax related appeals for claims aggregating approximately Rs. 8009.43 million against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 71 SCNs for claims aggregating Rs. 2354.19 million and 51 demands for amounts aggregating Rs. 2258.77 million in relation to central excise claims against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 4 SCNs for amounts aggregating Rs. 75.07 million and 6 demands for amounts aggregating Rs. 72.51 million in relation to customs claims against the Company. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 6 SCNs for amounts aggregating approximately Rs. 422.02 million and 24 demands aggregating approximately Rs. 125.24 million issued by the sales tax authorities. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 3 SCNs against us for claims aggregating approximately Rs. 10.93 million and 9 demands for amounts aggregating Rs. 8470.79 million in respect of other taxes, fees and cesses. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. There are approximately 4 service tax related SCNs issued to us for claims aggregating Rs. 62.4 million and 1 service tax related demand for an amount of approximately Rs. 15.13 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer. We are involved in approximately 11 arbitration proceedings for claims aggregating approximately Rs. 386.03 million. Please refer to Outstanding Litigation and Defaults on page 208 of this Letter of Offer.

xiii

HINDALCO INDUSTRIES LIMITED

Two cases have been filed in relation to transfer or transmission of our shares, where we have been named as a party. There are about 26 other cases filed against us for claims aggregating approximately Rs. 50.13 million.

B) Against the Promoters Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. C) Against the Directors Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. D) Against group companies Please refer to the Outstanding Litigation and Defaults on page 208 of this Letter of Offer. E) Against joint venture companies For more information regarding litigation involving us, our Directors, or us or our subsidiaries, our Promoters, our joint venture companies and group companies, see Outstanding Litigation and Defaults on page 208 of this Letter of Offer. Our indebtedness could adversely affect our financial condition and results of operations. We have entered into agreements with certain banks and financial institutions for short term loans and long term borrowings. Some of these agreements contain certain restrictive covenants, such as requiring consent of the lenders inter alia, for issuance of new shares, creating further encumbrances on our assets, disposing of our assets, declaring dividends or incurring capital expenditures beyond certain limits. Some of these borrowings also contain covenants which limit our ability to make any change or alteration in our capital structure, make investments, effect any scheme of amalgamation or restructuring. In addition, certain of these borrowings contain financial covenants, which require us to maintain, among other matters, specified net worth to assets ratio, debt service cover ratio, and maintenance of security coverage. There can be no assurance that we will be able to comply with these financial or other covenants or that we will be able to obtain the consents necessary to take the actions we believe are necessary to operate and grow our business. We have a number of contingent liabilities under Indian GAAP and our profitability could be adversely affected , if any of these contingent liabilities materialize. Our contingent liabilities as of March 31, 2005 and the six months ended September 30, 2005 not provided for include: (Rs. in millions) Half year ended September 30, 2005 (a) Claims/Disputed liabilities not acknowledged as debt: Following demands are disputed by the Company and are not provided for: i) Demand notice by Assistant. Collector, Central Excise Mirzapur for excise duty on power generated by companys captive power plant, Renusagar Power Co. Ltd. (Since amalgamated). Demand of interest on past dues of the Aluminium Regulation account upto 31.12.1987. Retrospective Revision of Water Rates by UP Jal Vidyut Nigam Limited (April 1989 to June 1993 & Jan 2000 to Jan 2001) Transit fees levied by Divisional Forest officer, Renukoot on coal and bauxite M.P Transit Fee on Coal demanded by Nonthern Coal Fields Limited
xiv

For the year ended March 31, 2005

91.21

91.21

ii) iii) iv) v)

63.29 40.80 175.93 124.90

63.29 40.8 52.05 112.48

HINDALCO INDUSTRIES LIMITED


(Rs. in millions) Half year ended September 30, 2005 vi) vii) viii) ix) x) xi) xii) xiii) Withholding Tax on payment of fees on GDR issue. Imposition of Cess on Coal by Shaktinagar Special Area Development Authority. Demand of Royalty on Vanadium by District Mining officer, Lohardaga. Demand from District Mining Office, Lohardaga & Gumla towards payment of increased surface rent on Mining Leases The demand of Excise Duty on gold Demand for non-payment of sales tax on leased assets. Demand raised for reversal of difference between duty paid and Cenvat credit taken in returned material. Claim by KSEB for difference between the actual demand and contract demand 91.56 35.36 53.40 31.90 1,557.70 260.50 13.00 26.73 98.63 385.53 12,796.99 For the year ended March 31, 2005 91.56 31.4 12.9 1,557.7 212.26 84.85 468.14 12,595.15

xiv) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax etc. each being for less than Rs. 10 millions b) i) ii) Bills discounted with Banks Guarantees outstanding (includes corporate guarantees of Rs.11,689.11 million (2004-05 Rs. 11,399.76 million) given on behalf of subsidiary companies) Letters of Credit Outstanding Bank Guarantees & Bonds

iii) iv) c)

675.65 287.17 50.10

684.17 249.54 50.10

The Company has received supplementary bills on account of revision in rate of power for Main Supply from the UPSEB for the period 15th May 1976 to 30th June 1980 and the same remains unprovided for as disputed by the Company In terms of the Scheme of Arrangement between the Company, the erstwhile Indo Gulf Corporation Ltd. (IGCL) and Indo Gulf Fertilisers Limited approved by the Honble High Courts at Allahabad and Mumbai vide their orders dated 18th November 2002 and 31st October 2002 respectively, the company may be liable to pay a portion of disputed demands of Income Tax of Rs.133.95 million pertaining to IGCL. 228,340,226 Equity Shares of Rs.10/- each fully paid up in IDEA Cellular Ltd. are held by the Company as investment. Out of the above 115,187,999 shares of Rs. 10/- each have been pledged for securing financial assistance granted by the lenders to that company.

d)

e)

If any of these contingent liabilities materialize, our profitability could be adversely affected. For more detailed descriptions of our contingent liabilities, see Auditors Report starting on page 126 of this Letter of Offer. We require certain registrations and permits from government and regulatory authorities in the ordinary course of business and the failure to obtain them in a timely manner or at all may adversely affect our operations. We require certain registrations and permits for operating our business, including factory license, approvals to store hazardous substances and environmental clearances, which we have applied for. For more information,
xv

HINDALCO INDUSTRIES LIMITED


see Government Approvals on page 258 of this Letter of Offer. If we fail to obtain approval of any of these registrations and permits in a timely manner, or at all, our business may be adversely affected and our directors and officers may be subjected to civil or criminal proceedings. In addition, we require certain registration and permits for our expansions and greenfield projects, which we have applied for. In respect of Utkal Alumina, some of the existing approvals are in the name of Indal and have not been amended in favour of Utkal Alumina. The company has applied for renewal of the letter of intent granted by the Ministry of Commerce, Government of India in respect of approval as a 100% export oriented unit, which is pending approval. Any renewal, reapplication or amendment of approvals in respect of Utkal Alumina cannot be completed till the said letter of intent is renewed. If we fail to obtain approval of any of these registrations and permits in a timely manner, or at all, our business may be adversely affected. For more information, see Government Approvals on page 258 of this Letter of Offer.

External Risk Factors


Changes in the market prices of alumina, aluminium and copper could adversely affect our revenues and profitability. Domestic and LME prices for aluminium and alumina: We price our alumina and aluminium products by reference to domestic market prices or international market prices (the London Metal Exchange, or LME, price for aluminum). These prices have been volatile and cyclical in the past. Any significant decline in the domestic and international prices of alumina and aluminium will adversely affect our revenues and profitability. Further, under current regulations in India, we are not permitted to hedge against changes in the domestic price of aluminum. LME price and TcRc for copper: The prices we pay for copper concentrate and the prices we charge for our copper products are based on the LME price for copper. However, because we are a custom copper smelter, we attempt to make the LME price a pass through for us as both our copper concentrate purchases and sales of finished goods are based on LME prices. Nevertheless, we are also exposed to differences in the LME price between the quotational periods for the purchase of copper concentrate and sale of the copper, and any decline will adversely affect us. We attempt to hedge against such risks, but are still exposed to timing and quantity mis-matches. Treatment and refining charges, or TcRc, for some of our long-term copper concentrate supply contracts are also negotiated as a percentage of the prevailing LME price. In addition, certain of our long-term copper concentrate supply agreements provide for price participation terms which are linked to LME prices. As a result, any significant volatility in the LME price for copper could adversely affect our revenue and profitability. The level of TcRc has a significant impact on the profitability of our copper business. These have been volatile and cyclical in the past. We purchase copper concentrates at the LME price for the relevant quotational period less TcRc. While our TcRc is negotiated between our supplier and us, our TcRc is influenced by global TcRc, which is primarily the result of factors such as the supply and demand of copper concentrates, prevailing and forecasted LME prices and mining and freight costs. Our TcRc prices are also substantially influenced by the benchmark price set by certain large Japanese smelters. The TcRc in the past has been volatile and any significant decline will adversely affect our profitability. Any increase in competition in our target markets could result in lower prices or sales volumes of the aluminum, aluminium products and copper we produce, which may cause our profitability to suffer. There is substantial competition in the alumina, aluminium and copper industries, both in India and internationally, and we expect this to continue. Our competitors in the alumina, aluminium markets and copper outside India include major international producers. Certain of these global players have significantly greater financial resources and manufacturing and technological capabilities, more established and larger marketing and sales organizations, and larger technical staffs than we do. In the domestic aluminium market, we compete primarily against National Aluminium Company Limited, Bharat Aluminium Company Limited and Madras Aluminium Company Limited. In the domestic copper market, we compete primarily against Sterlite Industries Limited and Hindustan Copper Limited. These companies are also expanding their production capacities. If domestic demand is not sufficient to absorb these increases in capacity, our competitors could reduce their prices, which may require us to do the same or cause us to lose market share to our competitors or sell our products in overseas markets at relatively lower prices. Should the price of our
xvi

HINDALCO INDUSTRIES LIMITED


products decline, our profit margins would decline, and without a sufficient increase in our sales volume, our revenues would also decline. The end-user markets for certain value-added aluminium and copper products are highly competitive. Aluminium and copper compete with other materials particularly plastic, steel, iron, glass, and paper, among others, for various applications. In the past, customers have demonstrated a willingness to substitute other materials for aluminium and copper. The willingness of customers to accept substitutes could have a material adverse effect on our business, results of operations and prospects. Our business performance is exposed to exchange rate fluctuations. We produce and sell commodities that are typically priced by reference to U.S. Dollar prices, while a majority of our costs are incurred in Indian Rupees. We also incur a portion of costs in Australian Dollars in connection with mining operations in Australia. As a result, our financial condition and results of operations are affected, directly or indirectly, by the exchange rates of the U.S. Dollar-Indian Rupee and U.S. Dollar-Australian Dollar. If the U.S. Dollar declines in value relative to the Indian Rupee, our revenues generated from and the profitability of the products we sell could be reduced. Similarly, a U.S. Dollar decline against the Australian Dollar could adversely affect the revenues and profitability of our wholly owned Australian subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. On the other hand, our foreign currency borrowings and purchases of imported capital equipments and inputs are impacted by any depreciation of the Indian Rupee. While we hedge currency exposures from time to time, as part of our risk management activities, our profitability may be significantly affected by exchange rate fluctuations between the U.S. Dollar and the Indian Rupee and between the U.S. Dollar and the Australian Dollar. Further, our hedging arrangements may, at times, limit the benefits of favourable exchange rate movements. In addition, the policies of the Reserve Bank of India may change from time to time and this may impact our ability to adequately hedge our foreign currency exposures. Changes in customs duties may have a material adverse effect on our results of operations and financial condition. The customs duties on imported copper and aluminium (other than for certain aluminium products) have been reduced over the last few years. Imports of copper metal and aluminium are currently subject to a customs duty of 10%. The Government of India may reduce customs duties further in the future, although the timing and extent of such reductions cannot be predicted. Since we sell a majority of our aluminium and a significant part of our copper production in the domestic market, any reduction in these customs duties will have an adverse effect on our results of operations and financial condition. In addition, if customs duties decline further, we could incur additional competition from foreign aluminium and copper producers which may force us to reduce our prices or decrease our domestic market share and adversely affect our result of operations. The Government of India and other state governments may further increase the royalty rates/ cess we pay for our mines. Given the commodity nature of our businesses, cost competitiveness is a key determinant of profitability. One of our key strengths is our cost effective access to quality bauxite. The principal components of bauxite costs are mining costs, royalties and freight. The Government of India charges us royalties on the amount of bauxite extracted. In September 2000, the Government of India changed the nationwide bauxite royalty from a fixed fee to a variable fee formula, which was further revised upward in October 2004 under the same formula. Any future increase in the royalty we pay will increase our cost of bauxite, which would adversely impact our profitability. Our operations are subject to extensive regulations and may be adversely affected by present or future violations or enforcement actions. Our operations are subject to extensive regulations including regulations relating to pollution and protection of the environment and worker health and safety. National, state and local authorities in the countries in which we have operations, including India and Australia, regulate the industries in which we operate with respect to matters such as labour conditions, royalties, permit and licensing requirements, planning and development, tax
xvii

HINDALCO INDUSTRIES LIMITED


registrations, mining leases, supply of water, environmental compliance (including, for example, compliance with waste and waste water treatment and disposal, air emissions, discharges and forest and soil conservation requirements), plant and wildlife protection, reclamation and restoration of properties after operations are complete, surface subsidence from underground mining and the effects that mining, smelting and refining operations have on groundwater quality and availability. Numerous governmental permits, approvals and leases are required for our operations. We are required to prepare and present to national, state or local authorities data pertaining to the effect or impact that any proposed exploration, mining or production activities may have upon the environment. The costs, liabilities and requirements associated with complying with these laws and regulations or complying with changes in requirements or the manner in which they are applied or the cost of rehabilitation of site operations which have been closed down may be substantial and time-consuming and may delay the commencement or continuation of exploration, mining or production activities. Failure to comply with these laws and regulations or to obtain or renew the necessary permits, approvals and leases may result in the loss of the right to mine or operate a smelter or refinery. There can be no assurance that compliance with these laws and regulations or changes thereto or the cost of rehabilitation of site operations which have been closed down or the failure to obtain necessary permits, approvals or leases or successful challenges to the grant of such permits, approvals and leases will not adversely affect our results of operations or financial condition. We incur and expect to continue to incur significant capital and operating costs to comply with environmental regulations. We could also incur significant costs, including clean up costs, fines and civil and criminal sanctions, if we fail to comply with environmental laws and regulations or the terms of consents and approvals. New legislation or regulations may be adopted in the future that may materially and adversely affect our operations, our cost structure or our customers ability to use our products. New legislation or regulations, or different or more stringent interpretation or enforcement of existing laws and regulations, may also require us or our customers to change operations significantly or incur increased costs which could have an adverse effect on our results of operations or financial condition. In addition, a violation of health and safety laws relating to a mine, smelter, refinery or other plant or a failure to comply with the instructions of the relevant health and safety authorities could lead to, among other things, a temporary shutdown of all or a portion of the mine, smelter, refinery or other plant, a loss of the right to mine or operate the smelter, refinery or other plant or the imposition of costly compliance procedures. If health and safety authorities require us to shut down all or a portion of a mine, smelter, refinery or other plant or to implement costly compliance measures, whether pursuant to existing or new health and safety laws and regulations, such measures could have a material adverse effect on our results of operations or financial condition. The price for our phosphatic fertilizers is primarily fixed by the Government of India and any decrease in the pre-determined price will adversely affect our results of operations. The price of phosphatic fertilizers is primarily fixed by the Government of India. In the event the prices of these products decline, it could result in an adverse impact on our revenues and results of operations. Our business faces natural disasters and operation risks that may cause significant interruption of operations. Mining or producing and transporting bauxite, alumina, primary aluminium products, copper concentrate, copper, copper products, coal and other raw materials is generally subject to a number of risks and hazards, including unusual or unexpected geological conditions, ground conditions, phenomena such as inclement weather conditions, floods, tsunamis and earthquakes and the handling of hazardous substances and emissions of contaminants. Our rolling mill operations are particularly susceptible to risk of fire. Such risks and hazards could result in injury or death, damage to, or destruction of, mineral properties, processing or production facilities or the environment, monetary losses and possible legal liability. Our business, financial condition, liquidity and operating results could be materially adversely affected if any of these developments were to occur. A slowdown in economic growth in India could cause our business to suffer. We sell a significant portion of our aluminium and copper products in the Indian market. Our performance and the growth of our business are dependent on the health of the overall Indian economy and our expansion plans are based on our expectations of continued economic growth in India. Any future slowdown in the Indian economy could affect us, our customers and other contractual counter-parties.
xviii

HINDALCO INDUSTRIES LIMITED


Our operations have been affected by social unrest in the past and may continue to be affected in the future. India has from time to time experienced social unrest and hostilities both internally and with neighbouring countries. A number of the bauxite and coal mines which we currently, or propose to, operate or source from are located in areas that have experienced social unrest and certain of these mines have been attacked by rebel groups. Two of our bauxite mines are located in the states of Jharkhand and Chhattisgarh which have experienced significant political upheaval and insurgencies which affected our operations in the past. These interruptions could have a material impact on our operations and profitability. We cannot assure you that such situations will not recur. In recent years, there have been military confrontations between India and Pakistan in the Kashmir region. India has also experienced terrorist attacks in some parts of the country. We cannot assure you that such situations will not recur. These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on our business, our future financial performance and the price of our Equity Shares. Political instability or a change in economic liberalization and deregulation policies could seriously harm business and economic conditions in India generally and our business in particular. In recent years, the Government of India has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant. The current ruling coalition, elected in May 2004, has announced policies and taken initiatives that support the continued economic liberalization policies that have been pursued by the previous governments. We cannot predict the Government of Indias liberalization policies and we cannot assure you that they will continue in the future. The rate of progress of economic liberalization could change, and specific laws and policies affecting alumina and aluminium companies, as well as copper and copper companies, foreign investment, currency exchange rates and other matters affecting investment in our Equity Shares could change as well, due to changes effected by current or future governments. In addition, significant changes in Indias economic liberalization and deregulation policies could disrupt business and economic conditions in India generally, and our business in particular. Natural disasters in South Asia and elsewhere could disrupt our operations and cause our business to suffer. Our offshore and onsite operations may be impacted by natural disasters such as earthquakes, tsunamis, disease and health epidemics. In December 2004, certain parts of India were severely affected by a tsunami triggered by an earthquake in the Indian Ocean. Though our operations were not affected by the disaster, we cannot guarantee that in the future our operations will not be affected by such natural disasters. Indian laws limit our ability to raise capital outside India and may prevent us from operating our business or entering into a transaction that is in the best interests of our shareholders. Indian law relating to foreign exchange management constrains our ability to raise capital outside India through the issuance of equity or convertible debt securities. Generally, any foreign investment in, or acquisition of, an Indian company, subject to certain exceptions, requires approval from relevant government authorities in India, including the Reserve Bank of India. Changes to such policies may create restrictions on our capital raising abilities. For example, a limit on the foreign equity ownership of Indian aluminium manufacturing companies may constrain our ability to seek and obtain additional equity investments by foreign investors. In addition, these restrictions, if applied to us, may prevent us from entering into certain transactions, such as an acquisition by a non-Indian company, which might otherwise be beneficial for us and the holders of our Equity Shares. Terrorist attacks and other acts of violence or war involving India, the United States, the United Kingdom, and other countries could adversely affect the financial markets, result in a loss of business confidence and adversely affect our business, results of operations and financial condition. Terrorist attacks and other acts of violence or war, including those involving India, the United States, the United Kingdom or other countries, may adversely affect Indian and worldwide financial markets. These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. Increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.

xix

HINDALCO INDUSTRIES LIMITED


Notes to risk factors:
1. Net worth of the Company as on March 31, 2005 was Rs. 76,571.9 million and as on September 30, 2005 was Rs. 82,593.9 million. The size of the Issue is Rs. 22,266 million. The net asset value per share (book value) as on March 31, 2005 For Equity Shares of Re. 1 face value is Rs.82.54. This Issue, on a rights basis of 231,936,993 Equity Shares with a face value of Re. 1 each at a premium of Rs. 95 per Equity Share for an amount aggregating Rs. 22,266 million to the existing equity shareholders in the ratio of one Equity Share for every four existing Equity Shares held by the existing shareholders on the record date, i.e., November 28, 2005 on a partly paid basis in terms of this Letter of Offer. We had entered into certain related party transactions for fiscals 2003, 2004 and 2005 disclosed in the section titled Related Party Transactions on page 123 of this Letter of Offer. Before making an investment decision in respect of this Offer, you are advised to refer to the section entitled Basis for Issue Price on page 34 of this Letter of Offer. Please refer to the sub section entitled Basis of Allotment on page 305 of this Letter of Offer for details on basis of allotment. Average cost of acquisition of Equity Shares of our Company by our Promoters is as under.

2.

3. 4. 5. 6.

Birla Group Holdings: Rs. 3.80 per Equity Share Dr. K.M. Birla: NIL (Acquired by way of gift)

7. 8.

For transactions in Equity Shares of the Company by the promoter group and Directors of the Company in the last six months, please refer to pages 22 and 89, respectively of this Letter of Offer. For interests of our directors and key managerial personnel, please refer to Management on page 84 of this Letter of Offer. For interests of our Promoters and promoter group please refer to Promoters and Promoter Group on page 96 of this Letter of Offer. We and the Lead Managers are obliged to keep this Letter of Offer updated and inform the public of any material change/development till the listing and trading commence.

9.

You may contact the Lead Managers for any complaints pertaining to the Issue including any clarification or information relating to the Issue. The Lead Managers are obliged to provide the same to you.

xx

HINDALCO INDUSTRIES LIMITED SUMMARY


Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the 12-month period ended March 31 of that year. In this section, any reference to we, us or our refers to Hindalco Industries Limited. Unless otherwise stated, the financial information used in this section is derived from our unconsolidated audited financial statements under Indian GAAP as restated. , Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. As a result, the financial statements for fiscal 2005 include the full year financial results of the aluminium business of Indal and may not be comparable with those of fiscal 2004. For details of the Scheme of Arrangement and its financial implications, please see Our Business on page 50 of this Letter of Offer. Bracketed numbers indicate losses/ negative figures. In this section, any conversion from US Dollars to Indian Rupees has been done based on the 12 PM Noon Exchange rate of 1US Dollar = 45.690 Indian Rupees on November 10, 2005 as given by the Federal Reserve Bank of New York Such conversions are for convenience purposes.

Business Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a flagship company of the Aditya Birla Group, which is one of the largest business groups in India. We were incorporated in 1958 and have been listed on the Indian Stock Exchanges since 1968 and on the Socit de la Bourse de Luxembourg since 1993. The listing and trading of our GDRs have been transferred from the Bourse de Luxembourg (a market appearing on the list of regulated markets issued by the European Commission) to the EuroMTF (which is regulated by Luxembourg Stock Exchange) with effect from November 25, 2005. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU of July 2005, we are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines. We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. For fiscal 2005, our net sales and operating revenues were Rs.95,232.5 million out of which 55% was accounted for by our aluminium business and 45% by our copper business. For the same period, our profit before interest and tax (PBIT) was Rs.20,832.4 million, with 77% and 12% accounted for by our aluminium and copper businesses, respectively. The remaining 11% was unallocable in nature. Our aluminium revenues and profit before interest and tax have grown at a compounded annual growth rate of 48% and 55%, respectively, since fiscal 2003. We acquired our copper business at the end of fiscal 2003. Our aluminium operations are based in India, with access to abundant, good quality bauxite and coal, as well as proximity to key consumer markets. Our total alumina production capacity is currently 1,145,000 metric tpa and our total aluminium production capacity is currently 455,000 metric tpa. Our production facilities comprise alumina refineries, smelters and facilities for value-added products such as rolled products, extrusions, foils and wheels. Our facilities are supported by dedicated bauxite mines and our own power plants, which provide us with significant cost advantages. Our copper smelting facility is based at Dahej, with a current capacity of 250,000 metric tpa. We have recently completed the capacity expansion of our copper smelter to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. As part of our upstream integration efforts, we acquired two copper mines in Mt. Gordon in Queensland, Australia and Nifty in Western Australia in 2003 through our wholly owned subsidiary Birla Mineral Resources Pty Limited which, in turn, wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. Mt. Gordon commenced its supply of copper concentrate in August 2004 while Nifty is expected to commence its supply of copper concentrate in the second half of fiscal 2006. As part of our efforts to add value to the by-products of copper smelting, we also produce phosphatic fertilizers and precious metals like gold and silver. Our copper business is also supported by a dedicated, all-weather jetty located at Dahej and owned by our
1

HINDALCO INDUSTRIES LIMITED


wholly owned subsidiary, Dahej Harbour and Infrastructure Limited. We are currently embarking on a growth plan designed to make us a global-sized, globally-competitive metals producer. We plan to achieve this through a combination of expansion of existing facilities and greenfield projects, in both alumina and aluminium, backed by dedicated power plants. We also plan to make further investments in copper mines, as and when appropriate opportunities are identified. These expansions will increase our overall size and capacity and help to reduce further our production costs, thereby improving our competitive position in the global markets.

Our Competitive Strengths


We believe that we have delivered consistent growth and superior value to our shareholders over the years, despite volatility in the global metal markets. We believe that our historical success and potential for growth are due primarily to the following competitive strengths: Strengths in Our Aluminium Business In our aluminium business, our competitive strengths include our globally competitive cost structure, fully integrated operations, cost effective access to abundant supply of quality raw materials and domestic market leadership. We are amongst the lowest cost producers globally. Given the commodity nature of our businesses, cost competitiveness is a key determinant of profitability. According to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. We believe that this has helped us in achieving operating margins that are amongst the best in the industry. Our operations are fully integrated. We have cost effective access to quality bauxite, low cost power from our power plants, which meet a large part of our power requirements and which are located on the pithead of coal mines, significant control over supplies of other key raw materials such as caustic soda and aluminium fluoride from subsidiaries and a comprehensive range of value-added products with proximity to end-use markets. These provide us significant cost advantages in the production of aluminium, delivery of quality products, achievement of operating efficiencies that we benchmark against the best in the world through continual improvements and adoption of best practices. The integrated nature of our operations also provides us with flexibility to change our product mix to take advantage of market opportunities. We have cost effective access to quality bauxite. Our existing refineries are located close to our bauxite reserves. Based on our current requirements as well as proposed expansion of existing refineries at Muri and Belgaum, we expect our total reserves, including bauxite deposits for which we are in the process of securing leases, to last for approximately 22, 44 and 23 years, respectively at our Muri, Renukoot and Belgaum refineries. We believe that we will be able to obtain access to additional reserves for our future needs. In addition, our bauxite reserves are of good quality and provide significant cost advantages in the production of alumina and aluminium. We have located our facilities close to coal deposits giving us access to low cost power. We also have cost effective access to coal deposits, providing us an advantage in our power costs, the largest cost component in our production of aluminium. This has helped us in generating uninterrupted power at a competitive cash cost which we believe is significantly lower than the alternative sources of power supplies in India and comparable to power costs for many global aluminium smelters. Our largest power plant at Renusagar (near our integrated aluminium complex at Renukoot) is located on the pithead of its sourcing coal mine, which provides us with significant cost advantages in generating power for use in our facilities. Our other power plant, at Hirakud, has a dedicated coal mine, which provides us with further cost advantages. Our Hirakud smelter accounted for approximately 16% of the total aluminium metal we produced in fiscal 2005. We are a leader in the domestic market. In addition to cost advantages, we also benefit from market leadership across the value chain. We are the domestic market leader in aluminium and have retained this position for several years now. In primary metals, our market share was approximately 33% in fiscal 2005. In the value-added rolled product segment, our market share in fiscal 2005 was 63%. In the highly fragmented extrusions markets, we had a 21% domestic share in fiscal 2005. We have built this strong market position through our quality products, superior customer service and reliability of supplies.

HINDALCO INDUSTRIES LIMITED


Strengths in Our Copper Business At the company level, we have the following competitive advantages in our copper business. Cost advantage. We believe that we are a low cost copper smelter. Our expanded copper capacity will help us reduce our costs significantly. By-product value addition. Another key competitive advantage is our ability to add value to by-products. Copper smelting generates sulphuric acid, the disposal of which is generally a problem. We have turned this problem into an opportunity by converting the sulphuric acid into phosphatic fertilizers, for which there is a growing market in India. Copper smelting also generates anode slime, which contain traces of gold and silver. Our in-house precious metal refinery helps in recovering these metals, which is an additional advantage over most custom smelters worldwide. Freight and handling cost advantage. We benefit from our proximity to growth markets in Asia, which have witnessed a growing deficit in copper in recent years. The refined copper deficit in Asia was at 2.8 million metric tons in fiscal 2005. With alternative supplies possible only from distant locations, we benefit from significant freight advantage in catering to growth markets in Asia. We further gain from the jetty in Dahej, owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited, that can handle vessels up to 70,000 deadweight tons, or DWT, and has a cargo handling capacity of approximately 3 million metric tons per annum depending upon jetty occupancy. Other Company Strengths We also benefit from the following other key strengths: Proven ability to handle large projects and successful acquisitions Since our inception, we have implemented several large expansions at existing facilities as well as greenfield projects, on schedule and within budget. We have also successfully completed and integrated several acquisitions, including the acquisition of Indian Aluminium Company Limited, the acquisition of our copper business from Indo Gulf Corporation and the acquisition of two copper mines in Australia through our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. We believe that our knowledge of the aluminium and copper industries and project management expertise positions us well to leverage emerging opportunities in the aluminium and copper industries. Our people Our management team includes some of the most experienced managers in the Indian aluminium and copper industries. Most of our senior management team have substantial experience in their respective industries and have been instrumental in the growth of our organization. We believe that our management team is well placed to provide strategic leadership and direction to explore new emerging opportunities in these sectors as well as constantly improve our current operations. We have witnessed low attrition of key management personnel and have also recruited several professionals with domain expertise in critical areas. We believe these provide us with a significant competitive edge.

Our Strategy
Aluminium Towards realizing our vision of attaining global size and further improve our cost competitiveness in the global aluminium industry, we are embarking on several expansions at our existing facilities and greenfield projects, both in alumina and aluminium. These include ongoing expansion of existing facilities, both in alumina and aluminium, a greenfield joint venture alumina project with Alcan Inc., under implementation, and a planned fully integrated greenfield project in Orissa with the capacity to produce alumina and aluminium. Our strategy is to support all of the above projects with low cost dedicated sources of key inputs, including bauxite and coal for dedicated power. Upon completion of our expansion plans, including the projects mentioned in the section Objects of the Issue on page 25 of this Letter of Offer, our aggregate alumina capacity is expected to increase from 1,145,000 metric tpa to 3,610,000 metric tpa. Aluminium smelting capacity is expected to increase from 455,000 metric tpa to 765,000 metric tpa. Our power generation capacity is also expected to increase from 987.2 megawatt to 1,637.2
3

HINDALCO INDUSTRIES LIMITED


megawatt. These projects together with other greenfield projects under evaluation are expected to significantly reduce our costs and move us into the ranks of the top 10 global producers of alumina and aluminium, by volume. Copper In the copper business, our strategy is to reduce costs through optimal utilization of expanded smelting capacity, currently under commissioning trials, and increase the extent of copper concentrate supply from the mines owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, own copper mines in Australia. We will also consider opportunities to acquire copper mines so as to satisfy our copper concentrate requirements.

HINDALCO INDUSTRIES LIMITED THE ISSUE


Equity Shares proposed to be issued by the Company Rights Entitlement 231,936,993 Equity Shares One Equity Share for every four Equity Shares held on the Record Date November 28, 2005 Rs. 96 per Equity Share 927,747,970 Equity Shares 927,747,970 fully paid up Equity Shares, and 231,936,993 Equity Shares partly paid up For more information, see Terms of Issue on page 293 of this Letter of Offer.

Record Date Issue Price per Equity Share Equity Shares outstanding prior to the Issue Equity Shares outstanding after the Issue

Terms of the Issue

Terms of Payment
Due Date On application Amount Rs. 24, which constitutes 25% of the Issue Price of Rs. 96, including share premium. Rs. 24, which constitutes a further 25% of the Issue Price of Rs. 96, including share premium Rs. 48, which constitutes the remaining 50% of the Issue Price of Rs. 96, including share premium.

Anytime between 9 and 12 months after the Allotment Date, at the option of the Company Anytime between 18 and 24 months after the Allotment Date, at the option of the Company

HINDALCO INDUSTRIES LIMITED SELECTED FINANCIAL INFORMATION


The following table sets forth our selected financial information derived from our restated consolidated financial statements as of and for the fiscal years ended March 31, 2003, 2004 and 2005, and for the six months ended September 30, 2005. These financial statements have been prepared in accordance with Indian GAAP and the Act and the annual financial statements have been restated as described in the auditors report included therewith, beginning on page 126 of this Letter of Offer. Bracketed numbers indicate losses/ negative figures. The selected financial information presented below should be read in conjunction with our financial statements, the notes thereto and the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations beginning on page 177 of this Letter of Offer. STATEMENT OF CONSOLIDATED PROFIT & LOSS Fiscal year ended March 31, 2003 Income: Net Sales Operating Revenues Net Sales & Operating Revenue Other Income Increase (Decrease) in inventories Total Expenditure: Raw material consumed Goods Purchased Payment to and provision for employees Manufacturing and operating expenses Selling, Distribution, Administration and other overheads Interest & Finance Charges Depreciation Total Net profit before tax and exceptional items Exceptional Items (Net) Net profit before tax Provision for current tax Provision for deferred tax Provision for Fringe Benefits Tax Provision for taxation for earlier year/s written back (net) Net profit after tax before Minority Interest Minority Interest Net Profit 27,385.0 0.6 3,797.4 13,213.4 5,010.5 1,901.7 3,711.3 55,019.8 11,815.0 1,613.2 10,201.9 2,669.5 827.9 0.0 (0.0) 6,704.5 47.9 6,656.6
6

(Rs. in millions) For the six months ended 2005 September 30, 2005 50,211.2 2,220.8 52,432.0 1,257.1 4,821.2 58,510.3 24,782.7 35.2 2,695.0 14,172.2 2,998.1 1,339.5 3,589.6 49,612.4 8,897.9 2.5 8,895.4 2,304.7 374.3 47.0 (0.3) 6,169.8 87.2 6,082.5

2004

64,009.4 304.6 64,314.1 2,102.0 418.8 66,834.9

77,513.9 4,718.9 82,232.7 2,795.2 3,188.5 88,216.5 36,054.2 8.4 4,598.6 20,293.5 4,911.3 2,345.6 5,140.3 73,351.9 14,864.5 10.0 14,854.5 3,233.5 1,637.7 0.0 8.7 9,974.5 39.7 9,934.8

96,257.4 4,797.2 101,054.6 2,778.8 3,021.0 106,854.5 43,461.9 182.2 5,051.3 24,965.2 6,109.5 2,159.1 6,324.9 88,254.1 18,600.4 130.6 18,469.9 5,418.8 809.0 0.0 (715.9) 12,958.0 110.1 12,847.9

HINDALCO INDUSTRIES LIMITED


STATEMENT OF CONSOLIDATED ASSETS AND LIABILITIES
(Rs. in millions) Fiscal year ended March 31, For the Six months ended September 30, 2005

2003 Fixed Assets: (A) Gross Block Less : Depreciation Less : Impairment Net Block Less : Revaluation Reserve Net Block after adjustment of revaluation reserve Capital Work-in-progress Sub-total (A) Investments (B) Current Assets, Loans & Advances: (C) Inventories Sundry Debtors Cash & Bank Balances Loans & Advances and other current assets Sub-total (C) Liabilities and Provisions: (D) Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities and provisions Sub-total (D) Minority Interest (E) Net Worth (E) Represented by: (F) 1. Share Capital Advance against Equity Share Capital 2. Reserves Less : Revaluation Reserve Less : Miscellaneous Expenditure to the extent written-off or adjusted Reserves (Net of Revaluation Reserves & Miscellaneous expenditure) Net Worth 1,305.1 112.8 60,519.6 0.0 (77.0) 60,442.6 61,860.5
7

2004

2005

86,766.9 (24,945.1) 0.0 61,821.9 0.0 61,821.9 8,776.4 70,598.3 11,867.7 14,490.9 7,027.8 3,537.0 9,644.3 34,700.1 27,736.8 5,303.7 10,258.7 11,649.0 54,948.1 357.4 61,860.5

102,585.1 (30,412.8) 0.0 72,172.4 0.0 72,172.4 7,115.6 79,287.9 18,655.7 17,033.7 7,517.4 2,831.2 10,222.3 37,604.5 24,385.1 12,851.5 11,952.6 15,119.3 64,308.5 932.1 70,307.6 1,412.9 0.0 69,089.5 0.0 (194.9) 68,894.7 70,307.6

109,531.7 (38,065.6) (999.3) 70,466.8 0.0 70,466.8 16,386.9 86,853.7 29,558.5 26,970.4 8,404.4 4,730.5 9,415.9 49,521.2 32,310.2 16,998.0 11,342.5 27,910.8 88,561.4 857.7 76,514.3 1,415.9 0.0 75,233.5 0.0 (135.0) 75,098.4 76,514.3

122,742.3 (41,742.4) (999.3) 80,000.6 0.0 80,000.6 12,304.0 92,304.6 28,033.4 33,637.4 8,664.2 8,523.1 8,225.1 59,049.8 30,560.8 25,895.2 11,502.0 27,873.9 95,831.8 1,144.7 82,411.2 1,415.9 0.0 81,116.0 0.0 (120.7) 80,995.3 82,411.2

HINDALCO INDUSTRIES LIMITED GENERAL INFORMATION


Dear Shareholder(s), Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on September 20, 2005 and the resolutions passed by the Committee of Directors on November 12, 2005 it has been decided to make the following offer to the Equity Shareholders of the Company, with a right to renounce: ISSUE, ON A RIGHTS BASIS OF 231,936,993 EQUITY SHARES WITH A FACE VALUE OF RE. 1 EACH AT A PREMIUM OF RS. 95 PER EQUITY SHARE FOR AN AMOUNT AGGREGATING RS. 22,266 MILLION TO THE EXISTING EQUITY SHAREHOLDERS IN THE RATIO OF ONE EQUITY SHARE FOR EVERY FOUR EXISTING EQUITY SHARES HELD BY THE EXISTING SHAREHOLDERS ON THE RECORD DATE, I.E., NOVEMBER 28, 2005 ON A PARTLY PAID BASIS IN TERMS OF THIS LETTER OF OFFER (ISSUE). THE ISSUE PRICE FOR THE PARTLY PAID EQUITY SHARES WILL BE PAID IN THREE INSTALLMENTS: 25% OF THE ISSUE PRICE WILL BE PAYABLE ON APPLICATION; 25% OF THE ISSUE PRICE WILL BECOME PAYABLE, AT THE OPTION OF THE COMPANY, BETWEEN 9 AND 12 MONTHS AFTER THE ALLOTMENT DATE; AND 50% OF THE ISSUE PRICE WILL BECOME PAYABLE, AT THE OPTION OF THE COMPANY, BETWEEN 18 AND 24 MONTHS AFTER THE ALLOTMENT DATE. THE TOTAL ISSUE PRICE IS 96 TIMES OF THE FACE VALUE OF THE EQUITY SHARES.

Registered Office of the Company:


Hindalco Industries Limited Century Bhavan, 3rd Floor Dr. Annie Besant Road, Worli, Mumbai 400 025 Registration No. 11-11238 and new 21 digit registration number U270293 MH 1958 PLC 11238. Registrar of Companies at Mumbai, Maharashtra located at Hakoba Mill Compound, 2nd Floor, Dattaram Lad Marg, Kalachowkie, Mumbai 400 033. The Equity Shares of the Company are listed on the BSE and NSE.

Board of Directors
Name and Designation Dr. K. M. Birla Chairman (Non-executive) Mrs. R. Birla Non-executive Director Mr. D. Bhattacharya Managing Director Mr. A.K. Agarwala Non-executive Director Mr. C.M.Maniar Independent Director Mr. E.B. Desai Non-executive Director Mr. S.S. Kothari Non-executive Director Mr. M.M.Bhagat Independent Director Mr. K. N. Bhandari Independent Director Age 38 60 57 72 69 74 83 72 63 Address 16-A, IL-Palazzo, Little Gibbs Road, Mumbai 400 006, Maharashtra 16-A, IL- Palazzo, Little Gibbs Road, Mumbai 400 006, Maharashtra 14/A,Woodlands, Peddar Road, Mumbai 400 026, Maharashtra Haveli, Flat No.3, L.D. Ruparel Marg, Mumbai 400 006, Maharashtra Garden House, 1st Floor, Dady Seth, 2nd Cross Lane, Chowpatty Band Stand, Mumbai 400 007, Maharashtra Sonarica, 81, 33A, Peddar Road, Mumbai - 400 026, Maharashtra 87-B, Gaurav Nagar, Civil Lines, Jaipur - 302 006, Rajasthan 13, Kabir Road, Kolkata 700 026, West Bengal 5, New Power House Road, Sector-7, Jodhpur 342 003, Rajasthan

For more details regarding our Directors please refer to Management on page 84 of this Letter of Offer.

HINDALCO INDUSTRIES LIMITED


Company Secretary and Compliance Officer
Mr. A. Malik Hindalco Industries Limited, Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025. Tel: (91 22) 5662 6666 Fax: (91 22) 2422 7586 / 2436 2516 Email: amalik@adityabirla.com Investors may contact the Compliance Officer for any pre-Issue / post-Issue related matter.

Bankers of the Company


Allahabad Bank 2, Netaji Subhash Road, Kolkata 700 001 Bank of America Express Towers, 16th Floor Nariman Point Mumbai 400 021 Bank of Nova Scotia Mittal Tower, B Wing, Nariman Point, Mumbai 400 021 Calyon Bank 12th Floor, Hoechst House Nariman Point Mumbai 400 021 Corporation Bank No.85, Mangaladevi Temple Street, Mangalore 575 001 Deutsche Bank AG Hazarimal Somani Marg Fort, Mumbai 400 001 ABN Amro Sakhar Bhavan, 3rd Floor Nariman Point, Mumbai 400 021. Bank of Baroda Baroda House, P No. 506, Mandvi, .B. Baroda 390 006 BNP Paribas French Bank Building, 62, Homji Street, Fort, Mumbai 400 001. Citibank N. A. Citibank Center, 7th Floor Bandra-Kurla Complex Bandra (East) Mumbai 400 051 DBS Bank 3rd Floor, Fort House 221 Dr. D.N. Road, Fort Mumbai 400 001 HDFC Bank HDFC Bank House Kamala Mills Compound 6th Floor, Senapati Bapat Marg Lower Parel, Mumbai 400 013 ICICI Bank Limited ICICI Towers Bandra-Kurla Complex Mumbai 400 51

HSBC 52/60 Mahatma Gandhi Road, Mumbai 400 001.

HINDALCO INDUSTRIES LIMITED


IDBI Bank Limited IDBI Tower, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 Standard Chartered Bank 90, Mahatma Gandhi Road Fort, Mumbai 400 001 Syndicate Bank Manipal 576 119, Udupi District. Union Bank of India Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai 400 021 Punjab National Bank 7, Bhikaji Cama Place, New Delhi 110 066 State Bank of India Madame Cama Road, Mumbai 400 021 UCO Bank No.10, Biplabi Trailokya Maharaj Sarani, Kolkata 700 001

Issue Management Team Lead Managers to the Issue


JM Morgan Stanley Private Limited 141 Maker Chambers III Nariman Point, Mumbai 400 021 Tel: (91 22) 5630 3030 Fax: (91 22) 2204 7185 Contact Person: Mr. Kushal Doshi Email: Hindalcorightsissue@jmmorganstanley.com Website: www.jmmorganstanley.com DSP Merrill Lynch Limited Mafatlal Centre, 10th Floor Nariman Point, Mumbai 400 021 Tel: (91 22) 56328000 Fax: (91 22) 22045818 Contact Person: Mr.Sumedh Jog Email: hindalco_rightsissue@ml.com Website: www. dspml.com The statement of inter se allocation of responsibilities for this Issue between JM Morgan Stanley Private Limited (JMMS) and DSP Merrill Lynch Limited (DSPML) is as follows: No. 1. Activities Capital structuring with the relative components and formalities such as composition of debt and equity, type of instruments Drafting and Design of the Offer Document and of advertisement / publicity material including newspaper advertisements and brochure / memorandum containing salient features of the Offer Document. The designated Lead Merchant Banker shall ensure compliance with the Guidelines for Disclosure and Investor Protection and other stipulated requirements and completion of prescribed formalities with Stock Exchange and SEBI. Responsibility JMMS / DSPML Coordinator JMMS

2.

JMMS / DSPML

JMMS

10

HINDALCO INDUSTRIES LIMITED


No. 3. Activities Retail/Non-institutional marketing strategy which will cover, inter alia, preparation of publicity budget, arrangements for selection of (i) ad-media, (ii) centres of holding conferences of brokers, investors etc. (iii) bankers to the issue, (iv) collection centres, (v) distribution of publicity and issue material including application form and Letter of Offer. Institutional marketing strategy. Selection of various agencies connected with the issue, namely Registrars to the Issue, printers, monitoring agency and advertisement agencies. Follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures. The post-issue activities will involve essential follow-up steps, which must include finalisation of basis of allotment / weeding out of multiple applications, listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as registrars to the issue, bankers to the issue, and bank handling refund business. Even if many of these post-issue activities would be handled by other intermediaries, the designated Lead Merchant Banker shall be responsible for ensuring that these agencies fulfill their functions and enable him to discharge this responsibility through suitable agreements with the issuer company. Responsibility JMMS / DSPML Coordinator JMMS

4. 5.

JMMS / DSPML JMMS / DSPML

DSPML JMMS

6.

JMMS / DSPML

DSPML

7.

JMMS / DSPML

DSPML

Legal Advisor to the Company


Amarchand & Mangaldas & Suresh A. Shroff & Co. 5th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. Tel: (91 22) 5660 4455 Fax: (91 22) 2496 3666

Legal Advisor to the Lead Managers


AZB & Partners 23rd Floor, Express Towers, Nariman Point, Mumbai 400 021, Tel: (91 22) 5639 6880 Fax: (91 22) 5639 6888

Auditors of the Company


Singhi & Co. 1-B Old Post Office Street, Kolkata 700 001 Tel: (91 33) 2248 4577 Fax: (91 33) 2220 7146

11

HINDALCO INDUSTRIES LIMITED


Registrar to the Issue
Karvy Computershare Private Limited Karvy House, 46 Avenue 4, Street No. 1 Banjara Hills, Hyderabad 500 034. Tel: (91 40) 2343 1546 Fax: (91 40) 2343 1551 Email: hindalcorights@karvy.com Website: www.karvy.com Contact Person: Murali Krishna Note: Investors are advised to contact the Registrar to the Issue/ Compliance Officer in case of any pre-issue/postissue related problems such as non-receipt of Letter of Offer/letter of allotment/ share certificate(s)/ refund orders.

Monitoring Agency
Industrial Development Bank of India Limited (IDBI Bank) IDBI Tower, WTC Complex, Cuffe Parade, Mumbai 400 005 Tel: (91 22) 2218 9111 Fax: (91 22) 2218 1294 Website: www. idbi.com

Banker to the Issue


ICICI Bank Limited Capital Market Division, 30, Mumbai Samachar Marg, Fort, Mumbai 400 001 Tel: (022) 2265 5285 Fax: (022) 2261 1138 Email: mumbai@icicibank.com Website: www.icicibank.com

Credit rating
This being an issue of Equity Shares, no credit rating is required. The details of the ratings received and outstanding by the Company for various securities/ instruments in the last three years are as follows: Borrowing Programs Short Term Debt/ Commercial Paper Short Term Debt Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Amount Rating Agency (In Rs. million) 2,500 Fitch Ratings India Pvt. Ltd. 250 CRISIL 1,500 CRISIL 500 CRISIL 2,000 CRISIL 500 CRISIL 5000 Fitch Ratings India Pvt. Ltd. 600 CRISIL 250 CRISIL 500 CRISIL 500 CRISIL 1050 CRISIL
12

Rating F1+(ind) P1+ AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA (ind) / Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable AAA/ Stable

Date of Rating Letter April 7, 2003 February 9, 2005 January 4, 2001 May 30, 2001 June 19, 2001 August 31, 2001 March 25, 2002 July 9, 2002 August 13, 2002 August 13, 2002 November 14, 2002 November 22, 2002

HINDALCO INDUSTRIES LIMITED


Borrowing Programs Non Convertible Debentures Non Convertible Debentures Non Convertible Debentures Amount Rating Agency (Rs. in millions) 600 CRISIL 2,500 CRISIL 1,000 CRISIL Rating AAA/ Stable AAA/ Stable AAA/ Stable Date of Rating Letter April 1, 2003 August 31, 2004 September 7, 2004

Impersonation
As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act which is reproduced below: Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or 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

Issue Schedule
The subscription will open upon the commencement of the banking hours and will close upon the close of banking hours on the dates mentioned below: Issue Opening Date : Monday, December 19, 2005 January 3, 2006 18, 2006

Last date for receiving requests for split forms : Tuesday, Issue Closing Date

: Wednesday, January

Allotment Letters / Refund Orders


The Company will issue and dispatch letters of allotment/ share certificates/ demat credit or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of 30 days from the date of closure of the Issue. If such money is not repaid within eight days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. The Board of Directors declares that funds received against this Issue will be transferred to a separate bank account other than the bank account referred to sub-section (3) of Section 73 of the Act. The Letter of Allotment / Refund Order exceeding Rs.1,500 would be sent by registered post/speed post to the sole/first applicants registered address. Refund Orders up to the value of Rs.1,500 would be sent under Certificate of Posting. Such Refund Orders would be payable at par at all places where the applications were originally accepted. The same would be marked Account Payee only and would be drawn in favour of the sole/first applicant. Adequate funds would be made available to the Registrar to the Issue for this purpose.

Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than eight days after the Company becomes liable to repay the subscription amount, i.e. forty-two days after closure of the Issue, the Company will pay interest for the delayed period, at the rates prescribed in sub-sections (2) and (2A) of Section 73 of the Act. The Issue will become undersubscribed after considering the number of shares applied as per entitlement plus additional shares. The Promoters or promoter group will subscribe to such undersubscribed portion as per the relevant provisions of the law. The undersubscribed portion shall be applied for only after the close of the Issue. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to the Takeover Code, such allotment of the undersubscribed portion will be governed by the provisions of the Takeover Code. Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. For further details please refer to Basis of Allotment on page 305 of this Letter of Offer.
13

HINDALCO INDUSTRIES LIMITED


No Offer in the United States
The rights and the shares of the Company are not registered under the United States Securities Act, 1933, as amended, and the Issue is not, and under no circumstances is to be construed as, an offering of any shares or rights for sale in the United States. For further details please see Terms of the Issue on page 293 of this Letter of Offer.

14

HINDALCO INDUSTRIES LIMITED CAPITAL STRUCTURE


The capital structure of our Company and related information is set forth below. For the purpose of this chapter bracketed numbers indicate negative figures. (Rs. in millions) Aggregate nominal value Authorized share capital 1450,000,000 Equity Shares of Re. 1 each 500,000 14% Free of Companys tax but subject to deduction of taxes at source at the prescribed rates, Redeemable Cumulative Preference Shares of Rs. 100/- each. Total Issued, subscribed and paid-up capital 927,808,470 Equity Shares of Re. 1 each fully paid-up (i), (ii) 60,500 Less: Face Value of shares forfeited 927.81 (0.06) 927.75 Add: Forfeited shares account (Amt. Paid-up) 0.03 927.78(iii) Present Issue being offered to the Equity Shareholders through the Letter of Offer 231,936,993 Equity Shares of Re. 1 each at a premium of Rs. 95 i.e. at a price of Rs. 96 Paid up capital after the Issue 1,159,684,963 Equity Shares of Re. 1 Share premium account Existing share premium account Share premium account after the Issue a. Subscribed and paid-up Equity Share Capital includes: (i) (ii) 49,176,677 Equity shares of Rs. 10/- each were allotted as fully paid-up Bonus shares by Capitalization of General Reserve and Capital Redemption Reserve. 600,000 Equity Shares of Rs. 10/- each fully paid-up issued pursuant to a contract for consideration other than cash. 9291.17
(vi)

Aggregate Value at Issue Price

1,450.00 50.00

1,500.00

231.93(vi)

22,265.95

1,159.68(vii)

31,325.18 (viii)

(iii) 18,767,835 Equity Shares of Rs. 10/- each (including 3,099 partly paid up shares) were allotted to the shareholders of erstwhile Indo Gulf Corporation Ltd. (since amalgamated) pursuant to the Scheme of Arrangement without payment being received in cash. The 3,099 partly paid up shares were made fully paid on various dates upto July 22, 2005. (iv) 299,522 Equity Shares of Rs. 10/- each fully paid up were allotted to the shareholders of Indian Aluminium Company Limited pursuant to the Scheme of Arrangement without payment being received in cash. (v) On August 6, 2005 the shareholders of the Company approved the subdivision of Equity Shares of the Company from Rs. 10 per share to Re. 1 per share.

15

HINDALCO INDUSTRIES LIMITED


(vi) Comprising 927,747,970 fully paid up Equity Shares and 231,936,993 Equity Shares partly paid up to the extent of 25% of the Issue Price including share premium. A further 25% of the Issue Price including share premium, shall become payable, at the option of the Company, anytime between 9 and 12 months after the Allotment Date. Rs 48 per Equity Share, which constitutes the remaining 50% of the Issue Price including share premium, shall become payable at the option of the Company, anytime between 18 and 24 months after the Allotment Date. (vii) The nominal value of Equity Shares does not include forfeited shares account. (viii) Assuming all calls on all Equity Shares offered under the Rights Issue are duly paid up.

Notes to the Capital Structure


1a. Build up of Equity Share Capital The details of movement in share capital as at September 30, 2005 is given as follows: Date of allotment February 2, 1959 April 29, 1959 No. of Face Issue Cumulative Consideration Remarks Equity Shares Value Price paid-up Allotted (Rs.) (Rs.) capital (Rs.) 70 149,930 10 10 10 10 700 Cash 1,500,000 Cash Subscribers to the memorandum of association. Initial issue to the subscribers to the memorandum of association and Kaiser Aluminium & Chemical Corporation.

March 28, 1960

600,000

10

7,500,000 Consideration Issue to Kaiser Aluminium & other than Chemical Corporation and to Kaiser Aluminium Technical cash(1) Services Inc. 27,256,500 Cash 28,830,000 Cash 41,848,500 Cash 59,925,000 Cash 60,000,000 Cash 59,915,000 Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Initial Issue to the Public. Reduction of Issued share capital pursuant to forfeiture of shares amounting to net Rs. 85,000. Annulment of shares forfeited Annulment of shares forfeited Annulment of shares forfeited Rights Issue Rights Issue Rights Issue Rights Issue

February 1, 1960 February 6, 1960 March 14, 1960 March 28, 1960 April 20, 1960 1963

1,975,650 157,350 1,301,850 1,807,650 7,500 (8,500)

10 10 10 10 10 10

10 10 10 10 10 10

1964 1965 1966 December 18, 1967 December 21, 1967 December 26, 1967 December 30 1967

1,700 650 100 84,934 48,533 105,424 1,437,669

10 10 10 10 10 10 10

10 10 10 10 10 10 10

59,932,000 Cash 59,938,500 Cash 59,939,500 Cash 60,788,840 Cash 61,274,170 Cash 62,328,410 Cash 76,705,100 Cash

16

HINDALCO INDUSTRIES LIMITED


Date of allotment January 12, 1968 January 30, 1968 March 07, 1972 July 14, 1972 July 09, 1982 October 05, 1982 July 26, 1988 December 22, 1988 October 1, 1990 October, 9, 1990 July 26, 1993 July 26, 1993 July 12, 1994 October 26, 1996 February May 2002 No. of Equity Face Issue Cumulative Consideration Remarks Shares Value Price paid-up Allotted (Rs.) (Rs.) capital (Rs.) 271,474 89,909 2,002,431 5,542 3,339,916 6,706 4,455,114 7,048 6,381,234 14,537,930 4,473,000 2,236,500 4,166,666 24,821,990 758,530 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 110 79,419,840 Cash 80,318,930 Cash 100,343,240 Bonus 100,398,660 Bonus 133,797,820 Bonus 133,864,880 Bonus 178,416,020 Bonus 178,486,500 Bonus 242,298,840 Cash 387,678,140 Bonus Rights Issue Rights Issue Bonus Equity Shares allotted Coupons allotted in Bonus issue Bonus Equity Shares allotted Coupons allotted in Bonus issue Bonus Equity Shares allotted Coupons allotted in Bonus Conversion of 12.5% Partly Convertible Debentures Bonus Equity Shares allotted GDR Issue Warrants issued to above GDR holders. Private Placement to Foreign Investors (GDR) Bonus Equity Shares allotted Reduction of Issued share capital pursuant to buy-back of shares* amounting to Rs. 7,585,300. Shares allotted to shareholders of erstwhile Indo Gulf Corporation Limited under Scheme of Arrangement of Hindalco / IGFL / IGCL (Including 3,099 partly paid up shares) Shares allotted to shareholders of Indal under Scheme of Arrangement relating to the de-merger of units of Indal Subdivision of the face value of each Equity Share from Rs. 10 into Re. 1

USD 432,408,140(2) Cash 16.1 USD 454,773,140(2) Cash 16.1 USD 496,439,800(2) Cash 24 10 744,659,700 Bonus 737,074,400 Buy Back

March 21, 2003

18,767,835

10

924,752,750 Non-cash (pursuant to Scheme of Arrangement)

March 23, 2005

299,522

10

927,747,970 Non-cash (pursuant to Scheme of Arrangement) 927,747,970 Share split

September 6, 2005 Total


* fiscal 2003.

927,747,970

927,747,970

927,747,970

5,807 Equity Shares of Rs. 10 each were bought back during fiscal 2002 and 752,723 Equity Shares of Rs. 10 each were bought back during

17

HINDALCO INDUSTRIES LIMITED


(1) 480,000 Equity Shares of Rs. 10 each were issued to Kaiser Aluminium & Chemical Corporation of Oakland, USA, credited as fully paid-up against the sale and assignment to the Company of know-how property and 120,000 Equity Shares of Rs. 10 each were issued to Kaiser Aluminium Technical Services Inc. of Oakland, USA, against the rendering to the Company of technical and consultative services. 2,236,500 warrants issued to the GDR holders were exercised in fiscal 1994, 1995 and 1996 as set out in note 1b below on various dates.

(2)

1b. Details of Share Premium Account prior to the Issue Financial Year 1990-1991 1993-1994 Particulars No. of Equity Shares 6,381,234 4,473,000 130,650* 4,166,666 467,900* 1,637,950* Premium Amount per share (Rs. in millions) 100.00 495.02 495.02 717.82 717.82 525.49 638.12 2,214.22 64.67 (108.33) 2,990.90 335.87 (105.71) 860.73 4,503.44 Cumulative Amount (Rs. in millions) 638.12 2,852.34 2,917.01 2,808.68 5,799.58 6,135.45 6,029.74 6,890.47 11,393.91

Conversion of 12.5% Partly Convertible Debentures Private Placement to Foreign Investors (GDR) Warrants exercised by above GDR holders. Less: Issue expenses

1994-1995

Private Placement to Foreign Investors (GDR) Warrants exercised by above GDR holders. Less: Issue expenses

1995-1996 2002-2003

Exercise of warrants Transferred on amalgamation of Indo Gulf Corporation Limited under Scheme of Arrangement of Hindalco / IGFL / IGCL Less: Adjusted as per Scheme of Arrangement relating to the de-merger of units of Indal

2004-2005

(2,102.74)

9,291.17

Warrants issued by the Company on July 26, 1993 and exercised in fiscal 1994, 1995 and 1996.

1c. Details of Equity Shares Bought Back (i) Buy-back on the BSE, of Equity Shares of the Company of face value Rs. 10 each. Time Period February 2002 April 2002 May 2002 No. of Shares 1,652 608,339 13,961 Average Price (In Rs.) 724.98 734.76 747.14 Total Amount (Rs. in millions) 1.20 446.98 10.43

18

HINDALCO INDUSTRIES LIMITED


(ii) Buy-back on the NSE, of Equity Shares of the Company of face value Rs. 10 each. Time Period February 2002 April 2002 2. Cumulative Redeemable Preference Shares There are no issued cumulative redeemable preference shares as on date of this Letter of Offer and the Company has not made any issue or redemption of cumulative redeemable preference shares in the preceding ten years. 3. Current shareholding pattern of the Company as on September 30, 2005 Shareholders No. of Equity Shares held pre-Issue % of pre-Issue capital No. of Equity Shares post Issue % of post Issue capital assuming allotment of all Equity Shares offered No. of Shares 4,155 130,423 Average Price (In Rs.) 724.97 733.97 Total Amount (Rs. in millions) 3.01 95.73

Promoters Dr. K.M. Birla Birla Group Holdings Private Limited Promoter Group Relatives and HUF Turquoise Investments and Finance Pvt. Ltd. Trapti Trading and Investments Pvt. Ltd. Birla Institute of Technology and Science Pilani Investment and Industries Corporation Ltd. Grasim Industries Ltd. Aditya Birla Nuvo Ltd. (formerly Indian Rayon And Industries Limited) Trustee on behalf of Hindalco under Scheme of Arrangement of HIL/IGCL/IGFL Umang Commercial Company Ltd. Kamal Trading Company Limited Heritage Housing Finance Limited Mangalam Services Limited TGS Investment and Trade Pvt. Ltd. Global Holdings Pvt. Ltd. Total Promoters and promoter group shareholding 643,420 63,951,970 56,088,430 21,583,090 22,690,160 23,034,530 16,316,130 0.07 6.89 6.04 2.33 2.45 2.48 1.76 804,275 79,939,962 70,110,538 26,978,863 28,362,700 28,793,163 20,395,163 0.07 6.89 6.04 2.33 2.45 2.48 1.76 362,400 3,663,360 0.04 0.39 453,000 4,579,200 0.04 0.39

16,316,130 14,391,940 522,890 308,330 74,330 86,310 3,060 240,036,480


19

1.76 1.55 0.06 0.03 0.01 0.01 0.00 25.87

20,395,162 17,989,925 653,613 385,413 92,913 107,888 3,825 300,045,600

1.76 1.55 0.06 0.03 0.01 0.01 0.00 25.87

HINDALCO INDUSTRIES LIMITED


Shareholders No. of Equity Shares held pre-Issue % of pre-Issue capital No. of Equity Shares post Issue % of post Issue capital assuming allotment of all Equity Shares offered

Public Other Directors and Relatives Banks, Financial Institutions & Insurance Companies UTI and Mutual Funds FII Corporates OCBs and NRIs Indian Public GDRs Transhold Total public shareholding Total 4. 701,810 109,275,737 46,433,968 185,037,936 37,647,022 40,438,508 115,221,720 150,950,670 2,004,119 687,711,490 927,747,970 0.08 11.78 5.01 19.94 4.06 4.36 12.42 16.27 0.22 74.13 877,263 136,594,671 58,042,460 231,297,420 47,058,778 50,548,135 144,027,150 188,688,338 2,505,149 859,639,363 0.08 11.78 5.01 19.94 4.06 4.36 12.42 16.27 0.22 74.13 100.00

100.00 1,159,684,963

Details of the shareholding of the Promoters, Promoter Group, directors of the promoter in the Company as on September 30, 2005 Name of entities (a) Promoters Dr. K.M. Birla Birla Group Holdings Private Limited Sub-total (a) Promoter Group (b) Relatives and HUF Mrs. R. Birla Mrs. V Bajaj Mrs. N Birla Aditya Vikram Kumar Mangalam Birla HUF Dr. K. M. Birla as father and natural guardian of his minor daughter Ms. Ananyashree Birla Dr. K M Birla Karta of AVKM Birla HUF Sub-total (b) 0.03 0.01 0.00 0.03 241,140 66,020 49,750 269,850 0.04 0.39 0.43 362,400 3,663,360 4,025,760 Percentage of shareholding No. of Shares

0.00 0.00 0.07

15,000 1660 643,420

20

HINDALCO INDUSTRIES LIMITED


Name of entities (c) Companies forming part of the Promoter Group Turquoise Investments and Finance Pvt. Ltd. Trapti Trading and Investments Pvt. Ltd. Birla Institute of Technology and Science Pilani Investment and Industries Corporation Ltd. Grasim Industries Ltd. 6.89 6.04 2.33 2.45 2.48 1.76 63,951,970 56,088,430 21,583,090 22,690,160 23,034,530 16,316,130 Percentage of shareholding No. of Shares

Aditya Birla Nuvo Ltd. (formerly Indian Rayon And Industries Limited)
Trustee on behalf of Hindalco under Scheme of Arrangement of HIL/IGCL/IGFL Umang Commercial Company Ltd. Kamal Trading Company Limited Heritage Housing Finance Limited Mangalam Services Limited TGS Investment & Trade Pvt. Ltd. Global Holdings Private Limited Sub-total (c) Total Promoter and Promoter Group shareholding 4a. Details of acquisition by our Promoters (i) Dr. K.M. Birla Date of acquisition Details of the transaction Gift Gift Bonus Gift Bonus Bonus

1.76 1.55 0.06 0.03 0.01 0.01 0.00 25.37 25.87

16,316,130 14,391,940 522,890 308,330 74,330 86,310 3060 235,367,300 240,036,480

Quantity (Number of Equity Shares of Rs. 10 each) 7,800 3,150 3,650 500 9,060 12,080

Price (in Rs.) NA NA NA NA NA NA

April 11, 1988 July 9, 1988 July 26, 1988 March 1, 1990 October 9, 1990 October 27, 1996

21

HINDALCO INDUSTRIES LIMITED


(ii) BGHPL Date of acquisition Details of the transaction Share purchase Conversion of partly paid convertible debentures Bonus Bonus Quantity (Number of Equity Shares of Rs. 10 each) 108,000 Price per share (in Rs.) 83.35

March 31, 1990 October 1, 1990

44,640 91,584 122,112

110.0 NA NA

October 9, 1990 October 27, 1996 5.

Details of the transactions in Equity Shares by the Promoters and the promoter group during the last six months Name Date of transaction May 26, 2005 Details of the transaction Purchased Quantity (Number of Equity Shares of Rs.10 each) 8,631 Price (in Rs.) 1,163.28

TGS Investment & Trade Pvt. Ltd. 6. Top ten shareholders a.

Top ten shareholders as on November 18, 2005 (face value of Rs. 10 per share) Name of the shareholders JP Morgan Chase Bank (formerly Morgan Guaranty Trust Co. of New York) as Depository of GDR holders Life Insurance Corporation of India Turquoise Investments and Finance Pvt. Ltd. Trapti Trading & Investments Pvt. Ltd. Grasim Industries Ltd. Pilani Investment and Industries Corporation Ltd Birla Institute of Technology and Science M and G Investment Management Ltd. A/c The Prudential Assurance Company Limited HSBC Global Investment Funds A/c HSBC Global Investment Funds Mauritius Limited Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited) Trustees holding shares under the scheme of Arrangement between HIL/IGCL/IGFL on behalf of Hindalco Total Total Shares Percentage of pre issue capital 15.85 7.11 6.89 6.05 2.48 2.45 2.33 2.08 1.85 1.76

147,083,292 65,930,080 63,951,970 56,088,430 23,034,530 22,690,160 21,583,090 19,327,244 17,202,910 16,316,130

16,316,130 469,523,966

1.76 50.609

22

HINDALCO INDUSTRIES LIMITED


b. Top Ten shareholders as on November 18, 2003 (face value of Rs. 10 per share) Name of the shareholders JP Morgan Chase Bank (formerly Morgan Guaranty Trust Company of New York,) As Depository of GDRs Life Insurance Corporation of India Turquoise Investments & Finance Pvt. Ltd Trapti Trading & Investments Pvt. Ltd Unit Trust of India Amexco Nominees Pvt Ltd Grasim Industries Limited Pilani Investment & Industries Ltd Birla Institute of Technology & Science Trustees holding shares under the scheme of Arrangement between HIL/IGCL/IGFL on behalf of Hindalco Total c. Top ten shareholders as on November 11, 2005 (face value of Re. 1 per share) Name of the shareholders JP Morgan Chase Bank (formerly Morgan Guaranty Trust Co. of New York) as Depository of GDR holders Life Insurance Corporation of India Turquoise Investments and Finance Pvt. Ltd. Trapti Trading & Investments Pvt. Ltd. Grasim Industries Ltd. Pilani Investment and Industries Corporation Ltd Birla Institute of Technology and Science M and G Investment Management Ltd. A/c The Prudential Assurance Company Limited HSBC Global Investment Funds A/c HSBC Global Investment Funds Mauritius Limited Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited) Trustees holding shares under the scheme of Arrangement between HIL/IGCL/IGFL on behalf of Hindalco Total
23

Total Shares

Percentage of pre issue capital 15.31 7.06 6.92 6.07 3.81 3.51 2.49 2.45 2.33

14,160,831 6,530,238 6,395,197 5,608,843 3,530,238 3,247,151 2,303,453 2,269,016 2,158,309

1,631,613 47,834,889

1.76 51.73

Total Shares

Percentage of pre issue capital 15.87 7.11 6.89 6.04 2.48 2.45 2.33 1.99 1.88 1.76

147,227,977 65,932,480 63,951,970 56,088,430 23,034,530 22,690,160 21,583,090 18,459,075 17,452,910 16,316,130

16,316,130 469,052,882

1.76 50.56

HINDALCO INDUSTRIES LIMITED


7. 8. 9. The total number of members of the Company as on November 18, 2005 were 239,474. The present Issue being a rights Issue, as per extant SEBI guidelines, the requirement of promoters contribution and lock-in are not applicable. The Company has not availed of bridge loans to be repaid from the proceeds of the Issue for incurring expenditure on the Objects of the Issue.

10. The Promoters and Directors of the Company and Lead Managers of the Issue have not entered into any buy-back, standby or similar arrangements for any of the securities being issued through this Letter of Offer. 11. The terms of issue to Non-Resident Equity Shareholders/Applicants have been presented under the section Terms of the Issue on page 293 of this Letter of Offer. 12. At any given time, there shall be only one denomination of the Equity Shares of the Company and the Company shall comply with such disclosure and accounting norms specified by SEBI from time to time. The Equity Shareholders of the Company do not hold any warrant, option or convertible loan or debenture, which would entitle them to acquire further shares in the Company. 13. No further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner which will affect the equity capital of the Company, shall be made during the period commencing from the filing of the Letter of Offer with the SEBI and the date on which the Equity Shares issued under the Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue. Further, presently the Company does not have any intention to alter the equity capital structure by way of split/ consolidation of the denomination of the shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities within a period of six months from the date of opening of the Issue. 14. The Issue will remain open for 31 days. However, the Board will have the right to extend the Issue period as it may determine from time to time but not exceeding 60 days from the Issue Opening Date. 15. The Promoters have confirmed that along with relatives and the companies controlled by the Promoters (together hereinafter referred to as Promoter in this clause) intend to subscribe to the full extent of their entitlement in the Issue. The Promoter reserves the right to subscribe to their entitlement in the Issue either by themselves, their relatives or a combination of entities controlled by them, including by subscribing for renunciation if any made within the promoter group to another person forming part of the promoter group. The Promoter will also apply for additional Equity Shares in the Issue, such that at least 90% of the Issue is subscribed. As a result of this subscription and consequent allotment, the Promoter may acquire shares over and above their entitlement in the Issue, which may result in an increase of the shareholding being above the current shareholding with the entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by the Promoter, if any, will not result in change of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the section on Objects of the Issue on page 25 of this Draft Letter of Offer), there is no other intention/purpose for this Issue, including any intention to delist the Company, even if, as a result of allotments to the Promoter, in this Issue, the Promoter shareholding in the Company exceeds their current shareholding. The Promoter intends to subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the Promoter of any unsubscribed portion, over and above their entitlement shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.

24

HINDALCO INDUSTRIES LIMITED OBJECTS OF THE ISSUE


To exploit the emerging global and domestic opportunities, we have chalked out a capital expenditure program aimed at taking the Company to the league of top 10 producers of alumina and aluminium in the world. In this regard, we have announced various expansion plans, for which the proceeds to this Issue would be utilized as one of the means of finance. The objectives of the Rights Offering are to part finance following projects: 1. Expansion of following existing facilities:

expanding the alumina capacity at Muri from 110,000 metric tpa to 450,000 metric tpa expanding the alumina capacity at Belgaum from 350,000 metric tpa to 650,000 metric tpa expanding the aluminium capacity at Hirakud from 65,000 metric tpa to 146,000 metric tpa

2.

Building-up of new alumina and aluminium capacities through following greenfield projects:

Aditya Alumina with capacity of 1,000,000 metric tpa expandable to 1,500,000 metric tpa Aditya Aluminium with capacity of 260,000 metric tpa expandable to 325,000 metric tpa

3.

Building new alumina capacities through the following Joint Venture

Utkal Alumina with total project capacity of 1,000,000 metric tpa to 1,500,000 metric tpa

4.

Meeting issue expenses

The main objects and objects incidental or ancillary to the main objects set out in our Memorandum of Association enable us to undertake our existing activities and the activities for which funds are being raised by us through this Issue. The fund requirement and deployment is based on internal management estimates and has not been appraised by any bank or financial institution. The fund requirement below is based on our current business plan and would be monitored by the monitoring agency, Industrial Development Bank of India Limited (IDBI Bank). In view of the highly competitive and dynamic nature of the industry in which we operate, we may have to revise our business plan from time to time and consequently our fund requirement may also change. This may include rescheduling of our capital expenditure programmes and increase or decrease the capital expenditure for a particular purpose vis--vis current plans at the discretion of our Management. In case of any variations in the actual utilization of funds earmarked for the above activities, increased fund deployment for a particular activity will be met from internal accruals of the Company and debt. The details of the proceeds of the Issue are summarized below: Rs. in millions Gross proceeds of the Issue Issue related expenses Net proceeds of the Issue

22,266 400 21,866

Substantial part of the proceeds of the Issue would be used for creating tangible assets in form of plant and machinery. The projects for which the proceeds of the issue are proposed to be utilised may require use of inputs including cement for construction etc. While our group companies may be engaged in the business of supplying such inputs and may supply such inputs for the purpose of the proposed projects, all such contracts would be entered on an arms length basis.

25

HINDALCO INDUSTRIES LIMITED


The Project wise requirement of funds as estimated by the Management is as under: (Rs. in millions) Capital Expenditure During Fiscal Fiscal Fiscal Fiscal 2005 2006(1) 2007(1) 2008(1) Expansions Muri Alumina Hirakud Aluminium Belgaum Alumina Greenfield Projects Aditya Aluminum Aditya Alumina Joint Venture Utkal Alumina Total
(1) (2) (3) Estimated Including interest during construction Includes the Issuers share of equity in the project cost only
(3)

Beyond Fiscal 2008(1)

Total (2)

700 320 -

3,760 3,250 -

3,500 4,710 1,020 1,840 5,010 260 2,400

7,960 10,380 8,430

1,130 1,070

3,860 5,070

8,580 8,250

34,730 17,320

48,300 31,710

890 1,020 10,100

2,435 20,595

3,750 27,430

6,115 60,825

13,190 119,970

The details of the project cost are as under: (Rs. in millions) Land and Land related Expansions Muri Alumina Hirakud Aluminium Belgaum Alumina Greenfield Projects Aditya Aluminium Aditya Alumina Joint Venture Utkal Alumina Total 10,840 77,895 7,540 10,505 13,190 119,970 3,735 4,855 35,870 21,145 3,900 2,260 4,795 3,450 48,300 31,710 360 1,250 640 6,520 7,930 6,430 660 270 450 420 930 910 7,960 10,380 8,430 Plant and Machinery IDC Contingency and Misc Total

The above fund requirement is based on our current business plan and projects that are in advanced stages. We may have to revise our business plan from time to time and consequently its funds requirement may also change. This may include rescheduling of capital expenditure programs, starting non-planned new projects, more actively develop projects that may currently be at a nascent stage, terminating projects currently planned and increase or decrease in the capital expenditure for a particular business unit vis--vis current plans at the discretion of the Management. Please refer to section on Risk Factors. Please refer to the section on Business Our Expansion Plans for further details of currently planned and proposed expansion projects.

26

HINDALCO INDUSTRIES LIMITED


Description of Projects
Expansions at Existing Facilities Muri Alumina We plan to increase the capacity at our Muri operations from 110,000 metric tpa to 450,000 metric tpa upon completion of the expansion. We have budgeted a sum of Rs.7,960 million for this expansion, which will be spent primarily on the costs of the alumina refinery, the co-generation plant, and railway system for evacuation of finished goods and bringing in raw material. We plan to use technology obtained from Alcan, which is expected to improve recovery and reduce consumption of raw material and energy. Consequently, we expect cash cost of alumina production at this facility to decline sharply upon stabilization of expanded capacity. We have made significant progress on project implementation. As of October 31, 2005, we had already spent Rs.1,092 million. The project is likely to be implemented over the next two years and is expected to go on stream by fiscal 2007. We have already received most of the required approvals, including the No Objection Certificate from the Jharkhand State Pollution Control Board for water. We have already received environmental clearances from the Ministry of Environment and Forests. The project being an expansion of our existing facility at Muri, does not involve significant land acquisition. Progress is being made on acquisition of land through the Land Revenue department and for water drawal permission from State Irrigation department. The details of significant purchase orders placed for plant and machinery for this project are as follows: Name of Machine 145 TPH Capacity CFBC Boilers (3 units) Supply of components, commissioning spares and special tools & tackles for 1,300 TPD capacity Hydrate Filtration & Calcination Plant with Hydrate Storage Shed. Supply, Erection & Commissioning of Bauxite Handling & Crushing Plant Complete design and basic engineering, manufacture, assembly, testing, supply of imported components of 140 TPH falling film evaporation plant Supply, Erection & Commissioning of 192 TPH Bauxite Grinding Plant Design and supply of the proprietary Equipment including Commissioning Spares for 1300 TPD capacity Hydrate Filtration & Calcination Plant with Hydrate Storage Shed. Cost Name of (Rs. in millions) Supplier 698 ISGEC John Thompson, Noida 264 Furnace Fabrica (India) Limited Date of Order 17.02.05 Date of Supply Final Boiler Commissioning by 30th Nov-06 By 30th Sept-06

07.04.05

223 FFE Minerals India Pvt.Ltd. 180 GEA Messo AG, Switzerland

23.06.05

21.03.05

177 FFE Minerals India Limited 157 Outokumpu Technology GMBH

23.06.05

07.04.05

By 16th Aug-06

27

HINDALCO INDUSTRIES LIMITED


Name of Machine Design, engineering & supply of equipment for two 15MW steam Turbine Generator sets Complete design & detailed engineering, manufacture, assembly, testing, supply of indigenous components of 140 TPH falling film evaporation plant Complete design, engineering & supply of materials & equipment for two 15MW steam Turbine Generator sets Cost (Rs. in millions) 155 Name of Supplier T D Power Systems Pvt.Ltd., Tokyo, Japan Date of Order 31.03.05 Date of Supply By 30th April-06.

138

Furnace Fabrica (India) 21.03.05 Ltd., Navi Mumbai

By 17th Jun-06

111

T D P Power Systems Pvt.Ltd., Bangalore

31.03.05

Final TG Commissioning by 11th Aug-06

No second-hand machinery has been bought or is proposed to be bought for this project. Orders remain to be placed for plant and machinery worth Rs. 2,340 million forming 36% of total cost of machinery for this project. Other significant contracts entered into for this project are as follows: Nature of Contract Civil, Structural & Architectural work for Alumina Refinery. Civil, Structural & Architectural work for Power House, Boiler Area Foundations, RCC Stock, Silo, Transformer Yard Foundation, Auxiliary Plant Building and Pump House, Pipe rake, Road, Drainage, underground facilities and associated work for 2x 15 MW CGP . Fabrication, erection and commissioning of Tanks/Silos/ Hoppers Services for Engineering, Project Management, Procurement, Construction, Supervision & Commissioning. Technical Fees Hirakud Aluminium We are in the process of increasing the capacity of our Hirakud smelter from its current capacity of 65,000 metric tpa to 146,000 metric tpa upon completion of our expansion plans. Our expansion plans involve a conversion from the Soderberg technology to pre-bake technology and also a transfer of idle pots from Belgaum to Hirakud. We have budgeted Rs.10,380 million, towards this project, which will be spent primarily on setting up the smelter, the power plant and coal mine development. The project is expected to be implemented over the next three years and is expected to be completed by fiscal 2008. As of October 31, 2005, we have spent approximately Rs.1,936 million on this project. The basic engineering package for the smelter expansion at Hirakud is expected to be completed by the chosen technology supplier in the next six months and the detailed engineering will be completed subsequently. The project team has commenced work on other areas such as civil work and fume treatment plant and the construction of the pot room column foundations is under progress.
28

Cost (Rs. in millions) 272 246

Name of Supplier Gannon Dunkerley & Co. Ltd. Gannon Dunkerley & Co.Ltd.

232

Bridge and Roof Co. (India) Ltd.

185 184

Engineers India Limited Alcan

HINDALCO INDUSTRIES LIMITED


A No Objection Certificate has been received from the Orissa State Pollution Control Board and project presentation to the Ministry of Environment and Forest has been made already. The project being an expansion of our existing facility at Hirakud does not involve significant land acquisition. The details of significant purchase orders placed for plant and machinery for this project are as follows: Name of Machine 155 TPH CFBC Boilers Cost (Rs. in millions) 699 Name of Supplier ThyssenKrupp Industries India Private Ltd Date of Order 26.05.04 Date of Supply Boiler No.6 by 78 weeks from 26.05.04, Boiler No.7 by 86 weeks & Boiler No. 8 by 95 weeks. within 17.07.06 within 67 weeks from 18.08.04

2 * 90 KA, 50-850V DC 132 KV Rectifier Substation- 1 No. 100 MW STG - Supply

300 256

ABB Ltd Demag Delaval Industrial Turbomachinery Pvt Ltd DDIT Industrieturbinen GmbH Alstom Projects India Ltd China Aluminium International Engg. Corporation Ltd ABB Power Technologies S.p.A Brush Electrical Machines Limited Siemens Ltd Alstom Norway AS

05.09.05 18.08.04

100 MW Steam Turbine FTP -3 Alumina Handling System

238 169 123

18.08.04 11.08.05 21.05.05

already in transit in India within 07.12.06 Within 21.05.06

87.9 MVA , 73kv Rectifier Transformer - 2 Nos 100 MW Generator 132 KV Switchyard & BOP-Electrical FTP -3

104 100

31.08.05 28.07.04

within 15.06.06 already supplied

97 77

05.09.05 05.09.05

within 30.06.06 within 04.12.06

No second-hand machinery has been bought or is proposed to be bought for this project. Orders remain to be placed for plant and machinery worth Rs. 4,324 million forming 55% of total cost of machinery for this project. Other significant contracts entered into for this project are as follows: Nature of Contract Technology, Engineering , Technical Service & Training Fees Civil & Structural Work Civil & Structural Work Belgaum Alumina We plan to increase the capacity at our Belgaum operations from its current capacity of 350,000 metric tpa to 650,000 metric tpa. We have estimated a capital expenditure of Rs.8,430 million for this expansion project, to be spent on the costs of the alumina refinery, the co-generation plant, the railway system and port facility for finished goods movements. We plan to use appropriate technology for improving recovery and reducing energy consumption, in turn with the objective of reducing cash cost of our operations. We have received environmental
29

Cost Name of Supplier (Rs. in millions) 139 China Aluminium International Engg. Corporation Ltd 110 Gannon Dunkerley & Company Ltd 109 Gannon Dunkerley & Co. Ltd

HINDALCO INDUSTRIES LIMITED


clearances and have applied for and are awaiting the allotment of mining leases in the state of Maharashtra to start the implementation. The project being an expansion of our existing facility at Belgaum does not involve significant land acquisition. No significant orders have been placed for plant and machinery or other services relating to this project. No second-hand machinery has been bought or is proposed to be bought for this project. Greenfield Projects Aditya Alumina and Aditya Aluminium We have plans to set up an integrated greenfield aluminium project in Orissa, with a capacity to produce 1,000,000 metric tpa of alumina and 260,000 metric tpa of aluminium upon completion. This will be supported by a 650 megawatt dedicated power plant, backed by dedicated coal mines. We have budgeted a sum of Rs.80,010 million, to be spent over the next five years. We have signed a Memorandum of Understanding with the Government of Orissa for grant of land, water, bauxite and coal mines, grid power back-up and approvals, clearances as well as other infrastructures required for the project. Further, we are working towards acquiring a dedicated coal deposit within the proximity of the proposed smelter and power plant in Lapanga, Orissa. We are evaluating technology options for both the alumina refinery and the aluminium smelter that could deliver benchmarked efficiencies and world-class productivity. As of October 31, 2005, we have spent approximately Rs.79 million on this project. 2,012 acres of land have been identified for Aditya Alumina at eight villages in Rayagada and Koraput District, Orissa. 3,331 acres of land have been identified for Aditya Aluminium at ten villages in Sambalpur District, Orissa. The land identified has not been acquired and will be acquired through the Industrial Development Corporation of Orissa (IDCO) and is presently held by multiple holders. No significant orders have been placed for plant and machinery or other services relating to this project. No second-hand machinery has been bought or is proposed to be bought for this project. Joint Ventures Utkal Alumina Our 55% Joint Venture with Alcan We are setting up a global-sized greenfield alumina project in Orissa as a joint venture with Alcan. We own 55% of the equity in the joint venture with the rest being held by Alcan. The project, which is currently contemplated to be an export-oriented unit, will have the capacity to produce 1,000,000 to 1,500,000 metric tpa of alumina upon completion and we are entitled to 55% of the output, in line with the joint venture agreement. This project is expected to cost approximately Rs. 47,960 million and our share of the equity is estimated to be approximately Rs. 13,190 million, based on certain debt to equity assumptions, to be spent over the next four years. The capital will be spent on the alumina refinery, the co-generation plant, bauxite mines, service facilities as well as port and rail facilities. The joint venture has already secured leases for 197.5 million metric tons of bauxite reserves at Baphlimali mines, which is approximately 20 kilometers away from the proposed refinery location at Doragurha, Orissa. We believe the Baphlimali bauxite reserve is amongst the finest quality reserves available in India and will help in achieving superior efficiencies and significantly lower costs of alumina production. We have completed the land acquisition and are in the process of taking possession of the land so acquired. We have also started site development work. For the project affected persons, the government, in consultation with the affected parties, has finalized a relief and rehabilitation package. This is being implemented by Utkal Alumina, under supervision of government agencies. As of October 31, 2005, we had contributed approximately Rs.652 million on this project. Most of the government and regulatory clearances have been obtained.

30

HINDALCO INDUSTRIES LIMITED


Scheduled Completion Dates for the Projects
Date of Completion of Land Acquisition Muri Alumina Hirakud Aluminium Belgaum Alumina Utkal Alumina Aditya Alumina Aditya Aluminium Note 1 Note 1 Note 1 October 05 September 06 September 06 Installation of Plant & Machinery July 06 October 06October 07 December 08 October 08 March 09- June 09 March 09September 09 Partial Startup August 06 December 06 February09 December 08 August 09 September 09 Commercial Production October 06 December 07 April09 March 09 November 09 March 10

Note 1: Muri Alumina, Hirakud Aluminium, Belgaum Alumina being expansions at the existing facilities do not involve significant land acquisition

Details of Purchase of Property


There has been no purchase of property from the Promoters, directors, proposed directors, or person having any direct or indirect interest in the company (including group companies) in the last 2 years.

Issue Expenses
The expenses for this Issue include issue management fees, underwriting commission, printing and distribution expenses, legal fees, advertisement expenses, depository charges, trustee fee and listing fees to the Stock Exchanges, among others. The total expenses for this Issue are estimated not to exceed 1.80% of the Offering.

Means of Funding
We have made firm arrangements of finance in excess of 75% of the total fund requirements, excluding proceeds of the Issue, through syndicated debt, as indicated in the following table: Means of Funding Tied-up Debt comprising: Debt with executed loan agreements Rs.49,500 Debt for which sanction received Rs.21,000 Amount (Rs. in millions) 70,500

Net Cash and Cash equivalent(1) (A) (B) (C) Cash and bank balances Investments in Mutual Funds Less Investments made from loans drawn down not yet invested in project

7,504 24,779 (2,620) 29,663 21,866 122,029


3,763 11,207 119,970

Net Cash and Cash equivalent (A)+(B)-(C) Net Issue Proceeds Total Funds Available Amount spent upto October 31, 2005 Further Amount to be Spent Total Fund Requirements
(1) Net Cash Balance as on September 30, 2005

31

HINDALCO INDUSTRIES LIMITED


Debt: We have received sanction for Rs.70,500 million from 31 banks and financial institutions in response to our loan syndication exercise. We have signed the loan agreement with 20 banks and financial institutions for total amount of Rs.49,500 million. The loan is a ten-year facility with an average maturity of eight years and has a draw-down period of two years. The loan is priced at the 5-year Government of India Securities yield plus 65 basis points. The company has an option to prepay the loan on the reset date which falls at the end of the fifth year. The details of the loan facility are as follows: Name of Bank / Institution Allahabad Bank Andhra Bank Bank of Baroda Canara Bank Central Bank of India Corporation Bank IDBI Bank Limited IDBI Indian Bank Indian Overseas Bank Indusind Bank Limited Oriental Bank of Commerce Punjab National Bank State Bank of Patiala Syndicate Bank The Bank of Rajasthan Limited The Jammu and Kashmir Bank UCO Bank Union Bank of India United Bank of India Total Amount Sanctioned (Rs. in millions) 2,000 1,000 5,000 5,000 2,000 2,500 1,000 5,000 2,500 1,500 1,000 3,000 5,000 1,000 3,500 500 2,000 1,500 3,000 1,500 49,500 Amount Drawn-down (Rs. in millions) 200 100 500 500 200 250 100 500 250 150 100 300 500 100 350 50 200 150 300 150 4,950

We have also received sanction letters from 13 banks and financial institutions for additional Rs. 21,000 million, for which we are currently in the process of finalising the loan documentation. In case of any shortfall/cost overrun for the above projects or for any other development opportunities, we intend meeting the fund requirements through our current cash surplus as well as our future internal accruals.

32

HINDALCO INDUSTRIES LIMITED


Funds Deployed
The total expenditure, in Rs. millions, incurred on the projects as on October 31, 2005 as per the Certificate given by Singhi & Co, Chartered Accountants is as follows: Project Muri Alumina Hirakud Aluminium Belgaum Alumina Utkal Alumina
(1)

Amount spent upto October 31, 2005 1,092 1,936 5 652 79 3,763

Aditya Alumina and Aluminium Total


(1)

Hindalcos share in equity only

We have sourced a major portion of the above amount from our internal accruals and specific tie-ups of funds were firmed up in March, 2005.

Interim Use of Proceeds


Pending any use as described above, we intend to invest the proceeds of this Issue in short-term liquid instruments / securities. These investments would be authorized by our Board or a duly authorized committee thereof.

Working Capital
As regards working capital in respect of the projects we have existing banking relationships with two consortiums of banks for our aluminium business with sanctioned fund based limit of Rs.5,500 million and with 14 banks for our copper business with drawals not exceeding Rs. 25,800 million as approved by the Board, which is adequate to meet our existing requirements. In the normal course of operations, we submit and would continue to submit a detailed assessment of working capital on an annual basis to these banks. We believe this would be sufficient to meet the annual requirement, including the enhanced needs of working capital arising out of the implementation of the Projects. We do not foresee any difficulty whatsoever in doing so.

33

HINDALCO INDUSTRIES LIMITED BASIS FOR ISSUE PRICE


Investors should also refer to the section Risk Factors and Auditors Report to get a more informed view before making the investment decision. The price per share has been provided for Re. 1/- share face value. Qualitative Factors The Aluminium Business

We are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. We are amongst the lowest cost producers of aluminium in the world with our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, being amongst the top 15% of the lowest cost producers globally. We are a fully integrated aluminium producer with cost effective access to quality bauxite, low cost power from our power plants, significant control over supplies of other key raw materials such as caustic soda and aluminium fluoride from subsidiaries and a comprehensive range of value-added products with proximity to end-use markets. Our existing refineries are located close to our bauxite reserves which are of good quality and provide significant cost advantages in the production of alumina and aluminium. We have located our facilities close to coal deposits giving us access to low cost power, thereby giving us an advantage in our power costs the largest cost component in our production of aluminium. We are a leader in the domestic market with a 33% market share in the primary metals segment, a 63% market share in the rolled products segment and a 21% market share in the extrusions segment.

The Copper Business

We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. We believe that we are a low cost copper smelter and are partially integrated with upstream copper mines. We add value to the by-products generated through copper smelting and produce and market value-added products such as phosphatic fertilizers and precious metals like gold and silver. We benefit from significant freight advantage in catering to growth markets in Asia and also gain from a jetty in Dahej, owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited that can handle vessels up to 70,000 DWT and has a cargo handling capacity of approximately 3 million metric tons per annum depending upon jetty occupancy.

Other Factors

We believe that our extensive knowledge of the aluminium and copper industries and project management expertise positions us well to leverage emerging opportunities in the aluminium and copper industries. Our management team includes some of the most experienced managers in the Indian aluminium and copper industries and is well placed to provide strategic leadership and direction to explore new emerging opportunities in these sectors as well as constantly improve our current operations. We have had a consistent profitability track record with our net profit after tax increasing at a compounded annual growth rate of 18% between fiscal 2001 and fiscal 2005.

34

HINDALCO INDUSTRIES LIMITED


Quantitative Factors Information presented in this section is derived from our unconsolidated audited restated financial statements prepared in accordance with Indian GAAP . 1. Weighted average earnings per share (EPS) * Financial Period Year ended March 31, 2003 Year ended March 31, 2004 Year ended March 31, 2005 Weighted Average
* As per restated accounts adjusted for share split

EPS (Rs.) 8.06 9.07 14.43 11.58

Weight 1 2 3

EPS for the six months ended September 30, 2005: Rs. 6.48 2. Price Earnings Ratio (P/E Ratio) a. b. P/E based on the year ended March 31, 2005: 6.7 times Peer group(1) P/E(2) (i) (ii) Highest: 35.7 times Lowest: 8.5 times

(iii) Peer group average: 18.7 times


1) 2) Peer group includes Madras Aluminium Company Limited, National Aluminium Company Limited and Sterlite Industries. P/E ratios for peer group from Capital Market Volume XX/ 17 dated October 24, 2005 to November 6, 2005.

3.

Weighted average return on net worth # Financial Period Year ended March 31, 2003 Year ended March 31, 2004 Year ended March 31, 2005 Weighted Average
# As per restated accounts adjusted for share split

Return on Net Worth (%) 12.0% 12.2% 17.5% 14.8%

Weight 1 2 3

4.

Minimum Return on Increased Net Worth Required to Maintain Pre-Issue EPS. The minimum return on increased net worth required to maintain pre-Issue EPS of Rs. 14.43 as on March 31, 2005 is 15.96%.
Note: Assuming that the Equity Shares offered on a rights basis are fully subscribed and all calls are paid-up

5.

Net Asset Value (NAV) @ a. b. c. NAV per Equity Share at March 31, 2005 is Rs. 82.54; NAV per Equity Share at September 30, 2005 is Rs. 89.03. NAV per Equity Share after the Issue is Rs.90.42 $. Issue Price per Equity Share is Rs.96.

35

HINDALCO INDUSTRIES LIMITED


d. NAV per Equity Share for the year ended March 31, 2003, 2004 and 2005 is as follows: Financial Period Year ended March 31, 2003 Year ended March 31, 2004 Year ended March 31, 2005 Weighted Average
@ As per restated accounts adjusted for share split $ Assuming that the Equity Shares offered on a rights basis are fully subscribed and all calls are paid-up

Net Asset Value per Equity Share (Rs.) 66.9 74.2 82.5 77.1

Weight 1 2 3

6.

Comparison of Accounting Ratios for the year ended March 31, 2005 with other listed companies EPS (Rs.) P/E (times) Return on Net Worth (%) 17.5% 30.3% 29.2% 8.8% 21.4% 14.2% Net Asset Value per Equity Share (Rs.) 82.5 68.1 72.9 320.4 136.0 39.4

Hindalco Industries Limited Madras Aluminium Company Limited National Aluminium Company Limited Sterlite Industries Group Average Industry Average Aluminium & Aluminium Products *

14.4 17.9 18.6 19.2 17.5 6.7

6.7 12.0 8.5 35.7 15.7 5.3

Source: Our EPS, P/E, Return on Net Worth and Net Asset Value per Equity Share is as per our audited restated financial statements adjusted for the stock split, where applicable; Source for other information is Capital Market Volume XX/ 17 dated October 24, 2005 to November 6, 2005. * Excluding Hindalco Industries Limited; Segment as per Capital Market Volume XX/ 17 dated October 24, 2005 to November 6, 2005.

The Lead Managers believe that the Issue Price of Rs. 96 per Equity Share is justified in view of the above qualitative and quantitative parameters. See the section titled Risk Factors on page vii of this Letter of Offer and the financials of the Company including important profitability and return ratios, as set out in the Auditors Report on page 126 of this Letter of Offer to have a more informed view.

36

HINDALCO INDUSTRIES LIMITED STATEMENT OF TAX BENEFITS


The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of these 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 the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives it faces in the future, it may not choose to fulfill. The following tax benefits shall be available to the Company and the prospective shareholders under Direct Tax.

1. To the Company - Under the Income-tax Act, 1961 (the Act)


1.1 There is no additional benefit arising to the Company under the Income Tax Act, 1961, by proposed Right Offer of Equity Shares.

2. To the Members of the Company Under the Income Tax Act


2.1 Resident Members a) b) Under Section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section 115-O of the Act is exempt from income-tax in the hands of the shareholders. Under Section 10(38) of the Act, long term capital gain arising to the shareholder from transfer of a long term capital asset being an equity share in the company or unit of an equity oriented mutual fund (i.e. capital asset held for the period of twelve months or more) entered into in a recognized stock exchange in India and being such a transaction, which is chargeable to Securities Transaction Tax, shall be exempt from tax. In terms of Section 88 E of the Act, the securities transaction tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of the business would be eligible for rebate from the amount of income-tax on the income chargeable under the head Profits and Gains under Business or Profession arising from taxable securities transactions. As per the provisions of Section 10(23D) of the Act, all mutual funds set up by public sector banks, public financial institutions or mutual funds registered under the Securities and Exchange Board of India (SEBI) or authorized by the Reserve Bank of India are eligible for exemption from income-tax, subject to the conditions specified therein, on their entire income including income from investment in the shares of the company. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets [other than those exempt u/s 10(38)] shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds issued by (i) (ii) National Bank for Agriculture and Rural Development established under Section 3 of the National Bank for Agriculture and Rural Development Act, 1981; National Highways Authority of India constituted under Section 3 of National Highways Authority of India Act, 1988;

c)

d)

e)

(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and (v) Small Industries Development Bank of India established under Section 3(1) of the Small Industries Development Bank of India Act, 1989. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition. f) Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed
37

HINDALCO INDUSTRIES LIMITED


securities or units [other than those exempt u/s 10(38)], shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain is invested in public issue of equity shares issued by an Indian Public Company within a period of six months from the date of such transfer. If only a part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new equity shares are transferred or converted into money within one year from the date of their acquisition. g) Under Section 54F of the Act, where in the case of an individual or HUF capital gain arise from transfer of long term assets [other than a residential house and those exempt u/s 10(38)] then such capital gain, subject to the conditions and to the extent specified therein, will be exempt if the net sales consideration from such transfer is utilized for purchase of residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under Section 111A of the Act, capital gains arising from transfer of short term capital assets, being an equity share in a company, which is subject to securities transaction tax will be taxable under the Act @ 10% (plus applicable surcharge and educational cess). Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains [not covered under Section 10(38) of the Act] arising on transfer of shares in the Company, if shares are held for a period exceeding 12 months, shall be taxed at a rate of 20% (plus applicable surcharge and educational cess on income-tax) after indexation as provided in the second proviso to Section 48 or at 10% (plus applicable surcharge and educational cess on income-tax) (without indexation), at the option of the Shareholders.

h)

i)

2.2 Return of Income not to be filed in certain cases Under provisions of Section 115-G of the Act, it shall not be necessary for a non-resident Indian to furnish his return of income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from. 2.3 Other Provisions of the Act a) Under Section 115-I of the Act, a non-resident Indian may elect not to be governed by the provisions of Chapter XII-A of the Act for any assessment year by furnishing his return of income under Section 139 of the Act declaring therein that the provisions of the Chapter shall not apply to him for that assessment year and if he does so the provisions of this Chapter shall not apply to him. In such a case the tax on investment income and long term capital gains would computed as per normal provisions of the Act. Under the first proviso to Section 48 of the Act, in case of a non-resident, in computing the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange (as per exchange control regulations), protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets [other than those exempt u/s 10(38)] shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds issued by (i) (ii) National Bank for Agriculture and Rural Development established under Section 3 of the National Bank for Agriculture and Rural Development Act, 1981; National Highways Authority of India constituted under Section 3 of National Highways Authority of India Act, 1988;

b)

c)

(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and
38

HINDALCO INDUSTRIES LIMITED


(v) Small Industries Development Bank of India established under Section 3(1) of the Small Industries Development Bank of India Act, 1989. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition. d) Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed securities or units [other than those exempt u/s 10(38)], shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain is invested in public issue of equity shared by an Indian Public Company within a period of six months from the date of such transfer. If only a part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new equity shares are transferred or converted into money within one year from the date of their acquisition. Under Section 54F of the Act, where in the case of an individual or HUF capital gain arise from transfer of long term assets [other than a residential house and those exempt u/s 10(38)] then such capital gain, subject to the conditions and to the extent specified therein, will be exempt if the net sales consideration from such transfer is utilized for purchase of residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under Section 111A of the Act, capital gains arising from transfer of short term capital assets, being an equity share in a company, which is subject to securities transaction tax will be taxable under the Act @ 10% (plus applicable surcharge and educational cess). Under Section 112 of the Act and other relevant provisions of the Act, long term capital gains [not covered under Section 10(38) of the Act] arising on transfer of shares in the Company, if shares are held for a period exceeding 12 months, shall be taxed at a rate of 20% (plus applicable surcharge and educational cess on income-tax) after indexation as provided in the second proviso to Section 48 or at 10% (plus applicable surcharge and educational cess on income-tax) (without indexation), at the option of the Shareholders.

e)

f)

g)

2.4 Foreign Institutional Investors (FIIs) a) By virtue of Section 10(34) of the Act, income earned by way of dividend income from another domestic company referred to in Section 115-O of the Act, are exempt from tax in the hands of the institutional investor. Under Section 115AD capital gain arising on transfer of short term capital assets, being shares and debentures in a company, are taxed as follows: (i) Short term capital gain on transfer of shares/debentures entered in a recognized stock exchange which is subject to securities transaction tax shall be taxed @ 10% (plus applicable surcharge and educational cess); and Short term capital gains on transfer of shares/debentures other than those mentioned above would be taxable @ 30% (plus applicable surcharge and educational cess).

b)

(ii) c)

Under Section 115AD capital gain arising on transfer of long term capital assets, being shares and debentures in a company, are taxed @ 10% (plus applicable surcharge and educational cess). Such capital gains would be computed without giving effect to the first and second proviso to Section 48. In other words, the benefit of indexation, direct or indirect, as mentioned under the two provisos would not be allowed while computing the capital gains. Under Section 54EC of the Act, capital gain arising from transfer of long term capital assets [other than those exempt u/s 10(38)] shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in the bonds issued by (i) National Bank for Agriculture and Rural Development established under Section 3 of the National
39

d)

HINDALCO INDUSTRIES LIMITED


Bank for Agriculture and Rural Development Act, 1981; (ii) National Highways Authority of India constituted under Section 3 of National Highways Authority of India Act, 1988;

(iii) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956; (iv) National Housing Bank established under Section 3(1) of the National Housing Bank Act, 1987; and (v) Small Industries Development Bank of India established under Section 3(1) of the Small Industries Development Bank of India Act, 1989. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new bonds are transferred or converted into money within three years from the date of their acquisition. e) Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed securities or units [other than those exempt u/s 10(38)], shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain is invested in public issue of equity shares issued by an Indian Public Company within a period of six months from the date of such transfer. If only a part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new equity shares are transferred or converted into money within one year from the date of their acquisition.

2.5 Venture Capital Companies/ Funds As per the provisions of Section 10(23FB) of the Act, income of

Venture Capital Company which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 and notified as such in the Official Gazette; and Venture Capital Fund, operating under a registered trust deed or a venture capital scheme made by Unit Trust of India, which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 and notified as such in the Official Gazette set up for raising funds for investment in a Venture Capital Undertaking is exempt from income tax.

2.6 Infrastructure Capital Companies/ Funds or Co-operative Bank As per the provisions of Section 10(23G) of the Act, income by way of dividends, interest or long term capital gains of

Infrastructure Capital Company; Infrastructure Capital Fund; and Co-operative Bank

from investment made in share or long term finance in undertakings specified therein shall be exempt from tax. However, such income earned by an Infrastructure Capital Company shall not be exempt for the purpose of computing tax on book profits u/s 115JB of the Act.

3. Wealth Tax Act, 1957


Shares in a company held by a shareholder will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act, 1957; hence, wealth tax is not leviable on shares held in a company.

4. The Gift Tax Act, 1957


Gift of shares of the company made on or after October 1, 1998 are not liable to tax. Notes: a) 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.
40

HINDALCO INDUSTRIES LIMITED


b) In respect of non-residents, taxability of capital gains mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any between India and the country in which the non-resident has fiscal domicile. In view of the individual nature of tax consequence, each investor is advised to consult his/ her own tax adviser with respect to specific tax consequences of his/ her participation in the scheme.

c)

41

HINDALCO INDUSTRIES LIMITED INDUSTRY OVERVIEW


The information presented in this section relating to the global aluminium and copper industries has been extracted from CRU International Limited reports and publicly available information. The information presented in this section relating to the Indian aluminium industry has been procured from Aluminium Association of India, unless otherwise specified. The information presented in this section relating to the Indian copper industry has been extracted from publicly available information, unless otherwise specified. These data have not been prepared or independently verified by us or the Lead Managers or any of their respective affiliates or advisors. For this section, all references to a particular year are to the 12-month period ended December 31 of that year, unless mentioned otherwise. All references to a particular fiscal year are to the 12-month period ended March 31 of that year. Bracketed numbers indicate losses/ negative figures.

Global Aluminium Market


Background Aluminium is a light weight, durable and corrosion resistant metal that can be extruded, rolled, formed and painted for use in a wide range of applications. According to the International Aluminium Institute, approximately 66% of global consumption is used in the construction, transportation and packaging sectors while the remaining 34% is used in consumer, capital goods and electricity transmission. Aluminium is produced from alumina, which is refined from bauxite, a mineral found in various parts of the world. There are several types of bauxite with alumina content ranging from 35% to 60%. Bauxite is refined to produce alumina predominantly through what is known as the Bayer process, although this process varies depending on the type and quality of bauxite. Alumina is then converted into aluminium metal using an electrolytic process. The global aluminium industry has experienced significant consolidation in recent years, including the recent merger of Pechiney with Alcan. In 2004, the top five producers accounted for approximately 42% of world primary aluminium production, with the largest producer, Alcan, accounting for 12% of global production. The other large producers are Alcoa, Russian Aluminium, Norsk Hydro and BHP Billiton, who together accounted for 30% of global primary aluminium production in 2004. Increasing Asian Aluminium Consumption Global demand for primary aluminium has grown consistently at a compounded annual growth rate of 5.1% between 1999 and 2004. Global primary aluminium consumption was approximately 30.3 million metric tons in 2004 as compared to 27.5 million metric tons in 2003. Driven by strong demand in end-use markets, global demand is expected to rise to 31.7 million metric tons by 2005, before increasing further to 37.8 million metric tons in 2009. The following table sets forth the actual and estimated regional consumption of aluminium from 2003 to 2009. Region 2003 Volume % Global Primary Aluminium Consumption Year ended December 31, 2004 Volume % 2005(1) Volume % 2009(1) Volume %

(In thousands of metric tons, except percentages) North America Western Europe China Rest of Asia (2) Latin America Middle East 6,465 6,431 5,130 5,420 941 949 23.5% 23.3% 18.6% 19.7% 3.4% 3.4% 7,205 6,677 6,006 5,918 1,077 1,027 23.8% 22.0% 19.8% 19.5% 3.6% 3.4% 7,374 6,753 6,763 6,095 1,155 1,087 23.2% 21.3% 21.3% 19.2% 3.6% 3.4% 7,907 7,313 9,689 7,123 1,383 1,276 20.9% 19.4% 25.7% 18.9% 3.7% 3.4%

42

HINDALCO INDUSTRIES LIMITED


Region 2003 Volume % Global Primary Aluminium Consumption Year ended December 31, 2004 Volume % 2005(1) Volume % 2009(1) Volume %

(In thousands of metric tons, except percentages) Eastern Europe CIS


(3)

738 735 360 384 27,553

2.7% 2.7% 1.3% 1.4% 100.0%

841 766 392 388 30,297

2.8% 2.5% 1.3% 1.3% 100.0%

880 814 411 398 31,730

2.8% 2.6% 1.3% 1.3% 100.0%

1,086 1,022 498 454

2.9% 2.7% 1.3% 1.2%

Africa Australasia Total


(1) (2) (3) Estimated. Includes Japan.

37,751 100.0%

Commonwealth of Independent States.

In the 2004, North America, Western Europe and China together accounted for approximately 66% of global primary aluminium consumption. North American demand has been led by the United States, which in 2004 accounted for 21% of global demand. Asia has shown the largest annual increases in consumption of primary aluminium over the last five years, driven largely by increased demand from China and Japan, which have emerged as the second and third largest aluminium consuming nations, accounting for 20% and 8%, respectively, of global primary aluminium demand in 2004. Increasing Deficit in Asian market According to the International Aluminium Institute, primary aluminium production has grown at a compounded annual growth rate of 4.7% per annum between 1999 to 2004. Historically, industrialized nations accounted for a large share of global production. However, changing dynamics in energy availability and the rising cost of alumina have resulted in a shift in aluminium production to countries with access to greater bauxite supplies and affordable sources of power. One region which is emerging as an attractive destination for aluminium smelting is Asia. From 1997 to 2004, the proportion of global primary aluminium production carried out in Asia (excluding the Middle East) increased from 13% to 26%, while the proportion of global primary aluminium production carried out in North America and Western Europe in aggregate declined from 43% to 33%. Notwithstanding the rise in aluminium production and capacities in the region, aluminium supplies in Asia have lagged behind demand, resulting in a supply deficit of 4.2 million metric tons during 2004. During this period, China witnessed a marginal surplus and the rest of Asia witnessed a deficit of 4.8 million metric tons. Given expectations of continued strong growth in China and other Asian markets, the demand-supply gap is likely to widen and is estimated to reach a high of 5.5 million metric tons by 2009. The following table sets forth the regional aluminium demand-supply balance from 2003 to 2009. Region 2003 Global Aluminium Surplus/Deficit Year ended December 31, 2004 2005(1) 2009(1)

Volume (In thousands of metric tons) North America Latin America Western Europe Eastern Europe (951) 1,316 (1,986) (327)
43

(2,095) 1,280 (2,037) (361)

(1,985) 1,229 (2,012) (388)

(2,038) 1,617 (2,712) (438)

HINDALCO INDUSTRIES LIMITED


Region 2003 Global Aluminium Surplus/Deficit Year ended December 31, 2004 2005(1) 2009(1)

Volume (In thousands of metric tons) CIS


(2)

3,197 378 316


(3)

3,334 460 580 (4,806) 1,858 1,318

3,371 685 665 (4,900) 1,860 1,331

4,295 1,647 (2) (5,523) 1,847 1,698

Middle East China Rest of Asia Australasia Africa


(1) (2) (3) Estimated Commonwealth of Independent States Includes Japan

(4,413) 1,814 1,068

According to Metal Bulletin Research, the global deficit of alumina in 2004 was 338,000 metric tons, which was approximately 0.6% of global alumina consumption for the same period. However, the overall deficit was larger in Asia primarily due to the demand and supply dynamics in China. While Asia accounted for 26% of global primary aluminium production in 2004, it accounted for only 16.5% of global metallurgical grade alumina production during the same period, according to Metal Bulletin Research. This indicates a sharp rise in aluminium smelting capacity in Asia without a commensurate increase in alumina refining capacities. More significantly, alumina imports accounted for approximately 45% of total metallurgical grade alumina consumption in China in 2004, with approximately 56% of the total imports being sourced from Australia. Going forward, China will remain the key driver of demand growth in the region with a projected demand of approximately 18.0 million metric tons for metallurgical grade alumina in 2007, growing at a compounded annual growth rate of 10.9%. Furthermore, China will continue to be dependent on imports to meet its domestic alumina consumption.

Pricing
Aluminium is traded on the LME. While prices are determined by LME price movements, producers also charge a regional premium that generally reflects the cost of obtaining the metal from an alternative source. The following table sets forth the movement in the average aluminium price from 1995 to 2004. Aluminium Prices Year ended December 31, 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

(in US$ per metric ton) LME Cash Price % Change 1,805 22.0 1,504 (16.7) 1,598 6.3 1,357 (15.1) 1,362 0.4 1,549 13.7 1,444 (6.8) 1,349 (6.6) 1,431 1,716 6.1 19.9

Alumina, however, is priced on the basis of negotiations, but usually determined with reference to the LME price for aluminium. Negotiated agreements generally take the form of long-term contracts, but fixed prices can be negotiated for shorter periods and a relatively small spot market also exists.

Indian Aluminium Market


Background The aluminium industry in India has grown progressively, tracking the countrys economy over the years. According to CRU estimates, domestic primary aluminium production will increase to a high of 943,000 metric tons in calendar year 2005, compared to 860,000 metric tons in calendar year 2004. CRU estimates production to reach 1,113,000 metric tons by calendar year 2006.
44

HINDALCO INDUSTRIES LIMITED


According to the Indian Minerals Yearbook 2003, India is home to the sixth largest bauxite deposit in the world with a reserve base of 1,400 million metric tons. Bauxite deposits are spread across the states of Orissa, Andhra Pradesh, Jharkhand, Chhattisgarh, Gujarat and Maharashtra. Indian bauxite is of superior quality and is largely located on a single plateau, thus making bulk mining possible and resulting in significant cost advantages. In the past, Indian producers suffered from high power costs, but with privatization of coal mines by the Government of India, new avenues have opened up for securing cost effective power for Indian producers. Backed by abundant, good quality bauxite and coal, as well as lower cost labour, Indian companies have emerged as low cost producers of aluminium. The domestic aluminium industry consists of three primary producers: Hindalco, National Aluminium Company Limited, or NALCO, and Vedanta Resources Plc, which controls Bharat Aluminium Company Limited, or BALCO, and Madras Aluminium Company Limited, or MALCO, all of whom are integrated producers with a presence ranging from bauxite mining to aluminium metal production. In fiscal 2005, Hindalco was the market leader with a 40% market share in India, while NALCO and Vedanta Resources Plc accounted for approximately 23% and 15%, respectively. Domestic Demand and Consumption Pattern Domestic demand for aluminium has grown at a compounded annual growth rate of 9.8% between fiscal 2002 and fiscal 2005 to reach a high of 897,000 metric tons in fiscal 2005, which also includes scrap and metal imports of 201,000 metric tons. More importantly, the last two years have witnessed even stronger growth with annual growth rates of 20.6% and 9.5% for in fiscal 2004 and 2005 respectively. The power sector is the largest user segment of aluminium, accounting for 45% of domestic consumption in fiscal 2005. Historically, the power sector has accounted for a significant portion of aggregate domestic demand as high voltage current is usually transmitted through aluminium cables in India. However, as a result of the changing growth dynamics and increasing acceptance of new applications, the proportion of aluminium consumed by other user sectors such as transportation, construction and packaging has increased in recent years. The transportation sector accounted for 21% of domestic demand in fiscal 2005, benefiting from higher volumes and increased per vehicle usage of aluminium. The construction and packaging sectors accounted for 8% and 5%, respectively, of domestic demand in fiscal 2005. Pricing and Tariff Domestic aluminium prices track the global price trends as producers usually price the metal at a marginal discount to the landed cost of imported metal. Though value-added product prices also track metal price movement, they usually witness relatively less volatility and command a premium reflecting the degree of value addition and quality, as indicated by the brand. Aluminium imports are subject to a customs duty of 10% and an additional surcharge on the customs duty at a rate of 2%. This represents a significant reduction from the 25% customs duty charged as recently as fiscal 2001, bringing India more in line with customs duties charged by other countries in Southeast Asia. Market Outlook The domestic aluminium industry is expected to grow in the coming years, supported by growth in the Indian economy and increased domestic demand in end-user markets. CRU estimates that primary aluminium consumption in India will increase to 1,209,000 metric tons by 2009. In addition, the Government of India is planning to significantly increase power generation capacity in the next few years. The Ministry of Power plans to double power capacity to 200,000 MW by 2012. As part of this plan, cumulative capacity of the transmission links will be enhanced from 4,800 MW to 30,000 MW by 2012. Coupled with the increased demand resulting from the privatization of electricity transmission and distribution and a greater emphasis on improving the existing electricity distribution infrastructure in India, especially in rural areas, the power sector is expected to boost domestic aluminium demand. This growth is also likely to be supported by increased use of aluminium in automobile and two-wheeler manufacturing as well as a potential growth in automotive component exports as major automotive manufacturers begin to look to India as a sourcing base for their operations.

45

HINDALCO INDUSTRIES LIMITED


The construction sector is also expected to witness continued growth for the foreseeable future. While the housing segment has benefited from improved availability of more affordable financing, this sector is likely to get a further boost from the opening up of the real estate sectors to foreign direct investment in India. Backed by increasing acceptance of aluminium as an alternative to wood, demand from this sector is poised to grow in the coming years. Moreover, the long term potential for the domestic markets is encouraging with the Indian per capita consumption growing from approximately 627 grams in fiscal 2002 to 830 grams in fiscal 2005, as compared to 4,598 grams in China and 21,286 grams in the United States in calendar year 2004.

Global Copper Market


Background Copper is a non-magnetic metal with high conductivity, tensile strength and resistance to corrosion. Copper consumption can be divided into three main product groups: copper wire rods, copper products and copper alloy products. According to Brook Hunt, over the last 10 years, the predominant intermediate use of copper has been the production of copper wire rods, which accounted for approximately half of total copper production in 2004. Copper wire rods are used in wire and cable products such as energy cables, building wires and magnet wires. Copper alloy products were the next largest users of copper in 2004, accounting for 17% of total demand, followed by copper tubes at 11%. In addition, copper has several non-electrical applications such as tubes for air conditioners and refrigerators, foils for printed circuit boards and other industrial and consumer applications. In 2004, the construction sector accounted for 37% of copper consumption, followed by the electrical and electronic sectors at 26%, industrial machinery and equipment at 15%, transportation equipment at 11% and consumer products at 11%. In addition to direct applications, copper is also used in a number of alloys, including brass (copper and zinc), bronze (copper and tin), nickel silver, phosphor bronze and aluminium bronze. The copper industry can be divided into three broad categories:

Copper mining which uses mined ore to produce copper concentrates, usually containing 25% to 40% copper; Copper custom smelting which smelts and refines copper from the concentrates obtained from copper mines; and Integrated copper producers, who undertake mining, smelting, and refining or leaching to produce copper. Integrated copper producers account for a large part of the copper capacity in the world.

Copper Consumption Global consumption of refined copper has grown consistently at a compounded annual growth rate of 3.8% between 1994 and 2004. The consumption of 16.8 million metric tons in 2004 reflects an increase of 8.8% over 2003. The key growth drivers are the continuing demand from the construction and power sectors. Global demand for refined copper is expected to reach 17.0 million metric tons in 2005, and to increase gradually to an estimated 19.6 million metric tons by 2009. Western Europe, China, North America and the rest of Asia (including Japan and the Middle East) together accounted for nearly 88% of global refined copper consumption. Europe and North America accounted for over 50% of refined copper consumption during the 1980s, but robust growth in Asia, led by China and Japan, has resulted in a significant change in global consumption patterns during the last decade. With a compounded annual growth rate of 6.6% between 1994 and 2004, Asia has been amongst the fastest growing copper market in the world. Driven by continuing growth in China and other regional markets, Asia is likely to witness continued strong growth over the next five years with regional consumption of refined copper estimated to reach 10.1 million metric tons by 2009.

46

HINDALCO INDUSTRIES LIMITED


The following table sets forth the regional consumption pattern of refined copper from 2003 to 2009 (estimated): Region Global Consumption of Refined Copper Year ended December 31, 2003 Volume % 2004 Volume % 2005(1) Volume % 2009(1) Volume %

(In thousands of metric tons, except percentages) Western Europe China North America Rest of Asia Japan CIS
(3) (2)

3,579 3,056 2,862 2,973 1,202 511 493 353 203 164 15,396

23.2% 19.8% 18.6% 19.3% 7.8% 3.3% 3.2% 2.3% 1.3% 1.1% 100.0%

3,710 3,468 3,164 3,157 1,279 669 542 381 215 169 16,754

22.1% 20.7% 18.9% 18.8% 7.6% 4.0% 3.2% 2.3% 1.3% 1.0% 100.0%

3,608 3,815 3,092 3,215 1,240 693 554 397 215 171 17,000

21.2% 22.4% 18.2% 18.9% 7.3% 4.1% 3.3% 2.3% 1.3% 1.0% 100.0%

3,831 5,170 3,378 3,703 1,220 758 665 475 241 181

19.5% 26.3% 17.2% 18.9% 6.2% 3.9% 3.4% 2.4% 1.2% 0.9%

Latin America Eastern Europe Africa Australasia Total


(1) (2) (3) Estimated. Includes the Middle East.

19,622 100.0%

Commonwealth of Independent States.

Copper Supply Global mine production is the principal source of copper, with scrap recycling accounting for only 11% to 13% of aggregate supplies. The five largest copper mining countries are Chile, USA, Peru, Australia and Indonesia, which together accounted for 64% of global copper mine production in 2004. Nearly one-third of global mine production is sold in the custom smelting market, with the rest being used for integrated production. Integrated copper production is concentrated in countries such as Chile, Peru, Canada and Australia, which together account for 25% of global smelter copper production and 29% of global refined copper production. The major custom smelting locations include China, Japan, South Korea, India, and Western Europe, which together accounted for 42% of global smelter production in 2004 and thus are major importers of copper concentrate. Refined copper production has grown at a compounded annual growth rate of 3.5% between 1995 and 2004. Global production currently stands at 15.9 million metric tons, reflecting a growth of 4.5% in 2004. Traditionally, the Americas and Western Europe accounted for a majority of copper production, though their share has been on the decline in recent years. Asian markets have witnessed strong growth in capacities during this period. In 2004, China and the rest of Asia (including Japan and the Middle East) accounted for 13% and 19%, respectively, of global refined copper production while the Americas and Western Europe accounted for 37% and 12%, respectively. In spite of strong production growth, Asian markets witnessed a supply deficit of 2.3 million metric tons in 2004. Of this, the supply deficit in China was 1.4 million metric tons.

47

HINDALCO INDUSTRIES LIMITED


The following table sets forth the actual and estimated regional demand - supply balance from 2003 to 2009: Region 2003 Global Copper Surplus/Deficit Year ended December 31, 2004 Volume (In thousands of metric tons, except percentages) North America Latin America Western Europe Eastern Europe CIS
(2)

2005(1)

2009(1)

(793) 3,178 (1,779) 273 816 220 (1,217)

(955) 3,175 (1,888) 268 758 104 (1,387) (1,563) 348 289

(706) 3,321 (1,711) 186 747 335 (1,404) (1,208) 333 368

(763) 4,009 (1,873) 97 772 477 (1,847) (1,347) 342 656

Japan China Rest of Asia Australasia Africa


(1) (2) (3) Estimated. Commonwealth of Independent States. Includes the Middle East.
(3)

(1,444) 318 252

Pricing Copper is traded on the LME. Although prices are determined by LME price movements, producers normally charge a regional premium that is market driven. The following table sets forth the movement in copper prices from 1995 to 2004. Copper Prices Year ended December 31, 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

(in US$ per metric ton) LME Cash Price % Change 2,937 27.3 2,296 (21.8) 2,279 (0.7) 1,654 (27.4) 1,572 (5.0) 1,814 15.4 1,578 (13.0) 1,558 (1.3) 1,779 2,866 14.2 61.1

For custom smelters, TcRc has a significant impact on profitability as prices for copper concentrate and prices of finished products are LME price net of TcRc or plus a premium, respectively. A significant proportion of concentrates are sold under frame contracts and TcRc is negotiated annually. The TcRc rates are influenced by the demandsupply situation in the concentrate market, prevailing and forecasted LME prices and mining and freight costs.

Indian Copper Market


Background The Indian copper industry primarily consists of custom smelters as there are limited quality copper deposits in the country. The available deposits are owned by the government-owned Hindustan Copper Limited, which was the only producer in India until 1995. However, the industry has transformed significantly since then with the entry of Birla Copper, now owned by Hindalco Industries Limited, and Sterlite Industries, part of Vedanta Resources Plc., who together accounted for 89% of domestic production in calendar year 2004. Reflecting this transformation, over the last 8 years, industry capacity has also grown approximately 8 times from a modest 72,000 metric tons in 1997 to 566,000 metric tons in 2004.
48

HINDALCO INDUSTRIES LIMITED


Consumption Pattern Domestic refined copper consumption has grown at a compounded annual growth rate of only 7.2% between 1999 and 2004. Overall growth has been hampered due to a sharp decline in domestic demand from the jelly filled telecom cables, or JFTC, sector, the largest user of copper in India. The deeper penetration of the cellular industry as well as a decrease in optic fiber prices led to a slow down in JFTC demand from government-owned purchasers, which in turn impacted copper consumption adversely. Supported by strong growth in other user segments such as winding wires, power cables and other user applications, industry demand has rebounded strongly during the last few years. CRU has estimated the aggregate refined copper consumption at 325,000 metric tons in 2004, a growth of 5.9% from 307,000 metric tons reported in 2003. Pricing and Tariff Domestic copper prices track the global prices as the metal is priced on the basis of the landed costs of imported metal. Copper imports are subject to a customs duty of 10% and an additional surcharge of 2% of the customs duty. The customs duty has been reduced from 15% to 10% in 2005. Domestic producers are also able to charge a regional premium, which is market driven. Market Outlook The Indian market outlook is expected to remain positive with strong growth in key user segments such as power, construction and engineering. According to CRU, domestic consumption of refined copper is expected to increase from 325,000 metric tons in 2004 to an estimated 378,000 metric tons by 2009, reflecting a compounded annual growth rate of 3.1% between 2004 and 2009. This growth is significantly lower than the historical averages, largely on account of negative growth in the telecom cable segment which continues to suffer from increasing penetration of the cellular telecommunication and low prices of optic fibers in the international markets. Indian producers, however, benefit from attractive opportunities in the regional markets, which had reported an aggregate supply deficit of 2.8 million metric tons in 2004. According to CRU, the Asian deficit is likely to widen further over the next few years, which offers promising prospects for exports.

49

HINDALCO INDUSTRIES LIMITED OUR BUSINESS


Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the 12-month period ended March 31 of that year. In this section, any reference to we, us or our refers to Hindalco Industries Limited. Unless otherwise stated, the financial information used in this section is derived from our unconsolidated audited financial statements under Indian GAAP as restated. , Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. As a result, the financial statements for fiscal 2005 include the full year financial results of the aluminium business of Indal and may not be comparable with those of fiscal 2004. Bracketed numbers indicate losses/ negative figures. In this section, any conversion from US Dollars to Indian Rupees has been done based on the 12 PM Noon Exchange rate of 1US Dollar = 45.690 Indian Rupees on November 10, 2005 as given by the Federal Reserve Bank of New York Such conversions are for convenience purposes.

Business Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a flagship company of the Aditya Birla Group, which is one of the largest business groups in India. We were incorporated in 1958 and have been listed on the Indian Stock Exchanges since 1968 and on the Socit de la Bourse de Luxembourg since 1993. The listing and trading of our GDRs have been transferred from the Bourse de Luxembourg (a market appearing on the list of regulated markets issued by the European Commission) to the EuroMTF (which is regulated by Luxembourg Stock Exchange) with effect from November 25, 2005. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU of July 2005, we are the fourth largest aluminium producing company based in Asia and the thirteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines. We are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005. For fiscal 2005, our net sales and operating revenues were Rs.95,232.5 million out of which 55% was accounted for by our aluminium business and 45% by our copper business. For the same period, our profit before interest and tax (PBIT) was Rs.20,832.4 million, with 77% and 12% accounted for by our aluminium and copper businesses, respectively. The remaining 11% was unallocable in nature. Our aluminium revenues and profit before interest and tax have grown at a compounded annual growth rate of 48% and 55%, respectively, since fiscal 2003. We acquired our copper business at the end of fiscal 2003. Our aluminium operations are based in India, with access to abundant, good quality bauxite and coal, as well as proximity to key consumer markets. Our total alumina production capacity is currently 1,145,000 metric tpa and our total aluminium production capacity is currently 455,000 metric tpa. Our production facilities comprise alumina refineries, smelters and facilities for value-added products such as rolled products, extrusions, foils and wheels. Our facilities are supported by dedicated bauxite mines and our own power plants, which provide us with significant cost advantages. Our copper smelting facility is based at Dahej, with a current capacity of 250,000 metric tpa. We have recently completed the capacity expansion of our copper smelter to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. As part of our upstream integration efforts, we acquired two copper mines in Mt. Gordon in Queensland, Australia and Nifty in Western Australia in 2003 through our wholly owned subsidiary Birla Mineral Resources Pty Limited which, in turn, wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. Mt. Gordon commenced its supply of copper concentrate in August 2004 while Nifty is expected to commence its supply of copper concentrate in the second half of fiscal 2006. As part of our efforts to add value to the by-products of copper smelting, we also produce phosphatic fertilizers and precious metals like gold and silver. Our copper business is also supported by a dedicated, all-weather jetty located at Dahej and owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited. We are currently embarking on a growth plan designed to make us a global-sized, globally-competitive metals producer. We plan to achieve this through a combination of expansion of existing facilities and greenfield projects, in both alumina and aluminium, backed by dedicated power plants. We also plan to make further investments in

50

HINDALCO INDUSTRIES LIMITED


copper mines, as and when appropriate opportunities are identified. These expansions will increase our overall size and capacity and help to reduce further our production costs, thereby improving our competitive position in the global markets. Besides our own expansion plans, it has been our policy to pursue certain expansion projects through our subsidiaries and joint ventures. This strategy has helped us expand either directly through our subsidiaries or in conjunction with a joint venture partner. To strengthen these projects to maximise the shareholder value, we, from time to time, evaluate proposals that may include reviewing the expansion plans of our subsidiaries and joint ventures, providing them technical and financial support (fund based and non fund based) to grow, facilitating the raising of funds by the subsidiaries and joint ventures either through private placements, preferential allotment or public issues etc. Such proposals are evaluated by us on a regular basis in the interest of the project and may require us to take certain actions as mentioned above. The revenues from each of our business segments for the periods stated are as follows: Business Segment Revenues Fiscal Year ended March 31, 2003 2004 2005

(Rs. in millions, except percentages) Aluminium Copper Net Sales & Operating Revenues 23,920.4 26,202.1 50,122.5 48% 52% 100% 29,957.8 32,125.8 62,083.5 48% 52% 100% 52,520.9 42,711.6 95,232.5 55% 45% 100%

Our Competitive Strengths


We believe that we have delivered consistent growth and superior value to our shareholders over the years, despite volatility in the global metal markets. We believe that our historical success and potential for growth are due primarily to the following competitive strengths: Strengths in Our Aluminium Business In our aluminium business, our competitive strengths include our globally competitive cost structure, fully integrated operations, cost effective access to abundant supply of quality raw materials and domestic market leadership. We are amongst the lowest cost producers globally. Given the commodity nature of our businesses, cost competitiveness is a key determinant of profitability. According to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. We believe that this has helped us in achieving operating margins that are amongst the best in the industry. Our operations are fully integrated. We have cost effective access to quality bauxite, low cost power from our power plants, which meet a large part of our power requirements and which are located on the pithead of coal mines, significant control over supplies of other key raw materials such as caustic soda and aluminium fluoride from subsidiaries and a comprehensive range of value-added products with proximity to end-use markets. These provide us significant cost advantages in the production of aluminium, delivery of quality products, achievement of operating efficiencies that we benchmark against the best in the world through continual improvements and adoption of best practices. The integrated nature of our operations also provides us with flexibility to change our product mix to take advantage of market opportunities. We have cost effective access to quality bauxite. Our existing refineries are located close to our bauxite reserves. Based on our current requirements as well as proposed expansion of existing refineries at Muri and Belgaum, we expect our total reserves, including bauxite deposits for which we are in the process of securing leases, to last for approximately 22, 44 and 23 years, respectively at our Muri, Renukoot and Belgaum refineries. We believe that we will be able to obtain access to additional reserves for our future needs. In addition, our bauxite reserves are of good quality and provide significant cost advantages in the production of alumina and aluminium.

51

HINDALCO INDUSTRIES LIMITED


We have located our facilities close to coal deposits giving us access to low cost power. We also have cost effective access to coal deposits, providing us an advantage in our power costs, the largest cost component in our production of aluminium. This has helped us in generating uninterrupted power at a competitive cash cost which, we believe, is significantly lower than the alternative sources of power supplies in India and comparable to power costs for many global aluminium smelters. Our largest power plant at Renusagar (near our integrated aluminium complex at Renukoot) is located on the pithead of its sourcing coal mine, which provides us with significant costs advantages in generating power for use in our facilities. Our other power plant, at Hirakud, has a dedicated coal mine, which provides us with further cost advantages. Our Hirakud smelter accounted for approximately 16% of the total aluminium metal we produced in fiscal 2005. We are a leader in the domestic market. In addition to cost advantages, we also benefit from market leadership across the value chain. We are the domestic market leader in aluminium and have retained this position for several years now. In primary metals, our market share was approximately 33% in fiscal 2005. In the value-added rolled product segment, our market share in fiscal 2005 was 63%. In the highly fragmented extrusions market, we had a 21% domestic share in fiscal 2005. We have built this strong market position through our quality products, superior customer service and reliability of supplies. Strengths in Our Copper Business At the company level, we have the following competitive advantages in our copper business. Cost advantage. We believe that we are a low cost copper smelter. Our expanded copper capacity will help us reduce our costs significantly. By-product value addition. Another key competitive advantage is our ability to add value to by-products. Copper smelting generates sulphuric acid, the disposal of which is generally a problem. We have turned this problem into an opportunity by converting the sulphuric acid into phosphatic fertilizers, for which there is a growing market in India. Copper smelting also generates anode slime, which contain traces of gold and silver. Our in-house precious metal refinery helps in recovering these metals, which is an additional advantage over most custom smelters worldwide. Freight and handling cost advantage. We benefit from our proximity to growth markets in Asia, which have witnessed a growing deficit in copper in recent years. The refined copper deficit in Asia was at 2.8 million metric tons in fiscal 2005. With alternative supplies possible only from distant locations, we benefit from significant freight advantage in catering to growth markets in Asia. We further gain from the jetty in Dahej, owned by our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited, that can handle vessels up to 70,000 deadweight tons, or DWT, and has a cargo handling capacity of approximately 3 million metric tons per annum depending upon jetty occupancy. Other Company Strengths We also benefit from the following other key strengths: Proven ability to handle large projects and successful acquisitions Since our inception, we have implemented several large expansions at existing facilities as well as greenfield projects, on schedule and within budget. We have also successfully completed and integrated several acquisitions, including the acquisition of Indian Aluminium Company Limited, the acquisition of our copper business from Indo Gulf Corporation and the acquisition of two copper mines in Australia through our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. We believe that our knowledge of the aluminium and copper industries and project management expertise positions us well to leverage emerging opportunities in the aluminium and copper industries. Our people Our management team includes some of the most experienced managers in the Indian aluminium and copper industries. Most of our senior management team have substantial experience in their respective industries and have been instrumental in the growth of our organization. We believe that our management team is well placed to provide strategic leadership and direction to explore new emerging opportunities in these sectors as well as constantly improve our current operations. We have witnessed low attrition of key management personnel and
52

HINDALCO INDUSTRIES LIMITED


have also recruited several professionals with domain expertise in critical areas. We believe these provide us with a significant competitive edge.

Our Strategy
Aluminium Towards realizing our vision of attaining global size and further improve our cost competitiveness in the global aluminium industry, we are embarking on several expansions at our existing facilities and greenfield projects, both in alumina and aluminium. These include: 1. 2. 3. Ongoing expansion of existing facilities, both in alumina and aluminium. A greenfield joint venture alumina project with Alcan Inc., under implementation. A planned fully integrated greenfield project in Orissa with the capacity to produce alumina and aluminium.

Our strategy is to support all of the above projects with low cost dedicated sources of key inputs, including bauxite and coal for dedicated power. Upon completion of our expansion plans, including the projects mentioned in the section Objects of the Issue on page 25 of this Letter of Offer, our aggregate alumina capacity is expected to increase from 1,145,000 metric tpa to 3,610,000 metric tpa. Aluminium smelting capacity is expected to increase from 455,000 metric tpa to 765,000 metric tpa. Our power generation capacity is also expected to increase from 987.2 megawatt to 1,637.2 megawatt. These projects together with other greenfield projects under evaluation are expected to significantly reduce our costs and move us into the ranks of the top 10 global producers of alumina and aluminium, by volume. Copper In the copper business, our strategy is to reduce costs through optimal utilization of expanded smelting capacity, currently under commissioning trials, and increase the extent of copper concentrate supply from the mines owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, own copper mines in Australia. We will also consider opportunities to acquire copper mines so as to satisfy our copper concentrate requirements.

Our Aluminium Business


Our principal aluminium business products are alumina, primary aluminium and value-added products. In fiscal 2005, we used over 66% of our alumina production for conversion into our aluminium products and sold the balance to third parties, as metallurgical grade as well as specialty alumina and hydrate. An increasing proportion of our aluminium business revenues have come from our value-added aluminium products. Products and Application Areas We produce and sell alumina, primary aluminium and aluminium value-added products such as rolled products, extrusions, foils and wheels. Alumina is refined from bauxite and is the key raw material for producing aluminium. In addition to metallurgical grade alumina, we also produce alumina as hydrate and value-added specialty alumina, which are custom made to the requirements of specific end uses. We currently produce approximately 110 grades of value-added alumina products for more than 300 customers in both the domestic and export markets. Primary aluminium is produced from the smelting of metallurgical grade alumina. We produce primary aluminium in the form of ingots, wire rods and billets. While ingots and billets are used extensively in the construction and transportation industries, wire rods are used in various electrical applications especially in the form of electrical conductors and cables. In addition to alumina and primary aluminium, we also produce value-added products such as rolled products, extrusions, foil and packaging and wheels. Rolled products are used for a variety of purposes in different industries including the printing, transportation, consumer durables, building and architecture, electrical and communications, packaging and general engineering industries. Extrusions are utilized in architectural, electrical, industrial, transportation and consumer durable industries, while foils find packaging related applications including packaging
53

HINDALCO INDUSTRIES LIMITED


used in the pharmaceutical, processed foods, cigarette and dentifrice industries as well as thin gauge rolled products for air conditioners and auto radiators. Value-added products reduce our exposure to LME aluminium price volatility. Our value-added aluminium revenues represented 42%, 36% and 55% of our aluminium metal revenues for fiscal 2003, 2004 and 2005, respectively. A summary of the different products relating to our aluminium business and their most frequent end uses is given below: Products Alumina Metallurgical grade alumina Specialty alumina Hydrates Primary Aluminium Ingot / Billets Wire rods Value-added products Rolled Products Printing industry (lithographic sheets), transportation industry (bus/truck bodies, radiator fins, miscellaneous automotive applications, development in railway wagons), consumer durables (utensils/pressure cookers, ceiling fans, refrigerators and washing machines), building and architecture (cladding, roofing, AC/ventilation ducting, insulation, flooring and new application of aluminium composite panel), electrical and communication (cable wrap, lamp cap, cable trays), packaging (bottlecap stock, can-end stock, aerosol cap, vial cap), and general engineering applications. Architectural, electrical, industrial, transportation and consumer durable. Packaging of pharmaceuticals, processed foods, cigarette and dentifrice industries, kitchen foil, casseroles, thin gauge rolled products for air conditioners and auto radiators. Automotive industry. Aluminium castings and fabrication. Various uses in the construction and transportation industries. Electrical conductors and cables. Primary aluminium production. Refractories/castables, grinding media, ceramic fibers, glass, polishing compounds, high tension insulators and spark plugs. Water treatment chemicals, aluminium fluoride, refractory cement, zeolite and as filler in various applications. End Use

Extrusions Foils and Packaging

Wheels

54

HINDALCO INDUSTRIES LIMITED


Production Processes The following diagram shows our production process from bauxite to alumina to aluminium to value-added products:

Our Alumina Refining Process We use the Bayer process to refine alumina from bauxite. The Bayer process is used in nearly all commercial refineries and is considered the industry standard for production of metallurgical grade alumina because of its proven application and efficient use of energy. In the Bayer process, caustic soda is used to extract the alumina content from ground bauxite, at temperatures suitable for the particular mineralogy of bauxite, after which the resultant sodium aluminate solution is separated from the undissolved residue called red mud. The solution is then subjected to seeded precipitation to produce alumina hydrate, which is then calcined into alumina. Our Primary Aluminium Production Process There are two types of electrolytic cells commonly used to produce primary aluminium, pre-baked and selfbaking cells. The two types of cells differ primarily in the fabrication and connection of the carbon anode. Most modern smelters rely on pre-baked reduction cells because primary aluminium can be smelted at lower production costs and hazardous gases formed in the production process can be more effectively treated and contained. We use pre-baked reduction cells at the Renukoot smelter and are in the process of expanding the Hirakud smelter by converting it from self-baking to pre-baked technology. Alumina is converted into primary aluminium through a smelting process using electrolytic reduction. The reduction process takes place in a reduction cell, referred to as the pot, where alumina is reduced to molten aluminium. From the pot-line, the molten metal is tapped to the casting unit, where the metal is cast into required forms such as ingots, billets, rolling slabs and wire rods, depending on the requirements of our value-added product operations.

55

HINDALCO INDUSTRIES LIMITED


Our Value-Added Aluminium Products Manufacturing Processes Our value-added manufacturing plants receive inputs, primarily in the form of ingots, rolling slabs and billets, from our own smelters, which helps ensure consistency of delivery and quality of inputs. Rolling Mills. The rolling process involves the conversion of rolling ingots into sheets, coils, plates, circles and other value-added products. We use a two-part hot and cold rolling process, in addition to the steps of scalping, soaking, annealing and heat treatment. In all of our mills, the products are processed through various finishing line equipment, before being packed to customers requirements and dispatched. Extrusions. The extrusion process involves heating of aluminium billets in an induction furnace or an oil-fired log heater to a temperature sufficiently high to allow external pressure to form the aluminium into desired shapes and sizes. Foil and Packaging. The manufacturing of foil and packaging products involves rolling foil to a thickness ranging from 6.5 microns to 200 microns, with an intermediate annealing process and final slitting. Depending on the end-use, the foil is then converted into various packaging structures by means of lamination, coating, extrusion or printing. Our plants are equipped with the latest micro-processor-based gauge control system, multi-color printing, coater/laminator, twin-head poly extruder and electronic engraver. Wheels. The basic raw material for alloy wheels is silicon-alloyed aluminium ingots. The manufacturing process involves melting of metal alloy ingots and casting of alloy wheels. The cast wheels then undergo x-ray testing, heat treatment and machining before they are finally tested in accordance with international standards for various quality attributes. The wheels undergo surface treatment and painting before final packing. Our Principal Locations The following table sets out details of our principal locations and capacities as of March 31, 2005:
State Aluminium Business: Details of Locations and Capacities Alumina Aluminium Redraw Rods (Mtpa) (Mtpa) (Mtpa) Rolling Mills (Mtpa) Extrusions (Mtpa) Foils Wheels Cogenerated Power (Pieces per annum) (MW) Power Plant (MW)

(Mtpa)

Renukoot Belgaum Muri Hirakud Alupuram Belur Taloja Kalwa Silvassa Total
(1) (2) (3)

Uttar Pradesh Karnataka Jharkhand Orissa Kerala West Bengal Maharashtra Maharashtra Dadra & Nagar Haveli

685,000 350,000 110,000 1,145,000

345,000 31,000
(1)

40,000 10,000 -

80,000 45,000 45,000 -

13,700 8,000 21,700

6,000

78 78

741.7 67.5 (3) 809.2

65,000 14,000(2) 455,000

5,000 300,000 11,000 300,000

50,000 170,000

Operations suspended since August 1992 due to an increase in power tariff because of which the operations became unviable. Operations suspended since August 2003 due to an increase in power tariff because of which the operations became unviable. Recently expanded by 100 MW

56

HINDALCO INDUSTRIES LIMITED


The following table sets forth, for the periods indicated, information relating to the production volumes of our alumina refineries, smelters, power plants and value-added semi-fabrication units: Aluminium Business: Production volumes & Capacity utilization(1) Year ended March 31 2003 2004 (in metric tons, except where noted) Production Alumina refineries Smelters Rolling mills Extrusion plants Foil and packaging plants Wheel plant(2) Power plants(3)
(1) (2) (3) Measured in pieces per annum Includes cogeneration; Measured in MU

2005

Utilization 76% 91% 91% 138% 385% 19%

Production 591,297 381,417 77,069 18,194 18,560 99,091 6,160

Utilization 90% 99% 96% 133% 371% 33%

Production Utilization 1,159,664 471,460 175,734 28,551 26,177 107,279 6,936 101% 93% 103% 132% 238% 36%

501,270 317,626 73,171 18,973 19,235 56,117 5,223

Installed capacity has been used for calculation of Capacity utilization

Our Key Raw Materials and Manufacturing and Operating Expenses Our key cost drivers are power and fuel, bauxite, carbon and caustic soda, which in aggregate accounted for approximately 76% of our raw materials and manufacturing and operating expenses for alumina, aluminium and value-added products in fiscal 2005. The following table sets forth a breakdown of our key cost drivers for fiscal 2003, 2004 and 2005: Aluminium Business: Raw Material and Manufacturing & Operating Expenses Year ended March 31, 2003 (in metric tons) Power and Fuel Raw Materials: Bauxite Carbon Caustic soda Other Raw Materials Other Manufacturing & Operating Expenses Total Raw Material and Manufacturing & Operating Expenses
(1) Includes Cogeneration - Power consumed in MU

2004 (in metric tons) 5,459 (1) (Rs. in millions) 8,000.0

2005 (in metric tons) 7,030 (1) (Rs. in millions) 12,948.4

(Rs. in millions) 5,629.0

4,668 (1)

1,420,912 136,721 61,147

1,175.3 1,855.2 711.0 1,814.6 1,444.7

1,705,093 158,509 71,720

1,609.2 2,221.4 954.7 809.1 1,458.5

3,251,628 205,422 119,348

2,690.2 2,872.4 1,726.5 3,027.2 3,422.5

12,629.7

15,052.9

26,687.2

57

HINDALCO INDUSTRIES LIMITED


Power and Fuel Our power and fuel costs essentially consist of costs associated with production and procurement of electricity, coal and fuel oil. The cost of power and fuel accounted for 45%, 53% and 49% of our aluminium raw materials and manufacturing and operating expenses during fiscal 2003, 2004 and 2005, respectively. Smelting primary aluminium requires a substantial, continuous supply of electricity. A reliable and inexpensive supply of electricity, therefore, significantly affects the viability and profitability of our operations. Our Power Plants We have two power plants one each at Renusagar and Hirakud with an aggregate capacity of 809.2 megawatt. With support from co-generation plants, these two power plants currently meet 88% of our power requirements. With a capacity of 741.7 megawatt, our plant at Renukoot is our largest source of power and provides electricity at competitive costs, made possible due to its proximity to the pithead of its sourcing coal mine, high plant load factor of over 90% and low fixed costs. Our Hirakud power plant had a capacity of 67.5 megawatt as on March 31, 2005. With the recent commissioning of a 100 megawatt unit the capacity now stands at 167.5 megawatt. Our Hirakud power plant provides electricity to our Hirakud smelter. As of March 31, 2005 the power plant operated at an 86.7% plant load factor. Our plant benefits from its access to a dedicated coal mine that provide significant cost advantages. As we increase the capacity of our Hirakud smelter, we intend to expand the capacity of our Hirakud power plant to meet our growing electricity requirements. For details of our expansion plans, see Objects of the Issue. Leveraging our significant advantages, we have been able to produce power at low costs. The average per unit cash cost of power at Renusagar and Hirakud was at Rs.1.19 per kilowatt hour and Rs.1.01 per kilowatt hour, respectively, in fiscal 2005. We have made alternate arrangements with the Uttar Pradesh and Orissa State Electricity Boards to supply 42.2 MVA and 40 MVA electricity to our plants at Renukoot and Hirakud, respectively, in case our captive power plants at Renusagar and Hirakud are unable to supply power to Renukoot and Hirakud, respectively, including on account of reasons like shut down for maintenance etc. Further to protect our power plants from the occurrence of severe frequency or voltage fluctuations we have also installed systems to isolate them from their respective state power grids. Principal inputs for our power plants Coal Coal is the principal input for our power plants. We source all of our coal requirements for Renusagar from the Northern coalfields and Central coalfields of government-owned Coal India Limited, which are approximately 8 kilometers and 300 kilometers away from Renusagar, respectively. The coal is transported by dedicated aerial ropeways from Northern Coalfields Limited and by rail and road from Central Coalfields Limited. The coal requirements for Hirakud power plant is met through supplies from the dedicated Talabira coalfields, which is approximately 45 kilometers away from Hirakud. The coal from Talabira coalfields to Hirakud is transported by road. During fiscal 2003, 2004 and 2005 our Renusagar power plant consumed 5.0 million metric tons, 5.4 million metric tons and 5.2 million metric tons, respectively, of coal. The Hirakud power plant consumed 0.4 million metric tons, 0.4 million metric tons and 0.5 million metric tons of coal during fiscal 2003, 2004 and 2005 respectively. We expect that our coal requirements will increase to approximately 7.2 million metric tons per year after considering the recent commissioning of a 100 megawatt unit and the proposed commissioning of an additional 100 megawatt unit at Hirakud. During fiscal 2005, to produce one kilowatt hour of electricity, we required on average 0.98 kilograms of coal. Coal costs represented an average of 77% of our cash cost of power generation during fiscal 2005. Suppliers of coal. The Government of India owns most of the coal mines in India, through its subsidiary, Coal India Limited. Users are provided with their coal under fuel supply agreements. The price and the quantity entitled by users are established by the Standing Linkage Committee (Long-Term) of the Ministry of Coal. These user allocations are reviewed on a quarterly basis by the Ministry of Coal. We have not experienced any difficulties in obtaining a sufficient amount of coal on reasonable terms in the past. However, the Ministry of Coal has
58

HINDALCO INDUSTRIES LIMITED


recently reduced the entitlements under our supply agreement to 85% of our requirements. We are confident that we will be able to secure alternative supplies for the shortfall, given that India has a large reserve of recoverable coal. We believe these reserves could satisfy our coal requirements in the event we are unable to obtain sufficient quantities of coal from our current sources. However, replacing our coal sources could substantially increase our costs. See Risk Factors A significant portion of our energy requirements are met by our own power plants and any disruptions to these operations could increase production costs. Water Water is also an important input for our power plants. We source the water requirements of our Renusagar power plant and smelters from the nearby Rihand dam. We also source the water requirements of our Hirakud power plant and smelter from Hirakud dam. Our dedicated power plants have never been shut down due to inadequacy of water. Bauxite Bauxite, the primary raw material used for the production of alumina, is a naturally occurring heterogeneous material composed primarily of aluminium hydroxide minerals together with iron oxide, titanium oxide and silica. We source most of the bauxite from our own mines while a portion is purchased from private mines. As of March 31, 2005, our bauxite deposits under existing leases had approximately 47.93 million metric tons of proven and probable reserves. We are in the process of securing leases for an additional 150.5 million metric tons in the states of Orissa, Maharashtra, Jharkhand and Chhattisgarh (including 81.95 million metric tones for Aditya Greenfield project in Orissa). Based on our current requirements as well as proposed expansion of existing refineries at Muri and Belgaum, we expect our total reserves including the above mentioned additional quantity to last for approximately 22, 44 and 23 years, respectively at our Muri, Renukoot and Belgaum refineries. Our bauxite related costs represented 10% of our aluminium raw materials and manufacturing and operating expenses in fiscal 2005. Our Third Party Purchases As part of our long-term strategy, to conserve our resources and thereby to extend the life of our own bauxite mines, we source part of our bauxite requirements from third parties through dedicated long-term supply contracts. We have entered into bauxite supply contracts for period of one year or more with these third parties. We also provide necessary geological and technical assistance to these third parties to ensure that bauxite supplies meet our quality requirements. The contracts include penalty/bonus clauses covering both quantity and quality of bauxite supplies. We have no statutory or any other obligation relating to our third party suppliers of bauxite, but meeting these statutory requirements is a prerequisite for their continued bauxite supply to us. Our Bauxite Mining Methods Our mining operations are conducted either as fully mechanized or semi-mechanized operations employing contractors at different locations. In fully mechanized operations, we use either the ripper-dozer-mobile crusher combination with no blasting or the drilling-blasting with a shovel-dumper-crusher combination. In semimechanized operations, bauxite sorting and sizing are carried out through manual labour. The mined-out bauxite is transported to the respective refineries either through road transport or a combination of road and rail transport. Carbon We use carbon in the process of electrolysis, in the form of cathodes and anodes, though the latter is the biggest component of our carbon costs. Anodes are made up of carbonaceous material of high purity. For pre-baked anodes, green carbon paste made of calcined petroleum coke and coal tar pitch is compacted or pressed into the form of anodes. These anodes are baked before their use in electrolytic cells, or pots. We have in-house facilities for the manufacture of carbon anodes meeting our entire carbon anode requirements. The calcined petroleum coke, coal tar pitch and fuel oil, which are the key ingredients for the manufacture of carbon anodes are sourced primarily from the domestic markets. There is an adequate supply of these raw materials in India, though their prices are generally determined by the movement in global prices. Our carbon consumption corresponded to approximately 11% of our overall aluminium raw materials and manufacturing and operating expenses for fiscal 2005.

59

HINDALCO INDUSTRIES LIMITED


Caustic soda Caustic soda is a key raw material used to dissolve the bauxite in the alumina refining process. The caustic soda requirement varies significantly depending on the bauxite quality and technology employed. At our refineries, caustic soda consumption represented approximately 6% of our aluminium raw materials and manufacturing & operating expenses during fiscal 2005. We source a majority of our requirements from our subsidiary, Bihar Caustic and Chemicals Limited, with the balance being sourced from other domestic producers. In addition, we also have the flexibility of imports depending on the price advantage from time to time. Saudi Arabian contract prices for caustic soda increased from US$115 (Rs. 5,254.4) per dry metric ton in the second quarter of calendar year 2004 to US$280 (Rs. 12,793.2) per dry metric ton in the second quarter of calendar 2005. Import of caustic soda was stopped in fiscal 2005 due to very high international prices and antidumping duty on caustic soda, which made domestic prices more attractive. Consequently, we are now relying only on our own production and local suppliers, who have been our regular suppliers. Our caustic soda prices can still be affected because these producers can raise their prices for caustic soda. Other Raw Materials We also use other raw materials such as fluorides and other chemicals. Other raw material costs represented approximately 14%, 5% and 11% of our aluminium production costs during fiscal 2003, 2004 and 2005, respectively. For these raw materials, we have several sources of supplies in the domestic markets and do not foresee any difficulty in securing supplies when needed. Other Manufacturing and Operating Expenses Our other manufacturing & operating expenses primarily consist of consumption of stores, spare parts and tools as well as repairs, renewals and replacements of buildings and machinery. In fiscal 2005 these expenses constituted 13% of our aluminium raw materials and manufacturing and operating expenses. Logistics and Transport We transport our raw materials and finished products through a combination of road, rail and sea, depending on the sourcing location of our raw materials or the final destination of our products. Our upstream production facilities are located close to our bauxite and coal mines while our value-added operations are spread across the country with the objective of being close to either port locations or consumer end-markets. Sales and Marketing We sell alumina, aluminium and value-added products, both in the domestic and export markets. The following table sets forth our actual sales, in both tonnage and value terms, during fiscal 2003, 2004 and 2005: Aluminium Business: Product-wise Sales Fiscal year ended March 31, 2003 (in metric tons) Alumina Metallurgical grade alumina Specialty alumina Hydrates Primary Aluminium Ingot / Billets Wire rods 121,713 50,268 9,311.2 4,146.3 170,319 58,778 13,653.1 4,990.6 158,519 62,841 14,374.8 5,908.0 0 0 0 0.0 0.0 0.0 0 0 0 0.0 0.0 0.0 113,343 109,237 100,248 1,475.1 2,413.4 1,807.0 (Rs. in millions) 2004 (in metric tons) (Rs. in millions) 2005 (in metric tons) (Rs. in millions)

60

HINDALCO INDUSTRIES LIMITED


Aluminium Business: Product-wise Sales Fiscal year ended March 31, 2003 (in metric tons) Value-added products Rolled products Extrusions Foils and Packaging Wheels
(1) (2)

2004 (in metric tons) (Rs. in millions)

2005 (in metric tons) (Rs. in millions)

(Rs. in millions)

51,343 19,001 19,243 52,786

5,040.3 1,921.6 2,560.6 92.6 19,770.5 3,736.8

58,175 18,352 18,819 105,975

5,851.7 1,927.1 2,574.1 185.7 25,705.1 3,869.7

144,158 28,453 26,004 111,045

16,380.0 3,379.3 4,542.9 197.8 40,832.1 10,853.2

Domestic sales Export sales


1. 2. In pieces

Includes conversion charges, trade sales and miscellaneous items, but excludes Net Export Incentives & Miscellaneous Receipts & Claims

We sell alumina in excess of our own aluminium production requirements, in both the domestic and export markets and have a broad customer base. The quality and reliability of our supplies are our key strengths in retaining these customers. The export price of metallurgical alumina is determined with reference to prevailing and predicted international alumina prices. The majority of our contracts are short term, though we also supply under long term contracts. Domestic sales are normally conducted on the basis of a fixed price, determined from time to time. The domestic price of alumina is normally higher than the export price due to smaller order sizes and other associated costs. We do not grant any credit period for alumina exports. All payments by our domestic customers are in Indian Rupees and by overseas customers in U.S. Dollars. For exports, deliveries are made through sea and materials are moved by road to the port. For domestic sales, our customers are responsible for arranging and paying for transportation from our alumina refinery. We sell primary aluminium in the form of ingots, billets and wire rods, in both the domestic and export markets. The domestic markets, where we service a large and fragmented customer base, accounted for over 96% of our primary aluminium sales in fiscal 2005. Our exports are usually to large commodity traders, who accept delivery in Singapore, before shipping to primary aluminium consumers in other countries. We have a broad customer base for primary aluminium products in India. We do not enter into any long-term contracts for domestic sale of primary aluminium. Our domestic pricing is based on various factors, including average LME prices, exchange rates, domestic demand-supply outlook, inventory levels and prices offered by competitors. The terms of our domestic sales are governed by an approved credit policy that may allow credit/secured credit/ cash payment terms to different customers based on credit appraisal of customer accounts from time to time. All payments by our domestic customers are in Indian Rupees and exports are priced in U.S. Dollars, backed by an irrevocable letter of credit issued prior to shipment. We sell value-added aluminium products in the form of rolled products, extrusions, foils and packaging materials and wheels, in both the domestic and export markets. In the domestic markets, we sell value-added products to manufacturers of consumer durables, bus/truck body building, industrial machinery, building and construction, packaging, and auto ancillary products. In addition, we sell products directly to end-consumers and have established brands such as Everlast roofing sheets, house foils such as Freshwrap, Superwrap and Freshpack and Aura alloy wheels. We have a broad and diversified customer base for our value-added aluminium products.
61

HINDALCO INDUSTRIES LIMITED


For exports, we have a strong market position in South Asia, South East Asia and the Middle East, with increasing sales in the United States, Africa and Europe as well. In fiscal 2005, our revenues from the export of value-added aluminium products constituted 28% of our total value-added aluminium product revenues, and our future plans are to further grow our exports. We avoid long-term contracts for value-added product pricing in India. We review domestic pricing on a monthly basis, based on various factors, including average LME prices, production costs, exchange rates, domestic demand-supply outlook, inventory levels and prices offered by competitors. In the export markets, prices are negotiated on the basis of a mark-up over LME prices. The terms of domestic sales are governed by our approved credit policy that may allow credit/secured credit/ cash payment terms to different customers based on credit appraisal of customer accounts from time to time. All payments by our domestic customers are in Indian Rupees and exports are priced in U.S. Dollars or Euros, backed by an irrevocable letter of credit issued prior to shipment. Some export shipments are, however, made against export credit guaranteed by an insurance company. Our value-added product facilities are strategically located near smelters, ports or marketplaces, giving us inherent advantages in logistic costs and delivery time. The products are moved by contracted transporters or customernominated truckers. An important part of our domestic distribution system is our network of channel partners, spread across the country. Sales Organization Our sales and marketing structure is geared to address market challenges. Our sales and marketing activities are overseen from Mumbai with regional sales offices in Mumbai, Delhi, Bangalore and Kolkata. We have separate teams focusing on the domestic and export sales operations. Competition While there are only two major players in the alumina market in India, there is substantial competition in the primary aluminium and value-added aluminium markets, both in India and internationally. For our alumina products sold in India, our only competitor is Nalco. In the export market, we compete with global alumina suppliers. For our primary aluminium products, we compete primarily with Nalco, Balco and Malco in the domestic markets and major international primary aluminium producers in the international markets. In the highly fragmented value-added products market, we compete primarily with the leading primary metal producers as well as several smaller producers in the respective product categories. In addition, the end-user markets for certain value-added products are highly competitive. Aluminium competes with other materials, particularly plastic, steel, iron, glass, and paper, among others, for various applications. In the past, customers have demonstrated a willingness to substitute other materials for aluminium. The willingness of customers to accept substitutes could have a material adverse effect on our business, results of operations and prospects. See Risk Factors Any increase in competition in our target markets could result in lower prices or sales volumes of the aluminium, aluminium products and copper we produce, which may cause our profitability to suffer. Demerger of Indal On August 23, 2004, our Board and the board of directors of Indal approved a Scheme of Arrangement wherein all the assets of Indal other than the foil unit at Kollur in Andhra Pradesh were to be demerged from Indal and merged into us. The Scheme was approved by the requisite majority of the shareholders and creditors of both the companies and also sanctioned by the High Court of Judicature at Bombay and the High Court at Calcutta on January 14, 2005 and December 23, 2004 respectively. Pursuant to the Scheme, Hindalco issued shares to the minority shareholders of Indal in the ratio of one share of Rs. 10 each in Hindalco, credited as fully paid up for every seven equity shares of Rs. 2 each held by the minority shareholder in Indal. The Scheme was made effective from March 7, 2005, and the appointed date was April 1, 2004. Consequent to the merger, certain plants belonging to the erstwhile Indal came into our fold. These plants are located at Belgaum in Karnataka, Muri in Jharkhand, Hirakud in Orissa, Alupuram in Kerala, Belur in West Bengal, Taloja and Kalwa in Maharashtra. The merger resulted in augmentation of production, sales and balance sheet items which were reflected in our financial statements for fiscal 2005. The key effects of this merger on the statement of profit and loss and statement of assets and liabilities for fiscal 2005 are given below:
62

HINDALCO INDUSTRIES LIMITED


1. 2. 3. 4. Our net sales and operating revenues and other income rose by approximately 23% and 9% respectively. Our PBIT was higher by approximately 24%. Out net fixed assets (including Capital Work-in-Progress), investments and net current assets were higher by approximately 21%, 22% and 28%. Our overall balance sheet size increased by approximately 22%.

Key Technology Arrangements Our aluminium business uses process and technologies that are used in nearly all commercial refineries and are considered industry standards for production. We entered into a license agreement dated April 13, 2005 with China Aluminium International Engineering Corporation Limited (CAIECL) to convert our existing potlines at Hirakud from Soderberg smelter into prebaked smelter, add 14 pots in those lines, and set-up an additional potline. The agreement covered the provision of technical services for implementation, licensed use of technology, basic engineering, detailed engineering and software for the new pot controllers including training to our personnel. Some of these were routed through Gauiyang Aluminium Magnesium Design & Research Institute (GAMI) of China which is a subsidiary company of CAIECL. In addition to the above, the erstwhile Indal entered into an agreement dated January 17, 2005 with Alcan International Limited of Montreal, Canada for the transfer of Alcan Alumina Technology and grant of license to use certain processes in the Muri plant. The agreement also covered the provision of technical information and engineering services. Our Expansion Projects We believe that our ongoing and planned capacity expansions will allow us to enhance our competitiveness by reducing our production costs and also improve our revenues and profitability. We are in the process of expanding our alumina capacity at our Muri facilities and our aluminium capacity at our Hirakud smelter. We have also identified several other expansion projects to substantially increase our production capacities for alumina and aluminium, which, if completed, will significantly reduce our unit production costs for these products. However, we have not received all the necessary approvals to carry out these projects and cannot assure you that these projects will be undertaken or, if undertaken, will not be altered or completed beyond current time and cost expectations. We believe that our substantial experience with improving our capacity at our various facilities will enable us to undertake and complete our expansion projects efficiently and successfully. Expansions at Existing Facilities Our expansion of existing facilities includes the following key projects:

expanding the alumina capacity at Muri from 110,000 metric tpa to 450,000 metric tpa. expanding the alumina capacity at Belgaum from 350,000 metric tpa to 650,000 metric tpa. expanding the aluminium capacity at Hirakud from 65,000 metric tpa to 146,000 metric tpa.

Muri Alumina We plan to increase the capacity at our Muri operations from 110,000 metric tpa in fiscal 2005 to 450,000 metric tpa upon completion of the expansion. This would include alumina refinery, the co-generation plant, the railway system and a port facility for evacuation. We plan to use technology obtained from Alcan, which is expected to improve recovery and reduce raw material and energy consumptions. Consequently, we expect cash cost of alumina production at this facility to decline sharply upon stabilization of expanded capacity. Belgaum Alumina We plan to increase the capacity at our Belgaum operations from its current capacity of 350,000 metric tpa to 650,000 metric tpa. This would include alumina refinery, the co-generation plant, the railway system and port facility for finished goods movements. We plan to use appropriate technology for improving recovery and reducing energy consumption with the objective of reducing cash cost of our operations. Hirakud Aluminium We are in the process of increasing the capacity of our Hirakud smelter from its current capacity of 65,000 metric
63

HINDALCO INDUSTRIES LIMITED


tpa to 146,000 metric tpa. Our expansion plans involve a conversion from the Soderberg technology to prebake technology and also a transfer of idle pots from Belgaum to Hirakud. Greenfield Projects Our greenfield expansions involve building up of new alumina and aluminium capacities through following projects:

Aditya Alumina with capacity of 1,000,000 metric tpa which is expandable to 1,500,000 metric tpa. Aditya Aluminium with capacity of 260,000 metric tpa which is expandable to 325,000 metric tpa.

Aditya Alumina and Aluminium We have plans to set up an integrated greenfield aluminium project in Orissa, with a capacity to produce 1,000,000 metric tpa of alumina, which is expandable to 1,500,000 metric tpa. This project will also have a capacity to produce 260,000 metric tpa of aluminum, which is expandable to 325,000 metric tpa upon completion. This will be supported by a 650 megawatt dedicated power plant, backed by dedicated coal mines. Further, we are working towards acquiring a dedicated coal deposit within the proximity of the proposed smelter and power plant in Lapanga, Orissa. Rajbar Aluminium We are also evaluating implementation of a greenfield smelter with a capacity to produce 325,000 metric tons of aluminium backed by dedicated power and coal mines in the State of Jharkhand. We have signed a Memorandum of Understanding with the state government of Jharkhand and are in the process of obtaining the necessary government and regulatory approvals for the project. Joint Ventures Utkal Alumina Our 55% Joint Venture with Alcan Inc. We are setting up a global-sized greenfield alumina project in Orissa as a joint venture with Alcan Inc. with a total project capacity of 1,000,000 metric tpa to1,500,000 metric tpa. We own 55% of the equity in the joint venture with the rest being held by Alcan and we are entitled to 55% of the output. Apart from the projects described above we may acquire additional copper mines as and when we identify appropriate ones. We have not currently identified a suitable mine for acquisition. For more details on our planned expansion projects which are under various stages of implementation, please see Objects of the Issue.

Our Copper Business


Our copper business accounted for approximately 45% of our revenues in fiscal 2005. We are a custom smelter and hence buy copper concentrate at LME linked prices for smelting and refining copper. We sell refined copper at LME linked prices in the domestic and export markets. TcRc, a major constituent of our copper net revenues, is influenced by global copper concentrate demand and supply, LME trends, LME-linked price participation and other factors. Our custom copper smelter is located at Dahej, Gujarat. We source our concentrates from various global suppliers and our overseas mines. Products and Application Areas Our principal products are copper cathodes and continuous cast rods. As part of our efforts to add value to the by-products of copper smelting, we also produce phosphatic fertilizers and precious metals like gold and silver. Our copper cathodes are square shaped with purity levels of 99.99% copper. These cathodes meet international quality standards and are registered as LME A Grade. The major uses of copper cathodes are in the manufacture of copper rods for the wire and cable industry and copper tubes for consumer durable goods. Copper cathodes are also used for making alloys like brass, bronze and alloy steel, with applications in defence, minting and construction. Our copper continuous cast rods meet all the requirements of international quality standards. They are available in 8, 11, 12.5, 16 and 19 mm diameters. The homogeneous structure and finer grain size of our continuous cast
64

HINDALCO INDUSTRIES LIMITED


rods leads to outstanding drawability and it can be drawn to an ultra fine wire with high productivity. Our continuous cast rods are currently used for power and communication cables, strips for power and distribution for transformers, magnet wires and zari manufacturing. Our continuous cast rods of larger diameters (11, 12.5 and 16 mm) are utilized for production of profiles and busbars. We are the only manufacturer of 19 mm diameter copper rods in India, which is largely used for groove conductors and profiles. Major uses of continuous cast rods includes usage as basic raw material for manufacture of wire and cable like winding wire, telephone cables, power cables, wiring harnesses, house wiring cable, instrumentation and control cable. Continuous copper rods are also used in the manufacture of strips that are used in transformers. Larger diameter rods are mainly used in strip making whereas 8 mm rods are used for wire and cable making. Continuous cast rods are also used in manufacture of flats and sections for electrical and electronic applications. We extract precious metals at our precious metal refinery also located at Dahej. Precious metals, like gold and silver, have an affinity to copper ore and hence are found in certain quantities in the concentrate supplies. We pay for the gold and silver content based on prevailing international bullion market prices and other terms. These are extracted through the process after copper refining to produce 99.9% pure gold and silver as well as selenium. The residue after extraction of gold and silver contains traces of platinum and palladium and is sold as platinum group metal mix, commonly known as PGM. As value-added products, we produce di-ammonium phosphate and NPK for use as fertilizer. Phosphoric acid is produced at our phosphoric acid plant by chemical reaction of sulphuric acid from our smelting complex and rock phosphate, which is imported. At our phosphatic fertilizer plant, phosphoric acid and ammonia are reacted to form di-ammonium phosphate. Addition of imported potash in required quantities is part of the chemical process to produce NPK complexes. We also sell sulphuric acid, copper slag, phosphogypsum and hydrofluosilic acid, which are by-products of our production processes. Our Production Processes The following diagram illustrates the processes used in our copper facilities:

D H I ( ety) L J t W holy O w ned Subsi ar l di y

Cu concent at r e O X Y G EN PLA N T

SM ELTER

CopperSl ag

SU LPH U RI C A CI PLAN T D

A ci d s es al A m m oni a

CopperA node

A node Scr ap

REFI ERY N

Rock Phos phat e A node Slm e i G yps um PH O SPH O RI C A CI PLAN T D Phos A ci . d PH O SPH A TI C FERTI ZER PLA N T LI CO N TI U O U S CA ST N CO PPER RO D S PRECI U S M ETA L O RECO V ERY PLA N T

DAP H ydr l lc A ci ofuosii d

Copperr ods

Cu cat hodes G ol Siver Sel um d, l , eni & PG M concent at r e

65

HINDALCO INDUSTRIES LIMITED


Our Principal Facilities The following table sets out the details of our facilities, principal products and capacities as of March 31, 2005: Location Copper Business: Details of Facilities, Principal Activities & Capacities Fiscal year ended March 31, 2005 Principal Products Dahej, Gujarat, India Copper cathodes Continuous cast rods Gold Silver Phosphatic fertilizers Sulphuric Acid Power plants Capacity 250,000 metric tpa 97,200 metric tpa 7.5 metric tpa 75 metric tpa 400,000 metric tpa 735,000 metric tpa 67.4 megawatt

In addition to the above, we own two copper mines located in East Pilbara and Queensland in Australia through our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, owns and operates these mines. As on March 31, 2005 the Nifty mine had proven and probable copper ore reserves of 34.59 million metric tons of 2.4% grade, while the Mt. Gordon mine had proven and probable copper ore reserves of 2.30 million metric tons of 3.0% grade. The following table sets forth, for the periods indicated, information relating to the production volumes of our smelter, refinery, phosphatic fertilizer plant and power plants: Copper Business: Production volumes & Capacity utilization(1) Year ended March 31, 2003 2004 (in metric tons, except where noted) Production Copper cathode
(2)

2005

Utilization 70% 79% 79% 121% 68% 39%

Production 101,179 91,380 231,903 7 32 203,737 350

Utilization 40% 94% 58% 92% 42% 28%

Production Utilization 128,923 88,298 286,264 5 37 261,882 410 52% 91% 72% 69% 49% 36%

105,316 76,766 315,785 5 31 176,341 252

Continuous cast rods Phosphatic fertilizers Gold Silver Sulphuric Acid(2) Power(3)
(1) (2)

Installed capacity has been used for calculation of Capacity utilization Production of copper cathode, sulphuric acid and phosphotic acid are net of 88,215 metric tons, 401,434 metric tons and 133,735 metric tons in fiscal 2005/ 85,431 metric tons, 323,969 metric tons and 100,476 metric tons in fiscal 2004/ 79,843 metric tons, 319,362 metric tons and 104,641 metric tons in fiscal 2003 respectively, which had been captively consumed. Measured in MU.

(3)

Our Smelter We own and operate a 250,000 metric tpa copper smelter in Dahej. The construction of the greenfield Dahej copper smelting and refining complex with a capacity of 100,000 metric tpa was completed in 1998. Thereafter, cost effective expansions in two phases have increased the capacity to 250,000 metric tpa. Our smelter consists of various plants divided into two production lines.
66

HINDALCO INDUSTRIES LIMITED


We have recently completed the capacity expansion of our copper smelter to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. Based on current capacities of world smelters, a 500,000 metric tpa complex would be the largest smelter in a single location in the world. We use state-of-the-art technology for our smelters. For example, our greenfield smelter was set up with technology we purchased from Outokompu, Finland. For our second expansion, we worked with Ausmelt, Australia. For the third expansion from 250,000 metric tpa to 500,000 metric tpa, the technology supplier is Mitsubishi Materials Corporation, Japan. All the critical process equipment for the smelters is supplied by the respective technology suppliers. Various other equipment have been supplied by leading international and Indian equipment manufacturers. The sulphur content in the copper concentrate which is released during the smelting process as sulphur dioxide is converted to sulphuric acid at our sulphuric acid plant. Our sulphuric acid plant started commercial production in 1998. It has a present capacity of 735,000 metric tpa (which is expected to increase to 1,470,000 metric tpa after full ramp up to 500,000 metric tpa of copper production) and is based on the double conversion double absorption process. The plant design was provided by Monsanto Envirochem, USA. Three storage tanks are provided to store the acid. Our Copper Refinery Our copper refinery at Dahej was commissioned in May 1998 as part of our greenfield copper smelting and refining complex. Our copper refinery currently has a capacity to produce 250,000 metric tpa of copper. An additional copper refinery for 250,000 metric tpa has been built and is ready for commissioning. During fiscal 2005, we produced 217,138 metric tons of copper cathodes with the ramp up of the capacity of our copper smelter and refinery. Our copper cathode production is first used to satisfy our own copper requirements to produce continuous copper rods, which is a value-added product. The copper that remains after our internal consumption is sold to third parties, in both the domestic and export markets as copper cathode. We employ state-of-the-art technologies in the operation of our copper refinery and continuous copper rods to produce quality products and reduce our production costs, such as: 1. 2. ISA electro refining, a technology developed by Mount ISA, Australia, which is one of the most commonly used and proven processes for refining copper; and South Wire (USA) for continuous copper rods.

Precious Metal Refinery Our precious metals refinery, with technology from Wenmec, Finland, has a capacity to produce 7.5 metric tpa of gold and 75 metric tpa of silver of 99.9% purity. During fiscal 2005, we produced 5,156 kg of gold and 36,595 kg of silver. Phosphatic Fertilizers Our phosphatic fertilizer plant, located at Dahej, started commercial production in September 2000. Our phosphatic fertilizer plant has the capability of producing both dia-ammonium phosphate and NPK. As of March 31, 2005, the capacity at our phosphatic fertilizer plant was 400,000 metric tpa. Our phosphoric acid plant, also located in Dahej, started commercial production in 1999. The plant has an installed capacity of approximately 180,000 metric tpa of phosphoric acid and 735,000 metric tpa of sulphuric acid. The plant also has a fluorine recovery section, which produces hydro fluosilic acid. The phosphoric acid produced is entirely captively consumed for production of phosphatic fertilizers. Hydro fluosilic acid is sold to approved users. Our Power Plants Electricity is an important cost element for producing copper. A reliable and inexpensive supply of electricity is therefore important. Since the commencement of our operations, the power tariff from the Gujarat state grid has been high. As a result, we decided to build our own power plants. Our power plants are able to provide almost all of the electricity requirements of our smelter and a substantial portion of the electricity requirements of our refinery. The power plants operate on imported coal as well as indigenous coal. Steam from the waste heat boiler is also utilized by the steam turbine to generate power.
67

HINDALCO INDUSTRIES LIMITED


Our Key Raw Materials and Manufacturing & Operating Expenses The principal inputs for our copper business are copper concentrate, rock phosphate, ammonia and utilities (electricity, compressed air and water). We have been able to secure an adequate supply of the principal inputs for our copper production and our operations have not been significantly affected in the past from an inability to source any of these principal inputs. As a precautionary measure, we maintain a stockpile of each of the principal inputs for our copper production and coal for power generation. Depending on the amount used by our copper smelter and refineries and the lead-time required to receive the input, we maintain a stockpile of principal inputs covering approximately 30 to 40 production days. The following table sets forth a breakdown of our key raw materials and manufacturing and operating expenses for fiscal 2003, 2004 and 2005: Copper Business: Raw Material and Manufacturing and Operating Expenses Fiscal year ended March 31, 2003 (in metric tons) Power and Fuel Raw Materials: Copper Concentrate Rock Phosphate Ammonia Other Raw Materials Other Manufacturing & Operating Expenses Total Raw Material and Manufacturing & Operating Expenses
(1) Power consumed in MU

2004 (in metric tons) 410 (1) (Rs. in millions) 1,357.0

2005 (in metric tons) 515 (1) (Rs. in millions) 2,399.4

(Rs. in millions) 994.3

336 (1)

555,884 361,152 67,661

15,618.1 868.5 522.1 671.5 1,057.0

614,343 342,165 50,852

22,737.8 885.0 600.3 1,191.3 1,173.1

741,358 452,613 63,787

32,854.5 1,455.2 878.0 720.9 1,342.0

19,731.3

27,944.4

39,650.0

Copper Concentrate Copper concentrate is the principal raw material for our copper smelter. In fiscal 2005, we sourced approximately 10% of our concentrate requirement from two mines in Australia, owned through our wholly owned subsidiary Birla Mineral Resources Pty Limited. The balance is procured from various other sources. Our Copper Mines Birla Mineral Resources Pty Limited, our wholly owned subsidiary, currently owns two copper mines in Australia through its wholly owned subsidiaries Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited. The Nifty mine, located in the Great Sandy Desert region of East Pilbara in Western Australia, was acquired in March 2003 and the Mt. Gordon mine, in Queensland, Australia, was acquired in November 2003. The Nifty mine consists of an open-pit mine, heap leach pads and a solvent extraction and electrowinning, or SXEW processing plant which produces copper cathode. In fiscal 2005, the Nifty mine produced 15,826 metric tons of copper cathode. A copper sulphide deposit is located at the lower levels of the Nifty mine and we are currently developing an underground mine and concentrator to mine and process copper ore from this deposit. This project is now in an advanced stage and production of concentrate is expected to commence in the second half of fiscal 2006.
68

HINDALCO INDUSTRIES LIMITED


The Mt. Gordon mine consists of an underground and open-pit mine, a copper concentrate plant and ferric leach plant. Until recently, this operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at our operations in Dahej. For fiscal 2005, Mt. Gordon mine produced 35,135 metric tons of copper. Mining Reserves As on March 31, 2005 the Nifty mine had proven and probable copper ore reserves of 34.59 million metric tons and estimated mineralized material not in reserves of 1.5 million metric tons. The Mt. Gordon mine had proven and probable copper ore reserves of 2.30 million metric tons and estimated mineralized material not in reserves of 12.72 million metric tons as on the same period. New reserves are expected to be proved on an annual basis as drilling advances ahead of mining. Sources of Copper Concentrate In fiscal 2005 we sourced approximately 76% of our copper concentrate requirement from long term suppliers and approximately 13% from spot purchases, compared to approximately 75% and 61% from long term suppliers and 25% and 40% from spot purchases in fiscal 2004 and fiscal 2003, respectively. Long Term Agreements: In general, our long-term agreements run for a period of three to five years, and is renewable at the end of the period. Quantity of supply for each contract year is fixed at the beginning and terms like TcRc and freight differential are negotiated each year depending upon market conditions. During fiscal 2005, we sourced approximately 76% of our copper concentrate requirements through long-term agreements. Spot Purchases: We also purchase copper concentrate on a spot basis to fill any gaps in our requirements based on production needs for quantity and quality. These deals are struck on the best possible TcRc during the period and are specific for short-term supply. During fiscal 2005, we sourced approximately 13% of our copper concentrate requirements through spot purchases. Power and Fuel The electricity requirements of our copper smelter and refinery are primarily met from our own power generation. Our power plant is connected to the Gujarat state power grid for only short-term, emergency start-up electricity and to meet fluctuations in peak demand, pursuant to an agreement with the state power grid which provides for the payment of a minimum demand charge. Our coal is currently sourced from South Africa, Australia, China and India through an international competitive bidding process. Most of the coal is used for our power plant and a small portion of it is used for our smelting process. Our plant meets a majority of its coal requirements through imports. Ammonia Our ammonia is sourced from Middle East countries including Qatar and Saudi Arabia pursuant to contracts renewed on an annual basis and from Iran on a spot basis as and when required. The pricing is based on a formula and the price varies from time to time. The contract provides for minimum supply quantities with an option to increase if required. Rock Phosphate Our rock phosphate is currently sourced from Jordon and Togo pursuant to contracts renewed on an annual basis and the pricing is fixed for the year. The contract provides for minimum supply quantities with an option to increase if required. Logistics and Transport Our Port Storage and Handling Facilities Since 1999, our wholly owned subsidiary, Dahej Harbour and Infrastructure Limited, has been operating an all season jetty located next to our facilities at Dahej, which is capable of handling more than three million metric tpa of cargo. It is used to handle the import of cargo such as copper concentrate, rock phosphate, ammonia and coal for power plants and also export copper products as break bulk cargo. The jetty also has pipelines to facilitate the loading of phosphoric acid and sulphuric acid for export and import. Depending upon the need for our own cargo, the jetty can also handle commercial cargo.
69

HINDALCO INDUSTRIES LIMITED


Sales and Marketing In our copper segment we sell copper cathodes and continuous cast rods. We also sell precious metals like gold and silver, phosphatic fertilizers and other by-products like sulphurice acid. The following table sets forth our actual sales, in both tonnage and value terms, during fiscal 2003, 2004 and 2005: Copper Business: Product-wise Sales Fiscal year ended March 31, 2003 (in metric tons) Copper Copper cathodes Continuous cast rods Precious metals Gold Silver Phosphatic fertilisers Other by-products Sulphuric Acid Domestic Sales Export Sales
(1)
(1)

2004 (in metric tons) (Rs. in millions)

2005 (in metric tons) (Rs. in millions)

(Rs. in millions)

105,316 77,134

9,051.8 8,166.7

101,033 91,537

10,486.8 11,265.9

126,451 87,924

17,965.5 14,773.6

6 31 346,013

2,910.7 224.5 3,403.8

7 32 260,022

3,770.2 269.9 3,492.5

5 35 302,436

3,205.3 352.2 4,181.7

176,341

160.7 16,134.6 7,806.6

194,559

277.3 18,537.4 11,101.6

268,592

434.4 22,985.7 18,322.6

Includes trade sales and miscellaneous items, but excludes Net Export Incentives & Miscellaneous Receipts & Claims.

Sales of Our Copper Products Our copper sales and marketing head office is located in Mumbai. Continuous cast rod sales at Rs.14,773.6 million amounted to approximately 45% of our total copper sales for fiscal 2005 compared to 52% in fiscal 2004 with the remaining being accounted for by copper cathodes. During fiscal 2005, we sold approximately 82,304 metric tons of copper in India. Domestic sales are normally conducted on the basis of a fixed price for a given month that we determine from time to time on the basis of average LME price for the month, as well as domestic supply and demand conditions. The price for copper we sell in India is normally higher than the price we charge in the export markets due to the tariff structure on costs, smaller order sizes that domestic customers place and the packaging, storing and truck loading expenses that we incur when supplying domestic customers. For domestic sales of copper, contracts are finalized for monthly quantities, monthly optional quantities, quotational period, premium and pricing methodology. Our export sales of copper are made on the basis of both long-term sales agreements and spot sales. The sales price of our copper exports includes the LME price plus the producers premium. We do not enter into fixed price long-term copper sales agreements with our customers. Rather, the price is based on LME price for the agreed quotational period plus an agreed premium. Typically, during the last three months of each year, we negotiate with our long-term customers a schedule for shipments with quantity for each period, the premium and the quotational period. Each year we set aside a certain portion of our copper production for sales in the spot market as a precautionary measure. This allows us to fulfill delivery obligations under our long-term sales agreements in the event of a disruption in our production, as well as to take advantage of sudden and unpredicted price surges in the global copper market. We believe that this practice is consistent with the standards adopted by other established exporters of copper. When not otherwise
70

HINDALCO INDUSTRIES LIMITED


used to cover our long-term sales agreements, we sell this reserved amount on the spot market. We are constantly in touch with our customers for availability of spot quantity and also receive enquiries for the same from time to time. We submit quotations, setting forth the quantity and delivery time of an allotment. We award the contract based on agreement of best possible terms. Delivery is generally made within 30 to 90 days. Most of our copper export sales are supported by an irrevocable letter of credit issued by a mutually agreeable financial institution prior to shipment. Our copper domestic sales are mostly paid for in full by the customer or are supported by an irrevocable letter of credit or bank guarantee issued by a mutually agreeable financial institution prior to our releasing the copper from our refinery, including interest for the period if credit is agreed upon. All payments by our domestic customers are in Indian Rupees and payments by our overseas customers are normally in U.S. Dollars. In certain cases where we have a long-term relationship with the export customer, we may agree for payment against dispatch documents including bill of lading which is generally received within 15 days. However, we generally do not allow two shipments for which payment is pending from a specific customer. Delivery for all supplies is generally effected within the agreed time period. However, from time to time, delivery period adjustments may be made on mutual agreement. During fiscal 2005, we sold 5,300 kilograms of gold and 34,900 kilograms of silver. The sale of gold and silver takes place from our Mumbai office to various jewellers and precious metal private traders. Sales are made on the basis of international bullion market prices prevailing on the day of the sale plus premiums or discounts as agreed. Payments for gold and silver sales are collected in advance prior to dispatch from Dahej. Our phosphatic fertilizer products are sold through private trade, cooperative societies and government institutions. Our primary marketing zones are the states of Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Punjab and Haryana. During the fiscal year 2005, we sold 302,436 metric tons of phosphatic fertilizers amounting to Rs. 4,181.7 million in revenues. Sulphuric acid produced is partially used in our phosphoric plant and the balance is sold to various companies and traders on both one year contracts and spot sales on the basis of price lists published from time to time depending on market conditions. During fiscal 2005, we sold 268,592 metric tons of sulphuric acid amounting to Rs. 434.4 million. Competition For our primary refined copper sold in India, our competitors are Sterlite Industries Limited and Hindustan Copper Limited. In the export market we compete with global copper suppliers. For gold and silver, we compete primarily with importers of these metals. For phosphatic fertilizers, we compete with numerous domestic producers, certain of which have larger capacities to service marketing focus areas. For sulphuric acid, we compete with a few domestic sulphur burning acid producers and one large domestic metal-based acid producer. Key Technology Arrangements We use a variety of technologies in relation to our copper business for which we have entered into technical know-how and technical assistance and services arrangements. For the conversion of copper concentrate into anode we entered into the following key arrangements: 1) 2) License agreement dated November 12, 1994 with Outokumpu Engineering Contractors OY of Finland for Flash Smelting Process for the Copper I smelter at Dahej. License agreement dated September 5, 2001 with Ausmelt Limited of Australia for grant of license for the use of the submerged lance smelting technology in the Copper II smelter at Dahej and provision of related technical information and advisory. License agreement dated October 11, 2002 with Mitsubishi Materials Corporation of Japan for grant of license for the use of the Mitsubishi Continuous Smelting and Converting Process in the Copper III smelter at Dahej and provision of related technical information and advisory.

3)

We entered into a license agreement with MIM Technology Marketing Limited of Australia dated December 20, 1994 through Outokumpu Engineering Contractors OY for the use of the ISA process which is used in the conversion of copper anode into copper cathode. The agreement covered supply of the entire engineering
71

HINDALCO INDUSTRIES LIMITED


package including the provision of related information and services. On July 22, 1995 we entered into an agreement with M/S. Southwire Company of the USA for supply of license, basic engineering know how and training relating to the establishment of our continuous cast copper rod plant at Dahej. In addition to the above we also entered into the following key arrangements in relation to the by-products of our copper business: 1) 2) 3) 4) Agreement dated July 7, 1999 with Outokumpu Wenmec OY of Finland for supply of equipment and commissioning of our precious metals refinery at Dahej with technological guarantees. License agreement dated November 12, 1994 with Outokumpu Engineering Contractors OY of Finland for use of Monsanto technology in the sulphuric acid plant. Agreement dated July 20,1995 with SNC Lavalin Europe N.V. for provision of proprietary equipment relating to the phosphoric acid plant at Dahej. License and know how agreement dated October 22, 1999 with INCRO S.A of Spain for use of INCRO technology in the phosphatic fertilizer plant at Dahej.

Expansion Projects We have recently completed the capacity expansion of our copper smelters to 500,000 metric tpa. We expect the full ramp up of the capacity to be achieved by fiscal 2007. We may acquire additional copper mines as and when we identify appropriate ones. We have not currently identified a suitable mine for acquisition.

Quality Assurance
We believe that the quality of our products and processes are integral to our position as one of the leading metals and mining companies in Asia and to our ability to retain and attract customers. We utilize modern systems to achieve this level of quality in our processes, as well as to monitor and maintain peak performance throughout the life of our operations. As a part of on-going efforts to attain continuous quality improvement, we employ several on the job quality improvement initiatives. All our aluminium plants are ISO 9001 and 14001 certified, and several have attained the OHSAS 18001 the occupational health and safety certification. On the export front, our aluminium business has been accorded a Trading House status by the Indian government. Effective January 30, 2003, the London Metal Exchange listed our copper business as a Grade A copper brand. Our copper business has also been accredited with ISO 9001, ISO 14001 and OSHAS 18001 certifications. We have received several awards and recognitions for our best practices including the Best Safety Performing Plant award given by the International Aluminium Institute in 2004, the Rajiv Gandhi National Quality Award 2003 in Large-Scale Manufacturing category, award by the Bureau of Indian Standards and the IMC Ramakrishna Bajaj National Quality Award 2004 in the manufacturing category.

Pricing and Risk Management


Our businesses are exposed to commodity price, foreign exchange and interest rate risks. We are subject to LME price fluctuations of aluminium, copper and gold and silver, fluctuations in the exchange rates of Indian Rupees to the U.S. Dollar, as well as the Japanese Yen, the Euro and the Australian Dollar, and volatility in interest rates (primarily in Indian Rupees but also for certain other currencies). We use a variety of tools to hedge these risks, including swaps and options (for commodity price risks), forwards, options and dollar loans (for foreign exchange risks) and derivative transactions (for interest rate risks). We have established a risk management framework to evaluate and monitor risks and returns in order to protect budgeted earnings and costs and reduce earnings volatility, thereby increasing shareholder value. Our Board of Directors has ultimate responsibility for approving all risk management policies and guidelines, setting risk limits and risk appetites, and ensuring that we establish effective risk management systems and procedures in line with applicable standards. Our Board of Directors has set up the Risk Management Board to assist in managing the various risks that we face. This board is assisted by the Price Management Committee and the following operational departments: the front office, back office and a compliance officer, who measure and monitor our risk profile and implement our risk policies and procedures on a day-to-day basis.
72

HINDALCO INDUSTRIES LIMITED


Our Risk Management Board is headed by our Managing Director and consists of a member of the Board of Directors, our Chief Financial Officer, the heads of various businesses. The board meets as necessary to evaluate perceived risks and to discuss reports from the Price Management Committee. Our Price Management Committee approves all absolute price-risk hedging proposals, evaluates our prevailing price risk exposures, reviews outstanding transactions and proposals and considers industry events and price expectations. Our front office is primarily responsible for executing trades. Our back office is a completely independent and separate department which confirms and reconciles all transactions, ensures compliance with our risk management policies and monitors outstanding hedging transactions. In addition to the foregoing control, we also have the following safeguards: approval for transaction limits are set only by the Risk Management Board, our commodity hedging transactions are conducted only with approved LME brokers, there is a monthly reconciliation between physical metal and LME positions, periodic reviews and audits are undertaken by our compliance officer and an external risk management expert, an annual audit is undertaken by our internal auditor and we document the risk management objective and policy for every transaction. Our currency and interest rate derivate transactions are conducted through reputed banks.

Research and Development


In aluminium, we currently operate two research and development centers at Belgaum and Taloja. Our Belgaum research and development facility undertakes product development and application research in the areas of Bayer process technology, special alumina and hydrates. Our value-added operations facilities are supported by a government-recognized research and development center which is located at our Taloja plant. This center works in the areas of lubrication, metallurgy and testing of various types of oils which are crucial to our valueadded operations. This laboratory is accredited to ISO 9001:2000, Quality Management and ISO 17025:1999, NABL accreditation for chemical and electrical testing of oils and lubricants. The results of our research and development efforts have helped us in continuous improvement in process efficiencies, cost reduction as well as development of new applications and increased customer acceptance, both in the domestic and overseas markets. In copper, we engage in research and development for improvement in efficiencies, productivity, environment and quality as well as through-put in furnaces. Our total expenditures for research and development was approximately Rs.19.1 million, Rs.40.9 million and Rs.92.4 million for fiscal 2003, 2004 and 2005, respectively.

Patents and Trademarks


We currently hold the following patent:

Patent No. 186716 dated January 12, 1992: A process for preparing cryolite by extracting flourine from spent pot filters. The patent is due to expire on January 16, 2012.

We have applied for the following patent in 2001:

Patent No. 401/MUM/2001: A process for an alumina conveying system.

We have also invested significant resources to establish and develop brands for our value-added products aimed at consumer markets: With the exception of Superwrap, which is a registered trademark, we have filed the brands for registration and approval with the relevant Indian authorities.

73

HINDALCO INDUSTRIES LIMITED


Serial Number 1. Trademark Hindalco Products Group mark signifying all available goods and services (i) word mark; (ii) slogan in four languages and (iii) bag cover and (iv) devise mark for chemicals used in agriculture, horticulture, manure, forestry, herbicides and for food preservation (i) word mark; (ii) label mark of standard pack; (iii) label mark of colours pack and (iv) label mark of popular pack (i) slogan showcasing aura wheels; (ii) banner showcasing aura wheels; (iii) mark with the letter A Status Pending: Application has been filed. Examination report and reply by the Company have been filed Pending: Application has been accepted. Examination report and reply by the Company have been filed

2.

Birla Balwaan

3.

Freshwrapp

Pending: Application has been accepted and correspondence number allotted but no examination report has been filed. Pending: Applications have been accepted For: (i) Correspondence number is allotted but no examination report has been received. (ii) Letter of acceptance before advertisement has been issued (iii) Examination report and reply by the Company have been filed Registered (in the name of Indal) : Registration No. 418944 issued on August 11, 1990; The registration is renewed till March 12, 2015 Registered (in the name of Indal) : Registration No. 529859B issued on May 17, 1990; The registration is renewed till March 17, 2014

4.

Aura

5.

Superwrap

Word mark for household foil

6.

MaxLoader

Word mark for body framework of truck

Employees
We believe that our success is significantly dependent on our ability to attract, develop and retain a superior workforce. We had a total of 13,752 employees at the end of fiscal 2003, 13,675 employees at the end of fiscal 2004 and 19,687 employees as of March 31, 2005. We expect that the number of our employees will increase as we complete our expansion projects. We believe that our relationship with our employees is good. In addition to our full-time employees, we retain contract workers to assist us in various aspects of our business. The terms of engagement for our contract workers are different than that of our full time employees. Recruitment. Our recruitment focuses on attracting and retaining high caliber individuals who are motivated to advance within the organization and meet our evolving needs. We follow all modes in the recruitment approach i.e. press advertisement, campus recruitment, search through consultants, special recruitment drives and headhunting agencies. The qualifications depend upon the job profile and vary from BTech / BE, MSc (pure sciences), MCS, MCA, MTech & PhD for technical grades to MBA and degrees with specific specializations for administrative grades. Primary consideration is given to qualifications, knowledge, skills and personal qualities, including the capacity to adapt and evolve over the longer term and the demands of the role to determine suitability. The selection of candidates is generally conducted by an interview panel, which evaluates the qualifications and suitability of candidates.
74

HINDALCO INDUSTRIES LIMITED


Training. The overall objectives of our training programs are to upgrade the skills of our employees so they can handle broader tasks to better utilize our existing resources. We believe that our emphasis on training and development helps our employees meet business challenges effectively. During fiscal 2003, 2004 and 2005, our employee turnover rate was only 7.82%, 9.57% and 13.75%, respectively. Union representation. Approximately 65% of our employees in our aluminium business are unionized. We have entered into long-term agreements with terms of between three and five years with recognised unions at various locations. These agreements provide for standard terms and conditions of workers, including compensation, benefits and working hours. Our copper business employees are not members of any unions. Instead, management meets with the employees regularly and resolves all issues to mutual satisfaction. Our industrial relations are cordial. We have not experienced any major disruptions in the last decade, due to work strikes or work stoppages at any of our major facilities. Compensation. The remuneration package of our full-time employees is established in a systematic manner. The standard remuneration package for our full-time employees includes a:

salary, which is increased in line with the performance of our business; bonus tied to our performance, the specific business unit in which the employee reports and individual performance; various allowances and welfare benefits, including medical care, housing subsidies, child care and education, retirement and other social security benefits; and provident fund, pension fund and gratuity.

Annual compensation reviews are based on external factors, such as economic growth, sectoral growth and demand and supply of skills and competencies, and internal factors, such as business performance, capacity of the business to pay as well as a performance grid for employees. We have a variable pay scheme for our managerial staff to recognize and reward superior performance. We do not have an employee stock option plan. Community development. We actively participate in the operation of schools and hospitals at our various locations and all our employees at those locations are entitled to access these facilities. We are also at the forefront of various community development activities. At certain locations, our employees are also involved in facilitating and nurturing self-help organizations in remote villages located close to our manufacturing facilities.

Environmental Matters
We are committed to the protection of the environment and have a well-drawn out environmental management strategy in place. All our installations are ISO 14001 certified and most are also OHSAS 18001 certified. We have installed state-of-the-art pollution control equipment to ensure cleaner operations at all our units. Similarly, in order to reduce effluent discharge, we have set-up effluent treatment systems in all our units. We have also undertaken several unique projects on an experimental basis jointly with local entrepreneurs for converting hazardous waste into useful products. A well equipped environment management cell has been established with qualified personnel to oversee our environmental activities and projects. This cell is supported by sophisticated control laboratories set up to constantly monitor the quality of air emissions and water effluents at our facilities. We have received several awards and recognitions for our contribution to environmental conservation and safety including the CII National Award for Excellence in Energy Management - 2004, National Energy Conservation Award - 2004 in the Aluminium Sector and Green Tech Gold Award 2003-04. We are subject to national and provincial environmental regulations which control waste discharge, land repair, emissions disposal and mining control. We believe that our operations are in compliance with the present regulatory requirements. We spent approximately Rs.1,771 million on pollution control equipment during fiscal 2005 and plan to spend an additional Rs.2,924 million within a span of 3 years. The Government of India, however, may impose stricter regulations or increase its enforcement activities which could require us to spend additional amounts on
75

HINDALCO INDUSTRIES LIMITED


environmental compliance. We have been subject to some environmental claims. For more details see Outstanding Litigation and Defaults on page 208 of this Letter of Offer.

Insurance
We currently maintain insurance coverage on our property and plants, our fixed assets, our transportation vehicles and various assets that we consider to be subject to significant operating risks. The risk coverage is decided in a scientific manner taking help of experts from the Insurance and Risk Advisory Services industry. We paid Rs. 365.0 million in fiscal 2005 towards insurance charges compared to Rs.335.3 million in fiscal 2004. The employees at all our locations are covered against the risks of accident in the work place as per the laws of the land. Further, the company maintains hospitals at some locations to extend medical facilities to its employees and in other locations, the employees are covered by suitable health insurance schemes. See Risk Factors Our insurance does not cover all of the risks we face, and the occurrence of events that are not covered by our insurance could cause us losses, which if significant, could adversely affect our financial condition.

76

HINDALCO INDUSTRIES LIMITED REGULATIONS AND POLICIES


Indian Regulations
We are governed by the Mines and Minerals (Development and Regulations) Act, 1957, or MMDR Act, and the Mineral Concession Rules, 1960, or MCR Rules, in respect of mining rights and the operations of mines in India. The Government of India announced the National Mineral Policy, 1993, and has also made subsequent amendments to the National Mineral Policy, 1993 to reflect principles of sustainable development. The MMDR Act and the MCR Rules have been amended from time to time to reflect the National Mineral Policy. Mining leases are granted under the MMDR Act, which was expressly enacted to provide for the development and regulation of mines and minerals under the control of the Union of India. A mining lease must be executed with the relevant state government. The mining lease agreement governs the terms on which the lessee can use the land for the purposes of mining operations. If the land on which the mines are located belongs to private parties, the lessee would have to acquire the surface rights from such private party. If such private party refuses to grant such surface rights, the lessee is to inform the same to the State Government and deposit the compensation for the acquisition of the surface rights with the State Government, and if the State Government deems that such amount is fair and reasonable, then the State Government will order the private occupier to permit the lessee to enter the land and carry out such operation as may be necessary for the purpose of the mining lease. For determining compensation to be paid to such private party, the State Government is guided by the principles of the Land Acquisition Act. In case of Government Land, the surface right to operate in the lease area is granted by the Government upon application and as per the norms of that State Government. Surface rights of private land can also be directly negotiated with the owner and the rights obtained. If the mining operation in respect of any mining lease leads to a displacement of people, the mining project can become functional only after obtaining the consent of such affected persons and the resettlement and rehabilitation of the persons displaced by the mining operations and payment of other benefits is required to be carried out in accordance with the guidelines of the relevant state governments, including payment for the acquired land, owned by those displaced persons. Applications for a mining lease and a prospecting license has to be made to the concerned state government, containing certain mandatory details in accordance with the MCR Rules. In respect of bauxite, coal and other minerals listed in the First Schedule of the MMDR Act, prior approval of the Government of India is required to be obtained by the State Government for entering into the mining lease. The approval of the Government of India is granted on the basis of the recommendations of the state governments, though the Government of India has the discretion to overlook the recommendation of the state Governments. On receiving the clearance of the Government of India, the state government grants the final mining lease and/or the prospecting license, as the case may be. The lease can be executed only after obtaining the mine plan approval and mine closure plan approval from the Indian Bureau of Mines (IBM). In case of coal this plan is approved by Ministry of Coal, Government of India. In case if forest lands are involved, the mining lease can be executed only after obtaining the forest clearances as per Forest Clearance (Conservation) Act, 1980. The mine can be operational only when the project (>5 Ha area) receives the Environment Clearance from the Ministry of Environment and Forest, Government of India. The maximum term for which a mining lease may be granted is 30 years. A mining lease may be renewed for further periods of 20 years or for a lesser period as per the request of the lessee. In respect of coal, prior approval of the Government of India is required for any renewal. The renewals are subject to the lessee not being in default of any applicable laws (including environmental laws). The MMDR Act provides that if the holders of a mining lease are using the mineral for their own industry, then such holder would be entitled to a renewal of his mining lease for a period of 20 years unless he applies for a lesser period. The lessee has to apply to the relevant state government for renewal of the mining lease at least one year prior to the expiry of the lease. However, the State Government can condone the delay in submitting an application for renewal of a lease provided that the application is made before the expiry of the lease. In the event that the State Government does not pass any orders in relation to an application for renewal prior to the expiry of the lease, the lease will be deemed to be extended till the State Government passes its orders on such application for renewal. A prospecting license for any mineral or prescribed group of associated minerals is granted for a maximum
77

HINDALCO INDUSTRIES LIMITED


period of three years and for a maximum area of 25 square kilometers. A prospecting license can be renewed in such a manner that the total period for which a prospecting license is granted does not exceed five years. In a state (province), a person can be granted a maximum area of 25 square kilometers in one or more prospecting license, but if the Government of India is of the opinion that in the interest of development of any mineral it is necessary to do so, the maximum area limit can be relaxed. A person may obtain a prospecting license in various states simultaneously up to the state-wide area limits. However, a person acquiring a prospecting license in the name of another person that is intended for himself shall be deemed to be acquiring the prospecting license for himself and the limits would apply accordingly. The person who undertakes prospecting under a prospecting license enjoys preferential right for the grant of the mining lease. The MMDR Act also deals with the measures required to be taken by the lessee for the protection of environment from any adverse effect of mining. The rules framed under the MMDR Act provide that every holder of a mining lease shall take all possible precautions for the protection of the environment and control of pollution while conducting mining operations in the area. The environmental protection measures that are required to be taken in any mining operation includes, among others, prevention of water pollution, measures in respect of surface water, total suspended solids, ground water pH, chemicals and suspended particulate matter in respect of air pollution, noise levels, slope stability and impact on flora/fauna, local habitation etc. Royalty Payable Royalty on the mineral-mine and a dead rent component are payable to the state government by the lessee in accordance with the MMDR Act. The mineral- royalty is payable in respect of an operating mine that has started dispatching and is computed in accordance with a formula stipulated in this regard. The Government of India has broad powers to change the royalty scheme but cannot do so more than once every three years. In September 2000, the central government changed the nationwide bauxite royalty scheme from a fixed fee to a variable fee formula, which was further revised upwards in October 2004 under the same formula. This formula takes into account LME aluminium price and percentage of aluminium in bauxite. In addition, the lessee will be liable to pay the occupier of the surface of the land over which he holds the mining lease an annual compensation determined by the State Government, which varies depending on whether the land is agricultural or non-agricultural. Compliance with other applicable laws: We are also required to obtain clearances under the Environment (Protection) Act, 1986, the Forest (Conservation) Act, 1980, if any forest land is involved, and other environmental laws such as the Water (Prevention and Control of Pollution) Act, 1974, Water (Prevention and Control of Pollution) Cess Act, 1977 and Air (Prevention and Control of Pollution) Act, 1981, before commencing the operations of the mines. To obtain an environmental clearance, a no-objection certificate from the concerned state pollution control board must first be obtained, which is granted after a notified public hearing, submission and approval of an environment impact assessment, or EIA report and an environment management plan, or EMP by the person as well as the mines. The EIA report spells , out all the operating parameters, including, for example, the pollution load etc. as well as their mitigative measures for that particular mine. Mining activity within a forest area is not permitted in contravention of the provisions of the Forest (Conservation) Act, 1980. The final clearance in respect of both forest and environment is given by the Government of India, through the Minister of Environment and Forest. However, all applications have to be made through the respective state governments who then recommend the application to the Government of India. The penalties for non-compliance range from closure or prohibition of mining activity in respect of the mines as well as the power to stop supply of energy, water or other service and monetary penalties on and imprisonment of the persons in charge of the conduct of the business of the company in accordance with the terms of the Environment (Protection) Act, 1986 and Forest Conservation Act, 1980. Water (Prevention and Control of Pollution) Act, 1974 A lessee is also required to comply with the provisions of the Water (Prevention and Control of Pollution) Act, 1974, which aims at the prevention and control of water pollution as well as restoration of water quality, through the establishment of state pollution control boards. Under the provisions of this act, any individual, industry or institution discharging industrial or domestic wastewater is required to obtain consent of the state pollution
78

HINDALCO INDUSTRIES LIMITED


control board. The consent to operate is granted for a specific period after which the conditions stipulated at the time of granting consent are reviewed by the state pollution control board. Even before the expiry of the consent period, the state pollution control board is authorized to carry out random checks on any industry to verify if the standards prescribed are being complied with by the industry. If the standards are not being complied with, the state pollution control board is authorized to serve a notice to the concerned person. In the event of noncompliance, the concerned state pollution control board may close the mine or withdraw its water supply to the mine or cause magistrates to pass injunctions to restrain such polluters. Water (Prevention and Control of Pollution) Cess Act, 1977 Mining is a specified industry under the Water (Prevention and Control of Pollution) Cess Act, 1977 and a lessee is required to pay the surcharge as stipulated under the terms of the Water (Prevention and Control of Pollution) Cess Act, 1977. The assessing authority on the state level levies and collects the surcharge based on the amount of water consumed by such industries. The rate is also determined by the purpose for which the water is used. Based on the surcharge returns to be furnished by the industry every month, the amount of cess is assessed by the relevant authorities. A rebate of up to 25% on the surcharge payable is available to those industries who consume water within the quantity prescribed for that category of industries and who also comply with the effluents standards prescribed under the Water Act or the Environment (Protection) Act. A lessee can draw water from bore wells or from water harvested in open pits within the lease area. However, a surcharge under the Water (Prevention and Control of Pollution) Cess Act, 1977 is to be paid by the lessee to the state governments of the states in which the mines are located. Air (Prevention and Control of Pollution) Act, 1981 A lessee is also required to comply with the provisions of the Air (Prevention and Control of Pollution) Act, 1981, under which any individual, industry or institution responsible for emitting smoke or gases by way of use as fuel or chemical reactions must apply in a prescribed form and obtain consent from the state pollution control board prior to commencing any mining activity. The board is required to grant consent within four months of receipt of the application. The consent may contain conditions relating to specifications of pollution control equipment to be installed. For ensuring the continuation of the mining operations, a yearly consent certification from the state pollution control board is required both under the Air (Prevention and Control of Pollution) Act, 1981 and Water (Prevention and Control of Pollution) Act, 1974, as discussed above.

79

HINDALCO INDUSTRIES LIMITED HISTORY OF OUR COMPANY AND OTHER CORPORATE MATTERS
Our Company is a flagship company of the Aditya Birla Group and was incorporated on December 15, 1958 as Hindustan Aluminium Corporation Limited under the provisions of the Act with its registered office at Industry House, 6th floor, 159 Churchgate Reclamation, Mumbai 400 020, India. We moved our registered office to Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025, India effective from September 1, 1970.We changed our name from Hindustan Aluminium Corporation Limited to Hindalco Industries Limited on October 9, 1989, as we had expanded our line of products and also proposed to diversify into other allied fields including aluminium foils, steel plant etc. The Equity Shares of our Company with face value of Rs. 10 each were first listed on BSE. The listing agreement was signed with BSE on January 28, 1960. Thereafter, the Equity Shares with face value of Rs. 10 each were listed on the NSE. In 1962 we set up collaboration with Kaiser Aluminium & Chemicals Corporation, USA when our integrated complex at Renukoot came on stream with a smelter capacity of 20,000 MTPA. It has since grown to become the largest integrated aluminium producer in India with a smelter capacity of 345,000 MTPA. Our equity shareholders and the equity shareholders of Renusagar Power Company Ltd. (Renusagar) approved a Scheme of Amalgamation of Renusagar into our Company, wherein all the assets of Renusagar were merged into our Company. The Scheme was sanctioned by the High Court of Judicature at Bombay on April 22, 1993 and by the High Court of Allahabad. Our Company has undergone in-house expansions and modernization and set up a Foil & Wheel plant at Silvassa, near Mumbai, in 1997-98. In the year 2000-01, our Company acquired a 74.6% stake in the Indian Aluminium Company Limited (Indal). Established in 1938, Indal started with Indias first aluminium sheet rolling mill at Belur, near Kolkata, West Bengal. Indal had a nationwide spread of plants and mines, operating through all stages of the aluminium value chain from bauxite mining, alumina refining, aluminium smelting with captive power to downstream sheet and foil rolling and extrusions. The countrys first scrap recycling facility was commissioned by Indal and reflected its commitment to promoting aluminium as the eco-friendly metal that can be recycled over and over again, consuming less power and conserving natural resources. After increasing our stake in Indal from 95.9% to 96.5% at an additional cost of Rs. 49.9 million, through an open offer made in accordance with regulatory requirements, on August 23, 2004, our Board and the Board of Directors of Indal approved a Scheme of Arrangement wherein all the assets of Indal other than the foil unit at Kollur in Andhra Pradesh were to be demerged from Indal and merged into our Company. The Scheme has already been approved by the requisite majority of the shareholders and creditors of both the companies and also sanctioned by the High Court of Judicature at Bombay and the High Court at Calcutta on January 14, 2005 and December 23, 2004 respectively. Simultaneously the capital reduction of the equity shares of Indal from Rs. 10 to Rs. 2 for per equity share was also approved by the High Court at Calcutta on December 23, 2004. Pursuant to the Scheme, Hindalco issued shares to the minority shareholders of Indal in the ratio of one share of Rs. 10 each in Hindalco, credited as fully paid up for every seven equity shares of Rs. 2 each held by the minority shareholder in Indal. The Indal shareholders will continue to hold their shares in Indal. Hindalcos current share in the remaining Indal is 96.98%. The Scheme was made effective from March 7, 2005, and the appointed date was April 1, 2004. Indals strength in downstream operations supplements our operations and as a consequence, we now enjoy a 33% market share in primary aluminium metals and 63% market share in the value-added rolled product segment. Meanwhile, our equity shareholders and the equity shareholders of Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) approved a Scheme of Arrangement between IGCL, IGFL and our Company in fiscal 2003, wherein the fertilizer business of IGCL was demerged and migrated to IGFL and the remaining business of IGCL (including its copper business) was merged with our Company. The scheme was sanctioned by the High Court of Judicature at Bombay and by the High Court of Lucknow. Pursuant to the Scheme, the Company issued shares to the minority shareholders of IGCL in the ratio of one share of Rs. 10 each in the Company, credited as fully paid up for every twelve equity shares of Rs. 10 each held by the minority shareholder in IGCL. The Scheme was made effective from February 12, 2003 and the appointed date being April 1, 2002. Subsequently, with a strategic intent to achieve vertical integration, the copper business of Hindalco acquired two captive copper mines in Australia Nifty mine located in the Great Sandy Desert region of East Pilbara in Western Australia, and Mount Gordon mine, in Queensland. The Nifty mine was purchased through acquisition of Straits Nifty Pty Ltd. (Later renamed to Birla Nifty Pty Ltd. with effect from March 10, 2003) from Straits
80

HINDALCO INDUSTRIES LIMITED


Resources Pty Ltd. in March 2003; and the Mt. Gordon copper mine was acquired from the Receivers and Managers of Western Metals Copper Ltd. in November 2003. Hindalcos subsidiary Birla Minerals Resources Pty Ltd. was used as a vehicle to acquire the two mines. As on the date of filing this Letter of Offer, our Promoters hold 4,025,760 Equity Shares of Re. 1 each representing 0.43 per cent of our pre-Issue equity (issued capital) and the Promoter Group holds 236,010,720 Equity Shares of Re. 1 each of our Company representing 25.44 per cent of our pre-Issue equity (issued capital). As on the date of filing this Letter of Offer, out of the nine Directors on our Board, two directors represent the Promoters and promoter group, one is an executive director, three are non-executive directors and three are independent directors.

Objects of our Company


Our objects as contained in our Memorandum of Association include 1. To manufacture and/or produce and/or otherwise engage generally in the manufacture or production of or dealing in alumina, aluminium and aluminium products and by-products and the sale dealing or other disposition of alumina, aluminium and aluminium products and by-products and to do all acts and things necessary or required in the premises. To conduct and carry on any business relating to electro-chemical products and metals, including aluminium and sodium, and their alloys, including the production or manufacture of and trading and/or sale or dealing in such products and metals.

2.

Changes in our Memorandum of Association


During the last ten years, the following changes have been made to our Memorandum of Association: Date of shareholder approval Changes August 2, 1995 Increase in authorized capital of the Company from Rs. 750 million to Rs. 1500 million, vide an increase in the authorised equity capital of the Company from Rs. 700 million divided into 70 million Equity Shares of Rs. 10 each to Rs.1,450 million divided into 145 million Equity Shares of Rs. 10 each. Consequent to subdivision of Equity Shares from face value Rs. 10 to Re. 1, change in the authorised share capital of the Company from 145 million Equity Shares of Rs. 10 each to 1450 million Equity Shares of Re. 1 each and 500,000 (Five Lacs) Redeemable Cumulative Preference Shares of Rs. 100 each (Rupees One Hundred Only) each carrying an appropriate rate of dividend as may be permitted at law.

August 6, 2005

The details of the capital raised by our Company are given in the section entitled Capital Structure on page 15 of this Letter of Offer.

Summary of Key Agreements


We have detailed below the key provisions of certain agreements for acquisitions, strategic investments and divestments. Our Acquisitions and Strategic Investments 1. On January 11, 2000, Indal, Hydro Aluminium a.s. (Hydro) and Utkal Alumina entered into a shareholders agreement for the purpose of regulating the relationship between the shareholders of Utkal Alumina. On July 3, 2003 Hydro sold its entire shareholding interest in Utkal Alumina to Alcan Inc (Alcan) and Indal. Further, Alcan sold a part of its shareholding in Utkal Alumina to Indal pursuant to agreements among Alcan, Indal and Hydro dated December 5, 2002 and among Alcan, Indal and Utkal Alumina of the same date. Pursuant to the scheme of amalgamation between Indal and the Company, which became effective from March 7, 2005, all business of Indal (except the aluminium foils business in Andhra Pradesh) were transferred to the Company, including all of Indals shareholding in Utkal Alumina. The Company, Alcan and Utkal Alumina have since entered into an amended and restated shareholder agreement dated April 18, 2005 to amend the previous shareholders agreements in respect of Utkal Alumina and to regulate the relationship
81

HINDALCO INDUSTRIES LIMITED


among the shareholders and the manner in which Utkal Alumina is to be managed. 2. The Company entered into a sale agreement dated January 24, 2003 with Straits Resources Limited, which as amended and supplemented by the adherence deed dated March 6, 2003 between Straits, Hindalco and Birla Mineral Resources Pty Ltd. The agreements were entered into for purchase of all the shares held by Straits Resources Limited in Straits (Nifty) Pty Ltd. by Birla Mineral Resources Pty Ltd. Straits Resources Limited and Birla Mineral Resources Pty Ltd. have also entered into a Settlement and Release deed to settle any disputes that the parties had or may have in the future in respect of the aforesaid purchase of shares.

Our Joint Ventures 1. The Company, entered into an agreement with the Tamil Nadu Industrial Development Corporation (TIDCO) on October 4, 1980 to establish a joint venture company for the manufacture of aluminium fluoride. Pursuant to this agreement, the Company and other companies in the Aditya Birla Group have made investments in Tanfac Industries Limited (formerly Tamil Nadu Flourine and Allied Chemicals Limited). The Company is a party to the shareholders agreement dated December 15, 2000 entered into between the AT&T Wireless Group, the Aditya Birla Group and the Tata Group. Subsequently, the Cingular Wireless Inc. has acquired the AT&T Group. This agreement records the rights and obligations of the parties in relation to the joint venture company formed pursuant to the agreement viz., Idea Cellular Limited.

2.

82

HINDALCO INDUSTRIES LIMITED DIVIDENDS


We have been a dividend paying company and have paid dividends in each of the last 15 years. We expect to continue to pay dividends in the future. The following are the dividend payouts in last five years by our Company: Financial Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
(1) Excluding dividend tax where applicable

Dividend per Equity Share of Rs. 10 each (Amount in Rs.) 12.00 13.50 13.50 16.50 20.00

Amount (Rs. in millions)(1) 893.59 1,005.21 1,248.42 1,525.84 1,855.61

83

HINDALCO INDUSTRIES LIMITED MANAGEMENT


Board of Directors
The following table sets forth details regarding our Board of Directors as on November 18, 2005: Name, Designation, Address, Occupation and Term 1. Dr. Kumar Mangalam Birla Designation: Chairman (Non-executive) 16-A, IL-Palazzo, Little Gibbs Road, Mumbai 400 006 Maharashtra Occupation: Industrialist First appointed on November 16, 1992 Nationality Indian Age (years) 38 Other Directorships in Indian companies Indian Public Limited Companies: 1. Aditya Birla Nuvo Ltd (formerly Indian Rayon & Industries Ltd.) 2. Grasim Industries Ltd. 3. Indo Gulf Fertilisers Ltd. 4. Indian Aluminium Company,Ltd. 5. Birla Sun Life AMC Ltd. 6. Birla Sun Life Insurance Company Ltd. 7. Tata Steel Ltd. 8. Ultra Tech Cement Ltd. 9. Maruti Udyog Ltd. 10. PSI Data Systems Ltd. 11. Aditya Birla Management Corporation Ltd. 12. Transworks Information Services Ltd. 13. Essel Mining & Industries Limited Indian Private Limited Companies: 1. Trapti Trading & Investments Pvt. Ltd. 2. Turquoise Investments & Finance Pvt. Ltd. 3. Gwalior Properties & Estates Pvt. Ltd. 4. Seshasayee Properties Pvt. Ltd. 5. Birla Group Holdings Pvt. Ltd. 6. TGS Investment & Trade Pvt. Ltd. 7. Global Holdings Pvt. Ltd. 8. Rajratna Holdings Pvt. Ltd. 9. Vaibhav Holdings Pvt. Ltd. 10. Vikram Holdings Pvt. Ltd. 2. Mrs. Rajashree Birla Designation: Non-Executive Director 16-A, IL- Palazzo, Little Gibbs Road, Mumbai 400006, Maharashtra Occupation: Industrialist First appointed on March 15, 1996 Indian 60 Indian Public Limited Companies: 1. Grasim Industries Ltd. 2. Aditya Birla Nuvo Ltd (formerly Indian Rayon & Industries Ltd. 3. Indo Gulf Fertilizers Ltd. 4. Ultra Tech Cement Limited 5. Essel Mining & Industries Ltd 6. Aditya Birla Health Services Ltd. Indian Private Limited Companies: 1. Birla Group Holdings Pvt. Ltd. 2. Trapti Trading & Investments Pvt. Ltd., 3. Turquoise Investments & Finance Pvt. Ltd. 4. Gwalior Properties & Estates Pvt. Ltd. 5. Seshasayee Properties Pvt. Ltd. 6. Vikram Holdings Pvt Ltd. 7. TGS Investment & Trade Pvt. Ltd., 8. Global Holdings Pvt. Ltd., 9. Rajratna Holdings Pvt. Ltd., 10. Vaibhav Holdings Pvt. Ltd.

84

HINDALCO INDUSTRIES LIMITED


Name, Designation, Address, Occupation and Term 3. Mr. D. Bhattacharya Designation: Managing Director 14/A, Woodlands, Peddar Road, Mumbai 400 026, Maharashtra. Occupation: Service First appointed on April 30, 2003 4. Mr. A.K. Agarwala Designation: Non-Executive Director Haveli, Flat No.3, L.D. Ruparel Marg, Mumbai 400006 Maharashtra Occupation: Retired Professional First appointed on September 11, 1998 5. Mr. C.M. Maniar Designation: Independent Director Garden House, 1st Floor, Dadyseth, 2nd Cross Lane, Chowpatty Band Stand, Mumbai 400 007, Maharashtra Occupation: Solicitor First appointed on March 8, 1982 Indian 69 Indian Public Limited Companies: 1. Chemtex Engineering of India Ltd. 2. Food & Inns Ltd. 3. Godfrey Phillips India Ltd. 4. Gujarat Ambuja Exports Ltd. 5. Varun Shipping Company Ltd. 6. Indo Euro Investment Co. Ltd. 7. Indian Card Clothing Co.Ltd. 8. Machine Tools (India) Ltd. 9. Multi Commodity Exchange of India Ltd. 10. Vadilal Industries Ltd. 11. Pioneer Invest Corp Ltd. 12. Sudal Industries Ltd. 13. Twenty First Century Printers Ltd. Indian Private Limited Companies: 1. 2. 3. 4. 5. 6. 7. Agfa India Pvt. Ltd. Akso Nobel Coatings India Pvt. Ltd. Lintas India Pvt. Ltd. Amsar Pvt. Ltd. HGC Foundation Pvt. Ltd. MAS Consulting Group Pvt. Ltd. Northpoint Centre of Learning Pvt. Ltd. Indian 72 Indian Public Limited Companies: 1. Udyog Services Ltd. 2. Bihar Caustic & Chemicals Ltd. 3. Tanfac Industries Ltd. 4. Renusagar Engineering & Power Services Ltd. 5. Indian Aluminium Company,Ltd.Vice Chairman 6. Birla Project Development Company Ltd (Additional Director) Nationality Indian Age (years) 57 Other Directorships in Indian companies Indian Public Limited Companies: 1. Aditya Birla Management Corporation Ltd. 2. Dahej Harbour and Infrastructure Ltd. 3. Utkal Alumina International Ltd. 4. Birla Management Centre Services Ltd. 5. Birla Project Development Company Ltd. 6. Minerals & Minerals Limited

85

HINDALCO INDUSTRIES LIMITED


Name, Designation, Address, Occupation and Term 6. Mr. E.B. Desai Designation: Non-Executive Director Sonarica, 81-A, Soviet Club Road, Off. Peddar Road, Mumbai - 400 006, Maharashtra Occupation: Solicitor First appointed on April 5, 1984 Mr. S.S. Kothari Designation: Non Executive Director 87-B, Gaurav Nagar, Civil Lines, Jaipur - 302 006, Rajasthan Occupation: Retired Professional First appointed on December 22, 1988 Mr. M.M.Bhagat Designation: Independent Director 13, Kabir Road, Kolkata - 700 026, West Bengal Occupation: Retired Professional First appointed on March 16, 1996 Mr. K. N. Bhandari Designation: Independent Director 5, New Power House Road, Sector-7, Jodhpur 342 003, Rajasthan Occupation: Retired Professional First appointed on August 1, 2001
86

Nationality Indian

Age (years) 74

Other Directorships in Indian companies Indian Public Limited Companies: 1. Birla Global Finance Ltd. 2. Century Textiles & Industries Ltd. 3. Hercules Hoists Ltd.(Alternate Director) 4. Panasonic Battery India Company Ltd. 5. Prudential ICICI Trust Ltd. 6. Kennametal Widia (India) Ltd. 7. Supreme Industries Ltd. Indian Private Limited Companies: 1. Bekaert Industries Pvt. Ltd. 2. Dolphin Fisheries & Trading Pvt. Ltd.

7.

Indian

83

Indian Private Limited Company: 1. Arihant Agencies Pvt. Ltd.

8.

Indian

72

Indian Public Limited Companies: 1. Zenith Exports Ltd. 2. VCK Share & Stock Broking Services Ltd. 3. Birla Insurance Advisory Services Ltd. 4. VCK Capital Market Services Ltd.

9.

Indian

63

Indian Public Limited Companies: 1. Agriculture Insurance Company Ltd. 2. Andhra Cements Ltd. 3. Srei Venture Capital Ltd. 4. Suraj Diamond & Jewellery Ltd

HINDALCO INDUSTRIES LIMITED


Brief Biography of our Directors
Dr. K.M. Birla has served on our Board of Directors since 1992 and became our Chairman in 1995. Dr. Birla was awarded a Bachelor of Commerce degree and is a Fellow Member of the Institute of Chartered Accountants of India. He has also completed a Masters in Business Administration from the London Business School. Dr. Birla was appointed Chairman of the Aditya Birla Group in 1995 and in addition to serving as Chairman of all of the Aditya Birla Groups blue-chip companies in India, Dr. Birla also serves as a director on the boards of the Aditya Birla Groups International companies in Thailand, Indonesia, Malaysia, Philippines and Egypt. Dr. Birla is appointed to the board of several prominent companies in India including Tata Steel Ltd. and Maruti Udyog Limited. Additionally, he is a member of the Board of Governors of the Birla Institute of Technology & Science (BITS), Pilani, and the Indian Institute of Management, Ahmedabad. Dr. Birla has held and continues to hold several key positions on various regulatory and professional boards, including The Prime Minister of Indias Advisory Council on Trade and Industry, the National Council of the Confederation of Indian Industry and the Advisory Council for the Centre for Corporate Governance. Dr. Birla is an Honorary Fellow of the London Business School, a title conferred upon him by the governing board of the London Business School. The Banaras Hindu University awarded him the D. Litt (Honors Causa) Degree, in 2004, in recognition of his contribution to Indian business. Mrs. R. Birla, wife of (Late) Mr. A.V. Birla, former Chairman of the Aditya Birla Group, was appointed to our Board of Directors in 1996. Mrs. Birla was awarded a Bachelors degree in Arts. Mrs. Birla serves on the board of directors of Grasim, ABNL, Indo Gulf and Ultra Tech Cement Ltd. and on the boards of the Aditya Birla Groups International companies spanning Thailand, Indonesia, Philippines, Malaysia and Egypt. As Chairperson of the Aditya Birla Centre for Community Initiatives and Rural Development, the apex body responsible for development projects, Mrs. Birla oversees the Aditya Birla Groups social and welfare-driven work across 30 companies. Mr. A.K. Agarwala joined us in 1960 and was appointed to our Board of Directors in 1998. Mr. Agarwala is also a director of several other companies including Udyog Services Ltd., Bihar Caustic & Chemicals Ltd., Tanfac Industries Ltd., Renusagar Engineering & Power Services Ltd., Indian AluminiumCompany Ltd., and Birla Project Development Company Ltd. He is a Trustee of G.D. Birla Medical Research and Education Foundation, Vaibhav Medical and Education Foundation and Aditya Vikram Birla Memorial Trust and is also Chairman of Business Review Council of the Aditya Birla Group. Mr. Agarwala has held the post of President of AluminiumAssociation of India in the past and is a member of the International Primary AluminiumInstitute. Mr. Agarwala holds a degree in Commerce and Law from Calcutta University and is a Fellow Member of the Institute of Chartered Accountants of India. Mr. C.M. Maniar was appointed to our Board of Directors in 1982. A solicitor by profession, Mr. Maniar is a Partner of the Mumbai based firm of Solicitors, M/s. Crawford Bayley & Co. He is an independent member of our board and a member of our Audit Committee and Investors Grievances Committee. Mr. Maniar serves on the boards of several other public and private companies, namely Chemtex Engineering of India Ltd., Foods & Inns Ltd., Godfrey Phillips India Ltd., Gujarat Ambuja Exports Ltd., Varun Shipping Company Ltd., Indo Euro Investment Co. Ltd., Indian Card Clothing Co. Ltd., Machine Tools (India) Ltd., Multi Commodity Exchange of India Ltd., Vadilal Industries Ltd., Pioneer Investcorp Ltd., Sudal Industries Ltd. and Twenty First Century Printers Ltd., Agfa India Pvt. Ltd., Akso Nobel Coatings India Pvt. Ltd., Northpoint Centre of Learning Pvt. Ltd., Lintas India Pvt. Ltd., Amsar Pvt. Ltd., HGC Foundation Pvt. Ltd. and MAS Consulting Group Pvt. Ltd. Mr. Maniar was awarded Bachelor degrees in Commerce and Law and a Master of Arts degree by Mumbai University. Mr. E.B. Desai was appointed to our Board of Directors in 1984. He is a Solicitor and a Partner of the Mumbai based firm of Solicitors, Mulla & Mulla & Craigie Blunt & Caroe. Mr. Desai is a NonExecutive Director of the Board and a member of our Audit Committee and Investors Grievances Committee. He serves on the board of directors of several Indian companies, namely Birla Global Finance Limited, Bekaert Industries Pvt. Ltd., Century Textiles & Industries Limited, Dolphin Fisheries & Trading Pvt. Ltd., Prudential ICICI Trust Limited, Supreme Industries Limited, Panasonic Battery India Company Limited and Kennametal Widia (India) Ltd. Mr. Desai was awarded a Bachelor of Arts and a Bachelor of Law degree by Mumbai University. Mr. S.S. Kothari was appointed to our Board of Directors in 1988 and was formerly our Company President. He is a director of Arihant Agencies Pvt. Ltd. Mr. Kothari graduated with a Bachelor of Science degree from Agra University. Mr. M.M. Bhagat was appointed to our Board of Directors as a nominee director in 1996 and is Chairman of our Audit Committee. Mr. Bhagat has been the Chairman and Managing Director of United India Insurance Company Limited, Birla Insurance Advisory Services Ltd., Zenith Exports Limited, VCK Share & Stock Broking Services (P) Ltd. and VCK
87

HINDALCO INDUSTRIES LIMITED


Capital Market Services Ltd. Mr. Bhagat received a Bachelor of Commerce degree and has attained ACII London and AIII Group Adviser-Insurance qualifications. Mr. K.N. Bhandari has been a member of our Board of Directors since 2001. Since 2001 Mr. Bhandari has been a nominee director of the General Insurance Corporation of India (as an Investor) and is on the board of directors of Andhra Cement Co. Ltd., Suraj Diamonds and Jewellery Ltd., Srei Venture Capital Ltd. and Agriculture Insurance Co. of India Ltd. Previously, Mr. Bhandari held the post of Chairman and Managing Director of the New India Assurance Co. Ltd. He graduated from Jodphur University with a Bachelor of Arts and a Bachelor of Law degree. Mr. D. Bhattacharya has been a member of our Board of Directors since April 30, 2003 and was appointed our Managing Director from 2003. Mr. Bhattacharya joined the Aditya Birla Group in 1998. Before he took charge of the Metals business as Managing Director of Hindalco, Mr. Bhattacharya held several key positions within the Aditya Birla Group, including Managing Director of the Aditya Birla Management Corporation and Managing Director of Indo Gulf Corporation Limited. Mr. Bhattacharya has also been responsible for the Insulator business and has led group-wide corporate functions such as Global Marketing Strategy, Management Services and IT. Prior to joining the Aditya Birla Group, Mr. Bhattacharya spent approximately 30 years working for Unilever during which time he held several key responsibilities and worked in several roles, in its Indian and overseas operations. He led the Chemical business of Unilever in India before moving to the Aditya Birla Group. He is a Chemical Engineer from Indian Institute of Technology (IIT).

Compensation of our Directors


The following tables set forth all compensation paid by us to our Directors for the fiscal year ended March 31, 2005. A. Non-Executive Directors Name of Director Commission Rs. in millions Dr. K.M. Birla Mrs. R. Birla Mr. E.B. Desai Mr. S.S. Kothari Mr. T. K. Sethi (deceased) Mr. C.M. Maniar Mr. M.M. Bhagat Mr. K.N. Bhandari Mr. A.K. Agarwala
directly.

Sitting Fees Meetings Attended 5 5 6 5 1 5 6 6 6 Amount (Rs.) 25,000 25,000 90,000 25,000 10,000 80,000 60,000 30,000 60,000

Total Rs. in millions 11.20 0.40 0.85 0.40 0.12 0.73 0.66 0.48(1) 0.57

11.18 0.37 0.76 0.37 0.11 0.65 0.60 0.45 0.51

(1) Paid to General Insurance Corporation of India, which has nominated Mr. Bhandari. Only the sitting fees were paid to Mr. Bhandari B. Executive Director Name of Director All elements of remuneration package Rs. in millions Mr. D. Bhattacharya 25.82 Performance bonus Rs. in millions 4.87 Total Rs. in millions 30.69

The appointment is subject to termination by three months notice in writing on either side. The appointment is for a period of five years with effect from October 2, 2003. No severance is payable to the Managing Director.

88

HINDALCO INDUSTRIES LIMITED


Shareholding of our Directors in our Company
Our Articles of Association require our Directors to hold Equity Shares and/or preference shares or both, in the capital of our Company of aggregate nominal value of Rs 2,500, which must be acquired within two months after his appointment or election to the post of Directors. The following table details the shareholding of our Directors in their personal capacity and either as sole or first holder, as at the date of this Letter of Offer. Name of Director Dr. K.M. Birla Mrs. R. Birla Mr. A. K. Agarwala Mr. C.M. Maniar Mr. D. Bhattacharya Mr. E. B. Desai Mr. M. M. Bhagat Mr. S. S. Kothari Mr. K.N. Bhandari
*

Number of Equity Shares (Pre-Issue as on November 18, 2005) 362,400 241,140 64,160 30,760 2,500 173,470 2,700 44,080 N.A (Nominee Director)

Number of Equity Shares (Post-Issue)* 453,000 301,425 80,200 38,450 3,125 216,838 3,375 55,100 -

The number of shares for the column entitled number of Equity Shares (Post-Issue) has been calculated assuming full subscription to rights entitlement in this Issue

Details of the transactions in Equity Shares by our Directors and their relatives during the last six months
Name of Director/Relative of Director Date of Transaction June 10, 2005 June 25, 2005 June 7, 2005 June 9, 2005 Details of Transaction Sale Sale Purchase Sold No. of Equity Shares of Rs. 10 each 2,000 700 600 663 Price per share (in Rs.) 1,120 1,177 1,096 1,130.12

Mr. A.K. Agarwala Mr. A.K. Agarwala Ms. R. Agarwala Mr. Shailendra. S. Kothari

Except for the above, none of our Directors have undertaken transactions in the Equity Shares of our Company during the last six months.

Changes in our Board of Directors during the last three years


Name Mr. T. K. Sethi Mr. D. Bhattacharya Date of Appointment September 17, 1974 April 30, 2003 Date of Cessation August 25, 2004 Reason Deceased Appointed to Board

Corporate Governance
There are two Board Level Committees in our Company, which have been constituted and function in accordance with the relevant provisions of the Act and the Listing Agreement. These are the (i) Audit Committee, and (ii) Investor Grievance Committee. A brief on each Committee, its scope, composition and meetings for the current year is given below:

(i)

Audit Committee
Members
G G

Mr. M.M. Bhagat (Chairman), Mr. E.B. Desai

89

HINDALCO INDUSTRIES LIMITED


G

Mr. C.M. Maniar

Mr. Anil Malik, Company Secretary, acted as Secretary of the Audit Committee in terms of Clause 49 of the Listing Agreement. The Audit Committee is comprised of two Independent Directors and one Non-Executive Director. The Audit Committee met five times during the course of this fiscal year, on April 30, 2005, June 6, 2005, July 29, 2005 September 20, 2005 and October 29, 2005. Scope and terms of reference The scope of the Audit Committee in companies is defined under Clause 49 of the Listing Agreement dealing with Corporate Governance and the provisions of the Act. The Audit Committee acts as a link between the management, the statutory, cost and internal auditors and the Board of Directors and oversees the financial reporting process.

(ii) Investors Grievances Committee


Members
G G

Mr. E.B. Desai (Chairman) Mr. C.M. Maniar

The Investor Grievances Committee is comprised of one Independent and one Non-Executive Director. The Investors Grievances Committee did not meet during the course of this fiscal year. Scope and Terms of Reference The committee was constituted in terms of the mandatory requirement of Clause 49 of the Listing Agreement to look into the redressal of grievances of investors like non receipt of share certificates, non-receipt of balance sheet, non-receipt of dividend warrants etc. During this fiscal year, our Company received 16 complaints from shareholders, all of which stand resolved as on November 18, 2005. We have one pending complaint from the last fiscal year, which is unresolved due to non receipt of required documents from the shareholder. Remuneration Committee The Company does not have a Remuneration Committee as it has only one Whole Time Director and his remuneration is determined by the Board. The Company has complied with SEBI guidelines in respect of corporate governance, specially with respect to broad basing of the Board and constitution of Committees.

90

HINDALCO INDUSTRIES LIMITED


Key Managerial Personnel
The details of our key managerial personnel are as follows:
Name Age Designation Qualifications Previous Employment Total Date of years of Joining Experience 37 December 4, 1967 Gross Salary* (Rs. in millions)

Mr.R.K. Kasliwal

60

Group Executive President and Chief Financial Officer

B.Com, F.C.A.

6.52

Mr. S. Talukdar

53 Deputy Chief Financial Officer 51 Chief Officer Operations (Aluminium & Power- Renukoot)

B.Sc., A.C.A. B.Tech. (Chem. Engg.); M.S. (Chem. Engg.)

The GEC of India Ltd.

26

October 1, 1986 August 18, 2003

2.59

Mr. R.K.Shah

G G

G G G G

Grasim Industries Ltd Thai Carbon Black Thailand Vikram Cement, M.P ., Aditya Cement Rajashree Cement Vikram Ispat, Maharashtra -

27

5.18

Mr. R.P Shah .

58

Executive President B.Tech. and Chief (Chem. Engg.) Manufacturing Officer Chief Marketing Officer B.Tech. (Chem. Engg.), P Diploma .G. (Marketing & Finance)
G G

34

December 30, 1969

3.21

Mr. S.K. Maudgal

51

G G

Asian Paints (I) Ltd. Hindustan CibaGeigy Ltd. Arvind Mills Ltd. Ceat Ltd. Hindustan Motors Limited, Chennai Kirloskar Electric Co. Ltd.

26

February 14, 2001

4.89

Mr. P Balakrishnan 56 .

Executive President B.E. (Mech), P .G.Diploma in Business Management Chief Operating Officer (Mining Operations) B.Sc (Engg.) Dalhousie University, Halifax, Nova Scotia, Canada; B.Engg.(Mining) , Technical University of Nova Scotia, Halifax, Canada

34

June 11, 2000

5.34

Mr. K. Freeman

52

Falconbridge Ltd, 30 Canada SouthernEra Resources Ltd. Anglo American Corp. South Africa De Beers Consolidated Mines Ltd. Debswana Diamond Co. Pty Ltd.

April 1, 2005

7.04**

Mr. P Roy .

52

Chief People Officer B.Sc, St Francis Desales College; Master in Personnel Management and Industrial Reln, TISS, Mumbai

G G G

Novartis India Searle (India) Ltd. General Electric India Air Freight Ltd Cadbury India Ltd.

27

December 21 , 2004

1.41***

91

HINDALCO INDUSTRIES LIMITED


Name Age Designation Qualifications Previous Employment Total Date of years of Joining Experience 29 September 1, 2004 May 10, 1990 December 15, 1977 Gross Salary* (Rs. in millions)

Mr. S. M. Bhatia

51

Chief Operating Officer (Demerged Indal units) Head, Foils and Wheels Head, Chemicals and International Trade Head, Risk Management and Business Development

B.Sc. Engg. (Mech.) B.Tech (Hons) (Mech Engg), IIT Kharagpur B.Tech (Chem), IIT Kanpur, PGDM, IIM Kolkata BA, University of London, School of Oriental and African Studies

Jindal Iron and Steel Co. Ltd. Larsen & Toubro

2.42***

Mr. S. Banerjee

49

25

1.93

Mr. S.Ray

51

Assam Oil Co.

28

2.25

Mr. B. Marshall

52

G G G G

Hunter Douglas Group 32 Hydro Aluminium Metal Trading Aluminium and Tin, Amalgamated Metal Corporation Vishakapatanam Steel 35 Plant, Bokaro Steel Plant Hindustan Steel Limited at Bhilai Steel Plant Neelachal Ispat Nigam Ltd 10

May 2, 2005

6.24**

Mr. S.N. Bontha

56

Chief Executive B.E. (Elect.), Officer (Aditya P Diploma .G. Aluminium Project) in Management

February 28, 2005

0.39***

G G

Mr. A. Malik

43

Company Secretary LLB, C.S.

October 4, 1995

0.54

Gross Salary as on March 31, 2005 is computed in accordance with Section 217(2A) of the Companies Act, 1956 except if indicated otherwise. Since the Key Managerial Personnel joined after March 31, 2005, the details of Gross Salary is from April 1, 2005/ date of joining up to August 31, 2005 and in accordance with Section 217(2A) of the Companies Act, 1956

**

*** Gross Salary as on March 31, 2005 from the date of joining in accordance with Section 217(2A) of the Companies Act, 1956

All the abovementioned key managerial personnel are permanent employees of our Company. The remuneration of each of our key personnel is as per the statement pursuant to Section 217(2A) of the Act and the Companies (Particulars of Employees) Rules, 1975.

92

HINDALCO INDUSTRIES LIMITED


Organizational Structure Chart
The organizational structure of our Company is given below:

Dr. K. M. Birla N onExecutve Chaim an i r Board ofD i ors rect 40% I ndependent 50% N on , Executve i
Audit Committee
75% Independent; 75% Independent; 25% Non-Executive

Finance Committee
25% Independent; 25% Independent; 50% Non-Executive 50% Non-Executive

Investor Grievance 50% Independent; C itt 50% Independent 50% Non-Executive 50% Non-Executive

Risk Management B d 50% Non-Executive

Managing Director
Chief Financial Officer Chief People Officer

CMO Mumbai

COO Renukoot

COO Kolkata

Head Foils & Wheels Mumbai

Head Chemicals Mumbai

Executive President Birla Copper

CEO Birla Minerals Australia

EFO Mumbai

COO Mining CEO-Aditya Almn

Company Secretary

Shareholding of key managerial personnel in our Company as on November 18, 2005 Name of Key Managerial Personnel Mr. R.K. Kasliwal Mr. R.K. Shah Shareholding of persons related to our key managerial personnel in our Company Name of Key Managerial Personnel Name of Equity Shareholder related to Key Managerial Personnel Ms. M. Kasliwal Mr. B.L. Shah Ms. R.K.Shah No. of Equity Shares held (Pre-Issue) 15,440 5,000 2,250 No. of Equity Shares held (Pre-Issue) 57,220 12,800

Mr. R.K. Kasliwal Mr. R.K. Shah Mr. R.K. Shah

93

HINDALCO INDUSTRIES LIMITED


Interest of Promoters, Directors and key managerial personnel Except as stated in Related Party Transactions on page 123 of this Letter of Offer, and to the extent of shareholding in our Company, our Promoters and promoter group do not have any other interest in our business. All Directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee. The Managing Director will be interested to the extent of remuneration paid to him for services rendered by him as officer of the Company. All our Directors may also be deemed to be interested to the extent of Equity Shares, if any, already held by them or their relatives in the Company, or that may be subscribed for and allotted to them, out of the present Issue in terms of the Letter of Offer and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. The Directors may also be regarded as interested in the Equity Shares, if any, held by or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors, members, partners and/or trustees. Further, Mr. Desai may also be deemed to be interested to the extent of fees payable to the firm of M/s Mulla & Mulla & Craigie Blunt & Caroe, of which he is a party, for services rendered to the Company from time to time for legal matters attended to by the firm on behalf of the Company. In the fiscal year 2004-2005 and 2005-2006 (till October, 2005), fees to the extent of Rs. 1.41 million and Rs. 1.40 million respectively were paid by the Company to the firm for services rendered to the Company for legal matters attended to by the firm on behalf of the Company. The key managerial personnel of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them in our Company, if any. Details of loans taken by key managerial personnel in our Company Name Loan Amount as on September 30, 2005 (Rs. in millions) Nil Nature of Loan

Mr. R.K. Kasliwal Mr. S. Talukdar Mr. R.K. Shah Mr. R.P Shah . Mr. S.K. Maudgal Mr. P Balakrishnan . Mr. K. Freeman Mr. P Roy . Mr. S. M. Bhatia Mr. S. Banerjee Mr. S. Ray Mr. B. Marshall Mr. S.N. Bontha Mr. A. Malik

Housing loan Housing loan Interest free loan -

0.80
Nil Nil

0.90 1.5
Nil Nil Nil Nil Nil Nil Nil Nil Nil

Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreement or arrangement during the preceding two years from the date of this Letter of Offer in which our Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them. Our Directors and our key managerial personnel have not taken any loan from our Company other than those mentioned above.

94

HINDALCO INDUSTRIES LIMITED


Changes in our key managerial employees during the last three years Name For the Year 2002-2003 N.A. For the Year 2003-2004 Mr. R.K. Shah For the Year 2004-2005 Dr. S.K. Tamotia Mr. S.M. Bhatia President & Chief Executive Officer Indal Units Chief Operating Officer Indal Units June 27, 2000 / September 24, 2004 September 1, 2004 Retirement Pursuant to Scheme of Arrangement with Indal Appointed Pursuant to Scheme of Arrangement with Indal Transferred from Group Chief Officer Operations (Aluminium & Power Renukoot) August 18, 2003 Appointed N.A. N.A. N.A. Designation Date of joining/leaving Reasons

Mr. S.N. Bontha Mr. S. Talukdar

Chief Executive Officer Aditya Aluminium Project Deputy Chief Financial Officer

February 28, 2005 October 1, 1986

Mr. P Roy . For the Year 2005-2006 Mr. K. Freeman Mr. B. Marshall

Chief People Officer

December 21, 2004

Chief Operating Officer (Mining Operations) Head, Risk Management & Business Development

April 1 , 2005 May, 2 2005

Appointed Appointed

95

HINDALCO INDUSTRIES LIMITED PROMOTERS AND PROMOTER GROUP


Promoters
The promoters of our Company are (i) Dr. Kumar Mangalam Birla and (ii) Birla Group Holdings Private Limited. Dr. Kumar Mangalam Birla Dr. Kumar Mangalam Birla, aged 38 was appointed Chairman of the Aditya Birla Group in 1995 and, serves as Chairman of all of the Aditya Birla Groups blue-chip companies in India, including our Company. For more details see the section on Management on page 84 of this Letter of Offer. Passport No.: Z 1464476 PAN No.: AEFPB 5926 H

Dr. K.M. Birlas bank account number, PAN No. and passport number have been provided to BSE and NSE.

Birla Group Holdings Private Limited


Birla Group Holdings Private Limited (BGHPL) (formerly RSN Holdings Limited) was incorporated on November 21, 1980 under the Act. Its name was changed from RSN Holdings Limited to Birla Group Holdings Private Limited on December 7, 1998. The main object of BGHPL is making investments and granting of loans. The promoters of the BGHPL are Dr. Kumar Mangalam Birla and his family members. The registered office of the company is situated at Industry House, 159 Churchgate Reclamation, Mumbai 400 020. BGHPL, either itself or though its subsidiaries, holds equity holdings in major Aditya Birla Group Companies. BGHPL has the following significant subsidiaries viz., (i) Trapti Trading & Investments Private Limited; (ii) Turquoise Investments And Finance Private Limited and (iii) TGS Investment & Trade Private Limited.

Board of Directors
1. 2. 3. 4. 5. Dr. Kumar Mangalam Birla Mrs. Rajashree Birla Mr. Suresh Tapuriah Mr. L.K. Daga Mr. P Jajodia .K.

96

HINDALCO INDUSTRIES LIMITED


Financial Performance
The operating results of BGHPL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder. Please note that bracketed numbers indicate losses/ negative figures: (Rs. in millions) Particulars As at and for the year ended March 31, 2003 38.24 (28.45) 0.24 432.26 (11,756) 622.50 As at and for the year ended March 31, 2004 40.43 (15.80) 0.24 416.46 (6,529) 606.70 As at and for the year ended March 31, 2005 43.65 (10.30) 0.24 406.16 (4,257) 596.40 For the period ended September 30, 2005 15.79 (8.93) 0.24

Total Income Profit after Tax Equity Share Capital (Par value Rs. 10/- per Share) Reserves Earnings Per Share ( Rs. ) Net Asset Value

397.23 (3,690) 587.47

The Company being a private limited company, its shares are not listed on any stock exchange. BGHPLs PAN No. has been submitted to BSE and NSE. Companies with which the Promoters have disassociated in the last three years: The Promoters have not disassociated themselves from any company in the last three years.

Promoter Group
Relatives of the Promoter that are part of the promoter group The following relatives form part of our promoter group: Sl. No. 1. 2. 3. 4. 5. 6. Name Relationship No. of shares as of September 30, 2005 241,140 66,020 49,750 15,000 Nil Nil Percentage of holding 0.03 0.01 0.01 0.00 0.00 0.00

Mrs. Rajashree Birla Mrs. Vasavadatta Bajaj Mrs. Neerja Birla Ms. Ananyashree Birla Master Aryaman Vikram Birla Ms. Advaitesha Birla

Mother of Dr. Kumar Mangalam Birla Sister of Dr. Kumar Mangalam Birla Wife of Dr. Kumar Mangalam Birla Minor daughter of Dr. Kumar Mangalam Birla Minor son of Dr. Kumar Mangalam Birla Minor daughter of Dr. Kumar Mangalam Birla

97

HINDALCO INDUSTRIES LIMITED


The Equity Shares are held by our Promoters through companies, trusts, HUFs owned/controlled by them. The ventures forming part of the promoter group include:
S. No Name of Promoter Group Ventures 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) Aditya Vikram Kumar Mangalam Birla HUF BGH Exim Ltd Birla Global Asset Finance Company Ltd. Birla Global Finance Limited Birla Institute of Technology and Science Birla Technologies Ltd. Birla TMT Holdings Pvt. Ltd. Essel Mining & Industries Ltd. Global Holdings Pvt. Ltd Grasim Industries Ltd. Gwalior Properties and Estates Pvt. Ltd Heritage Housing Finance Ltd HGI Industries Ltd IGH Holdings Pvt. Ltd Indo Gulf Fertilisers Limited Kamal Trading Company Limited Laxminarayan Investment Ltd. Mangalam Carbide Ltd Mangalam Services Ltd Pilani Investment and Industries Corporation Ltd Rajratna Holdings Pvt. Ltd Samruddhi Swastik Trading & Investments Ltd. Seshasayee Properties Pvt. Ltd Sun Gold Trading and Investments Ltd TGS Investment & Trade Pvt. Ltd. Trapti Trading & Investments Pvt Ltd. Trustee on behalf of Hindalco under scheme of arrangement of HIL/IGCL/IGFL Turquoise Investments And Finance Pvt. Ltd. Ultra Tech Cement Limited Umang Commercial Company Limited Vaibhav Holdings Pvt. Ltd Vikram Holdings Pvt. Ltd

For details of shareholding of our Promoters and promoter group, refer to the section Capital Structure on page 15 of this Letter of Offer. Interests of Promoters and Promoter Group in the Company Except as stated hereinbefore and in Related Party Transactions on page 123 of this Letter of Offer, and to the extent of shareholding in our Company, our Promoters and promoter group do not have any other interest in our business.
98

HINDALCO INDUSTRIES LIMITED GROUP COMPANIES


Hindalco is the flagship company of the Aditya Birla Group. The Aditya Birla Group is a true multinational corporation. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. The Aditya Birla Group is a dominant player in all of the sectors in which it operates. The Groups products and services offer distinctive customer solutions such as viscose staple fibre, non-ferrous metals, cement, viscose filament yarn, branded apparel, carbon black, chemicals, fertilisers, sponge iron, insulators and financial services. Its 66 manufacturing units and sectoral services span India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia and China. The Group has also made successful forays into the IT and BPO sectors. Please note that pursuant to resolutions passed on September 11, 2005 by the respective board of directors of Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) (ABNL Indo Gulf Fertilisers Limited (IGFL and Birla ), ) Global Finance Limited (BGFL IGFL and BGFL are proposed to be merged into ABNL and will stand dissolved by a ), scheme of amalgamation under Sections 391-394 of the Act. The scheme of amalgamation is subject to shareholder approval of the respective companies, sanction of the Bombay High Court, Allahabad High Court, Lucknow Bench and Gujarat High Court and clearance of the respective stock exchanges. Bracketed numbers indicate losses/ negative figures. Details of our top five listed group companies in terms of market capitalisation are as under:

I.

Grasim Industries Limited

Grasim Industries Limited (Grasim), was incorporated on August 25, 1947 under the Gwalior Companies Act in the name of Gwalior Rayon Silk Mfg (Wvg) Company Limited. The company changed its name to Grasim Industries Limited on July 22, 1986. Grasim ranks among Indias largest private sector companies, with a net turnover of Rs. 62,292.6 million in 2004-05. Starting as a textiles manufacturer in 1948, Grasims businesses today comprise Viscose Staple Fibre (VSF), cement, sponge iron, chemicals and textiles. The company holds a dominant position in its businesses. On July 6, 2004, Larsen & Toubro Limited (L&T) and Grasim announced completion of the implementation process of the demerger of the cement division of L&T. On successful completion of its open offer, Grasim acquired controlling stake in the newly formed company, UltraTech Cement Limited (UltraTech), the demerged cement business of L&T. Shareholding as of September 30, 2005 S. Name of the Shareholder No 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Fund & UTI Banks and FIs FIIs GDRs and others Corporates NRIs/OCBs Individual shareholding Total Board of Directors 1. 2. 3. 4. 5. Dr. K.M. Birla Mrs. R. Birla Mr. M.L. Apte Mr. B.V. Bhargava Mr. R.C. Bhargava No. of shares 22,897,134 7,869,230 13,184,487 18,341,338 10,364,638 2,831,443 3,568,659 12,616,509 91,673,438 Percentage of holding 24.98 8.58 14.38 20.01 11.31 3.09 3.89 13.76 100.0

99

HINDALCO INDUSTRIES LIMITED


6. 7. 8. 9. Mr. Y.P Gupta . Mr. S.B. Mathur Mr. C. Shroff Mr. S.G. Subrahmanyan

10. Mr. S.K. Jain 11. Mr. D.D. Rathi Financial Performance The operating results of Grasim for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for the year ended March 31, 2003 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 916.7 28,793.5 46,062.0 3,675.8 40.1 324 As at and for the year ended March 31,2004 916.7 35,138.3 52,132.1 7,792.6 85.0 393

As at and for As at and for the year ended the period ended March 31, 2005 September 30, 2005(i)
916.7 42,319.6 62,292.6 8,857.1 96.6 472

916.7 NA 31,923.8 4,386.0


47.84

NA

(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.

Share - Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg

Date 16-Sept-2005 16-Sept-2005

Lowest (Rs.) 1,028.8 1,010

Date 24-May-2005 7-July-2005

1,410 1,415

There has been no change in capital structure in the last six months.

II.

UltraTech Cement Limited.

UltraTech Cement Limited (UCL) is a member of the Aditya Birla Group and a subsidiary of Grasim Industries Limited. ULC was incorporated on August 24, 2000 under the Act, in the name of L&T Cement Limited and the name was changed to UltraTech Cemco Limited with effect from November 19, 2003. The company changed its name to UltraTech Cement Limited on October 14, 2004. Its cement capacity is 17 million tonnes per annum. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. It has five integrated plants, five grinding units and three terminals two in India and one in Sri Lanka. It is the countries largest exporter of cement and clinker.

100

HINDALCO INDUSTRIES LIMITED


Shareholding as of September 30, 2005 S . Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Promoters and Persons Acting in Concert Mutual Fund & UTI Banks and FIs FIIs GDRs Foreign Nationals Corporates NRIs/OCBs Indian Public Total Board of Directors 1. 2. 3. 4. 5. 6. 7. 8. 9. Dr. K.M. Birla Mrs. R. Birla Mr. R.C. Bhargava Mr. Y.M. Deosthalee Mr. A.R. Gandhi Mr. Y.P Gupta . Dr. S. Misra Mr. V.T. Moorthy Mr. J.P Nayak . No. of shares 63,542,320 3,523,129 8,449,853 8,727,821 964,406 51,839 17,884,146 624,934 20,630,173 124,398,621 Percentage of holding 51.08 2.83 6.79 7.02 0.78 0.04 14.38 0.50 16.58 100.00

10. Mr. S. Rajgopal 11. Mr. D.D. Rathi Financial Performance The operating results of UCL for fiscal 2004, 2005 and for the period ended September 30, 2005 are as hereunder. UCL was not part of the promoter group as on March 31, 2003: (Rs. in millions except per share data) As at and for the year ended March 31,2004 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 1,244.0 9,505.4 22,511.3 388.3 3.12 85.20 As at and for the year ended March 31, 2005 1,244.0 9,427.3 26,810.5 28.5 0.23 85.78

As at and for the period ended September 30, 2005(i) 1,244.0 NA 14,224.0 601.0 4.83 NA

(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.

101

HINDALCO INDUSTRIES LIMITED


Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg

Date 22-Sept-2005 26-Sept-2005

Lowest (Rs.) 314 295.4

Date 6-June-2005 6-June-2005

495 498

There has been no change in capital structure in the last six months.

III.

Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited)

Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) was incorporated on September 26, 1956 under the name of Indian Rayon Corporation Limited. The company changed its name to Indian Rayon And Industries Limited on January 23, 1987 and subsequently to Aditya Birla Nuvo Limited on October 27, 2005. ABNL is the Aditya Birla Groups most diversified conglomerate, with a turnover in excess of Rs. 18,606 million in 2004-2005. It is a leading player in its key business segments, including viscose filament yarn (VFY), carbon black, branded garments, textiles and insulators. Over the past three years, ABNL through its subsidiaries has made successful forays into insurance, IT services and Business Process Outsourcing (BPO), striking a balance between manufacturing, brands and services. Shareholding as of September 30, 2005 S . Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Funds & UTI Banks and FIs FIIs Corporates NRIs/OCBs Individuals Others Total Board of Directors 1. 2. 3. 4. 5. 6. 7. 8. Dr. K.M. Birla Mrs. R. Birla Mr. H.J. Vaidya Mr. B.L. Shah Mr. P Murari . Mr. B.R. Gupta Ms. T. Vakil Mr. V. Rao No. of shares 17,150,514 5,550,536 9,444,928 8,879,102 1,831,671 887,920 12,935,175 3,209,406 59,889,252 Percentage of holding 28.63 9.27 15.76 14.82 3.06 1.48 21.62 5.36 100.00

9. Mr. S.C. Bhargava 10. Mr. G.P Gupta . 11. Mr. A. Gupta 12. Mr. S. Aga
102

HINDALCO INDUSTRIES LIMITED


Financial Performance The operating results of ABNL for fiscal 2003, 2004, 2005 and the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for the year ended March 31, 2003 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 598.8 11,109.1 14,424.2 1,053.3 17.59 196 As at and for the year ended March 31,2004 598.8 12,078.0 15,773.9 1,312.8 21.91 212 As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005(i)
598.8 12,941.8 18,606.2 1,137.2 18.98 226

598.8 NA 10,481.2 693.3 11.58 NA

(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.

Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg

Date 12-Sept-2005 2-Nov-2005

Lowest (Rs.) 411.3 413

Date 13-July-2005 13-July-2005

650 675

There has been no change in capital structure in the last six months.

IV.

Indo Gulf Fertilisers Limited

Indo Gulf Fertilisers Limited (IGFL), was incorporated on March 10, 1998 in the name of Kamal Syn Paper (India) Pvt. Ltd. The company changed its name to Rajashree Fertilisers Limited and subsequently to Indo Gulf Fertilisers Limited on July 29, 2002. IGFL is among the largest private sector fertiliser companies in India. Located at Jagdishpur, near Lucknow, in the agriculture intensive Indo-Gangetic plain in Uttar Pradesh, IGFL manufactures and markets urea, a nitrogenous fertiliser. The move to demerge the fertiliser business of erstwhile Indo Gulf Corporation Limited into an independent entity and amalgamate the remaining copper business with Hindalco was a strategic initiative, aimed at enhancing shareholder value. As a result of the exercise, IGFL has emerged fully focused on fertilisers. Shareholding as of September 30, 2005 S. Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoters and Persons Acting in Concert Mutual Funds & UTI Banks, FIs and Insurance Companies FIIs GDRs and others Corporates NRIs/OCBs Individuals Total
103

No. of shares 26,252,248 4,464,265 3,355,840 1,682,647 725,112 1,653,594 1,367,445 5,591,652 45,092,803

Percentage of holding 58.22 9.9 7.44 3.73 1.61 3.67 3.03 12.4 100.00

HINDALCO INDUSTRIES LIMITED


Board of Directors 1. 2. 3. 4. 5. 6. 7. 8. Dr. K.M. Birla Mrs. R. Birla Mr. B.N. Puranmalka Mr. V.T. Purswani Mr. V.N. Nadkarni Mr. D.C. Gami Mr. G.P Gupta . Dr. R. Jain

Financial Performance The operating results of IGFL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for the year ended March 31, 2003 Equity Capital Reserves (excl. revaluation reserves) Net Sales/ Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 450.9 4,390.4 6,752.1 1,728.0 38.3 107.4 As at and for the year ended March 31,2004 450.9 5,150.6 5,785.2 902.7 20.0 124.2 As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005(i)
450.9 5,575.6 6,783.5 569.3 12.63 133.7

450.9 NA 3,169.4 319.0 7.07 NA

(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.

Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg

Date 29-Sept-2005 29-Sept-2005

Lowest (Rs.) 117.75 105.4

Date 11-May-2005 15-June-2005

208 209

There has been no change in capital structure in the last six months.

V.

Birla Global Finance Limited

Birla Growth Fund Limited was incorporated on June 26, 1986 in the name of Birla Growth Fund Limited. The company was renamed as Birla Global Finance Ltd (BGFL) on December 13, 1994. Today BGFL is the flagship of the Groups financial services, responsible for the promotion and development of the joint venture, with Sun Life of Canada Birla Sun Life Asset Management Co. Ltd. Headquartered in Mumbai, the company has a network of branches across the country and marketing associates covering 130 centers. It is listed on the BSE and NSE.

104

HINDALCO INDUSTRIES LIMITED


Shareholding as of September 30, 2005 S. Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. Promoters and Persons Acting in Concert & Directors & Relatives Mutual Funds & UTI Banks, FIs and Insurance Companies Corporates NRIs/OCBs Individuals Others Total Board of Directors 1. 2. 3. 4. 5. 6. 7. Mr. B.N. Puranmalka Mr. E.B. Desai Mr. A.C. Dalal Mr. S. Haribhakti Mr. G.M. Dave Mr. K.Vikamsey Mr. S.K. Mitra No. of shares Percentage of holding

19,274,396 137,716 1,101 1,804,790 97,119 3,517,348 99,131 25,750,439

74.85 0.53 0.01 7.01 0.38 13.66 0.38 100.00

Financial Performance The operating results of BGFL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Equity Capital Reserves (excl. revaluation reserves) Income from operations Profit After Tax (PAT) Basic Earning per Share (EPS) Net Asset Value (NAV) 157.5 442.4 319.7 15.3 (1.06) 38 157.5 431.6 537.5 31.2 0.44 37 As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005(i)
257.5 619.7 681.1 309.8 14.26 34

257.5 NA 351.9 124.7 4.84 NA

(i) Information as available in the unaudited published financials of the company, as required under clause 41 of the Listing Agreement.

Share Quotation The shares are listed on BSE and NSE. The details of the highest and lowest price on BSE and NSE during the preceding six months are as follows: Highest (Rs.) BSE NSE
Source: Bloomberg

Date 5-Oct-2005 5-Oct-2005

Lowest (Rs.) 80 78

Date 6-July-2005 8-July-2005

206 206

There has been no change in capital structure in the last six months.
105

HINDALCO INDUSTRIES LIMITED SUBSIDIARIES


We have fifteen subsidiaries being: (i) Bihar Caustic and Chemicals Limited, (ii) Birla Maroochydore Pty Limited, (iii) Birla Mineral Resources Pty. Ltd., (iv) Birla Mt. Gordon Pty Limited, (iv) Birla Nifty Pty. Ltd., (vi) Birla Resources Pty. Ltd., (vii) Dahej Harbour & Infrastructure Ltd., (viii) Indian Aluminium Company,Ltd., (ix) Indal Exports Ltd, (x) Lucknow Finance Company Ltd., (xi) Minerals & Minerals Ltd., (xii) Renuka Investment & Finance Ltd., (xiii) Renukeshwar Investments & Finance Ltd., (xiv) Suvas Holdings Private Limited and (xv) Utkal Alumina International Limited. Bracketed numbers indicate losses/ negative figures.

I.

Bihar Caustic & Chemicals Limited

Bihar Caustic & Chemicals Limited (BCCL) was incorporated under the Act on July 20, 1976, as a joint venture between Bihar State Industrial Development Corporation (BSIDC) and Birla Group and its registered office is at Garhwa Road, P Rehla - 822 124 Dist. Palamau. The company made a rights issue in 2003. For more details please refer to Statutory .O. and Other Information on page of 283 of this Letter of Offer. The main business of Bihar Caustic & Chemicals Limited is manufacturing Caustic Soda, Liquid Chlorine and Hydrochloric Acid

Board of Directors
1. 2. 3. 4. 5. 6. 7. 8. Mr. A.K. Agarwala Mr. S.V. Haribhakti Mr. A.N. Jha Mr. K.K. Maheshwari Mr. V. Prakash Mr. B. Choudhuri Mr. P . Sharma .P Mr. P Ojha .N.

Shareholding as on September 30, 2005


S. Name of the Shareholder No. 1. 2. 3. 4 5. 6. 7. Promoter Shareholding Mutual Funds & UTI Banks, FIs and Insurance Companies Corporates NRIs/OCBs Individuals Others Total No. of shares 15,197,987 1,800 8,000 1,394,506 113,715 6,598,234 72,258 23,386,500 Percentage of holding 64.99 0.01 0.03 5.96 0.49 28.21 0.31 100

106

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of BCCL for fiscal 2003, 2004, 2005 and the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each)
* Due to rights issue of 2:1

As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005
912.01 75.12 78.0 302.34 8.37 47.26 952.87 86.26 233.7 375.84 4.84 24.21*

1,101.59 264.52 233.86 619.22 11.31 34.86

670.09 192.75 233.86 811.96 8.24 43.41

Share Quotation The shares are listed on BSE. The details of the highest and lowest price on BSE during the preceding six months are as follows: Highest (Rs.) BSE
Source: Bloomberg

Date 5-Sept-2005

Lowest (Rs.) 51.25

Date 30-June-2005

85.7

II.

Birla Maroochydore Pty. Limited

Birla Maroochydore Pty. Limited. was incorporated on February 24, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. Hindalco forayed into Australia by acquiring Straits (Nifty) Pty Ltd., which owned the Nifty Copper mines in Australia. The Nifty mine, located in the Great Sandy Desert region of East Pilbara in Western Australia, was acquired in March 2003. Nifty mine consists of an open-pit mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant which produces copper cathode. In fiscal 2005, Nifty mine produced 15,826 tons of copper cathode. An agreement was entered with Straits Resources Ltd., a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. The company owns 51% stake in Maroochydore Property. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka

Shareholding as on September 30, 2005 S. No. 1. Name of the Shareholder Hindalco Total
107

No. of shares 10,000,001 10,000,001

Percentage of holding 100 100

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Birla Maroochydore Pty. Ltd. for fiscal 2004, 2005 and the period ended September 30, 2005 are as hereunder: (in AUD except per share data) As at and for period the ended March 31, 2004 Total Income Profit after tax /Loss before Tax Equity capital (par value AUD 1 per share) Reserves Earnings per share Book value per Share (of AUD 1 each)
Pty Ltd, the holding company in Australia.

As at the year ended March 31, 2005 1,068 (126,282) 10,000,001 (197,196) 0.98

As at and for period the ended

September 30, 2005* (51,738) 10,000,001 NA NA

1,927 (70,914) 10,000,001 (70,914) 0.99

* Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources

III.

Birla Mineral Resources Pty Ltd.

Birla Mineral Resources Pty Ltd. (BMRL) was incorporated on January 28, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005 Australia. The company forayed into Australia by acquiring Straits (Nifty) Pty Ltd, which owned the Nifty Copper mines in Australia. An agreement was entered with Straits Resources Ltd, a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. BMRL issued 16 million equity shares to the Company in the six months ended September 30, 2005. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 159,820,001 159,820,001 Percentage of holding 100 100

108

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of BMRL for fiscal 2004, 2005 and the period ended September 30, 2005 are as hereunder: (AUD in millions except per share data) As at and for period the ended March 31, 2004(i) Total Income Profit after tax/ Loss Equity capital (par value AUD 1 per share) Reserves Earnings per share Book value per Share (of AUD 1 each)
(i) Stand alone audited financials. (ii) Stand alone financials provided by management certification. * Profit before tax

As at the year ended March 31, 2005(i) 0.61 3.54 143.82 (13.20) 0.91

As at and for period ended

September 30, 2005(ii)


-

3.95 (16.74) 113.82 (16.74) 0.85

0.14* 159.82 NA NA NA

IV.

Birla Mt Gordon Pty. Ltd.

Birla Mt Gordon Pty. Ltd. was incorporated on September 19, 2003 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. The Mt. Gordon mine, in Queensland, Australia, was acquired in November 2003. Mt. Gordon mine consists of an underground and open-pit mine, a copper concentrate plant and ferric leach plant. Until recently, the operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at our operations in Dahej, Gujarat. For fiscal 2005, Mt. Gordon mine produced 35,126 tons of copper in cathode/concentrate. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Mr. P Balakrishnan . Mr. S. Loyalka

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 24,000,001 24,000,001 Percentage of holding 100 100

109

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Birla Mt Gordon Pty. Ltd. for fiscal 2004, 2005 and the period ended September 30, 2005 are as hereunder: (AUD in millions except per share data) As at and for period the ended March 31, 2004 Sales Revenue Profit after tax/ Loss before tax Equity capital (par value AUD 1 per share) Reserves Earnings per share Book value per Share (of AUD 1 each)
* Pty Ltd, the holding company in Australia.

As at the year ended March 31, 2005 85.29 (30.09) 24 (36.63) -

As at and for period ended

September 30, 2005* 45.76 (14.44) 24 NA


-

38.62 (6.54) 24 (6.54) 0.73

NA

Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources

V.

Birla Nifty Pty. Limited

Birla Nifty Pty. Limited was incorporated on May 27, 1996 under the Corporations Law of New South Wales in the name of Straits (Whim Creek Operations) Pty Ltd, by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. The company changed its name to Birla (Nifty) Pty Ltd. on March 10, 2003 and subsequently to Birla Nifty Pty Ltd. on June 26, 2003. Hindalco forayed into Australia by acquiring Straits (Nifty) Pty Ltd., which owned the Nifty Copper mines in Australia. An agreement was entered with Straits Resources Ltd., a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 87,413,924 87,413,924 Percentage of holding 100 100

110

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Birla Nifty Pty. Ltd. for fiscal 2004, 2005 and the period ended September 30, 2005 are as hereunder: (AUD in 000 except per share data) As at and for year ended March 31, 2004 Sales Revenue (from financial, 2003) Profit after tax /Loss before Tax Equity capital (par value AUD 1 per share) Reserves Earnings per share Book value per Share (of AUD 1 each)
*

As at the year ended March 31, 2005 50.43 (20.70) 71.41 17.00 1.24

As at and for period the ended September 30, 2005*

79.85 34.93 41.41 37.70 0.84 1.91

42.13 1.58(i) 87.41 NA NA NA

Unaudited financials provided by management certification. The financials have been audited at the consolidated level viz., Birla Mineral Resources Pty Ltd, the holding company in Australia. Profit before tax.

(i)

VI. Birla Resources Pty. Limited


Birla Resources Pty. Limited. was incorporated on December 22, 2000 under the Corporations Act, 2001 by the seal of the Australian Securities Commission and its registered office is at Level 2, 23 Ventnor Avenue, West Penrith WA 6005, Australia. Hindalco forayed into Australia by acquiring Straits (Nifty) Pty Ltd., which owned the Nifty Copper mines in Australia. An agreement was entered with Straits Resources Ltd., a listed entity which owned 100% of Straits (Nifty) Pty Ltd. to form Birla Mineral Resources Pty Ltd. Birla Maroochydore Pty. Ltd. and Birla Nifty Pty Ltd. are subsidiaries of Birla Mineral Resources Pty Ltd. The company provides advisory services to Birla Mineral Resources Pty Limited. Board of Directors 1. 2. 3. 4. Mr. D. Bhattacharya Mr. M.R. Prasanna Dr. M.R. Ramsay Mr. S. Loyalka

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 650,000 650,000 Percentage of holding 100 100

111

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Birla Resources Pty. Ltd. fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (in AUD) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Gross Income from Operating Activities Profit after tax Equity capital (par value AUD 1 per share) Reserves Earnings per share Book value per Share (of AUD 1 each)
* Unaudited financials provided by management certification.

As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005*
783,673.57 1,640.80 650,000 314.60 1 (1,957.12) 1,698.16 650,000 2,012.76 1 30,317.81 7.87 650,000 2,020.63 1

113,333.03 0.0
650,000 2,020.63 1

VII. Dahej Harbour and Infrastructure Limited


Dahej Harbour and Infrastructure Limited (DHIL) was incorporated under the Act on November 30, 1998 and its registered office is at P Lakhigam - 392 130, Dahej, Dist. Bharuch, Gujarat. .O. Dahej Harbour and Infrastructure Limited was a subsidiary of Indo Gulf Corporation Ltd. (IGCL) and became a subsidiary of Hindalco after the Companys amalgamation with IGCL. Dahej Harbour and Infrastructure Limited provides cargo handling services to the industry and for the copper division of the Company. Board of Directors 1. 2. 3. Mr. D. Bhattacharya Mr. R.K. Kasliwal Mr. P Balakrishnan .

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 50,000,000 50,000,000 Percentage of holding 100 100

112

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of DHIL for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Net Sales and other Income Profit after tax (PAT) Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each) 528.16 131.48 500.0 236.84 2.63 14.74 460.44 126.77 500.0 363.61 2.54 17.27 As at and for As at and for the the year ended period ended March 31, 2005 September 30,

2005
564.24 257.75 500.0 621.36 5.16 22.43

291.19 137.47 500.00 758.83 2.75 25.18

VIII. Indian Aluminium Company, Limited


Indian Aluminium Company, Limited (Indal) was incorporated under the Indian Companies Act, 1913 on December 17, 1938 and its registered office is at 1, Prafulla Chandra Sen Sarani (formerly Middleton Street) Kolkata 700 071. The main business of Indal is manufacture of aluminium foils. Pursuant to a scheme of Arrangement (Scheme) which has been approved by Bombay High Court and Calcutta High Court all the business undertakings (other than the aluminium foil business at Kollur, Andhra Pradesh) of Indian Aluminium Company, Limited have been transferred to the Company with effect from the appointed date i.e. April 1, 2004. The Scheme is made effective from March 7, 2005. Board of Directors 1. 2. 3. 4. 5. 6. 7. Dr. K.M. Birla Mr. A.K. Agarwala Mr. P Choksey .K. Mr. N.J. Jhaveri Dr. S. Misra Mr. A.L. Mudaliar Mr. B.L. Shah

113

HINDALCO INDUSTRIES LIMITED


Shareholding as on September 30, 2005 S . Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Hindalco LIC UTI GIC Mutual Funds Nationalised Banks Government Corporates and Individuals Foreign shareholders Total
*

No. of shares 69,103,902 940 1,025 100 1,270 15,460 203,325 1,874,375 56,734 71,257,131

Percentage of holding 96.98* 0.0 0.0 0.0 0.00 0.02 0.29 2.63 0.08 100.00

The difference in the shareholding of Hindalco as reflected in the shareholding pattern of Indal and the Investment of Hindalco in Indal is due to pending transfers/escrow account.

Financial performance The operating results of Indal for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for As at and for As at and for the the year ended the year ended the year ended period ended March 31, 2003 March 31, 2004 March 31, 2005 September 30,

2005
Total Income Profit after tax/Loss before tax Equity capital (par value Rs. 10 per share in 2003 & 2004 and Rs. 2 per share in 2005) Reserves Earnings per share Book value per Share (of Rs. 10 each in 2003 & 2004 and Rs. 2 per share in 2005) 14,202.88 1,186.30 712.57 8,126.48 16.65 123 16,354.00 1,321.53 712.57 9,416.59 18.55 141.01 664.97 (15.45) 142.51 26.29 (0.22) 2.32

320.22 (6.17) 142.51 20.12 (0.09) 2.23

IX. Indal Exports Limited


Indal Exports Limited was incorporated on June 21, 1989 under the Act and its registered office is at 1, Prafulla Chandra Sen Sarani (formerly Middleton Street) Kolkata 700 071. The company is a wholly owned subsidiary of Hindalco Industries Limited. The shares have been transferred from Indian Aluminium Company,Limited pursuant to a scheme of arrangement. The main activities of the company was essentially trading in aluminium and related products. However, since the last six years the main source of income for the company has been from investments. Board of Directors 1. 2. 3. Mr. A.K. Basu Mr. I. Pathak Mr. A. Sen

114

HINDALCO INDUSTRIES LIMITED


Shareholding as on September 30, 2005 S. No. 1. Name of the Shareholder Hindalco Total Financial performance The operating results of Indal Exports Limited for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in 000 except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Earnings per share Book value per Share (of Rs. 10 each) 337 (263) 1,400 3,770 (1.88) 36.93 176 (19) 1,400 3,751 (0.14) 36.79 As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 100 (18) 1,400 3,733 (0.13) 36.66 No. of shares 140,000 140,000 Percentage of holding 100.00 100.00

46 (14) 1,400 3,719 (0.10) 36.56

X.

Lucknow Finance Company Limited

Lucknow Finance Company Limited was incorporated under the Act on May 31, 1989 and its registered office is at 14-A/5, Park Road, Lucknow 226 001. Lucknow Finance Company Limited is registered with the RBI as a NBFC. Board of Directors 1. 2. 3. 4. Mr. P Balakrishnan . Mr. R.K. Kasliwal Mr. N.L. Jain Mr. R.A. Patodia

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total No. of shares 12,002,500 12,002,500 Percentage of holding 100 100

115

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Lucknow Finance Company Limited for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder. (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Earnings per share Book value per Share (of Rs. 10 each) 14.95 3.13 120.03 19.25 0.26 11.60 14.98 8.49 120.03 27.73 0.71 12.31 As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 10.77 1.02 120.03 28.75 0.08 12.40

7.31 2.44 120.03 31.19 0.20 12.60

XI. Minerals and Minerals Limited


Minerals and Minerals Limited was incorporated under the Indian Companies Act on May 2, 1953. The company changed its registered office from West Bengal to Bihar on October 3, 1970, and its present registered office is at Lohardaga, Jharkhand. The company is engaged in raising bauxite from the mines which is supplied to the Company. Board of Directors 1. 2. 3. 4. 5. 6. Mr. D. Bhattacharya Mr. R.K. Kasliwal Mr. R.K. Shah Mr. S.N. Sharma Mr. K.K. Patodia Mr. R. Mohnot (Additional Director)

Shareholding as on September 30, 2005 S . Name of the Shareholder No. 1. Hindalco Total No. of shares 50,000 50,000 Percentage of holding 100 100

116

HINDALCO INDUSTRIES LIMITED


Financial performance The operating results of Minerals and Minerals Limited for fiscal 2003, 2004, 2005 and for period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each) 14.82 2.05 0.5 8.84 48.51 186.82 13.68 0.41 0.5 9.25 8.27 195.08 As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 29.90 0.56 0.5 9.92 11.17 208.42 51.65

0.17 0.5 10.09 3.36 211.78

XII. Renuka Investments & Finance Limited


Renuka Investments & Finance Limited (RIFL) was incorporated under the Act on October 24, 1994 as a private limited company. RIFL became a deemed public company on March 15, 1995 and its registered office is at P Renukoot .O. 231 217, Dist. Sonbhadra, Uttar Pradesh. RIFL has investments in property at Ahura and in shares of Nalco and Bihar Caustic. It is not involved in any other business or operation and is registered with the RBI as a NBFC. Board of Directors 1. 2. 3. Mr. R.K. Kasliwal Mr. R.A. Patodia Mr. D.C. Kabra

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total Financial performance The operating results of RIFL for fiscal 2003, 2004, 2005 and for period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each) 26.99 7.90 92.5 11.85 0.85 11.28
117

No. of shares 9,250,000 9,250,000

Percentage of holding 100 100

As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 65.78 61.07 92.5 186.61 6.60 30.18

135.54 113.68 92.5 125.53 12.29 23.57

3.98 2.63 92.5 189.24 0.28 30.46

HINDALCO INDUSTRIES LIMITED


XIII. Renukeshwar Investments & Finance Limited
Renukeshwar Investments & Finance Limited is a Non-Banking Finance Institution incorporated under the Act on October 24, 1994 as a private limited company with its registered office at P Renukoot 231 217, Dist. Sonbhadra, .O. Uttar Pradesh. Board of Directors 1. 2. 3. Mr. R.K. Kasliwal Mr. K.K. Patodia Mr. A. Malik

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. Hindalco Total Financial performance The operating results of Renukeshwar Investments & Finance Limited for fiscal 2003, 2004, 2005 and for period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Earnings per share Book value per Share (of Rs. 10 each) 16.47 1.09 47.96 0.97 0.22 10.20 150.79 127.04 47.96 128.00 26.49 36.70 As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 19.46 19.02 47.96 147.03 3.97 40.67 No. of shares 4,795,000 4,795,000 Percentage of holding 100 100

0.14 0.12 47.96 147.15 0.03 40.68

XIV. Suvas Holdings Limited


Suvas Holdings Limited was incorporated on September 20, 2000 as a private limited company under the Act. The company changed its status to a public limited company with effect from June 1, 2004. Its registered office is at Chandramukhi Basement, Nariman Point, Mumbai 400 021. The company is a joint venture with Laxmi Organics Industries Limited with the main objective of setting up a power generation plant. Board of Directors 1. 2. 3. 4. Mr. S. Banerjee Mr. R. Goenka Mr. R. Goenka Mr. S. Ray

118

HINDALCO INDUSTRIES LIMITED


Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. 2. Hindalco Laxmi Organics Industries Limited Total Financial performance The equity capital of the company was Rs. 3.7 million, Rs. 0.5 million and Rs. 0.1 million as on March 31, 2005, March 31, 2004 and March 31, 2003 respectively. The company is in pre-operative stage and has not commenced business. No. of shares 188,700 181,300 3,70,000 Percentage of holding 51.00 49.00 100.00

XV. Utkal Alumina International Limited


Utkal Alumina International Limited was incorporated on September 29,1993 under the Act as a private limited company, and its registered office is at J-6, Jaydev Vihar, Bhubaneshwar 751 013. The Company became a deemed public company under Section 43A of the Act and subsequently pursuant to shareholders resolution dated July 11, 2005 a fresh certificate of incorporation was issued on August 22, 2005. The company is a joint venture with Alcan Inc., Canada and has been established with the purpose of setting-up an alumina plant in the state of Orissa. Indal entered into an agreement with Orissa Mining Corporation (OMC) dated February 8, 1993 in terms of which the OMC agreed to provide Indal certain services in relation to exploring and exploiting the deposits of bauxite in Orissa for the production of alumina (the Project) and also agreed to provide data and transfer a mining lease and the associated rights to Indal or a new company incorporated by Indal for undertaking the Project. In consideration of the transfer of the lease, it was also undertaken that Indal or the new company undertaking the Project would issue fully convertible cumulative preference shares, carrying a dividend of 15% amounting to Rs. 20 crores to OMC. A mining lease was executed between the Government of Orissa and OMC on February 17, 1998 in relation to a bauxite mine for the Project. Pursuant to the said agreement dated February 8, 1993 by a transfer deed dated November 10, 2000, all the rights, liabilities, covenants, stipulations and conditions contained in the said mining lease in the name of OMC were transferred to Utkal Alumina in place of Indal, as Utkal Alumina was the said new company undertaking the Project. The shareholders of Utkal Alumina have subsequently authorized the board of directors to issue such preference shares to OMC. The terms of such preference shares are being finalized and such preference shares are pending issuance. Board of Directors 1. 2. 3. 4. 5. Mr. D. Bhattacharya Mr. M.R. Prasanna Mr. C.B. Agrawal Mr. J. Demanche Mr. T. Guelton

Shareholding as on September 30, 2005 S. Name of the Shareholder No. 1. 2. Hindalco Alcan Inc. Total Financial performance The current paid-up capital of the company is Rs. 1,475,159,200. The paid-up equity capital of the company was Rs. 1,029,792,960 as on March 31, 2005, Rs. 663,835,300 as on March 31, 2004 and Rs. 663,835,300 on March 31, 2003. The company is in pre-operative stage and has not commenced business. No. of shares 81,133,756 66,382,164 147,515,920 Percentage of holding 55.00 45.00 100.00

119

HINDALCO INDUSTRIES LIMITED OUR JOINT VENTURE COMPANIES


I. Tanfac Industries Limited
Tanfac Industries Limited is a public limited company and was incorporated on December 20, 1972 under the Act in the name of Tamil Nadu Fluorine and Allied Chemicals Limited. The company changed its name to Tanfac Industries Limited on July 29, 1992. The company is a joint venture between the Tamil Nadu Industrial Development Corporation Limited (TIDCO) and the Aditya Birla Group of companies, viz., Grasim Industries Limited, Hindalco Industries Limited and Pilani Investment Industries Corporation Limited. The company started commercial production in the year 1985. As on June 30, 2005 we hold 9.8% of the equity share capital of Tanfac Industries Limited. The company has a production facility at SIPCOT Industrial Complex, Cuddalore, Tamil Nadu, for the manufacture of chemicals including aluminium fluoride, anhydrous hydrofluoric acid, cryolite, speciality fluorides, sulphuric acid and oleum. Board of Directors 1. 2. 3. 4. 5. 6. 7. 8. 9. Mr. P Yadav, IAS . Mr. S. Ramachandran, IAS Mr. A.K. Agarwala Mr. V.T. Moorthy Mr. K.K. Maheshwari Mr. A.M. Swaminathan Mr. K.R. Viswanathan Prof. Ramaswamy P Aiyar . Dr. P Ram .

Shareholding as of September 30, 2005 S. Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Promoter and persons acting in concert Mutual Funds & UTI Banks, FIs and Insurance Companies FIIs Corporates NRIs/OCBs Individuals Others Total No. of shares 5,085,302 3,900 77,700 650 960,619 39,770 3,805,009 2,050 9,975,000 Percentage of holding 50.99 0.04 0.78 0.01 9.62 0.40 38.14 0.02 100

120

HINDALCO INDUSTRIES LIMITED


Financial Performance The operating results of Tanfac Industries Limited for fiscal 2003, 2004, 2005 and for the period ended September 30, 2005 are as hereunder: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves Basic Earnings per share Book value per Share (of Rs. 10 each) Share Quotation The equity shares of Tanfac Industries Ltd are listed on the BSE, Calcutta Stock Exchange Association and Madras Stock Exchange. The details of the highest and lowest price on BSE during the preceding six months are as follows: Highest (Rs.) BSE
Source: Bloomberg

As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 881.28 3.50 99.75 263.49 0.35 36.41

728.00 38.93 99.75 319.82 3.90 42.06

755.12 33.88 99.75 343.57 3.40 44.44

524.57 (18.22) 99.75 245.27 (1.83) 34.59

Date 5-Aug-2005

Lowest (Rs.) 28

Date 11-May-2005

75.5

II.

Idea Cellular Limited.

Idea Cellular Limited is a joint venture with the Company. As on March 31, 2005 we hold 10.11% of the equity share capital. Idea Cellular Limited was incorporated on March 14, 1995 and has its registered office at Suman Towers, Plot number 18, Sector 11, Gandhi Nagar. The company is a joint venture between the Aditya Birla Group, the Tata Group and AT&T Wirless Inc. of USA (now Cingular Wireless Inc). On September 28, 2005, ABNL acquired 371.8 million equity shares in the company at an aggregate price of Rs. 6,607.3 million from AT&T Cellular Pvt. Ltd, Mauritius, raising its equity holding in the company from 4.28% to 20.74% and that of the Aditya Birla Group from 33.7% to 50.15%. The main objects of Idea Cellular Limited is to provide cellular mobile telephone services in eight telecom circles viz., Maharashtra (including Goa and excluding Mumbai), Gujarat, Andhra Pradesh, Delhi, Madhya Pradesh, Kerala, Harayana and Uttar Pradesh (West). Board of Directors 1. 2. 3. 4. 5. 6. 7. Mr. D.D. Rathi Mr. I. Hussain Mr. K. Chaukar Mr. M.R. Prasanna Mr. R. Gopalakrishnan Mr. S. Aga Mr. T Graham

121

HINDALCO INDUSTRIES LIMITED


Shareholding as of September 30, 2005 S . Name of the Shareholder No. 1. 2. 3. 4. 5. 6. 7. 8. Aditya Birla Nuvo Limited (formerly Indian Rayon and Industries Limited) Hindalco Grasim Industries Ltd. Birla TMT Holdings Ltd. Tata Industries Limited AT&T Cellular Pvt. Limited Goodison Investments Ltd. (Formerly AIG (Mauritius) LLC) Others Total Financial Performance The operating results of Idea Cellular Limited for fiscal 2003, 2004, 2005 and the period ended September 30, 2005 are as hereunder. Bracketed numbers indicate losses/ negative figures: (Rs. in millions except per share data) As at and for As at and for the year ended the year ended March 31, 2003 March 31, 2004 Total Income Profit after tax Equity capital (par value Rs. 10 per share) Reserves & Surplus Basic Earnings per share Book value per Share (of Rs. 10 each)
* as revised. ** For calculation of EPS, Profit for the period and the previous year is reduced by Rs. 266.38 million and Rs. 531.30 million respectively on account of Preference Share Dividend as per Accounting Standard 20 - Earnings per Share

No. of shares

Percentage of holding

468,597,140 228,340,226 171,013,894 265,280,040 716,058,128 371,780,750 38,456,441 587 2,259,527,206

20.74 10.11 7.57 11.74 31.69 16.45 1.70 0.00 100.00

As at and for As at and for the the year ended period ended March 31, 2005 September 30, 2005 16,417.15 260.53 22,595.27 (16,996.01) (0.12) 2.48

8,618.67 (1,598.08) 21,395.27 (15,187.42) (0.94) 2.75

11,806.96 (2,069.12) 22,595.27 (17,256.54) (1.19)* 2.36

9,297.44 210.29 22,595.27 (16,785.72) (0.02)** 2.57

The equity shares of Idea Cellular Limited are not listed.

122

HINDALCO INDUSTRIES LIMITED RELATED PARTY TRANSACTIONS


We have various transactions with various parties including our subsidiary companies, joint venture companies, trusts and key management personnel. As a policy, we enter into transactions with related parties on an arms-length basis. The list of related parties and the transactions entered into are as follows: S. Particulars No. 1. Subsidiary Company Name of Party Indian Aluminium Company, Limited Indal Exports Limited Minerals and Minerals Limited Renukeshwar Investments & Finance Limited Renuka Investments & Finance Limited Dahej Harbour and Infrastructure Limited (From 2002-2003) Lucknow Finance Company Limited (From 2002-2003) Birla Maroochydore Pty Limited (From 2002-2003) Birla Mineral Resources Pty Limited (From 2002-2003) Birla Resources Pty Limited (From 2002-2003) Birla Nifty Pty Limited (From 2002-2003) Birla Mt Gordon Pty Limited (From 2003-2004) Bihar Caustic and Chemicals Limited (With effect from January 1, 2004) Utkal Alumina International Limited (With effect from July 1, 2003) Suvas Holdings Limited (From 2003-2004) Trident Trust (From 2002-2003) Bihar Caustic and Chemicals Limited (upto December 31, 2003) Tanfac Industries Limited IDEA Cellular Limited (formerly Birla Tata AT&T Ltd.) Mr. A.K. Agarwala (upto September 10, 2003) Mr. D. Bhattacharya - Managing Director (with effect from October 2, 2003)

2. 3.

Trust Joint Ventures

4.

Key Managerial Personnel

Details of Transactions with Subsidiary Companies are as below: Transactions with Subsidiary Companies Year ended March 31, 2003 2004 2005 (Rs. in millions) Sales and Conversion Services rendered Interest and dividend received Interest paid Purchase of materials Services received Investments, Deposits, loans and advances made during the year Investments, Deposits, loans and advances as at year end Guarantees and Collateral securities given 747.2 45.6 317.9 11.1 45.8 312.3 4,419.9 15,738.2 1,114.0 17.8 78.8 22.4 371.1 318.4 1,111.2 16,462.3 5,110.9 327.7 24.7 48.5 21.5 4,146.7 278.6 1,117.7 5,877.9 11,400.0

Six months ended


September 30, 2005

206.7 43.1
24.4 -

2,472.4
145.3

886.0 6,762.8 11,689.1

123

HINDALCO INDUSTRIES LIMITED


Transactions with Subsidiary Companies Year ended March 31, 2003 2004 2005 (Rs. in millions) Licence and Lease arrangements a) Licence Fees b) Deposits Outstanding balances at year end - Debit Balances - Credit Balances 4.9 144.5 11.4 141.9 5.6 350.2 4.9 44.5 4.9 54.9

Six months ended


September 30, 2005

2.5 54.9 107.1 156.9 Six months ended


September 30, 2005

Details of Transactions with Joint Venture Companies are as below: Transactions with Subsidiary Companies Year ended March 31, 2003 2004 2005 (Rs. in millions) Sales and Conversion Services rendered Interest and dividend received Interest paid Purchase of materials Services received Investments, Deposits, loans and advances made during the year Investments, Deposits, loans and advances as at year end Guarantees and Collateral securities given Licence and Lease arrangements a) Licence Fees b) Deposits Outstanding balances at year end - Debit Balances - Credit Balances 0.0 7.9 0.4 0.9 13.1 5.5 0.2 0.1 65.2 766.7 1.2 1,541.5 2,732.9 2,131.4 0.6 0.2 48.7 633.6 0.8 700.0 2,293.4 850.0 108.4 0.0 0.9 181.7 0.4 2,293.4 875.0

84.9 0.5
-

91.6 0.2 0 2,293.4 875.0

0.1 22.8

124

HINDALCO INDUSTRIES LIMITED


Details of Transactions with the Trust are as below: Transactions with the Trident Trust Year ended March 31, 2003 2004 (Rs. in millions) Beneficiary Interest in the Trust Interest Received from Trust 344.5 344.5 344.5 344.5 32.26 2005

Six months ended


September 30, 2005

Details of Transactions with Key Management Personnel are as below: Transactions with Key Management Personnel Year ended March 31, 2003 2004 2005 (Rs. in millions) Managerial Remuneration (including perquisites) 12.2 16.5 25.8 9.4

Six months ended


September 30, 2005

125

HINDALCO INDUSTRIES LIMITED AUDITORS REPORT


To, The Board of Directors HINDALCO INDUSTRIES LIMITED Dear Sirs, As required by Part II of Schedule II of the Companies Act, 1956 and Guidelines titled Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 issued by the Securities and Exchange Board of India (SEBI) in pursuance of Section 11 of Securities and Exchange Board of India Act, 1992, we have examined the financial information contained in the statements annexed to this report which is proposed to be included in the Letter of Offer of HINDALCO INDUSTRIES LIMITED (The Company) in connection with the proposed Rights Issue and we report that :

The Company
We have examined the Statement of Profit and Loss Restated (Annexure-1) of the Company for six months ended on September 30, 2005 and each of the years ended on March 31, 2001, 2002, 2003, 2004 and 2005 and the Statement of Assets and Liabilities Restated as on those dates (Annexure - 2), the Statement of Cash Flows Restated for the period / years ended on those dates (Annexure - 3), and the related financial statements schedules (Annexure 4 to 10) as extracted from the audited financial statements each of the financial years ended on March 31, 2001, 2002, 2003, 2004 and 2005, and adopted by the members of the Company and for the six-month period ended on September 30, 2005, approved by Board of Directors of the Company and after making the necessary and relevant disclosures and adjustments as appropriate and required to be made, in our opinion in accordance with the provisions of Part II and Schedule II of the Companies Act, 1956 and SEBI Guidelines: We have examined the following financial information relating to the Company proposed to be included in the Letter of Offer, approved by the Board of Directors and annexed to this report. a. b. c. d. e. Details of Dividends paid by the Company (Annexure 11) Summary of accounting ratios based on the adjusted profits relating the earning per share, net asset value and return on net worth. (Annexure 12) Capitalization statement of the Company. (Annexure 13) Details of other Income and Operating Revenues (Annexure - 14) Tax shelter statement. (Annexure 15)

Consolidated Group
We have examined the Statement of Consolidated Profits and Losses Restated (Annexure 16) for six months ended on September 30, 2005 and each of the financial years ended on March 31, 2002, 2003, 2004 and 2005, the Statement of Consolidated Assets and Liabilities Restated (Annexure 17) as on those dates, the Statement of Consolidated Cash Flow - Restated (Annexure 18) for the period / years ended as on those dates and the related financial statements schedules (Annexure 19 to 21) as extracted from the Audited Consolidated Financial Statements for six months ended on September 30, 2005 and each of the Financial years ended on March 31, 2002, 2003, 2004 and 2005 and approved by the Board of Directors of the Company and after making the necessary and relevant disclosures and adjustments as appropriate and required to be made in our opinion in accordance with the provisions of Part II of Schedule II of the Companies Act, 1956 and the SEBI Guidelines. As stated in note No. B (3) of Annexure 4, the Company has not restated the financial information for the periods prior to which, the Accounting Standards 11 (revised). The effect of changes is Foreign Exchange Rates; Accounting Standard 22 - Accounting for Taxes on income; and Accounting Standard 28 - Impairment of Assets; became applicable as required by clause (b) of paragraph 6.10.2.7 of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 because of non applicability of these accounting standards in those years. In our opinion, the financial information of the Company and Consolidated Group read with notes to accounts
126

HINDALCO INDUSTRIES LIMITED


and the above para, as attached to this report and as mentioned above have been prepared in accordance with the provisions of Part II of Schedule II of the Companies Act, 1956 and SEBI guidelines. This report is intended solely for the use of HINDALCO INDUSTRIES LIMITED, for the purpose of inclusion in the Letter of Offer in connection with the proposed Right Issue of the Company. This report may not be used or relied upon by, or disclosed, referred to or communicated by yourself (in whole or in part) to, any third party for any purpose other than the stated use, except with our written consent in each instance, and which consent, may be given, only after full consideration of the circumstances at that time. For Singhi & Co. Chartered Accountants Dated: The 12th day of November, 2005 1B, Old Post Office Street Kolkata 700 001 RAJIV SINGHI Partner Membership No. 53518

127

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 1


STATEMENT OF PROFIT AND LOSS RESTATED
(Rs. in millions)
Six months ended Sep 30, 2005 Income: Net Sales & Operating Revenue:(net of excise) Of products manufactured by the Company Of products traded in by the Company Operating Revenues Total Other Income Increase (Decrease) in inventories Total Expenditure: Raw material consumed Goods Purchased Payment to and provision for employees Manufacturing and operating expenses Selling, Distribution, Administration and other overheads Interest & Finance Charges Depreciation Total Net profit before tax and exceptional items Exceptional Items Net profit before tax Provision for current tax Provision for deferred tax Provision for Fringe Benefits Tax Provision for deferred tax of earlier year/s written back (net) Net profit after tax Balance brought forward from previous year Balance brought forward from Amalgamating Company 26,361.75 31.44 2,252.76 11,211.45 1,926.39 1,000.17 2,453.79 45,237.75 8,731.96 8,731.96 (2,262.50) (411.70) (43.60) 6,014.16 550.00 128 46,223.65 171.34 4,126.34 20,112.38 4,390.74 1,699.56 4,632.57 81,356.58 19,132.86 (91.03) 19,041.83 (5,705.00) (758.86) 715.60 13,293.57 550.00 31,008.78 2,370.56 11,988.57 2,732.27 1,771.54 3,174.52 53,046.24 12,456.69 12,456.69 (2,606.40) (1,461.00) 8,389.29 550.00 23,236.08 2,228.45 9,124.92 3,052.91 1,364.92 2,642.24 41,649.52 10,627.04 (1,633.12) 8,993.92 (2,520.00) (652.50) 5,821.42 550.00 3,161.40 4,755.70 1,671.64 5,549.21 1,589.87 455.95 1,543.34 15,565.71 10,049.99 10,049.99 (2,570.00) (620.00) 6,859.99 550.00 4,290.69 1,523.16 4,829.88 1,492.95 618.78 1,423.86 14,179.32 9,800.79 9,800.79 (3,020.00) 0.00 6,780.79 550.00 48,044.42 37.94 603.85 48,686.21 1,263.39 4,020.11 92,822.70 170.95 2,238.86 95,232.51 2,700.45 2,556.48 59,213.85 2,869.67 62,083.52 2,400.05 1,019.36 65,502.93 47,448.52 2,674.02 50,122.54 1,917.21 236.81 52,276.56 266.99 23,368.70 2,054.02 192.98 25,615.70 314.54 22,869.13 1,199.79 (88.81) 23,980.11 23,101.71 22,554.59 Year Ended March 31, 2005 2004 2003 2002 2001

53,969.71 100,489.44

HINDALCO INDUSTRIES LIMITED


Six months ended Sep 30, 2005 Proposed Dividend writtenback due to buy-back of equity shares Transferred from Debenture Redemption Reserve BALANCE AVAILABLE FOR APPROPRIATIONS APPROPRIATIONS: Debenture Redemption Reserve Capital Redemption Reserve Proposed Dividend on Equity Shares Tax on Dividend Proposed/Paid Transfer to General Reserve Balance carried to balance sheet 6,564.16 6,564.16 960.00 1,855.61 264.16 10,613.80 550.00 14,243.57 920.70 1,525.84 195.50 6,472.25 550.00 9,664.29 428.42 7.53 1,248.42 159.92 7,148.69 550.00 9,542.98 721.50 0.06 1,005.21 5,133.22 550.00 7,409.99 521.50 893.59 91.15 5,274.55 550.00 7,330.79 Year Ended March 31, 2005 2004 2003 2002 2001

6,564.16

400.00 14,243.57

10.16 725.00 9,664.29

9,542.98

7,409.99 7,330.79

129

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE 2


STATEMENT OF ASSETS AND LIABILITIES RESTATED
As at Sep 30, 2005 A Fixed Assets Gross Block Less : Depreciation Less : Impairment Net Block Less : Revaluation Reserve Net Block after adjustment of revaluation reserve Capital Work-in-progress Total B Investments 99,794.00 (33,095.87) (999.27) 65,698.86 65,698.86 6,047.63 71,746.49 36,166.38 87,727.93 66,584.94 56,679.77 56,726.19 53,582.59 2005 2004 As at March 31st 2003 2002 2001

(30,693.37) (19,182.79) (16,069.88) (999.27) 56,035.29 56,035.29 13,229.81 69,265.10 37,021.45 47,402.15 47,402.15 4,676.66 52,078.81 33,772.05 40,609.89 40,609.89 8,024.14 48,634.03 26,484.20

(24,858.27) (21,977.96) 31,867.92 31,604.63

(11,358.08) (12,867.46) 20,509.84 6,441.35 26,951.19 19,852.50 18,737.17 2,782.46 21,519.63 19,174.57

Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances and other current assets Total 29,640.11 8,284.93 7,504.13 7,912.49 53,341.66 23,745.18 7,873.67 4,009.69 9,135.71 44,764.25 11,913.43 5,611.13 2,279.02 9,058.99 28,862.57 10,022.22 5,607.41 3,031.42 9,112.46 27,773.51 3,771.75 2,731.79 3,870.28 6,199.13 16,572.95 3,473.54 2,055.05 2,658.08 4,899.00 13,085.67

D.

Liabilities and Provisions: Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities and provisions 27,676.72 15,544.94 11,708.69 23,730.26 29,523.38 8,476.59 11,296.98 25,181.93 17,259.35 8,386.55 9,951.35 10,537.18 20,492.70 3,457.48 8,490.35 8,540.29 9,280.03 297.33 4,443.15 3,540.50 6,940.36 206.83 2,844.47

Total E. Net Worth

78,660.61 82,593.92

74,478.88 46,134.43 76,571.92 68,579.00

40,980.82 61,910.92

17,561.01

9,991.66

45,815.63 43,788.21

130

HINDALCO INDUSTRIES LIMITED

ANNEXURE 2
STATEMENT OF ASSETS AND LIABILITIES RESTATED (Contd.)
As at Sep 30, 2005 2005 2004 As at March 31st 2003 2002 2001

F.

Represented by: 1. Share Capital 2. Reserves Less : Revaluation Reserve Less : Miscellaneous Expenditure to the extent not written-off or adjusted Reserves (Net of Revaluation Reserves & Miscellaneous expenditure) Networth 927.78 81,752.17 927.77 924.77 924.64 60,986.28 744.63 744.69

75,738.01 67,654.23 -

56,429.08 55,910.98

- (11,358.08) (12,867.46)

(86.03)

(93.86)

81,666.14 82,593.92

75,644.15 67,654.23 76,571.92 68,579.00

60,986.28 61,910.92

45,071.00 43,043.52 45,815.63 43,788.21

131

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED


ANNEXURE 3 STATEMENT OF CASH FLOWS RESTATED
Six months ended Year Ended March 31,

(Rs. in million)

Sep 30, 2005

2005 $

2004

2003 #

2002

2001

A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax and extraordinary items Adjustment for : Depreciation Investment activities Lease Rent Paid Foreign Exchange Loss Provisions / Misc w/off Interest charged Operating profit before working capital changes Changes in working Capital: Trade and other receivables Inventories Trade payable Cash generated from operation Direct taxes paid Payment of compensation under voluntary retirement scheme NET CASH GENERATED FROM OPERATIONS 4,852.81 17,609.33 11,128.73 8,825.72 7,303.30 6,872.36 1,031.47 (5,894.92) (1,273.82) 5,004.40 (125.21) (26.38) (1,774.76) (9,377.40) 5,273.79 17,049.89 636.01 (76.57) (2,462.76) (1,891.21) 1,920.23 12,717.96 (1,589.23) (720.97) (1,861.82) 1,830.07 12,005.70 (3,179.98) (731.01) (298.21) 551.76 (499.98) (190.26) 184.92 2,453.79 (1,136.72) 13.30 79.18 1,000.17 11,141.68 4,632.57 (2,706.71) 41.51 95.18 1,732.85 22,928.26 1,514.52 15,151.70 1,200.97 12,758.42 455.95 618.78 3,174.52 (2,091.28) 97.25 2,642.24 (1,874.61) 162.78 1,543.34 1,423.86 8,731.96 19,132.86 12,456.69 10,627.04 10,049.99 9,800.79

(1,957.34) (1,179.96) 3.45

10,091.94 10,666.92

9,614.48 10,161.60 (2,311.18) (3,289.24)

132

HINDALCO INDUSTRIES LIMITED


STATEMENT OF CASH FLOWS RESTATED (Contd.)
Six months ended Year Ended March 31,

(Rs. in million)

Sep 30, 2005 B. CASH FLOW FROM INVESTMENT ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of shares of Subsidiaries Acquisition of Business* Purchase of Investments(net) Loan repayment received from Subsidiaries (Net) Interest received Dividend received Lease rent received Cash flow before extraordinary items Sale of investments (Shares of MRPL to ONGC) NET CASH USED IN INVESTMENT ACTIVITIES C. CASH FLOW FROM FINANCING ACTIVITIES FINANCING ACTIVITIES Buy Back of Equity Share Capital Share call money received Proceeds from long term borrowings (net) Proceeds from short term borrowings (net) Interest paid Lease Rent Paid Dividend paid NET CASH FROM FINANCING ACTIVITIES 0.01 (1,677.32) 6,899.52 (1,181.46) (2,115.72) 1,925.03

2005 $

2004

2003 #

2002

2001

(5,138.52) (11,733.39) 33.34 (784.97) 528.15 (982.58) 113.70

(7,030.31) 69.16 (906.58) (5,583.52) 474.67 937.99 378.80 -

(9,901.50) 65.19 (4,399.34) (69.18) (380.50) 165.00 918.32 396.11 17.83

(6,918.88) (2,869.04) 23.19 61.49

- (10,126.30) (286.93) 1,069.65 328.73 2,293.97 980.09 69.57 -

1,832.37 (10,357.22) (130.96) 362.55 524.12 5.70 280.96 1,255.79 794.27 10.82

(3,296.37) (20,089.50)

(11,659.79) (13,188.07) 211.52

(5,784.24) (9,590.22) -

(3,296.37) (20,089.50)

(11,659.79) (12,976.55)

(5,784.24) (9,590.22)

0.01 8,146.22 (719.44) (1,740.32) (1,725.25) 3,961.22

0.13 (2,233.54) 4,280.95 (1,539.69) (97.25) (1,408.34) (997.74)

(553.15) 4,321.88 1,198.11 (994.13) (162.78) (1,580.56) 2,229.37

(4.21) 2,033.08 (337.85) (984.74) 706.28

1,331.21 (538.36) (685.83) 107.02

133

HINDALCO INDUSTRIES LIMITED


STATEMENT OF CASH FLOWS RESTATED (Contd.)
Six months ended Year Ended March 31,

(Rs. in million)

Sep 30, 2005 NET INCREASE IN CASH AND CASH EQUIVALENTS CASH & CASH EQUIVALENTSOPENING BALANCE CASH & CASH EQUIVALENTSCLOSING BALANCE * $ # 3,481.47 4,397.80 7,879.27

2005 $ 1,481.05 2,916.75 4,397.80

2004 (1,528.80) 4,445.55 2,916.75

2003 # (1,921.46) 6,367.01 4,445.55

2002

2001

2,225.34 (2,610.84) 4,141.67 6,367.01 6,752.51 4,141.67

Expense incurred on merger of Demerged business of INDAL in 2004-05 and amalgamating business in 2002-03, net of its opening cash & cash equivalent has been shown as Acquisition of Business. Refer Note No. 2 of Notes to Accounts (Annexure - 4) Refer Note No. 3 of Notes to Accounts (Annexure - 4)

Notes: 1 2 Cash and cash equivalent includes cash and bank balances and Deposits with Companies and interest accrued thereon. Interest charged excludes and Purchase of Fixed Assets includes interest capitalised Rs.191.23 million in six months ended Sep 30, 2005, Rs 342.35 million in 2004-05, Rs. 212.35 million in 2003-04, Rs.584.90 millions in 2002-03 & Rs.436.48 millions in 2001-02

ANNEXURE - 4

134

HINDALCO INDUSTRIES LIMITED ANNEXURE - 4 SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS
A)
1.

SIGNIFICANT ACCOUNTING POLICIES:


FIXED ASSETS Fixed Assets are stated at cost. Cost includes borrowing costs and other related overheads incurred during the period of construction.

2.

INTANGIBLE ASSETS Intangible assets are stated at cost. Cost includes any directly attributable expenditure on making the asset ready for its intended use.

3.

DEPRECIATION AND AMORTISATION (a) Depreciation on Fixed Assets has been provided for on Straight Line Method at the rates and manner prescribed under Schedule XIV to the Companies Act, 1956, as amended.

(b) Leasehold land / mining rights are amortised over the period of lease. (c) Assets where ownership vests with the Government Authorities are amortised at the rates of depreciation specified in Schedule XIV to the Companies Act, 1956.

(d) Intangible assets are amortised over their estimated useful life. 4. IMPAIRMENT Impairment loss is recognized wherever the carrying amount of an asset is in excess of its recoverable amount and the same is recognized as an expense in the statement of profit and loss and carrying amount of the asset is reduced to its recoverable amount. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased. 5. LEASES (a) Assets taken on finance lease (including that prior to 1st April 2001) are capitalised and finance charges are charged to statement of profit and loss on accrual basis.

(b) Lease payments under an operating lease recognized as expense in the statement of profit and loss as per terms of lease agreement. 6. INVESTMENTS (a) Long term Investments are carried at cost after deducting provision, in cases where the fall in market value has been considered of permanent nature.

(b) Current investments are stated at lower of cost and fair value. 7. INVENTORIES (a) Inventories of stores and spare parts are valued at or below cost after providing for cost of obsolescence and other anticipated losses, wherever considered necessary.

(b) Machinery spares which can be used only in connection with an item of Fixed Asset and whose use is not of regular nature are written off over the estimated useful life of the relevant asset. (c) Inventories of items other than those stated above are valued At cost or Net Realizable Value, whichever is lower. Cost is generally determined on weighted average cost basis and wherever required, appropriate overheads are taken into account. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale.

135

HINDALCO INDUSTRIES LIMITED


8. FOREIGN CURRENCY TRANSACTIONS (a) Year-end balance of foreign currency transactions is translated at the year-end rates and the corresponding effect is given in the respective accounts. Transactions completed during the year are adjusted on actual basis. In respect of transactions covered by Forward Foreign Exchange Contracts, the difference between the forward rate and exchange rate at the inception of contract is recognized as income or expense over the life of the contract except for contracts relating to liabilities incurred for purchase of Fixed Assets, the difference thereof is adjusted in the carrying amount of respective Fixed Assets. Transactions covered by cross currency swap and options contracts to be settled on future dates are recognized at the year-end rates of the underlying foreign currency. Effects arising of swap contracts are being adjusted on the date of settlement.

(b)

(c)

9.

RETIREMENT BENEFITS (a) (b) (c) Year-end liability for Superannuation benefits to the eligible employees are provided and funded to approved funds. Year-end liability on account of Gratuity is provided for on actuarial valuation basis. In respect of the aluminium business such amount is funded with an approved fund. Leave Encashment benefits are provided for on actuarial basis.

10. RECOGNITION OF INCOME AND EXPENDITURE Income & Expenditure are recognized on accrual basis and provision is made for all known expenses. 11. BORROWING COSTS Borrowing cost directly attributable to the acquisition or construction of qualifying assets are capitalised. Other borrowing costs are recognized as expenses in the period in which they are incurred. 12. TAXATION Provision for current income tax is made in accordance with the Income Tax Act, 1961. Deferred tax liabilities and assets are recognized at substantively enacted tax rates, subject to the consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. 13. MANAGEMENT OF METAL PRICE RISK In respect of copper division the company has adopted a policy to minimize the risks associated with fluctuations in the price of copper and other precious metals by hedging mismatch on futures market. However, the company does not conduct speculative operations in the futures market. The results of metal hedging contracts /transactions are recorded at their settlement as part of raw material cost or sales as the case may be. The settlement of these transactions generally coincides with the accounting of the underlying transactions. 14. PROVISION A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 15. CONTINGENT LIABILITY Contingent liabilities are not provided for in the accounts and are disclosed by way of Notes.

136

HINDALCO INDUSTRIES LIMITED


B)
1.

NOTES TO ACCOUNTS
Pursuant to a Scheme of Arrangement u/s. 391 to 394 of the Companies Act, 1956 (the Scheme) which has been approved by Honble Bombay High Court and Kolkata High Court on 14th January, 2004 and 23rd December 2004, respectively, all the business undertakings (other than the aluminium foil business at Kollur, Andhra Pradesh), hereinafter referred to as demerged undertaking, of Indian Aluminium Company, Ltd. (Indal) has been transferred to the Company with effect from the appointed date i.e. 1st April, 2004 on going concern basis. Demerged undertaking is engaged inter alia in conducting and carrying on the business of mining, manufacture and sale of hydrate and alumina, alumina chemicals, aluminium, aluminium products including aluminium sheets, extrusions and foil and generation of electricity.

2.

A Scheme of Arrangement (the Scheme) between the Company, Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) and their respective shareholders and creditors which envisages the demerger of the fertiliser business of IGCL to IGFL, and the subsequent amalgamation of the Remaining Business of IGCL with the Company, has been approved by the Honble High Courts at Allahabad and Mumbai vide their Orders dated 18th November, 2002 and dated 31st October, 2002 respectively. In terms of the scheme, the remaining business (hereinafter referred to as amalgamating company) comprising of manufacturing of copper and certain precious metals, the processing, producing, manufacturing and marketing of certain types of chemicals (including diammonium phosphates) and rendering assistance and services in relation to the same has been amalgamated and transferred and vested in the Company, on a going concern basis with effect from the appointed date, i.e. from opening of business on 1st April, 2002. Accounts are not restated for the periods prior to which the Accounting Standards, as stated under, became effective : Accounting Standard Accounting Standard 11 (revised) - The Effects of Changes in Foreign Exchange Rates Accounting Standard 22 - Accounting for Taxes on Income Accounting Standard 28 - Impairment of Assets Effective Date Periods commencing on or after 1-4-2004 Periods commencing on or after 1-4-2001 Periods commencing on or after 1-4-2004 (Rs. in millions) Rs. in millions Half Year ended Sep 30, 2005 2004-05 9,654.80

4 5

Capital Commitments outstanding [Advance/Deposit paid Rs.3,445.49 million (Rs. 3097.48 million in 2004-05)] Rs.3,097.48 (I) Contingent Liabilities not provided for in respect of: (a) Claims/Disputed liabilities not acknowledged as debt: Following demands are disputed by the Company and are not provided for: i) Demand notice by Asstt. Collector Central Excise Mirzapur for excise duty on power generated by companys captive power plant, Renusagar Power Co. Ltd (Since amalgamated). * Writ petition pending with Delhi High Court, Delhi. Earlier demand raised was quashed by Delhi High Court. The amount has been sequestered in the Aluminium Regulation account. According to the terms of settlement dated 5.12.83 between the Central Govt.
137

10,986.09

91.21

91.21

HINDALCO INDUSTRIES LIMITED


Rs. in millions (Rs. in millions) Half Year ended Sep 30, 2005 and the Company, this amount will be reimbursed to the Company in the event the case is decided against the Company. ii) Demand of interest on past dues of the Aluminium Regulation account upto 31.12.1987. * The demand is in dispute with Controller of Aluminium Regulation Account. iii) Retrospective Revision of Water Rates by UP Jal Vidyut Nigam Limited (April 1989 to June 1993 & Jan 2000 to Jan 2001) * Writ petition pending with Lucknow Bench of Allahabad High Court. The demand stayed vide order dated 11.5.2001 175.93 52.05 63.29 63.29 2004-05

40.80

40.80

iv)

Transit fees levied by Divisional Forest Officer, Renukoot on coal and bauxite * Appeal pending with Allahabad High Court and payment of transit fee has been stayed. According to legal opinion received by the Company, the forest department has no authority to levy such fee.

v)

M.P Transit Fee on Coal demanded by Northern Coal Fields Limited * Writ petition pending with Jabalpur High Court. The Company has paid Rs 105.90 million to NCL under protest subject to the final conclusion of the writ petition

124.90

112.48

vi)

Withholding Tax on payment of fees on GDR issue. * Appeal pending before Income Tax Appellate Tribunal, Mumbai. Demand adjusted against refund due to the Company Imposition of Cess on Coal by Shaktinagar Special Area Development Authority. * Appeal pending before Allahabad High Court, Allahabad. Demand and levy stayed. According to legal opinion received by the Company, the state has no power to tax the mineral since this field is covered under Mines and Minerals Development and Regulation Act

91.56

91.56

vii)

35.36

31.40

138

HINDALCO INDUSTRIES LIMITED


Rs. in millions (Rs. in millions) Half Year ended Sep 30, 2005 viii) Demand of Royalty on Vanadium by District Mining officer, Lohardaga. * Appeal pending with Allahabad High Court, Allahabad. The demand stayed on certain conditions which have been fulfilled by the Company. 31.90 53.40 2004-05 12.90

ix)

Demand from District Mining office, Lohardaga & Gumla towards payment of increased surface rent on Mining * The notices have been replied by the company refuting the demand on the grounds that Surface Rent has already been paid upto Dec04 at the rates specified by the State Government

x)

The demand of Excise Duty on gold * Appeal pending with Customs, Excise and Service tax Appellate Tribunal, West Zone, Mumbai

1,557.70

1,557.70

xi)

Demand for non-payment of sales tax on leased assets. * Writ petition admitted and stay granted by High Court, Ahmedabad

260.50

212.26

xii)

Demand raised for reversal of difference between duty paid and Cenvat credit taken in returned material. * Appeal to be filed with CESTAT

13.00

xiii) Claim by KSEB for difference between the actual demand and contract demand * Company has submitted its representation to KSEB

26.73

xiv) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax etc. each being for less than Rs. 10 millions * * b) i) ii) The demands are in dispute at various legal forums Status indicating uncertainties

98.63

84.85

Bills discounted with Banks Guarantees outstanding (includes corporate guarantees of Rs.11,689.11 million (2004-05 Rs. 11399.76 million) given on behalf of subsidiary companies) Letters of Credit Outstanding Bank Guarantees & Bonds

385.53

468.14

12,796.99 12,595.15 675.65 287.17 684.17 249.54

iii) iv) c)

The Company has received supplementary bills on account of revision in rate of power for Main Supply from the UPSEB for the period 15th May 1976 to 30th June 1980 and the same remains unprovided for as disputed by the Company

50.10

50.10

139

HINDALCO INDUSTRIES LIMITED


(Rs. in millions) Half Year ended Sep 30, 2005 d) In terms of the Schemes of Arrangement between the Company, the erstwhile Indo Gulf Corporation Ltd. (IGCL) and Indo Gulf Fertilisers Limited approved by the Honble High Courts at Allahabad and Mumbai vide their orders dated 18th November 2002 and 31st October 2002 respectively and between the Company and Indian Aluminium Company, Ltd. (Indal) approved by the Honble High Courts at Kolkata and Mumbai vide their orders dated 23rd December 2004 and 14th January 2005 respectively, the company may be liable to pay a portion of disputed demands of Income Tax pertaining to IGCL & Indal. 228,340,226 Equity Shares of Rs.10/- each fully paid up in IDEA Cellular Ltd. are held by the Company as investment. Out of the above 115,187,999 shares of Rs. 10/- each have been pledged for securing financial assistance granted by the lenders to that company. 2004-05

e)

II)

Provisions: For Excise duty on electricity (Additions and Deductions during the year Nil) 54.73 54.73

III)

The Company has given undertakings to various Financial Institutions for non-disposal of shares held in Bihar Caustic & Chemicals Ltd., Tanfac Industries Ltd. and 57,085,060 shares of Rs 10/ each of IDEA Cellular Ltd. till the Institutional loans are repaid in full. The Company has export obligations of Rs.7534.43 million Rs.7,534.43 million (USD 169.54 million) [2004-05 Rs 7,501.33 million (USD 171.46 million)] Rs 7501.33 million against the Import Licences taken for import of capital goods under Export Promotion Capital Goods Scheme. The Company has export obligation of Rs.5,373.66 millions (USD 122.15 millions) [2004-05 Rs 2,592.25 millions (USD 59.25 million)] Rs 2592.25 millions against the Advance Licence.

a)

b)

140

HINDALCO INDUSTRIES LIMITED


7 As per the Accounting Standard (AS) 28 - Impairment of Assets, which came into effect from 1st April 2004, the Company carried the impairment test as of 1st April 2004 and provided for the impairment loss where recoverable amount was lower than amount carried in the accounts by adjusting the same (net of deferred taxes of Rs.336.29 million) against opening balance of revenue reserves as per the transitional provisions. Details are given below: A) Aluminium Nature of Asset Events/Circumstances Impairment Loss Amount (Rs. in million) 164.00 120.20 330.95 143.39 146.43 194.58 Basis of Recoverable Amount Value in use Net Selling Price Net Selling Price Value in use Net Selling Price Net Selling Price

Certain assets of Foil units Certain assets of Wheel Unit Certain assets of Smelters Certain assets of Other Units B) Copper Nature of Asset

Low return on Investments due to severe competition in the market place Inadequate return on Investment due to low demand Inadequate return on Investment mainly due to high cost of operation Erosion in value

Events/Circumstances

Impairment Loss Amount (Rs. in million) 339.87

Basis of Recoverable Amount Value In use

Certain Assets of Copper Unit

Higher carrying value than Value in Use

For arriving at Value in Use discount rate of 9.5% has been used. Net Selling Price has been determined based on valuation report from external agencies. As at Sep 30, 2005, the Company made an assessment to ascertain whether there is any indication that an asset may be impaired and found no such indication. However, a detailed assessment will be carried at the close of financial year. 2004-05 8 Loan and Advances includes I) a) Due from a firm of Solicitors & Advocates in which one of the Directors is a partner. (Maximum balance during the year Rs.0.13 million) b) c) Due from Officers (Maximum balance during the year Rs.0.07 million) Payments made to Rosa Power Supply Co. Ltd. Rs. 20.99 million (maximum balance Rs. 20.99 million) [2004-05 Rs. 20.99 million (maximum balance Rs. 20.99 million)], Bina Power Supply Co. Ltd. Rs. 391.44 million (maximum balance Rs. 491.44 million) [2004-05 Rs. 391.44 million (maximum balance Rs.391.44 million)] and Birla Telecom Ltd. Rs.1.47 million (maximum balance Rs 1.47 million) [2004-05 Rs.1.47 million (maximum balance Rs 1.47 million)] to be adjusted against the value of the Equity Shares to be issued by such companies in the event the relative projects are implemented after receipt of all regulatory approvals. 0.07 -

141

HINDALCO INDUSTRIES LIMITED


II) To Subsidiary Companies : (Rs. in millions) As on 30.09.2005 Maximum As on amount 31.03.2005 outstanding during the period 0.04 252.55 54.85 209.55 0.13 122.90 54.85* 34.44 0.08 Maximum amount outstanding during the year 8.24 54.03 122.90 59.85 201.28 330.00 0.08

Renukeshwar Investments & Finance Limited Renuka Investments & Finance Limited Bihar Caustic & Chemicals Ltd. Lucknow Finance Company Limited (without interest) Utkal Alumina International Limited Dahej Harbour and Infrastructure Limited Indal Export Ltd. * III) with no repayment schedule

0.04 252.55 54.85* 1.83 0.04

Inter Corporate Deposits : a) Inter Corporate Deposit aggregating to Rs.160.76 million (maximum balance Rs.160.76 million) [2004-05 Rs.160.76 million (maximum balance Rs.160.76 million)] made to Aditya Birla Power Company Ltd. (formally Birla Project Development Corporation Ltd) on interest pursuant to MOU entered into with the company for development of new projects. Inter Corporate Deposit aggregating to Rs.218.48 million (maximum balance Rs.218.48 million) [2004-05 Rs.200.71 million (maximum balance Rs.200.71 million)] made to Aditya Birla Management Corporation Ltd. (ABMCL) bearing interest. The company is one of the promoter member of ABMCL, a company limited by guarantee which has been formed to provide a common pool of facilities and resources to its members, with a view to optimise the benefits of specialisation and minimise cost for each member. The company has participated in the common pool and has shared the expenses incurred by ABMCL and accounted for these under appropriate heads.

b)

c)

IV)

Balances with Trident Trust representing 16,316,130 equity shares of the Company issued pursuant to the Scheme of Arrangement approved by the Honble High Courts at Mumbai and Allahabad vide their Order dated 31st October, 2002 and 18th November, 2002, respectively, to the Trident Trust, which is created wholly for the benefit of the Company and is being managed by trustees appointed by it. Future obligations towards lease rentals under the lease agreements taken prior to 1st April 2001 (Rs. in millions) Period Lease Payment HY Ended 2004-05 Sep 05 80.41 68.05 21.60 Present Value HY Ended 2004-05 Sep 05 76.73 64.92 20.09

a)

Not later than one year Later than one year and not Later than five years b)

Future obligations towards lease rentals under the lease agreements taken on or after 1st April 2001 (Rs. in millions) Period Lease Payment HY Ended 2004-05 Sep 05 0.29 0.10 0.29 0.24 Present Value HY Ended 2004-05 Sep 05 0.27 0.09 0.27 0.21

Not later than one year Later than one year and not Later than five years
142

HINDALCO INDUSTRIES LIMITED


c) In 2004-05, in line with Accounting Standard 19 Leases, on April 1, 2004 the Company has capitalized assets taken on finance lease in earlier years at their respective cost amounting Rs. 1728 million together with their respective accumulated depreciation of Rs. 470.50 million. The total of future minimum lease payment commitments under non-cancellable operating lease agreement for a period of twenty years to use railway tracks along with locomotives for transportation of its materials are as under: (Rs. in millions) Period Not later than one year Later than one year and not later than five years Later than five years HY Ended Sep 05 4.00 16.00 46.67 2004-05 4.00 16.00 48.67

d)

The above amounts are exclusive of taxes and duties. During the year the company has charged Rs. 2.00 million (Previous year - Rs. 4.00 million) as rent in respect of this lease. 10 Disclosure in respect of jointly controlled entities in which the company is a joint venturer, in compliance with AS-27 on Financial Reporting of Interest in Joint Ventures : (Rs. in millions) Rs in millions HY Ended Sep-05 Particulars Tanfac IDEA Industries Cellular Limited Ltd (Unaudited) (Unaudited) India 9.98% 91.39 56.95 52.35 53.96 India 10.11% 5,313.41 4,306.96 1,398.41 1,323.93 321.16 144.58 2004-05 Tanfac IDEA Industries Cellular Ltd Ltd (Unaudited) (Unaudited) India 9.98% 97.83 62.73 87.92 87.87 0.04 16.46 India 10.11% 4,234.85 3,180.91 1,659.06 1,632.73 102.18 238.40 2003-04 Tanfac Industries Limited (Unaudited) India 9.98% IDEA Tanfac Cellular Industries Ltd Limited 2002-03 IDEA Cellular Ltd Bihar Caustic & Chemicals Ltd. India 20.00% 333.37 259.65 182.40 167.38 2.40 150.01

Country of incorporation Percentage of Share in Joint Venture Assets Liabilities Income Expenditure Capital Commitments (net of advance) Contingent Liabilities 11 Deferred Tax

India 10.11%

India 9.98% 82.63 40.75 72.28 68.39 0.97 2.33

India 9.83% 3,179.26 2,109.47 926.07 1,116.84 64.20 1,61.74

96.90 3,784.28 51.64 2,756.53 75.37 1,193.17 71.99 1,402.15 4.43 27.64 133.51 105.73

Major components of Deferred Tax arising on account of temporary timing differences along with their movement as at balance sheet date are : (Rs. in millions) Particulars Deferred Tax Assets (A) Brought forward long term Capital Losses Deferred Tax Liability (B) Depreciation Others 10,919.67 789.02 11,708.69
143

HY Sep-05 -

2004-05 10,450.26 846.72 11,296.98

2003-04 36.58 8,809.71 1,178.22 9,951.35

2002-03 100.52

2001-02 163.51

7,413.10 4,386.02 1,177.77 220.64 8,490.35 4,443.15

Net Deferred Tax Liabilities (B-A)

HINDALCO INDUSTRIES LIMITED


12 13 Purchase of copper concentrate is accounted for provisionally pending finalisation of content in the concentrate, price, and custom duty. Variations are accounted for in the year of settlement. A part of electricity supplied by the company, which has been treated by UPPCL as sale, has been accounted for on the basis of provisional rates. The effect of variation in the rate will be accounted for in the year in which rates are finalised by UPPCL. Sale of Di-Ammonium Phosphate (DAP) and other complex fertilisers are covered under the concessional schemes for decontrolled fertilisers of the Government of India. Pending declaration of final rate of concession for the quarter ended 30th September 2005 the claim for concession under the scheme for that period has been accounted for provisionally based on final rates declared for the preceding quarter. Exceptional items in 2004-05 represent Rs. 91.03 million on account of expenses incurred on amalgamation as per note no.1 and in 2002-03 represent loss of Rs.1,467.27 million on sale of shares in Mangalore Refinery Rs.1467.27 million and Petrochemicals Limited and Rs.165.85 million towards expenses incurred on amalgamation as per Note No. 2.

14

15

144

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 5


SEGMENTAL REPORTING - RESTATED
(Rs. in million)
Six months ended Sep 30, 2005 Particulars REVENUE External Sales & Operating Revenue Inter Segment Sales 27,547.18 (2.45) 27,544.73 Less: Inter Segment Sales Total Revenue RESULTS Segment/Operating Results Un-allocable Income (Net of Expenses) Interest Expenses Non Recurring Expenses Provision for Tax (including Deferred Tax) Net Profit OTHER INFORMATION Segment Assets Un-allocable Assets Total Assets Segment Liabilities Unallocable Liabilities & Provisions Total Liabilities Depreciation Un-allocable Depreciation Total Depreciation Capital Expenditure including CWIP 3,064.97 1,908.31 1,775.95 671.44 6,441.91 65,319.71 52,321.27 117,640.98 43,699.58 161,340.56 8,388.78 14,830.69 8,899.57 23,730.26 2,447.39 6.40 2,453.79 4,973.28 4,980.49 5,990.14 3,482.25 1,138.66 4,944.08 10,121.80 60,073.08 47,935.18 108,008.26 43,136.40 151,144.66 15,065.88 10,116.05 25,181.93 4,620.91 11.66 4,632.57 10,970.63 3,486.88 3,203.40 2,263.12 910.92 3,172.07 5,185.22 43,833.57 32,806.97 76,640.54 38,072.89 114,713.43 8,357.29 2,179.89 10,537.18 3,174.04 0.48 3,174.52 6,690.28 7,699.46 2,673.63 2,642.24 10,373.09 1,752.84 889.40 2,663.58 3,847.11 41,165.85 27,861.28 69,027.13 33,864.61 102,891.74 6,510.69 2,029.60 8,540.29 2,642.24 8,729.00 (163.04) 8,565.96 1,166.17 (1,000.17) (2,717.80) 6,014.16 15,957.41 2,538.00 18,495.41 2,337.01 (1,699.56) (91.03) (5,748.26) 13,293.57 8,905.94 3,097.00 12,002.94 2,225.29 (1,771.54) (4,067.40) 8,389.29 6,605.28 3,839.54 10,444.82 1,547.14 (1,364.92) (1,633.12) (3,172.50) 5,821.42 21,141.48 48,688.66 (2.45) 52,520.90 42,711.61 95,232.51 95,232.51 29,957.76 32,125.76 62,083.52 62,083.52 23,920.40 23,920.40 26,202.14 26,202.14 50,122.54 50,122.54 Aluminium Copper Total Aluminium 2004-05 2003-04 2002-03

Copper

Total Aluminium

Copper

Total Aluminium

Copper

Total

21,141.48 48,686.21 -

52,520.90 42,711.61 -

29,957.76 32,125.76 -

27,544.73 21,141.48 48,686.21

52,520.90 42,711.61 95,232.51 29,957.76 32,125.76 62,083.52 23,920.40 26,202.14 50,122.54

SECONDARY SEGMENT REPORTING : Secondary segment is based on geographical demarcation i.e. India and rest of the world: HY Sep-05 India Rest of the world 33,669.61 15,019.05 2004-05 68,773.21 26,459.30 2003-04 49,132.55 12,950.97 2002-03 39,839.90 10,282.64

145

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 6


Related Party Transactions :
A List of Related Parties (a) Subsidiaries of the Company Indian Aluminium Company, Limited Annapurna Foils Limited Indal Exports Limited Minerals and Minerals Limited Renukeshwar Investments & Finance Limited Renuka Investments & Finance Limited Dahej Harbour and Infrastructure Limited Lucknow Finance Company Limited Birla Maroochydore Pty Limited Birla Mineral Resources Pty Limited Birla Resources Pty Limited Birla (Nifty) Pty Limited Birla Mt. Gordon Pty Limited Mt Bihar Caustic and Chemicals Limited Utkal Alumina International Limited Suvas Holdings Limited (b) Trusts of the Company Trident Trust (c) Joint Ventures Bihar Caustic and Chemicals Limited Tanfac Industries Limited IDEA Cellular Limited (formerly Birla Tata AT&T Ltd.) Manglore Refinary & Petrochemicals Limited (d) Key Managerial Personnel: Mr. A.K. Agarwala - Whole Time Director Mr. Debu Bhattacharya- Managing Director upto 10.09.2003 w.e.f. 02.10.2003 For 2001-02 upto 31.12.2003 From 2002-03 From 2002-03 From 2002-03 From 2002-03 From 2002-03 From 2002-03 From 2002-03 From 2003-04 w.e.f. 01.01.2004 w.e.f. 01.07.2003 From 2003-04 For 2001-02 Remarks

146

HINDALCO INDUSTRIES LIMITED


B (a) The following transactions were carried out with the Related parties in the ordinary course of business: Subsidiary Companies and Joint Ventures : Six months ended Sep 05 SubsiJoint diaries Ventures Transaction during the year 1 2 3 4 5 6 7 Sales and Conversion Services rendered Interest and dividend received Interest paid Purchase of materials Services received Investments, Deposits, loans and advances made during the year Investments, Deposits, loans and advances as at year end Guarantees and Collateral securities given Licence and Lease arrangements a) Licence Fees b) Deposits 2.46 54.85 4.92 54.85 4.92 44.45 206.67 43.14 24.43 2,472.37 145.30 84.86 0.50 91.59 0.17 327.73 24.72 48.46 21.53 4,146.73 278.63 108.36 0.02 0.9 181.71 0.38 1,113.98 17.77 78.8 22.37 371.08 318.4 0.59 0.24 48.68 633.58 0.75 747.15 45.64 317.89 11.08 45.84 312.25 0.24 0.09 65.23 766.7 1.23 1,432.08 3.59 245.33 0 78.34 0.2 56.1 5.59 122.57 822.46 1.54 2004-05 SubsiJoint diaries Ventures 2003-04 Subsidiaries Joint Ventures 2002-03 Subsi- Joint diaries Ventures (Rs. in million) 2001-02 SubsiJoint diaries Ventures

886.04

1,117.69

1,111.15

700 4,419.94 1,541.5

281.92 1,414.32

6,762.76 2,293.36 11,689.11 875.00

5,877.91 2,293.36 2293.36 11400 11,400 875

16,462.25 5,110.90

2,293.36 15,738.23 2,732.90 10,652.22 5,076.30 849.96 - 2,131.35 - 1,735.73

9 10

Outstanding balances at year end 1 2 (b) Debit Balances Credit Balances 107.09 156.97 0.08 22.75 5.57 350.23 13.11 5.49 11.43 141.93 0.41 0.89 4.86 144.52 0.02 7.86 142.85 5.8 11.1 10.86

Trident Trust Beneficiary Interest in the Trust Interest Received from Trust 344.52 32.63 344.52 344.52 344.52

( c)

Key Managerial Personnel: Managerial Remuneration (including perquisites) 9.43 25.82 16.51 12.19 12.07

147

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED


ANNEXURE - 7
Principal terms of Loans and Assets Charged as security (Rs. in millions)
Particulars Secured Loans: Secured Redeemable Non-Convertible Debentures Balance as on Balance as on Rate of Interest 11.20% 9.75% 9.00% 7.95% Repayment Schedule Redeemable on 12th January, 2008 Redeemable on 2nd July, 2008 Redeemable on 17th September, 2008 Redeemable on 15th July, 2009 Redeemable on 23rd August, 2007 Redeemable on 23rd August, 2007 (Rs. 500.00 million) & 23rd August, 2009 (Rs. 250.00 million) Redeemable on 29th November, 2009 Redeemable on 14th June, 2006 Redeemable on 20th November, 2007 Redeemable on 15th September, 2009 The 9.95% and 6.60% debentures are secured by first charge on immovable properties of Belur unit situate in the State of West Bengal , both present and future, ranking pari-passu and fixed assets of the Belur Unit both present and future (save and except book debt) and 6.39% debentures are secured / to be secured by first charge on immovable properties of Hirakud Smelter and power plant ,both present and future ranking pari-passu and fixed assets of Hirakund smelter and power plant both present and future. These debentures are secured/ to be secured by Put/call option on first charge on immovable property of Copper 19th July, 2007 Plant situate at Dahej both present and future ranking pari-passu with existing charge holders and a fixed assets present and future ranking pai-passu of the Copper plant at Dahej. Further 12.75% debentures are secured on movable properties subject to charge created/to be created in favour of the Bankers for securing Working Capital facilities. These debentures are secured by first charge on immovable properties of aluminium plant situate at Renukoot, both present and future, ranking pari-passu save and except, some of the Workers Quarters and on fixed assets both present and future ranking pari-passu of the Aluminium plant situate at Renukoot. Put/call option on 12th January, 2006 Put/ call option on 2nd July, 2006 Put/call option on 17th September, 2006 Put/ call option on 15th July, 2007 Put/call option on 23rd August, 2005 Put/call option on 23rd August, 2007 for Rs. 250.00 million only Security Remarks Sept 30, 2005 March 31, 2005 1,500.0 2,000.0 500.0 600.0 1,500.0 2,000.0 500.0 600.0

750.0

250.0 750.0

6.95% 7.20%

1,050.0 500.0 486.8 1,000.0

1,050.0 500.0 486.8 1,000.0

6.40% 9.95% 6.60% 6.39%

Put/call option on 29th November, 2007

600.0

600.0

12.75%

2,000.0 1,000.0 500.0 500.0 2,500.0 Term loans from Government of Uttar Pradesh under subsidised Housing Scheme for Industrial Workers Cash Credit and Export Credit Accounts 0.7

2,000.0 1,000.0 500.0 500.0 2,500.0 0.7

8.70% 8.10% 6.20% 5.95% 6.50% 9.97%

Rs. 26.50 crore each on 4th December, 2005 and 4th December, 2006 and Rs. 3.50 crore each on 12th December, 2005 & 12th December, 2006 Redeemable on 23rd April, 2007 Redeemable on 19th July, 2009 Redeemable on 8th January, 2008 Redeemable on 14th January, 2008 Redeemable on 6th September, 2009 2005-06 Rs.0.19 Million and balance in 2006-07 to 2010-11

Secured by hypothecation of Workers Quarters

1019.99 1,019.99

1,775.7

As As per the nature negotiated of facility from time to time with refrence to various facilities

Secured by hypothecation of stocks of Raw Materials, Consumable Stores, Spares, Work-in-Progress and Finished Products of other than its Copper Division, movable assets and book debts of its Copper Division, both present and future. Further secured/to be secured by way of joint equitable mortgage of the immovable assets, on second charge basis, of the Copper Division, ranking pari-passu with other Lenders/Institutions.

148

HINDALCO INDUSTRIES LIMITED


(Rs. in millions)
Particulars Rupee term Loan from various Banks Balance as on Balance as on Rate of Interest 7.07% Repayment Schedule Rs. 99 millions, Rs.148.5 millions, Rs.247.5 millions, Rs.247.5 millions, Rs.495 millions, Rs.742.5 millions, Rs.990 millions and Rs.1980 millions every year beginning 2007-08 to 2014-15 In 2005-06 The loan is secured/ to be secured by first charge on all immovable properties of the Company both present and future ranking pari-passu and hypothecation on all the assets both present and future of the Company ranking pari-passu. Security Remarks Sept 30, 2005 March 31, 2005 4,950.0 4,950.0

Rupee term Loan from UTI Bank Rupee term Loan from UTI

6.69

13.4

15.17%

2.2

4.4

15.17%

In 2005-06

Rupee Term loans from Financial Institutions are secured by joint and equitable mortgage / hypothecation of all properties (save & except book debts) of the Copper Division of the Company, both present & future, ranking pari-passu inter-se, subject to prior charges created in favour of the Companys Bankers on specified movables assets for securing the borrowings for the working capital facilities and Hirakud Power assets

Rupee term Loan from IDBI

75.4

105.8

11.00%

2005-06 Rs.60.8 millions & 2006-07 Rs.45 millions 2005-06 Rs.1.8 millions & 2006-07 - Rs.1.3 millions In 2005-06 Foreign Currency Loan of USD 48 million from Banks, ranking pari-passu and are secured by hypothecation on Unit No.8 of power plant at Renusagar. USD 40 million loan is secured by first charge on specific assets and USD 12.5 million loan is secured by tangible movable properties including movable plant & machinery and or equipments both present and future located at factories, godowns and premises at Taloja and Kalwa. and JPY loan equivalent to USD 100 million are secured by first charge on immovable properties of the Copper division situate at Dahej ranking pari-passu and hypothecation of fixed assets both present and future of Copper division at Dahej ranking pari-passu

Rupee term Loan from IIBI Ltd Foreign Currency Term Loans - HSBC

2.2

3.1

15.30%

351.9

700.0

Libor + 55 bps

Foreign Currency Term Loans - SCB & BOA Foreign Currency Term Loans - HSBC Foreign Currency Term Loans - HSBC Foreign Currency Term Loans - BNP Paribas Foreign Currency Term Loans - BNP Paribas Foreign Currency Term Loans from Financial institutions

399.5 594.0 2,300.0 1,119.3 1,124.3 243.7

793.1 602.4 2,300.0 1,119.3 1,124.3 294.4

6M Libor In 2005-06 +77.5 bps 6M Libor + 90bps 6M Libor + 33 bps 6M Libor + 60bps 6M Libor + 60bps 5.95% In 2006-07 In 2008-09 In 2010-11 In 2010-11 Three equal half yearly installments of Rs.98.1 millions Foreign Currency loan from a Financial Institution is guaranteed by a bank guarantee and such guarantee is secured by hypothecation of all plant & machinery both present & future pertaining to the Copper Division. This is further secured by joint equitable mortgage, on first charge basis, of all immovable properties of the Copper Division at Dahej both present & future.

27,676.7

29,523.4

149

HINDALCO INDUSTRIES LIMITED


(Rs. in millions)
Particulars Unsecured Loans: Employees and other Deposits Rupee Loans from Banks Foreign Currency Loans from Banks Foreign Currency Loans from Financial Institutions Buyers Credit 269.8 42.8 2,143.8 13,088.6 15,544.9 43,221.7 268.3 55.0 3,420.3 1,484.1 3,248.9 8,476.6 38,000.0 7% to 7.50% 8% to 12.75% 2.34% to 5.44% 3.60% to 3.68% 0.37% to 3.45% Within a year a year Within Within a year a year Within a Within a year year Within Within aa year year Within Within a year a year Balance as on Balance as on Rate of Interest Repayment Schedule Security Remarks Sept 30, 2005 March 31, 2005

Total Loans

150

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED


ANNEXURE - 8 SUMMARY OF INVESTMENTS AS AT YEAR / PERIOD END
(Rs. in million) Sep-05 LONG TERM INVESTMENTS UNQUOTED Trade - Shares in Subsidiary Companies Other than trade Government Securities Shares in Subsidiary Companies Other Shares, Debentures and Bonds QUOTED Trade Shares in Subsidiary Companies Other Shares, Debentures and Bonds Other than trade Government Securities Shares in Subsidiary Companies Other Shares, Debentures and Bonds Units of Mutual Funds CURRENT INVESTMENTS UNQUOTED Other than trade Other Shares, Debentures and Bonds Units of Mutual Funds TOTAL Aggregate Book Value : Unquoted Quoted Units of Mutual Funds Aggregate Market Value Quoted 8,951.26 2,423.34 24,791.78 36,166.38 10,290.22 8,118.57 2,421.06 26,481.82 37,021.45 8,025.92
151

2004-05

2003-04

2002-03

2001-02

2000-01

1151.69 0.37 5229.31 2569.89

906.74 0.37 4,691.57 2,519.89

500.00 0.39 3,569.02 2,852.88

500.00 0.41 2,816.57 3,001.03

0.41 142.00 2,658.80

0.37 96.65 2,658.80

124.54 9.96 61.71 2227.13 13.1

122.26 9.96 61.71 2,227.13 13.10

122.26 9.96 61.71 12,021.11 2,282.04 -

27.95 61.71 11,971.25 2,626.48 -

27.95 10,126.30 3,402.17 -

27.95 10,126.30 4,005.34 -

24,778.68 36,166.38

26,468.72 37,021.45

12,352.68 33,772.05 6,922.29 14,497.08 12,352.68 33,772.05 16,963.73

250.00 5,228.80 26,484.20 6,568.01 14,687.39 5,228.80 26,484.20 10,647.37

49.60 3,445.27 19,852.50 2,850.81 13,556.42 3,445.27 19,852.50 7,191.72

444.37 1,814.79 19,174.57 3,200.19 14,159.59 1,814.79 19,174.57 8,151.78

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 9


SUNDRY DEBTORS
(Rs. in millions) As at Sep Particulars Debts outstanding over six months - Considered good - Considered doubtful Other Debts - Considered good - Considered doubtful Provision for Doubtful Debts Total Sundry Debtors Receivable from Promoter /Promoter Group Co. Others Total Sundry Debtors 7,786.67 (85.41) 8,284.93 22.15 8,262.78 8,284.93 7,712.42 (94.70) 7,873.67 30.91 7,842.76 7,873.67 5,382.53 (19.07) 5,611.13 1.93 5,609.20 5,611.13 5,324.21 (17.41) 5,607.41 3.45 5,603.96 5,607.41 2,662.92 (6.85) 2,731.79 0.71 2,731.08 2,731.79 1,853.38 2,055.05 0.27 2,054.78 2,055.05 498.26 85.41 161.25 94.70 228.60 19.07 283.20 17.41 68.87 6.85 201.67 30, 2005 2005 As at 31st March 2004 2003 2002 2001

152

HINDALCO INDUSTRIES LIMITED ANNEXURE - 10 LOANS AND ADVANCES AND OTHER CURRENT ASSETS:
(Rs. in Millions) As at Sep Particulars Advance and Loan to Subsidiary Companies Receivable from Promoter /Promoter Group Co. Loan to Employees Inter Corporate Deposits Advances recoverable in cash or in kind or for value to be receivedand/or to be adjusted Prepaid Expenses Advance Income Tax Paid (Net) Balance with Customs, Port Trusts, Excise etc. Security and other Deposits Excise, Customs and other Claims Receivable Accrued Interest Accrued Export Incentives TOTAL 30, 2005 344.72 421.63 205.78 599.24 2,538.31 289.47 14.66 735.70 2,212.41 134.17 416.40 7,912.49 2005 212.27 400.08 201.77 631.47 2,597.96 214.67 11.51 729.09 3,714.67 44.45 377.77 9,135.71 As at 31st March 2004 555.65 515.46 13.86 726.16 2,006.95 1,270.09 0.02 403.62 3,330.76 82.45 153.97 9,058.99 2003 928.27 386.80 1,815.11 1,292.89 1,008.75 1,236.89 403.70 2,017.79 22.26 9,112.46 2002 385.25 42.36 3,425.82 996.90 183.59 493.97 199.09 398.15 74.00 6,199.13 2001 207.27 113.10 2,026.17 1,051.87 146.35 752.79 142.99 382.78 75.68 4,899.00

153

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 11


DETAILS OF DIVIDEND PAID
Particulars 2005 Number of Equity Shares (Nos. in millions) Face Value Per Share (Rs.) Paid up value per share (Rs.) Rate of Dividend - % Total Dividend Paid / Proposed (Rs. in millions) Corporate Dividend Tax (Rs. in millions) 92.77 10 10 200 1,855.61 264.16 2004 92.48 10 10 165 1,525.84 195.50 Financial Year 2003 92.48 10 10 135 1,248.42 159.92 2002 74.46 10 10 135 1,005.21 2001 74.47 10 10 120 893.59 91.15

154

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 12


SUMMARY OF ACCOUNTING RATIOS
Rs. in milions (Except per share data) Six Months Sep-05 1. Net Profit after tax before Exceptional Items Net profit after tax Add: Exceptional Items Net Profit after tax before Exceptional Items 6,014.16 6,014.16 13,293.57 91.03 13,384.60 8,389.29 8,389.29 5,821.42 1,633.12 7,454.54 6,859.99 6,859.99 6,780.79 6,780.79 2005 2004 2003 2002 2001

2.

Weighted average number of Equity Shares outstanding during the year / period (Nos. in millions)

927.75

92.77

92.48

92.50

74.46

74.46

3. 4.

Number of equity shares outstanding at the end of the year / period (Nos. in millions) Networth

927.75 82,593.92

92.77 76,571.92

92.48

92.48

74.46

74.47

68,579.00 61,910.92 45,815.63 43,788.21

Before Share Split Accounting ratios Earning per Share Basic and diluted (1) / (2) Net Asset Value per share (4) / (3) Return on Networth (1) / (4) After Share Split 5. Weighted average number of Equity Shares outstanding during the year / period (Nos. in millions) 6. Number of equity shares outstanding at the end of the year / period (Nos. in millions) Accounting ratios Earning per Share Basic and diluted (1) / (5) Net Asset Value per share (4) / (6) Return on Networth (1) / (4) * Not annualised * 6.48 89.03 14.56% 14.43 82.54 17.48% 9.07 74.16 12.23% 8.06 66.95 12.04% 9.21 61.53 14.97% 9.11 58.80 15.49% 927.75 927.75 924.75 924.75 744.60 744.66 927.75 927.75 924.75 925.03 744.59 744.60 144.27 825.35 17.48% 90.72 741.59 12.23% 80.59 669.49 12.04% 92.13 615.30 14.97% 91.07 588.03 15.49%

155

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 13


CAPITALISATION STATEMENT
Rs. in million Pre-issue as at Sep 30, 2005 Borrowings: Short Term Long Term Total Debts Shareholders Funds Equity Share Capital Reserves and surplus Less : Miscellaneous expenditure (to the extent not written off) Total Shareholders Funds Long Term Debt / Equity Ratio 82,593.92 0.30 104,859.87 0.24 927.78 81,752.17 (86.03) 1,159.72 103,786.18 (86.03) 18,250.45 24,971.25 43,221.70 18,250.45 24,971.25 43,221.70 Adjusted for right issue

Note: Short term borrowings include installment of long term borrowings repayable within one year

156

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 14


Details of Other Income and Operating Revenues
(Rs. in millions) Six month ended Sep 30, 2005 Other Income: Rent Received Profit/(Loss) on sale/discarded of Fixed Assets (Net) Liabilities / Provisions no longer required written back Income from Investments Interest Dividend Profit/(Loss) on sale of Investments (Net) Diminution in carrying cost of Investments/written back (Net) Interest on Inter Corporate Deposits and Deposit in Banks Interest from Others From Income Tax Department Others Miscellaneous Receipt 314.53 67.75 91.25 1,263.39 Six month ended Sep 30, 2005 Operating Revenues: Exports Incentives Miscellaneous Receipts and Claims (Net) 382.90 220.95 603.85 1,851.67 387.19 2,238.86 2,561.06 308.61 2,869.67 2,407.70 266.32 2,674.02 214.35 52.64 266.99 242.39 72.15 314.54 Recurring Recurring 2,700.45 2,400.05 1,917.21 2,054.02 1,199.79 975.26 77.98 549.96 373.82 13.20 294.92 284.80 86.74 159.89 51.14 Non recurring Recurring Non recurring 3.33 524.12 192.34 63.40 7.09 794.27 544.67 208.90 19.85 378.80 798.05 (0.09) 267.81 64.57 396.10 564.50 24.98 490.88 133.65 328.73 589.65 562.77 186.81 69.57 140.55 570.41 Recurring Recurring Recurring Non recurring Recurring 11.42 (4.75) 14.62 77.66 13.67 (1.82) 35.08 7.63 25.35 10.42 57.26 6.55 1.59 13.28 Recurring Non recurring Non recurring 2005 Year Ended March 31, 2004 2003 2002 2001 Nature of item

2005

2004

Year Ended March 31, 2003 2002

2001

Nature of item

157

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED ANNEXURE - 15


TAX SHELTER STATEMENT
(Rs. in millions) PARTICULARS Tax Rate Net profit before Tax & exceptional items Tax at Notional Rate Adjustments: Export Benefits Difference between Tax Depreciation and Book Depreciation Other Adjustments Adjustments or rectifications resulting from Auditors Qualification Net Adjustments Tax saving on this difference Total Taxation (Current Tax) Exceptional items Taxation on exceptional items Tax on profit before exceptional items 1,310.93 699.40 2,010.33 676.68 2,262.50 2,262.50 2,362.00 1,180.23 3,542.23 1,296.19 5,705.00 91.03 6.66 5,698.34 423.70 3,896.60 872.50 5,192.80 1,862.92 2,605.92 2,605.92 785.40 1,926.70 1,056.70 3,768.80 1,385.03 2,520.40 1,633.12 (12.20) 2,532.60 731.05 649.55 1,471.45 2,852.05 1,018.18 2,569.66 2,569.66 1,078.60 604.00 482.40 2,165.00 856.26 3,019.95 3,019.95 HY Sep-05 33.66% 8,731.96 2,939.18 2005 36.59% 19,132.86 7,001.19 2004 35.88% 2003 36.75% 2002 35.70% 2001 39.55% 9,800.79 3,876.21

12,456.69 10,627.04 10,049.99 4,468.84 3,905.44 3,587.85

158

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 16


STATEMENT OF CONSOLIDATED PROFIT AND LOSSES - RESTATED
(Rs. in millions) Six months ended Sep 30, 2005 Income : Net Sales Operating Revenues Net Sales & Operating Revenue Other Income Increase (Decrease) in inventories Total Expenditure Raw material consumed Goods Purchased Payment to and provision for employees Manufacturing and operating expenses Selling, Distribution, Administration and other overheads Interest & Finance Charges Depreciation Total Net profit before tax and exceptional items Exceptional Items (Net) Net profit before tax Provision for current tax Provision for deferred tax Provision for Fringe Benefits Tax Provision for taxation for earlier year/s written back (net) Net profit after tax before Minority Interest Minority Interest NET PROFIT Balance brought forward from Previous year Adjusted pursuant to the Scheme of Arrangement Transfer from Debenture Redemption Reserve Proposed Dividend written back due to buy-back of Equity Shares. Balance available for Appropriations Appropriations Debenture Redemption Reserve Capital Redemption Reserve Special Reserve Proposed Dividend on Equity Shares Tax on Dividend Proposed /Paid Transfer to General Reserve Balance Carried to Balance Sheet 50,211.16 2,220.80 52,431.96 1,257.13 4,821.21 58,510.30 24,782.72 35.21 2,695.03 14,172.24 2,998.08 1,339.49 3,589.62 49,612.39 8,897.91 2.50 8,895.41 2,304.72 374.31 46.95 (0.33) 6,169.76 87.23 6,082.53 (1,192.52) 7.00 2005 96,257.40 4,797.24 101,054.64 2,778.83 3,021.03 106,854.50 43,461.86 182.22 5,051.26 24,965.24 6,109.45 2,159.12 6,324.93 88,254.08 18,600.42 130.55 18,469.87 5,418.81 809.04 (715.94) 12,957.96 110.11 12,847.85 3,777.93 (4,488.22) 416.67 Year ended March 31,* 2004 2003 77,513.86 4,718.85 82,232.71 2,795.21 3,188.54 88,216.46 36,054.17 8.42 4,598.62 20,293.47 4,911.28 2,345.64 5,140.34 73,351.94 14,864.52 10.04 14,854.48 3,233.51 1,637.73 8.70 9,974.54 39.70 9,934.84 2,371.31 645.00 2002

64,009.41 35,651.76 304.64 93.55 64,314.05 35,745.31 2,102.04 2,290.08 418.76 377.64 66,834.85 38,413.03 27,384.98 9,618.99 0.56 3,797.39 2,864.67 13,213.39 8,373.00 5,010.47 3,167.55 1,901.72 808.01 3,711.31 2,175.10 55,019.82 27,007.32 11,815.03 11,405.71 1,613.17 71.77 10,201.86 11,333.94 2,669.49 2,843.91 827.88 704.80 (0.03) 6,704.52 47.93 6,656.59 1,372.62 3,288.22 10.16 11,327.59 462.42 7.53 0.63 1,248.42 160.07 7,077.21 2,371.31 11,327.59

7,785.23 295.41 7,489.82 2,128.68 -

4,897.01

12,554.23 960.00 38.28 1,864.11 266.88 10,617.48 (1,192.52) 12,554.23

12,951.15 970.70 1.70 1,531.15 197.11 6,472.56 3,777.93 12,951.15

9,618.50 721.50 0.06 1,005.21 4,995.24 2,896.49 9,618.50

0.49

(0.01) 4,896.53 4,897.01

* Figures for the financial year 2001-02 do not include proportionate share in Joint Ventures.

159

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 17


STATEMENT OF CONSOLIDATED ASSETS AND LIABILITIES - RESTATED
(Rs. in millions) As at Sept 30, 2005 A Fixed Assets Gross Block Less : Depreciation Less : Impairment Net Block Less : Revaluation Reserve Net Block after adjustment of revaluation reserve Capital Work-in-progress B C Investments Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances and other current assets D. Liabilities and Provisions: Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities and provisions E. E. F. Minority Interest Net Worth Represented by: 1. 2. Share Capital Advance against Equity Share Capital Reserves Less : Revaluation Reserve Less : Miscellaneous Expenditure to the extent written-off or adjusted Reserves (Net of Revaluation Reserves & Miscellaneous expenditure) Networth 80,995.30 82,411.18 75,098.44 76,514.31 68,894.69 70,307.56 60,442.59 61,860.52 45,314.71 46,059.34 (120.65) (135.02) (194.85) (77.00) (30.92) 81,115.95 1,415.88 1,415.87 75,233.46 1,412.87 69,089.54 1,305.11 112.82 60,519.59 744.63 56,703.71 (11,358.08) 30,560.83 25,895.18 11,501.98 27,873.85 95,831.84 1,144.73 82,411.18 32,310.15 16,998.00 11,342.46 27,910.83 88,561.44 857.73 76,514.31 24,385.11 12,851.50 11,952.61 15,119.27 64,308.49 932.11 70,307.56 27,736.81 5,303.70 10,258.67 11,648.96 54,948.14 357.36 61,860.52 13,143.57 807.00 5,979.52 5,170.96 25,101.05 1,988.95 46,059.34 33,637.42 8,664.18 8,523.10 8,225.10 59,049.80 26,970.41 8,404.44 4,730.47 9,415.89 49,521.21 17,033.69 7,517.35 2,831.20 10,222.28 37,604.52 14,490.85 7,027.82 3,537.04 9,644.34 34,700.05 6,326.71 3,999.37 3,957.84 6,955.49 21,239.41 80,000.63 12303.96 92,304.59 28,033.36 122742.28 (999.27) 80,000.63 109,531.67 (999.27) 70,466.80 70,466.80 16,386.94 86,853.74 29,558.53 102,585.10 (30,412.75) 72,172.35 72,172.35 7,115.58 79,287.93 18,655.71 86,766.93 (24,945.06) 61,821.87 61,821.87 8,776.43 70,598.30 11,867.67 74,233.56 (30,532.77) 43,700.79 (11,358.08) 32,342.71 7,160.96 39,503.67 12,406.26 (41,742.38) (38,065.60) 2005 2004 As at March 31,* 2003 2002

*Figures for the financial year 2001-02 does not include proportionate share in Joint Ventures.
160

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 18


STATEMENT OF CONSOLIDATED CASHFLOWS - RESTATED
(Rs. in million) HY Sep 05 A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax and extraordinary items 8,897.91 Adjustment for : Depreciation 3,589.62 Amortisation of Intangible Asset Investment activities (1,163.86) Lease Rent Paid Foreign Exchange Loss / (Gain) (98.55) Preliminary /Deferred expenses 7.43 Provisions / Misc w/off 88.23 Interest & Finance charges charged 1,331.07 Operating profit before working capital changes 12,651.85 Changes in working Capital: Trade and other receivables 871.54 Inventories (6,667.01) Trade payable 184.69 Cash generated from operation 7,041.07 Direct taxes paid (164.47) Payment of compensation under (27.84) voluntary retirement scheme Cash flow before extraordinary items 6,848.76 Extraordinary items Increase in deferred revenue expenditure 0.59 NET CASH GENERATED FROM OPERATIONS 6,849.35 B. CASH FLOW FROM INVESTMENT ACTIVITIES Goodwill on acquisition Purchase of Fixed Assets (9,441.77) Sale of Fixed Assets 66.29 Purchase of shares of Subsidiaries ( net) Disposal of investment in Subsidiaries Acquisition of Business* /Subsidiary Purchase of Investments(net) 1,721.79 Loan repayment received from Subsidiaries (Net) Interest received 399.05 Dividend received 516.41 Lease rent received 3.24 Cash flow before extraordinary items (6,734.99) Exceptional Items (2.50) NET CASH USED IN INVESTMENT ACTIVITIES (6,737.49)
161

2005 18,600.42 6,223.14 101.79 (2,797.46) 41.51 696.04 127.73 2,208.47 25,201.64 (1,973.29) (9,925.91) 5,541.14 18,843.58 580.04 (80.66) 19,342.96 (9.01) 19,333.95 (739.98) (17,801.74) 685.14 (91.03) (10,369.51) 1,234.43 833.47 10.82 (26,238.40) (39.52) (26,277.92)

2004 14,864.52 5,028.03 112.31 (2,535.62) (120.21) 85.89 112.74 2,185.87 19,733.53 (2,981.94) (2,501.81) 2,915.37 17,165.15 (2,025.32) 15,139.83 (10.04) (70.84) 15,058.95 (12,210.71) 91.54 (49.86) (35.86) (6,123.90) 984.58 636.52 (16,707.69) (16,707.69)

2003 # 11,815.03 3,711.31 (2,041.38) (8.96) 27.53 36.75 1,900.56 15,440.84 (758.86) (3,736.91) 2,568.70 13,513.77 (3,325.68) 10,188.09 (13.38) 10,174.71 (15,797.19) 125.57 (1,848.67) (78.46) 6.90 858.38 212.74 17.83 (16,502.90) 211.52 (16,291.38)

2002 11,405.71 2,175.10 (2,057.56) 45.24 10.62 4.09 808.01 12,391.21 (663.34) (608.80) 431.16 11,550.23 (2,549.23) 9,001.00 (19.78) 8,981.22 (7,665.36) 31.67 1.54 (9.45) (445.16) 1,074.30 250.93 (6,761.53) (6,761.53)

HINDALCO INDUSTRIES LIMITED


STATEMENT OF CONSOLIDATED CASHFLOWS - RESTATED (Contd.)
(Rs. in million) HY Sep 05 C. CASH FLOW FROM FINANCING ACTIVITIES Buyback of Equity Share Capital Proceeds from issue of Equity Share Share call money received Advance received against share Capital Proceed from Rights Issue ( Net of Expenses) Proceeds from long term borrowings (net) Proceeds from short term borrowings (net) Repayment of Finance Lease Liabilities Interest and Finance Charges paid Dividend paid NET CASH FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH & CASH EQUIVALENTSOPENING BALANCE CASH & CASH EQUIVALENTSCLOSING BALANCE 5,112.41 8,886.02 * $ # Expense incurred on merger of Demerged business of INDAL in 2004-05 and amalgamating business in 2002-03, net of its opening cash & cash equivalent has been shown as Acquisition of Business. Refer Note No.7 in Notes to Accounts (Annexure - 19) Refer Note No.8 in Notes to Accounts (Annexure - 19) 3,631.94 5,112.41 4,950.59 3,631.94 6,447.60 4,950.59 4,300.36 6,455.88 141.25 0.01 401.94 6,766.01 (1,519.09) (2,128.37) 3,661.75 3,773.61 97.14 0.01 0.17 12,304.38 (54.62) (2,189.53) (1,733.11) 8,424.44 1,480.47 (2,257.75) (1,410.17) 330.09 (1,318.65) 103.68 0.13 (90.77) 3,984.97 (553.15) 214.32 112.18 (1.11) 6,845.10 1,372.66 (1.07) (1,714.90) (1,654.37) 4,619.66 (1,497.01) (4.21) 1,132.07 602.91 (710.39) (1,084.55) (64.17) 2,155.52 2005 $ 2004 2003 # 2002

Notes : 1 2 3 Cash and cash equivalent includes cash and bank balances and Deposits with Companies and interest accrued thereon. Figures for the previous year have been regrouped / rearranged wherever found necessary. Interest charged excludes and Purchase of Fixed Assets includes interest capitalised Rs.315.28 million in HY Sep-05,Rs 464.30 million in 2004-05, Rs. 254.05 million in 2003-04, Rs.626.98 million in 2002-2003 and Rs.452.81 million in 2001-02 Figures of 2001-02 do not included proportionate share in Joint Ventures. Cash and cash equivalent for 2002-03 have been adjusted to remove Inter Corporate Deposits placed by the Company in Joint Ventures. For F 2001-02 ,extraordinary items include Refund of Interest from DOT and new brand launch expenses .Y For F 2002-03 ,extraordinary items from investment activities represents proceeds from sale of shares of .Y MRPL to ONGC

4 5 6

162

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 19 NOTES TO ACCOUNTS - CONSOLIDATED
1. PRINCIPLES OF CONSOLIDATION a) The financial statements have been prepared to comply in all material aspects with applicable accounting principles in India, and the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI). CONSOLIDATED FINANCIAL STATEMENTS relates to Hindalco Industries Limited, the Company and its Subsidiaries and Joint ventures (the Group).The Consolidated Financial Statements are in conformity with the AS -21 and AS - 27 issued by ICAI and are prepared on the following: i) The financial statements of the Company and its Subsidiaries and interest in Joint ventures have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating inter-company balances and transactions including profits in year end inventories. The consolidated financial statements are prepared by adopting uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Companys separate financial statements except otherwise stated elsewhere in this schedule. The excess of cost to the Company of its investments in the subsidiaries over its portion of equity of subsidiaries at the dates they become subsidiaries is recognised in the financial statements as goodwill. The excess of Companys portion of equity of the subsidiaries over the cost to the Company of its investments at the dates they become subsidiaries is recognised in the financial statements as capital reserve. Minority Interests in the consolidated financial statements is identified and recognised after taking into consideration : The amount of equity attributable to minorities at The date on which investments in a subsidiary is made. The minorities share of movement in equity since the date parent- subsidiary relationship came into existence. The losses attributable to the minorities are adjusted against the minority interest in the equity of the subsidiary.

b)

ii)

iii)

iv)

v)

The excess of loss over the minority interest in the equity, is adjusted against General Reserve of the Company. c) Accounting Policies and Notes on Accounts of the Company and all the subsidiaries are set out in their respective financial statements.

163

HINDALCO INDUSTRIES LIMITED


2. a) The Consolidated Financial Statements comprise the financial statements of Hindalco Industries Limited and its subsidiaries and its interest in Joint Ventures as under: Name of the company HY Sep-05 Subsidiaries: Indian Aluminium Company, Limited Utkal Alumina International Limited ** Suvas Holdings Limited ** Indal Exports Limited Bihar Caustic and Chemicals Limited Minerals and Minerals Limited Renukeshwar Investments & Finance Limited Renuka Investments & Finance Limited Dahej Harbour and Infrastructure Limited Lucknow Finance Company Limited Birla Maroochydore Pty Limited* + Birla Mineral Resources Pty Limited + Birla Resources Pty Limited Birla (Nifty) Pty Limited* Birla Mt. Gordon Pty Limited* % Annapurna Foils Ltd. Joint Ventures : Tanfac Industries Limited IDEA Cellular Limited Bihar Caustic & Chemicals Ltd. Financial year of all subsidiaries and joint ventures ends on 31st March * ** + % ** Subsidiaries of Birla Mineral Resources Pty Limited. Have not yet commenced commercial production was subsidiary of Indian Aluminium Company, Limited till 2003-04 Birla Maroochydore Pty Limited and Birla Mineral Resources Pty Ltd were incorporated on 24 Feb 03 and 28 Jan 03, respectively and their first accounting period ended on 31st March, 2004. Birla Mt Gordon Pty. Ltd. was incorporated on 1st November, 2003 Proportionate share in Joint Ventures were not included in consolidation for the financial year 2001-02 as the Accounting Standard - 27 Financial Reporting of Interests in Joint Ventures became applicable from 01.04.2002. 9.98% 10.11% 9.98% 10.11% 9.98% 10.11% 9.98% 9.83% 20.00% ** ** ** India India India 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 67.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% India India India Australia Australia Australia Australia Australia India 97.06% 55.00% 51.00% 97.06% 55.00% 51.00% 96.53% 53.10% 49.24% 96.53% 54.57% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 95.96% 74.64% 95.96% 74.64% India India India India India India India 2004-05 Extent of Companys interest 2003-04 2002-03 2001-02 Country of Incorporation

100.00% 100.00% 54.65% 54.57%

100.00% 100.00% 100.00% 100.00%

b)

For the purpose of consolidation, the Consolidated Financial Statements of Birla Mineral Resources Pty Limited which reflects the consolidation of Birla (Nifty) Pty Limited, Birla Mt Gordon Pty Limited and Birla Maroochydore Pty Limited has been prepared. In order to consolidate the audited consolidated financial statements of Birla Mineral Resources Pty Limited, where considered material, been restated to comply with Generally Accepted Accounting Principles in India.
164

HINDALCO INDUSTRIES LIMITED


c) Year 2004-05 In accordance with the requirement of Accounting Standard 11 (Revised) The effects of changes in foreign exchange rates, operations of foreign subsidiaries have been considered as non-integral operations and accordingly their financial statements have been converted in Indian Rupees at following exchange rates : (i) (ii) (iii) Revenue and Expenses: At the average exchange rate during the period. Current Assets and Current Liabilities: Exchange rate prevailing at the end of the period. Fixed Assets: Exchange Rate prevailing at the end of the period.

The resultant translation exchange difference has been transferred to foreign currency translation reserve. Upto year 2003-04 In accordance with the requirement of Accounting Standard 11 The effects of changes in foreign exchange rates, financial statements of foreign subsidiaries have been converted in Indian Rupees at the following exchange rates: (i) (ii) (iii) Revenue and Expenses: At the average exchange rate during the period. Current Assets and Current Liabilities: Exchange rate prevailing at the end of the period. Fixed Assets: Exchange Rate at the date of acquisition.

The resultant translation exchange difference has been transferred to profit & loss account. 3. Accounts are not restated for the periods prior to which the Accounting Standards, as stated under, became effective : Accounting Standard Accounting Standard 11 (revised) -The Effects of Changes in Foreign Exchange Rates Accounting Standard 22 - Accounting for Taxes on Income Accounting Standard 28 - Impairment of Assets Effective Date Periods commencing on or after 1-4-2004 Periods commencing on or after 1-4-2001 Periods commencing on or after 1-4-2004 (Rs. in million) HY Sep-05 4. Capital Commitments outstanding [Advance/Deposit paid Rs.3,446.79 millions (2004-05 Rs 3,201.96 millions)] Joint Ventures (net of advances) 5. (I) Contingent Liabilities not provided for in respect of : a) Claims/Disputed liabilities not acknowledged as debt The Company and Subsidiaries : Income Tax Excise/Custom/Sales Tax Others Joint Ventures : Income Tax Excise/Custom/Sales Tax Others
165

2004-05 12,414.98 145.31

11,480.01 144.61

108.28 1,983.92 1,581.82

108.28 1,920.56 1,106.34

3.49 109.25 211.10

3.12 102.07 42.77

HINDALCO INDUSTRIES LIMITED


b) i) ii) Bills discounted with Banks Guarantees outstanding Joint Ventures iii) Letters of Credit Outstanding Joint Ventures iv) Bank Guarantees & Bonds Joint Ventures c) The Company has received supplementary bills on account of revision in rate of power for Main Supply from the UPSEB for the period 15.5.1976 to 30.6.1980 and the same remains unprovided for as disputed by the Company 385.53 2,995.44 30.33 675.65 12.84 1,330.44 209.26 50.10 468.14 2,770.39 40.02 684.17 12.84 877.19 132.53 50.10

d)

In terms of the Schemes of Arrangement between the Company, the erstwhile Indo Gulf Corporation Ltd (IGCL) and Indo Gulf Fertilisers Limited approved by the Honble High Courts at Allahabad and Mumbai vide their orders dated 18th November 2002 and 31st October 2002 respectively and between the Company and Indian Aluminium Company, Ltd (Indal) approved by the Honble High Courts at Kolkata and Mumbai vide their orders dated 23rd December 2004 and 14th January 2005 respectively, the company may be liable to pay a portion of disputed demands of Income Tax pertaining to IGCL & Indal. 228,340,226 Equity Shares of Rs.10/- each fully paid up in IDEA Cellular Ltd. are held by the Company as investment. Out of the above 115,187,999 shares of Rs. 10/- each have been pledged for securing financial assistance granted by the lenders to that company. The Company has given undertakings to various Financial Institutions for non-disposal of shares held in Tanfac Industries Ltd. and 57,085,060 shares of Rs 10/- each of IDEA Cellular Ltd. till the Institutional loans are repaid in full.

II)

III)

6.

a)

The company and its subsidiaries and joint ventures has export obligations of Rs 7,534.43 million (USD 169.54 million) [2004-05 Rs.7,501.33 million (USD 171.46 million)] and Rs.1.19 millions, respectively, against the Import Licences taken for import of capital goods under Export Promotion Capital Goods Scheme. The company has export obligation of Rs 5,373.66 millions (USD 122.15 million) [2004-05 Rs 2,592.25 millions (USD 59.25 million)] against the Advance Licence.

b) 7.

Pursuant to a Scheme of Arrangement u/s. 391 to 394 of the Companies Act, 1956 (the Scheme) which has been approved by Honble Bombay High Court and Kolkata High Court on 14th January, 2004 and 23rd December 2004, respectively, all the business undertakings (other than the aluminium foil business at Kollur, Andhra Pradesh), herein after referred to as demerged undertaking, of Indian Aluminium Company, Ltd (Indal) has been transferred to the Company with effect from the appointed date i.e. 1st April, 2004 on going concern basis. Demerged undertaking is engaged inter alia in conducting and carrying on the business of mining, manufacture and sale of hydrate and alumina, alumina chemicals, aluminium, aluminium products including aluminium sheets, extrusions and foil and generation of electricity.

8.

A Scheme of Arrangement (the Scheme) between the Company, Indo Gulf Corporation Limited (IGCL) and Indo Gulf Fertilisers Limited (IGFL) and their respective shareholders and creditors which envisages the demerger of the fertiliser business of IGCL to IGFL, and the subsequent amalgamation of the Remaining Business of IGCL with the Company, has been approved by the Honble High Courts at Allahabad and Mumbai vide their Orders dated 18th November, 2002 and dated 31st October, 2002 respectively. In terms of the scheme, the remaining business (hereinafter referred to as amalgamating company) comprising of manufacturing of copper and certain precious metals, the processing, producing, manufacturing and marketing of certain types of chemicals (including diammonium phosphates) and rendering assistance and services in relation to the same has been amalgamated and transferred and vested in the Company, on a going concern basis with effect from the appointed date, i.e. from opening of business on 1st April, 2002.
166

HINDALCO INDUSTRIES LIMITED


9. As per the Accounting Standard (AS) 28 - Impairment of Assets, which came into effect from 1st April 2004, the Company carried the impairment test as of 1st April 2004 and provided for the impairment loss where recoverable amount was lower than amount carried in the accounts by adjusting the same (net of deferred taxes of Rs.336.29 million) against opening balance of revenue reserves as per the transitional provisions. Details are given below : A) Aluminium Nature of Asset Events/Circumstances Impairment Loss Amount (Rs in million) 164.00 120.20 330.95 143.39 146.43 194.58 Basis of Recoverable Amount Value In use Net Selling Price Net Selling Price Value In use Net Selling Price Net Selling Price

Certain assets of Foil units Certain assets of Wheel Unit Certain assets of Smelters Certain assets of Other Units B) Copper Nature of Asset

Low return on Investments due to severe competition in the market place Inadequate return on Investment due to low demand Inadequate return on Investment mainly due to high cost of operation Erosion in value

Events/Circumstances

Impairment Loss Amount (Rs in million) 339.87

Basis of Recoverable Amount Value In use

Certain Assets of Copper Unit

Higher carrying value than Value in Use

For arriving at Value in Use discount rate of 9.5% has been used. Net Selling Price has been determined based on valuation report from external agencies As at Sep 30, 2005, the Company made an assessment to ascertain whether there is any indication that an asset may be impaired and found no such indication. However, a detailed assessment will be carried at the close of financial year. 10. a) Future obligations towards lease rentals under the lease agreements taken prior to 1st April 2001 Period Not later than one year Later than one year and not later than five years b) (Rs. in millions) Lease Payment Present Value HY Sep-05 2004-05 HY Sep-05 2004-05 80.41 68.05 21.60 76.73 64.92 20.09

Future obligations towards lease rentals under the lease agreements taken on or after 1st April 2001 (Rs. in millions) Period Not later than one year Later than one year and not later than five years Later than five years Lease Payment Present HY Sep-05 2004-05 HY Sep-05 3.22 23.13 3.50 21.02 3.82 3.17 14.47 Value 2004-05 3.32 15.15 2.23

167

HINDALCO INDUSTRIES LIMITED


c) In 2004-05, in Line with Accounting Standard 19 Leases, on April 1, 2004 the Company has capitalized assets taken on finance lease in earlier years at their respective cost amounting Rs 1728 million together with their respective accumulated depreciation of Rs 470.50 million. The total of future minimum lease payment commitments under non-cancellable operating lease agreement for a period of twenty years to use railway tracks along with locomotives for transportation of its materials are as under: (Rs. in millions) Period Not later than one year Later than one year and not Later than five years Later than five years e) HY Sep-05 4.00 16.00 46.67 2004-05 4.00 16.00 48.67

d)

Future minimum lease payment commitments for operating lease under the lease agreements for the following period: Period Not later than one year Later than one year and not Later than five years HY Sep-05 10.85 13.62 2004-05 8.52 11.08

11. Purchase of copper concentrate is accounted for provisionally pending finalisation of content in the concentrate, price, and custom duty. Variations are accounted for in the year of settlement. 12. A part of electricity supplied by the company, which has been treated by UPPCL as sale, has been accounted for on the basis of provisional rates. The effect of variation in the rate will be accounted for in the year in which rates are finalised by UPPCL. 13. Sale of Di-Ammonium Phosphate (DAP) and other complex fertilisers are covered under the concessional schemes for decontrolled fertilisers of the Government of India. Pending declaration of final rate of concession for the quarter ended Sep 30, 2005 the claim for concession under the scheme for that period has been accounted for provisionally based on final rates declared for the preceding quarter. 14. Exceptional items in 2004-05 represents expenses of Rs.91.03 million incurred on demerger as per note no.6 and disputed claim of Rs.39.52 million of earlier years accounted by one of the subsidiary. 15. Deferred Tax Major components of Deferred Tax arising on account of temporary timing differences along with their movement are: (Rs. in millions) Particulars Deferred Tax Assets (A) Brought forward long term Capital Losses Others Deferred Tax Liability (B) Depreciation Others 11,419.27 384.17 11,501.98 10,875.13 771.30 11,342.46 10,982.67 1,006.65 11,952.61 9,275.91 6,021.28 1,083.58 121.75 0.01 301.45 0.01 303.96 36.71 100.82 163.51 HY Sep-05 2004-05 2003-04 2002-03 2001-02

Net Deferred Tax Liabilities (B-A)

10,258.67 5,979.52

16. In view of different sets of environment in which subsidiaries namely Birla Mineral Resources Pty Limited, Birla (Nifty) Pty Limited, Birla Mt. Gordon Pty Limited, Birla Resources Pty Limited and Birla Maroochydore Pty Limited are operating, Accounting policies followed in respect of following items by them are different from the accounting policies mentioned in Schedule 23 of the Financial statements of the Company.
168

HINDALCO INDUSTRIES LIMITED


Particulars FixedAssets AccountingPolicies Company Subsidiaries Carriedathistoricalcost Carriedatthefairvalue Assetstakenonfinance leasehavebeentreated aspartofthefixedassets recordingtheminitiallyat fairvalueanddepreciating itoveritsusefullife. Amount(Rs.inmillion) HYSep-05 2004-05 2003-04 6,614.59 6,670.66 5,372.43 NIL NIL 22.85 Proportion 2004-05 2003-04 9.47% 7.44% NIL 0.03%

2002-03 HYSep-05 3,453.71 9.47% 30.78 NIL

2002-03 5.69% 0.05%

Assetstakenon Inrespectofassetstaken FinanceLease onfinanceleasepriorto 1stApril2001,theelement ofleaserentalapplicableto thecostofassetshasbeen chargedtotheprofitand lossaccountoverthe estimatedlifeoftheassets andfinancingcosthasbeen allocatedoverthelifeofthe leaseonanappropriatebasis. Depreciation & Amortisation Depreciationischargedonthe basisofratesandmanner specifiedforeachclassof assetsinScheduleXIVofthe CompaniesAct,1956,as amended.

Depreciationratesused (rangingfrom10%-50%) foreachclassofassetsare determinedbytheremaining expectedlifeofmine.The carryingcostofthemine propertiesitselfisamortisedon thebasisofproductionoutputbasis. Exchangedifferencesrelatingto amountspayableandreceivable inforeigncurrenciesareaccounted forasexchangegainsorlossesin thestatementoffinancial performance.

794.68

1,049.26

785.20

NIL

22.13%

16.59%

15.28%

NIL

Gain/Loss relatingto exchange differences

Exchangedifferencesrelatingto amountspayableandreceivablein foreigncurrenciesareaccountedfor asexchangegainsorlossesinthe profitandlossaccount,exceptfor amountrelatingtoliabilitiesincurred forpurchaseoffixedassets,the differencethereofisadjustedinthe carryingamountofthefixedassets. TheCostofreclamationofmined outland,Afforestationetc.is treatedaspartofrawmaterials cost.

Nil

Nil

22.57

NIL

Nil

Nil

21.61%

NIL

Environment & rehabilitation expenditure

Aprovisionforenvironmentaland rehabilitationcostsaremadeforthe totalestimatedfuturecostsof environmentalandrehabilitation workrequiredtobeperformedfor eachoperationandareaofinterest andacorrespondingamountis capitalisedtomineproperties, whichisamortisedoverthelife oftheoperation. Expensesrelatingtominingand processingexceptpower&fuel, ratesandtaxes,insurance, travelingexpenses,royalty,freight andforwardingarenotclassified functionallyandareshownunder conversion,fabricationandother operatingexpenses Investmentsincontrolledentities arecarriedinthefinancial statementsatthelowerof costandrecoverableamount. Dividendsanddistributionsare broughttoaccountintheprofit andlossaccountwhentheyare declaredbythecontrolledentities. Forwardrateagreementand optionsaremarkedtospotatyearend andthesameisrecognizedasdeferred gain/lossinfinancialstatements.

549.71

265.19

246.24

68.63

100%

100%

100%

100%

Expenses

Miningcostareclassifiedunder rawmaterialconsumptionand productionoverheadareclassified functionallyanddisclosedunder primaryheadsofaccounts

1,916.98

2,911.70

1,837.60

67.00%

65.16%

65.88%

Investments

LongtermInvestmentsarestated atcostafterdeductingprovisions, ifany,incaseswherethefallin marketvaluehasbeen consideredofpermanentnature. Currentinvestmentsarestatedat lowerofcostandfairvalue.

Recognition Forwardrateagreementand of optionsarenotmarked-to Hedginggain spotatyearend. / loss

503.32

539.79

Nil

100%

100%

NIL

169

HINDALCO INDUSTRIES LIMITED


17. Year 2002-03 being the first year of consolidation of financial statements of Joint Ventures with the Company and its subsidiaries in line with the Accounting Standard - 27, applicable w.e.f. 1st April, 2002, figures for 2001-02 are not comparable to that extent.

170

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 20


SEGMENTAL REPORTING - CONSOLIDATED
(Rs. in million)
Six months ended Sep 30, 2005 Particulars REVENUE External Sales Inter Segment Sales 27,965.97 9.42 27,975.39 Less: Inter Segment Sales Total Revenue (9.42) 23,034.87 23,034.87 1,431.12 7.56 1,438.68 (7.56) 52,431.96 16.98 52,448.94 (16.98) 53,209.56 8.91 53,218.47 (8.91) 45,469.72 45,469.72 2,375.36 15.01 2,390.37 (15.01) 101,054.64 23.92 101,078.56 (23.92) 45,014.04 7.23 45,021.27 (7.23) 35,846.29 35,846.29 1,372.38 11.77 1,384.15 (11.77) 82,232.71 19.00 82,251.71 (19.00) Aluminium Copper Others Total Aluminium 2004-05 2003-04

Copper

Others

Total Aluminium

Copper

Others

Total

27,965.97 23,034.87 1,431.12 52,431.96 53,209.56 45,469.72 2,375.36 101,054.64 45,014.04 35,846.29

1,372.38 82,232.71

RESULTS Segment/OperatingResults Operating Results Un-allocable Income (Net of Expenses) Expenses) Expenses InterestExpenses Non Recurring Expenses Provision for Tax (including Deferred Tax) Net Profit OTHER INFORMATION 69,090.02 68,765.87 5,951.86 143,807.75 35,700.65 179,508.40 6,849.57 11,110.73 857.14 18,817.44 5,253.76 11,633.03 778.20 63,100.43 61,408.49 6,116.48 130,625.40 35,443.10 166,068.50 17,664.99 5,230.89 6,797.67 596.28 60,751.21 42,524.55 4,439.28 107,715.04 28,027.97 135,743.01 12,624.84 8,984.49 (189.42) 277.64 9,072.71 16,192.69 1,741.30 481.21 18,415.20 10,921.27 3,667.37 357.90 14,946.54

1,164.69 (1,339.49) (2.50)

2,344.34 (2,159.12) (130.55)

2,263.62 (2,345.64) (10.04)

(2,725.65) 6,169.76

(5,511.91) 12,957.96

(4,879.94) 9,974.54

SegmentAssets Assets Un-allocableAssets Total Assets Liabilities SegmentLiabilities Unallocable Liabilities Un-allocable Liabilities &Provisions Total Liabilities Depreciation Un-allocable Depreciation Total Depreciation

9,056.41 27,873.85 1,836.07 1,502.46 244.69 3,583.22 6.40 3,589.62 3,599.96 2,260.58 452.73

10,245.84 27,910.83 6,313.27 11.66 6,324.93 3,035.30 1,768.73 313.90

2,494.43 15,119.27 5,117.93 22.41 5,140.34

Capital Expenditure including CWIP

3,896.46

5,178.17

237.22

9,311.85

5,327.95

9,714.12

604.74

15,646.81

5,545.65

5,822.11

402.03

11,769.79

171

HINDALCO INDUSTRIES LIMITED


2004-05 Particulars REVENUE External Sales Inter Segment Sales 32,678.35 9.94 32,688.29 Less::Inter Segment Sales Less Inter Segment Sales Total Revenue RESULTS Operating Results Segment/OperatingResults Un-allocable Income (Net of Expenses) Interest Expenses Non Recurring Expenses Provision for Tax (including Deferred Tax) Net Profit OTHER INFORMATION 51,583.24 32,169.50 3,838.47 4,288.91 91,880.12 25,362.90 117,243.02 3,646.24 4,606.68 492.84 291.01 9,036.77 2,612.19 11,648.96 2,262.55 889.40 190.09 345.37 3,687.41 9,335.26 2,673.63 156.34 399.02 12,564.25 7,684.41 3,687.41 1,990.66 164.13 20.31 2,175.10 248.28 7,932.69 3,145.62 467.07 44,258.73 3,559.37 47,818.10 25,362.16 73,180.26 3,612.69 1,558.27 5,170.96 2,154.79 7,479.87 3,838.87 870.13 251.31 12,440.18 1,276.57 (1,901.72) (1,613.17) (3,497.34) 6,704.52 9,658.31 756.77 10,415.08 1,798.64 (808.01) (71.77) (3,548.71) 7,785.23 (9.94) 32,678.35 26,101.78 26,101.78 4,037.52 1,060.15 5,097.67 1,191.76 243.32 1,435.08 (243.32) 1,191.76 64,009.41 1,313.41 65,322.82 (1,313.41) 64,009.41 31,593.87 31,593.87 31,593.87 4,057.89 904.24 4,962.13 (904.24) 4,057.89 35,651.76 904.24 36,556.00 (904.24) 35,651.76 Aluminium Aluminium Copper Chemicals Copper Others 2003-04 2003-04 Total Total Copper Others Others Aluminium Aluminium Chemicals Total Total

- (1,060.15) 26,101.78 4,037.52

SegmentAssets Un-allocableAssets Total Assets SegmentLiabilities Liabilities Un-allocableLiabilities & Provisions Unallocable Liabilities & Provisions Total Liabilities Depreciation Un-allocable Depreciation Total Depreciation

Capital Expenditure including CWIP

Note : During the year 2004-05, the Company re-identified primary business segment to reflect more appropriate presentation in line with reorganisation of some subsidiaries and accordingly figures of 2003-04 were also regrouped to make them comparable.

172

HINDALCO INDUSTRIES LIMITED HINDALCO INDUSTRIES LIMITED - CONSOLIDATED ANNEXURE - 21


Related Party Disclosures - CONSOLIDATED
A List of Related Parties (a) Trusts of the Company. Trident Trust (b) Joint Ventures Tanfac Industries Limited IDEA Cellular Limited Bihar Caustic and Chemicals Limited Mangalore Refinery and Petrochemicals Limited Utkal Alumina International Limited Utkal Aluminium International Limited Associates : Utkal Alumina International Limited Orissa Extrusions Limited Annapurna Foils Limited (c) Key Managerial Personnel : Mr.Debu Bhattacharya Mr. A.K.Agarwala Dr. S.K.Tamotia Mr.G.Mukherjee Mr.N .K.Choudhary Mr.P .N.Ojha B Managing Director Whole Time Director President and CEO Managing Director Managing Director, Operations Managing Director (w.e.f 02-10-2003) (upto 10-09-2003) (FY 2001-02 to FY 2003-04) ( F -2001-2002) .Y (April 01, 2001 to November 28,2001) (For HY Sep-05) ( From F 2002-03 upto 02-07-2003) .Y ( F -2001-2002) .Y ( For the transactions during the period April 2001 to October 2001) (Formerly known as Birla Tata AT & T Limited) (From F 2002-03 upto 31-12-2003) .Y ( F -2001-2002) .Y ( F -2001-2002) .Y (From F : 2002-2003) .Y

The following transactions were carried out with the Related parties in the ordinary course of business (a) Joint Ventures / Associates :
S. No. Transactionsduringtheyear Transaction during the year SalesandConversion Conversion Services Rendered Interest and Dividendreceived received Interest Purchase ofmaterials Purchase materials Services Received Investmet, Deposits, loans && Investments,Deposits,loans advances made during the year advancesmadeduringtheyear Guarantees Collateral securiteis given GuaranteesandCollateralsecuritiesgiven Transactions HYSep-05 Joint Ventures 84.86 0.50 91.59 2004-05 Joint Ventures 97.54 0.02 0.81 163.57 2003-04 Joint Ventures 77.63 0.33 42.69 433.55 Joint Ventures 87.44 0.09 57.43 675.71 2002-2003* Associate Joint Ventures 56.10 9.18 123.29 2001-2002** Associate

1 2 3 4

87.71 1.72 3.76

822.46 1.54 1,446.96 1,735.73

26.26 132.89 -

5 6 7

0.17 875.00
173

0.35 875.00

0.78 700.00 849.96

1.23 1,541.50 2,131.35

4.30 -

HINDALCO INDUSTRIES LIMITED


S. No. Transactions HYSep-05 Joint Ventures 2004-05 Joint Ventures 2003-04 Joint Ventures Joint Ventures 2002-2003* Associate Joint Ventures 2001-2002** Associate

1 2 3 (b )

Outstanding Balance as on 31st March DebitBalances Debit Balances


Credit Balances CreditBalances Investments, Deposits, loans &advances Investments,Deposits,loans advances

0.08 22.75 -

11.80 4.94 -

15.01 0.80 -

10.01 7.29 529.21

11.10 10.86

47.57

5,311.54

1.92

Trident Trust Beneficiary Interest in the trust BeneficiaryInterestin Interestreceived Interest received from Trust 344.52 32.63 344.52 344.52 344.51

( c)

Key Managerial Personnel : (including perquisites) ManagerialRemuneration(includingperquisites) Net of eliminations Netofeliminations 19.28 25.82 26.61 20.46 27.00

**

Gross

174

HINDALCO INDUSTRIES LIMITED


STOCK MARKET DATA FOR EQUITY SHARES OF OUR COMPANY
Our Equity Shares are listed on the BSE and NSE. As our shares are actively traded on the BSE and NSE, our stock market data have been given separately for each of these Stock Exchanges. Whilst reviewing the information provided below, it should be noted that each Equity Share of Rs. 10 was split into ten Equity Shares of Re. 1 each pursuant to the resolution passed by the shareholders of our Company on August 6, 2005. Our Equity Shares commenced trading ex-split with effect from August 30, 2005. The high and low closing prices recorded on the BSE and NSE for the preceding three years and the number of Equity Shares traded on the days the high and low prices were recorded are stated below: BSE
Yearending March31 High (Rs.) Dateof High Volumeon date of high(no. ofshares) 799 60,182 136,005 42,584 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 110,853 21,251 112,088 91,013 Average pricefor theyear (Rs.) 623.68 1,016.63 1,106.00 1,236.00

2003 2004 2005 April 1, 2005 to August 29, 2005

778 1,503 1,487 1,460

April 1, 2002 January9,2004 January3,2005 August18,2005

469.35 530.25 725.00 1,066

October 14, 2002 April 1, 2003 May17,2004 June 2, 2005

Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August30,2005 to November21,2005 165.00 September19, 2005 1,061,481 112.60 October 31, 2005 1,271,773 138.80

NSE
Yearending March31 High (Rs.) Dateof High Volumeon date of high(no. ofshares) 8,403 108,977 220,283 105,837 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 29,100 28,487 265,525 109,811 Average pricefor theyear (Rs.) 622.50 1,065.53 1,109.85 1,263.20

2003 2004 2005 April 1, 2005 to August 29, 2005 August 30, 2005 to November 21, 2005

785 1,599 1,499.7 1,459.4

April 1, 2002 January 6, 2004 January 4, 2005 August 18, 2005

460.00 October 30, 2002 532.05 April 1, 2003 720 May 17, 2004 1,067 June 2, 2005

Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each 164.45 September20, 2005 4,734,026 112.65 October 31, 2005 3,804,158 138.55

175

HINDALCO INDUSTRIES LIMITED


The high and low prices and volume of Equity Shares traded on the respective dates during the last six months are as follows : BSE
Month Year High (Rs.) Dateof High Volumeon date of high(no. ofshares) 2,053,297 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 512,012 Average pricefor theyear (Rs.) 126.63

November1,2005 to November21,2005 October 1, 2005 to October 31, 2005 August30,2005 to September30,2005

138.30

November18,2005

114.95

November1,2005

154.75

October 4, 2005

884,406

112.60

October 31, 2005

1,271,773

133.68

165.00

September19,2005

1,061,481

140.00

August31,2005

311,223

152.50

Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August 1, 2005 to August29,2005 July,2005 June,2005 May,2005 April,2005 1,460 1,299.95 1,265.00 1,250.00 1,430.00 August18,2005 July 29, 2005 June 30, 2005 May26,2005 April 11, 2005 42,584 57,127 40,829 34,997 12,500 1,250.5 1,179 1,066 1,127 1,180 August 1, 2005 July 4, 2005 July 2, 2005 May31,2005 April 29, 2005 14,566 58,925 91,013 28,831 22,538 1,355.25 1,239.48 1,165.50 1,188.50 1,305.00

NSE
Month Year High (Rs.) Dateof High Volumeon date of high(no. ofshares) 4,741,243 Low (Rs.) Dateof Low Volumeon dateoflow (no.of shares) 844,794 Average pricefor theyear (Rs.) 127.13

November1,2005 to November21,2005 October 1, 2005 to October 31, 2005 August30,2005 to September30,2005 August 1, 2005 to August29,2005 July,2005 June,2005 May,2005 April,2005

138.00

November18,2005

116.25

November1,2005

154.70

October 4, 2005

1,944,357

112.65

October 31, 2005

3,804,158

133.68

164.45

September20,2005

4,734,026

140.05

August31,2005

1,004,383

152.25

1,459.40

Equity Share of Rs. 10 split into ten Equity Shares of Re. 1 each August18,2005 105,837 1,241.55 August 2, 2005

70,712

1,350.48

1,315 1,235 1,240 1,429.9

July 29, 2005 June 30, 2005 May 3, 2005 April 7, 2005

180,025 296,966 155,336 29,043

1,177 1,067 1,125 1,179

July4,2005 June 2, 2005 May31,2005 April 29, 2005

197,125 109,811 141,586 141,684

1,246.00 1,151.00 1,182.50 1,304.45

The market price was Rs. 130.65 on BSE on November 11, 2005, the trading day immediately preceding the day on which the committee of the Board met to finalize the offer price for the Issue. The market price was Rs. 130.8 on NSE on November 11, 2005, the trading day immediately preceding the day on which the committee of the Board met to finalize the offer price for the Issue.
176

HINDALCO INDUSTRIES LIMITED MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our selected financial and other operating data and our financial statements under Indian GAAP and the related notes, appearing elsewhere in this Letter of Offer and the related notes to accounts and significant accounting policies that have been incorporated in the section titled Auditors Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. A description of what constitutes a forward-looking statement is provided in Forward-Looking Statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Risk Factors and elsewhere in this Letter of Offer. Unless otherwise stated, the financial information used in this section is derived from our standalone audited financial statements under Indian GAAP as restated. , Our fiscal year ends on March 31 of each year, hence all references to a particular fiscal year are to the 12-month period ended March 31 of that year. In this section, any reference to we, us or our refers only to Hindalco Industries Limited. Bracketed numbers indicate losses/ negative figures. In this section, any conversion from US Dollars to Indian Rupees has been done based on the 12 PM Noon Exchange rate of 1US Dollar = 45.690 Indian Rupees on November 10, 2005 as given by the Federal Reserve Bank of New York Such conversions are for convenience purposes. Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. As a result, the financial statements for fiscal 2005 include the full year financial results of the aluminium business of Indal and may not be comparable with those of fiscal 2004. For details on the Scheme of Arrangement and its financial implications, please see Our Business on page 50 of this Letter of [-] Offer.

Overview
We are the leading producer of aluminium and copper in India and are also one of the leading metals and mining companies in Asia. We are a vertically integrated aluminium producer and according to CRU, our Renukoot plant, which accounted for 84% of our primary aluminium metal production in fiscal 2005, is amongst the top 15% of the lowest cost producers globally. According to CRU, as of July 2005, we are the fourth largest aluminium producer in Asia and the fourteenth largest in the world by volume. In our copper business, we are a custom smelter and are partially integrated with upstream copper mines, which are owned and operated by Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, are owned by our wholly owned subsidiary Birla Mineral Resources Pty Limited. As a custom smelter, we buy copper concentrate at LME-linked prices for smelting and refining copper and we sell refined copper at LME-linked prices in the domestic and export markets. According to CRU, we are currently the largest producer of copper in India and expect to be amongst the top 10 producers of copper in the world, by installed capacity, by end of the calendar year 2005.

Our Business Segments


We evaluate and report our financial results in two business segments : Aluminium: Our operations consist of bauxite mining, alumina refining, smelting and converting the primary metal into value-added products. We have dedicated sources of critical raw materials such as bauxite, power and, to a limited extent, coal and have committed supply sources of auxiliary chemicals. In addition, we manufacture the anodes used in our smelter operations in-house. We also produce alumina that is in excess of our requirements. We sell our excess alumina, primary aluminium in the form of ingots, billets and wire rods and value-added products such as rolled products, extrusions, foils and alloy wheels manufactured by us as well as by our subsidiary Indian Aluminium Company, Limited. Copper: Our operations consist of producing (through smelting, converting and refining copper from copper concentrate) copper and manufacture of precious metals (gold, silver, selenium and platinum group mix), phosphatic fertilizers, and other by-products such as sulphuric acid generated by the copper manufacturing process. Our operations are supported by our wholly owned subsidiary Birla Mineral Resources Pty Limited which wholly owns Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited, which, in turn, own copper mines in Australia. Our operations are also supported by an in-house jetty owned by our wholly owned
177

HINDALCO INDUSTRIES LIMITED


subsidiary, Dahej Harbour and Infrastructure Limited and power plants located close to our copper smelter at Dahej, India. We sell the refined copper in the form of cathodes and continuous cast rods and also sell the precious metals, phosphatic fertilizers and other by-products such as sulphuric acid. We believe that we are a domestic leader in both metals and also a significant exporter. The following table summarizes the proportion of our net sales & operating revenues and profit before interest and tax (PBIT) from the two business segments, for the periods indicated: Segmental Net Sales & Operating Revenues and PBIT Year Ended March 31, 2003 Net Sales & Operating Revenues Aluminium Copper Unallocable Total 100% 48% 52% PBIT Net Sales & Operating Revenues 48% 52% 2004 PBIT Net Sales & Operating Revenues 55% 45% 2005 PBIT

55% 32% 13% 100%

63% 22% 16%

77% 12% 11%

100%

100%

100%

100%

Factors Affecting Our Results of Operations


Several factors affect our results of operations that may make it difficult to predict future financial results based on past performance. These include commodity price movements, operating costs and efficiency, product and market mix, duties and taxes and exchange rates. Commodity Prices Commodity prices have significant impact on our results of operations. These are influenced by changes in global economic conditions, related industry cycles, demand-supply dynamics, attempts by individual producers to capture market share and also by speculation in the market. In addition to market fluctuations, our average selling prices can be affected by contractual arrangements and hedging strategies. The commodity price fluctuations and market cycles have historically had a material impact on our results of operations and are expected to continue to do so in the future. LME Price for Aluminium We sell primary aluminium in the domestic and export markets. We price our alumina and aluminium products by reference to domestic market prices or international market prices. Domestic pricing is influenced by the movements in LME prices, regional premiums, exchange rates and customs duty changes. For more information on the impact of customs duties on our net revenues, see - Factors Affecting Our Results of Operations Government Policy below. In the export markets, we sell primary metal with reference to LME prices, but are able to charge a regional premium that generally reflects the cost of securing the metal from an alternative source of supply. Alumina prices are negotiated and are usually determined with reference to the LME price for aluminium. We sell both under long-term contracts as well as in spot sales. The decision on the manner of sale is influenced by the demand-supply and pricing outlook for alumina in the international markets. LME prices for aluminium have been volatile and cyclical in the past and we expect this to continue. The following table sets out indicative average LME cash prices per metric ton for the periods indicated: Average LME Cash Prices Year Ended December 31, 2002 2003 (In currency per metric ton) LME Aluminium US$1,349 Rs. 61,635.8
178

2004

US$1,431

Rs. 65,382.4

US$1,716

Rs. 78,404.0

HINDALCO INDUSTRIES LIMITED


LME Price for Copper The prices we pay for copper concentrate and the prices we charge for our copper products are based on the LME price for copper. However, because we are a custom copper smelter, we attempt to make the LME price a pass through for us as both our copper concentrate purchases and sales of finished goods are based on LME prices. Nevertheless, we are also exposed to differences in the LME price between the quotational periods for the purchase of copper concentrate and sale of the copper, and any decline will adversely affect us. We attempt to hedge against such risks, but are still exposed to timing and quantity mis-matches. TcRc for some of our longterm copper concentrate supply contracts are also negotiated as a percentage of the prevailing LME price. In addition, some of our long-term copper concentrate supply agreements provide for price participation terms which are linked to LME prices. As a result, any significant volatility in the LME price for copper could adversely affect our revenues and profitability. The level of TcRc has a significant impact on the profitability of our copper business. We purchase copper concentrates at the LME price for the relevant quotational period less TcRc. While our TcRc is negotiated between the supplier and us, our TcRc is influenced by global TcRc, which is primarily the result of factors such as the supply and demand of copper concentrates, prevailing and forecasted LME prices and mining and freight costs. We use a blend of long term and spot purchases to meet our copper concentrate requirements, which are influenced by contract and spot TcRc. Long term purchases accounted for approximately 75% and 76% of our copper concentrate requirements in fiscal 2004 and fiscal 2005 respectively. In addition, 10% of our concentrate requirements in fiscal 2005 were met from two mines in Australia, owned through our wholly owned subsidiary Birla Mineral Resources Pty Limited. While contract rates are negotiated annually (substantially influenced by the benchmark price set by certain large Japanese smelters), the spot price fluctuates depending on the concentrate demand-supply and LME price. Spot TcRc experienced a declining trend throughout fiscal 2003 and fiscal 2004 although it witnessed a sharp recovery during the second half of fiscal 2005, and hence is difficult to predict. Our spot purchases accounted for 25% and 13% of our requirements in fiscal 2004 and 2005, respectively. We sell our products at a premium to LME price for the relevant quotational period, which is affected by global demand and supply of refined copper and prevailing freight costs. In the domestic market, we price copper at the landed cost of imported metal that reflects LME, regional premiums, import duties and exchange rate. Any lowering on customs duties would thus have an adverse impact on domestic prices. For more information on the impact of customs duties on our net revenues, see Factors Affecting Our Results of Operations Government Policy below. LME copper prices and TcRc have been volatile in the recent past and we expect this to continue. Significant movements affect our revenues and profitability. The following table sets out indicative average LME cash prices per metric ton of copper, average TcRc under long-term supply contracts for copper and average spot TcRc for copper in U.S. dollars for the periods indicated: Average LME Cash Prices and Average Long term & Spot TcRc Year Ended December 31, 2002 2003 (In currency per metric ton) LME Copper Long term TcRc Spot TcRc Operating Costs and Efficiency Given the commodity nature of our businesses, operating costs and efficiencies are critical to maintaining our competitiveness and profitability. In our aluminium business, our costs can be broadly categorized into power and fuel, raw materials including bauxite, carbon, caustic soda and other raw materials such as florides and chemicals and other manufacturing & operating expenses primarily consisting of stores, spare parts and tools as well as repairs, renewals and replacements
179

2004

US$1,558 US$399 US$179

Rs.71,185.0 Rs.18,230.3 Rs.8,178.5

US$1,779 US$333 US$82

Rs.81,282.5 Rs.15,214.8 Rs.3,746.6

US$2,866 US$243 US$340

Rs.130,947.5 Rs.11,102.7 Rs.15,534.6

HINDALCO INDUSTRIES LIMITED


of building and machinery. Of these, power and fuel, and raw materials were the primary cost drivers accounting for 89%, 90% and 87% of our aluminium raw materials and manufacturing & operating expenses in fiscal 2003, 2004 and 2005 respectively. Power forms the largest component of the costs relating to our aluminium business. We benefit from low cost and stable supplies from our power plants. In fiscal 2003, 2004 and 2005, dedicated power accounted for 99%, 99% and 88%, respectively, of our total power needs. At 15,062 Kwh per metric ton of primary aluminium production at Renukoot and at 16,303 Kwh at Hirakud, we believe that our efficiencies are comparable with the best smelters using a similar technology in the world. However, any change in power cost and efficiencies will adversely impact us. See Risk Factors A significant portion of our energy requirements are met by our dedicated power plants and any disruption to these operations could increase our production costs. Bauxite quality, costs and availability have significant bearing on the costs and efficiencies relating to our aluminium business, thus impacting profitability. We source a large part of our requirements from own bauxite mines with the rest coming from dedicated suppliers. Our present bauxite reserves are of good quality and based on our current requirements as well as proposed expansion of existing refineries at Muri and Belguam, we expect our total reserves, including bauxite deposits for which we are in the process of securing leases, to last for approximately 22, 44 and 23 years, respectively at our Muri, Renukoot and Belgaum refineries. The principal components of bauxite costs are mining costs, royalties and freight. The Government of India has increased royalty payments in recent periods and may do so again. Any increase in these costs will adversely impact our profit margins. See Risk Factors If we are unable to obtain a steady supply of bauxite at reasonable costs, our results of operations may be affected. Apart from copper concentrate, power and fuel are the biggest cost drivers of our copper business. We operate our dedicated power plant with imported coal, taking advantage of our coastal location. Coal prices have risen in the last two years, exchange rates have been volatile with the appreciation of the Indian Rupee against the US Dollar and freight rates have increased. Any change in global coal prices, exchange rates and freight costs could affect our operations in the future. Product and Market Mix The results of our operations are impacted by the product and market mix within each of our business segments and our profitability and return ratios will be affected by the mix of aluminium and copper in overall operations. Our aluminium business margins are generally higher than our copper business margins due to the integrated nature of our aluminium business which ranges from bauxite mining to value-added finished products. However, as a custom smelter, our copper business does not benefit from the same advantages. We expect that, in the near term, the product mix between aluminium and copper will change as our copper production will rise with the recent increase in capacity of our copper smelter at Dahej from 250,000 metric tpa which is expected to achieve a full production capability of 500,000 metric tpa. Our aluminium expansion projects are expected to commence production only after fiscal 2007. We also expect our copper margins to improve with the increased capacity. Thereafter, upon completion of our aluminium expansion projects, we currently expect that our product mix will change again with the significantly increased production of aluminium products. In the aluminium business, the market mix has a significant impact on our operations since domestic prices of aluminium are determined with reference to landed cost of imported metal, which usually reflects the LME price, regional premium, and import duties. On the other hand, export selling prices equal the LME price and regional premium only. In addition, the product mix also impacts our results given that value-added products command higher prices due to mark-up over the LME price reflecting the extent of value addition. The growing share of value-added products also helps in minimizing volatility in earnings. Recognizing this, we have focused on domestic sales and value-added products in recent years. In fiscal 2005, aluminium metal exports accounted for 17% of aluminium metal revenues, up from 13% in fiscal 2004 and 16% in fiscal 2003, and value-added products accounted for 55% of aggregate aluminium metal revenues in fiscal 2005, up from 36% in fiscal 2004 and 42% in fiscal 2003. In the copper business, we also focus on increasing our production volumes of value-added products such as continuous cast rods, which accounted for 52% and 45% of copper revenues during fiscal 2004 and 2005, respectively. In fiscal 2005, copper exports accounted for 56% of our copper revenues and 62% of our sales tonnage with the rest being sold in the domestic markets. As India is already a net exporter of copper, our
180

HINDALCO INDUSTRIES LIMITED


increased production resulting from any capacity expansions will be sold primarily in the export markets. In addition, as our exports are primarily focused on regions that are at close proximity to India such as North Asia, Southeast Asia and the Middle East, our freight costs to such markets tend to be lower as compared to many other copper exporting countries. We intend, however, to grow domestic volumes, through development of new applications and increased sales to existing customers. We expect that we will produce more phosphatic fertilizers and precious metals for domestic sale with the expansion of our copper capacity to 500,000 metric tpa, which will also affect our product and market mixes. Duties and Taxes Our results will be significantly impacted by changes in import duties, export incentives and taxes. Given that the domestic pricing of both aluminium and copper are determined with reference to landed cost of imports, duties thereon influence our average selling prices and hence profitability. On the other hand, we gain from reduction in import duties on imports of key inputs such as copper concentrate, coal for our power plants which is used for our copper operations and caustic soda, fuel oil and coke for our aluminium operations. Also, our operations are impacted by export incentives as we exported nearly 15% of our primary aluminium production and 43% of our copper production in fiscal 2005. Import Duties The import of aluminium currently attracts a basic duty of 10% while the import of copper attracts a basic import duty of 10%. Duties of customs attract a cess of 2% of the net amount payable. The basic import duty on concentrate remains unchanged at 5% since fiscal 2000. The current import duty on coal is 5%. The government of India may reduce customs duties even further and the timing and extent of such reductions cannot be predicted. Any such reduction will have a direct impact on domestic pricing and profitability of both aluminium and copper operations. Export Incentives The government of India provides incentives on exports in the form of duty exemption, remission of duty on import of inputs required for export production and concessional customs duty for import of capital equipment with accompanying export obligation. Further, the goods exported are not subject to excise duty, which is otherwise levied on goods removed from factory for domestic consumption. At present, our operations benefit from export incentive schemes provided by the government of India such as Duty Exemption Scheme, Duty Remission Scheme and Export Promotion Capital Goods Scheme. Any loss or reduction in these export incentives or duty exemptions would impact our profit margins. Taxes and Royalties Our results of operations are affected by the income tax we pay on our profits and, to a lesser extent, on dividend distributions. Income tax on Indian companies is currently charged at a statutory rate of 33.66%, including a surcharge of 10% and a 2% education cess on the tax payable. The corporate tax rates were at 36.75%, 35.87% and 36.59% respectively in the fiscal 2003, 2004 and 2005 respectively. We are also subject to other government royalties and taxes. We pay royalties on bauxite and coal mined. The government of India has powers to change the royalty, but cannot do so more than once every three years. In September 2000, the government changed the nationwide bauxite royalty from a fixed fee to a variable fee formula, which was further revised upward in October 2004 under the same formula. Royalty is calculated as a percentage of the average metal price on the LME during the period. More recently, the Orissa state government has started levying a tax on the annual value of mineral bearing land under the rural infrastructure and socioeconomic development act 2004. For coal the tax is calculated at 15% on the annual value of mineral bearing land which is reckoned on the basis of average value of mineral produced over the last two years. This levy would be payable on our coal output in Orissa. Any material changes in the taxes, royalties and surcharges described above will have a direct impact on our operations and profitability even in the future.

181

HINDALCO INDUSTRIES LIMITED


Exchange Rates We produce and sell commodities that are typically priced by reference to U.S. Dollar prices, both in the domestic and export markets. However, a majority of our costs are incurred in Indian Rupees and to a lesser extent in Australian Dollars. We therefore benefit from the depreciation in the value of the Indian Rupee against the U.S. Dollar and suffer from its appreciation. Though the Indian Rupee has historically depreciated against the U.S. Dollar, in recent times, the U.S. Dollar has weakened against the Indian Rupee. If the trend continues, our revenues and profitability will be affected adversely. Towards minimizing the impact of currency fluctuations, we hedge our currency exposures from time to time in line with our risk management policy. However, we cannot assure you that these measures will adequately protect us against currency movements. Also, the policies of the Reserve Bank of India may change from time to time, affecting our ability to hedge currency exposures adequately. Results of Operations The following table sets forth selected information from our results of operations for the periods indicated: Selected Results of Operations Year Ended March 31, 2003 Net Sales & Operating Revenues Total Expenditure Operating Profit Other Income Interest Depreciation Profit before Exceptional Items and Tax Exceptional Items Profit before Tax Provision for Current Tax Provision for Deferred Tax Provision for Deferred Tax for earlier years written back Net Profit 5,821.4 50,122.5 37,405.6 12,717.0 1,917.2 1,364.9 2,642.2 10,627.0 1,633.1 8,993.9 2,520.0 652.5 2004 (Rs. in millions) 62,083.5 47,080.8 15,002.7 2,400.1 1,771.5 3,174.5 12,456.7 0.0 12,456.7 2,606.4 1,461.0 0.0 8,389.3 2005(1) 95,232.5 72,468.0 22,764.5 2,700.5 1,699.6 4,632.6 19,132.9 91.0 19,041.8 5,705.0 758.9 (715.6) 13,293.6

(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.

182

HINDALCO INDUSTRIES LIMITED


The following table sets out selected financial information on our aluminium and copper business segments for the periods indicated: Selected Segmental Information Year Ended March 31, 2003 2004 (Rs. in millions) Aluminium Business Segment Net Sales & Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed %age share Return on Capital Employed (%) PBIT Margin (%) Copper Business Segment Net Sales & Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed %age share Return on Capital Employed (%) PBIT Margin (%) Unallocable Unallocable Income (Net of Expenses) Capital Employed Total Net Sales & Operating Revenues Profit Before Interest & Tax (PBIT) Capital Employed Return on Capital Employed (%) PBIT Margin (%) 50,122.5 11,992.0 94,351.5 13% 24% 62,083.5 14,228.2 95,232.5 20,832.4 1,547.1 31,835.0 2,225.3 35,893.0 2,337.0 33,020.4 26,202.1 52% 3,839.5 32% 24,014.2 25% 16% 15% 32,125.8 52% 3,097.0 22% 27,621.8 27% 11% 10% 42,711.6 45% 2,538.0 12% 37,813.4 30% 7% 6% 23,920.4 48% 6,605.3 55% 38,502.3 41% 17% 28% 29,957.8 48% 8,905.9 63% 40,661.5 39% 22% 30% 52,520.9 55% 15,957.4 77% 55,129.0 44% 29% 30% 2005(1)

104,176.3 125,962.7 14% 23% 17% 22%

(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.

183

HINDALCO INDUSTRIES LIMITED


Year Ended March 31, 2005 Compared with Year Ended March 31, 2004 Net Sales & Operating Revenues and Segmental Profitability Our net sales and operating revenues increased by 53% from Rs.62,083.5 million in fiscal 2004 to Rs.95,232.5 million in fiscal 2005. Our revenues include sales from both our aluminium and copper business segments. Our aluminium segment accounted for 55% of our revenues in fiscal 2005 as compared to 48% in fiscal 2004. Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. As a result, our financial statements for fiscal 2005 may not be comparable with those of fiscal 2004. For details on the Scheme at Arrangement and its financial implications, please see Our Business on Page 50 of the Letter of Offer. [-] The revenues from each of our business segments for fiscal 2004 and fiscal 2005 are as follows : Segment Revenues Year Ended March 31, 2004 (Rs. in millions) As a percentage of Net Sales & Operating Revenues 0% 30% 17% 1% 48% 35% 7% 6% 0% 4% 52% 100% 2005 (Rs. in As a millions) percentage of Net Sales & Operating Revenues 5,695.5 20,282.8 24,499.9 2,042.6 52,520.9 32,739.1 3,557.4 4,181.7 434.4 1,799.0 42,711.6 95,232.5 6% 21% 26% 2% 55% 34% 4% 4% 0% 2% 45% 100%

Aluminum: Alumina Primary aluminum Value-added aluminium products Others


(1)

0.0 18,643.6 10,538.5 775.6 29,957.8 0% 21,752.7 4,040.1 3,492.5 277.3 2,563.2 32,125.8 62,083.5

Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric acid Others
(1)

Total copper revenues Net Sales & Operating Revenues

(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items

Aluminium: Revenues from our aluminium business increased from Rs.29,957.8 million in fiscal 2004 to Rs.52,520.9 million in fiscal 2005. Revenues rose by 15% on a comparable basis over fiscal 2004 even after excluding results of the newly merged Indal. We recorded the highest production across all aluminium product segments in fiscal 2005. Our sales volumes crossed previous highs, except in sales of aluminium ingots and billets as more metal was used in-house for value-added products. Realisations too registered an increase in all the product categories. The highlight of the years performance was the contribution of value-added products to sales. At 198,615 metric tons, excluding wheels tonnage, the value-added products segment constituted 47% of metal sales tonnage and 54% of metal revenues. Our alumina production stood at 1,159,664 metric tons while sales aggregated to 322,828 metric tons with balance captively consumed for metal production. Revenues from third party sale of our alumina were Rs.5,695.5 million reflecting an average realisation of Rs.17,642.6 per metric ton. Our primary metal production, consisting of aluminium ingots and billets, was at 409,068 metric tons, pegging
184

HINDALCO INDUSTRIES LIMITED


the capacity utilisation level at 90% in fiscal 2005 compared to 94% in fiscal 2004. The sales tonnage at 158,519 metric tons was 7% less compared to fiscal 2004, as a substantial part of our primary metal production was used for manufacturing value-added products. Total revenues from our primary metal sales rose by 5% on the back of improved pricing conditions. This is reflected in average metal realisation which grew 13% from Rs.80,161.5 per metric ton in fiscal 2004 to Rs.90,681.9 per metric ton in fiscal 2005. The realisations were higher on account of the strong LME prices. During the year, the average LME price increased by 19% from US$1,496 (Rs. 68,352.2)per metric ton to US$1,779 (Rs.81,282.5) per metric ton. However, this rise did not translate into an equivalent change in domestic prices due to the appreciation in the value of the Indian Rupee against the US Dollar and reduction in import tariff to 15% in January 2004 before being cut to 10% effective from March 2005. Our production of redraw rods rose by 7% to 62,392 metric tons in fiscal 2005 compared to 58,233 metric tons in fiscal 2004. The stable demand from electrical sector ensured good off-take and helped increase the total sales tonnage by 7% to 62,841 metric tons. Revenues surged 18%. Realisations increased by as much as 11% to Rs.94,015.7 per metric ton from Rs.84,905.5 per metric ton during the previous year. We have been striving to improve the share of value-added products, which accounted for nearly 50% of aggregate metal sales in fiscal 2005. A well structured plan has been put into place to carry forward the strategy to expand this market further including refinement and institutionalization of key account management practices, identification of potential markets to substitute imports by customers, setting up of a large distribution network covering the entire country and plans to further improve the depth of coverage, de-risking of the distribution chain through channel financing and establishment of an Aluminium Gallery to showcase new products and applications in aluminium. Rolled products constitute the largest segment of value-added products, contributing 73% to our total valueadded products sales tonnage in fiscal 2005. A strong growth in the consumer durables and the transport sectors were the main growth drivers. Coupled with aggressive marketing and support services, our rolled product sales volume soared to 144,158 metric tons. Even adjusted for Indal merger effects in fiscal 2005, sales volume has grown by an impressive 23% compared to fiscal 2004. Exports accounted for 41% of the sales tonnage as the company penetrated deeper into the markets of the USA, the UAE and Taiwan. The realisations grew by 13% outperforming the trend in ingot realisations, due to higher mark-up and richer product mix. As a result, our revenues from the sale of rolled products jumped to Rs.16,380.0 million constituting 37% of our total metal revenues. Our foils business is the second largest value-added products segment and accounted for 10% of our total metal products sales in value terms in fiscal 2005. Aggregate sales volume climbed up to 26,004 metric tons garnering Rs.4,543 million in revenues. The sales tonnage rose by 11% as compared to last year, even if adjusted for Indal merger effects. Meanwhile, average realisation moved up 28% from Rs.136,786.2 per metric ton in fiscal 2004 to Rs.174,699.8 per metric ton in fiscal 2005, reflecting a 93% higher realisation over the ingot realisations as compared to 71% in the previous fiscal. The higher premium reflected the significant improvement in product mix and deeper penetration into the profitable niche segments of the end-user sectors. The total production of our extruded products stood at 28,551 metric tons and excluding the demerged Indals production, the output rose by 23%. Sales volume clocked 28,453 metric tons due to a high demand from construction and automobiles sectors. Improved product range and development of new applications like shuttering systems, auto components and aluminium truck & bus bodies also helped. Notably, this was achieved despite industrial unrest at our Alupuram plant, leading to a production loss of approximately 5 months. The problem has since been resolved and the plant is currently operating at full capacity. Average realization improved by 13% compared to the previous period and pushed revenues to a new high of Rs.3,379.3 million. Our wheels business operates in a highly competitive environment with four major players and imports as major supply source. Sales volumes of our wheels business increased by 5% and revenues by 6% to Rs.197.8 million in fiscal 2005. The slow growth in realisations primarily reflects competitive pressures in the market as well as our conscious strategy to widen product range, with a bias towards smaller cars in the popular segment. The latter move was a conscious effort towards expanding the alloy wheels market for long term benefits. LME prices started the year at US$1,723 (Rs. 78,723.9) per metric ton then declined to US$1,575 (Rs. 71,961.8) per metric ton in May before trending up to a high of US$2,032 (Rs. 92,842.1) per metric ton in March and subsequently closed the year at US$1,973 (Rs. 90,146.4) per metric ton. Supported by the LME and high demand for value185

HINDALCO INDUSTRIES LIMITED


added products, we realised better prices across all segments of value-added products, despite the appreciating Indian Rupee and fall in import tariffs. Higher share of value-added products and a richer product mix resulted in higher premiums over metal. Continuous efforts to improve efficiency, control costs and achieve higher volumes led to an all time high PBIT of Rs.15,957.4 million in fiscal 2005 compared to Rs.8,905.9 million in fiscal 2004. The PBIT margin of our aluminium business was maintained at 30% in fiscal 2005, while return on capital employed rose from 22% in fiscal 2004 to 29% in fiscal 2005. Copper: Revenues from our copper business increased from Rs. 32,125.8 million in fiscal 2004 to Rs. 42,711.6 million in fiscal 2005. Aggregate copper sales tonnage rose to 214,375 metric tons in fiscal 2005 - a rise of 11% over 192,570 metric tons in fiscal 2004. With increasing penetration into the high deficit South East Asian and Far Eastern markets, total export rose 16% to 132,071 metric tons. Copper cathode production rose 16% from 186,611 metric tons in fiscal 2004 to 217,138 metric tons in fiscal 2005, as the Copper II achieved full stabilisation in February 2005. Our production of continuous cast rods declined by 3.4% to 88,298 metric tons in fiscal 2005 compared to 91,380 metric tons in fiscal 2004, with the utilisation level declining marginally from 94% to 91%. Volumes from the sale of copper cathodes increased by 25% to 126,452 metric tons while that from the sale of continuous cast rods fell marginally by 4%. Domestic sales tonnage of continuous cast rods increased by 9% and copper cathode exports rose by 34% in fiscal 2005 compared to fiscal 2004. To extract value from our phosphatic fertilizer business, we launched our fertilizer brand - Birla Balwan in fiscal 2005. The exercise has already started showing results as our sales of phosphatic fertilisers crossed 300,000 metric tons with a 16% increase and revenues by 20% to Rs.4,181.7 million. The inverted duty structure for gold and silver makes their production an uneconomical proposition. Therefore, we consciously scout for concentrate with low gold content. In line with lower production, our gold revenues were 15% lower at Rs.3,205.3 million and quantity sold declined by 19% from 6,556 Kgs to 5,301 Kgs. The general increase in copper LME prices had a limited impact on the financials for the year, primarily due to the fact that LME is largely a pass through for custom smelters like us. In fact, the higher LME copper prices increased our working capital requirement resulting in increased interest and financial charges. We continued to suffer on account of TcRc which hit a new low in the last quarter of fiscal 2004 before witnessing a sharp recovery during the second half of fiscal 2005. However, as our contracts had already been negotiated for a large part of the year, the impact of the recovery was not evident until the fourth quarter. The copper business continued to be effected by the accelerated pace of tariff changes, which fell from 25% to 20% in January 2004, then further to 15% in July 2004 before being cut to 10% in February 2005. The appreciation of the Indian Rupee against the US Dollar and the reduction of export incentives to Rs.6,500 per metric ton in November 2004 also impacted the results of our copper operations. Overall profitability was constrained as PBIT declined from Rs.3,097.0 million in fiscal 2004 to Rs. 2,538.0 million in fiscal 2005, as a fallout of the difficult business conditions outlined above. Other Income Our other income rose by 13% to Rs.2,700.5 million, partly on account of inclusion of Indal, but mainly because of interest on income tax refund and higher income from current investments. Interest Our total interest expense declined by 4% from Rs.1,771.5 million in the previous year to Rs.1,699.6 million on account of repayment of debenture and foreign currency loans. We also capitalized Rs.342.4 million of interest along with capital expenses. Depreciation Our depreciation charges have increased by 46% mainly due to the inclusion of Indals assets and full year depreciation on our Copper II plant at Dahej. The average depreciation rate for fiscal 2005 stood at 8.0% as compared to 6.2% in fiscal 2004.

186

HINDALCO INDUSTRIES LIMITED


Taxes Our total effective tax rate at 34% in fiscal 2005 remained almost the same as last years 33%, even though the deferred tax rate declined to 4% from 12%. This was due to an increase in effective current tax rate, from 21% in fiscal 2004 to 30% in fiscal 2005, on account of lower tax depreciation and removal of export benefits under the Income Tax Act, 1962. Reversal of the deferred tax on account of decrease in income tax rate resulted in a net addition of Rs.715.6 million to our bottomline. Extraordinary Items We incurred expenses amounting to Rs.91.0 million for carrying out the scheme of amalgamation of demerged business of Indal with itself. Net Profit As a result of the above, our net profit increased from Rs.8,389.3 million in fiscal 2004 to Rs.13,293.6 million in fiscal 2005. Our earnings per share adjusted for exceptional items rose by 59% to Rs.144.26 per share in fiscal 2005 as compared to Rs.90.71 in fiscal 2004. Year Ended March 31, 2004 Compared with Year Ended March 31, 2003 Net Sales & Operating Revenues and Segmental Profitability Our net sales & operating revenues increased by 24% from Rs.50,122.5 million in fiscal 2003 to Rs.62,083.5 million in fiscal 2004. Our aluminium business accounted for 48% of our revenues for fiscal 2004, while the balance 52% came from the copper business. The revenues from each of our business segments for fiscal 2003 and fiscal 2004 are as follows: Segment Revenues Year Ended March 31, 2003 (in As a (Rs. in Rs. million) percentage millions) of Net Sales & Operating Revenues Aluminum: Alumina Primary aluminum Value-added aluminium products Others
(1)

2004 (in (Rs. in Rs. million) millions) As a percentage of Net Sales & Operating Revenues 0% 30% 17% 1% 48%

0.0 13,457.5 9,615.1 847.8 23,920.4

0% 27% 19% 2% 48%

0.0 18,643.6 10,538.5 775.6 29,957.8

Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric Acid Others
(1)

17,218.5 3,135.2 3,403.8 160.7 2,283.9 26,202.1 50,122.5

34% 6% 7% 0% 5% 52% 100%

21,752.7 4,040.1 3,492.5 277.3 2,563.2 32,125.8 62,083.5

35% 7% 6% 0% 4% 52% 100%

Total copper revenues Net Sales & Operating Revenues

(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items

187

HINDALCO INDUSTRIES LIMITED


Aluminium: Revenues from our aluminium business increased by 25% from Rs.23,920.4 million in fiscal 2003 to Rs.29,957.8 million in fiscal 2004. Leveraging strong supplies, our aggregate metal sales volumes increased by 24% to 325,162 metric tons with domestic sales accounting for 85% of volumes in fiscal 2004 as against 82% in fiscal 2003. This was possible due to better demand from end-users primarily on account of our marketing and branding efforts and greater emphasis on quality and customer service. Our production of aluminium ingots and billets grew 21% from 266,837 in fiscal 2003 to 323,184 metric tons in fiscal 2004, backed by 18% higher production in Alumina. Production of rolled products grew by 5% to 77,069 metric tons accompanied by a richer product mix. Our production of redraw rods surged 15% to 58,233 metric tons on better demand from the electrical sector. Our extrusion production declined by 4% to 18,194 metric tons and foil production declined by 3.5% to 18,560 metric tons in fiscal 2004 mainly due to change in product mix. Alloy wheel production zoomed from 56,117 pieces to 99,091 pieces. Our primary metal sales volume, consisting of aluminium ingots and billets, increased by 40% from 121,713 metric tons in fiscal 2003 to 170,319 metric tons in fiscal 2004. Our revenues from the sale of ingots/ billets rose by 47% from Rs. 9,311.2 million in fiscal 2003 to Rs. 13,653.1 million in fiscal 2004 primarily due to a 5% increase in average realizations which rose from Rs. 76,500.8 per metric ton in fiscal 2003 to Rs. 80,161.5 per metric ton in fiscal 2004. Taking advantage of the robust demand from the electrical sector, our volume sales of redraw rods increased by 17% in fiscal 2004. Product revenues grew by 20%, mirroring higher realisations. In addition, we benefited from the improved demand in the electrical sector by supplying higher quantities of ingots to secondary producers of redraw rods. The continuing growth in the construction sector, a pick up in the consumer durables after a gap of two years and sustained strong demand from the packaging sector served to fuel the growth in our rolled products segment. Aggressive marketing and branding with a thrust towards the development and promotion of new applications and brands, and higher exports lead to an increase in the sales tonnage of our rolled products by 13%, from 51,343 metric tons in fiscal 2003 to 58,175 metric tons in fiscal 2004. Extrusion volumes were marginally lower due to a change in the product mix and reduced orders for strategic applications. Reflecting rising LME and higher domestic metal prices, average product realisations rose marginally amidst intense competition. Consequently, despite lower volumes, our product revenues were maintained at Rs.1,927.1 million for fiscal 2004. As part of our application and product development efforts, we promoted the use of extruded aluminium profiles in bus and truck bodies, especially with large automotive producers, including the largest chassis manufacturer in India. Aggregate sales volumes in our foils segment declined marginally as we stayed away from unprofitable user/ application segments. With a positive change in the product mix, average realisation moved up significantly and sustained product revenues despite lower volumes. The emphasis on new applications and brands continued during fiscal 2004 with the Freshwrapp kitchen foils brand making substantial in-roads into the market and the launch of an innovative 24 Hour Bacteria Protection foil for the first time in India. To attain higher volumes the distribution reach was extended to several smaller towns and far-off locations across the country. In our wheels division, sales volumes rose from 52,786 pieces in fiscal 2003 to 105,975 pieces in fiscal 2004. The acceptance of the Aura brand by a large number of automotive manufacturers helped improve our OEM sales. We also benefited from aggressive marketing and promotional efforts including successful campaigns like Make Heads Turn. We obtained the ISO TS16949 certification in fiscal 2004 which aligns existing automotive quality systems in the US, Germany, France and Italy by specifying quality requirements for design and development, production, installation and servicing of automotive-related products. Apart from strong volumes, we also gained from the rising trend in global metal prices. LME aluminium soared from a low of US$1,315 (Rs. 60,082.4) per metric ton in April 2003 to a high of US$1,754 (Rs. 80,140.3) per metric ton in February 2004 before settling at US$1,689 (Rs. 77,170.4) per metric ton at the end of fiscal 2004. Consequently, the annual average LME was higher by 10% at US$1,496 (Rs. 68,352.2) per metric ton in fiscal 2004 against US$1,354 (Rs. 61,864.3) per metric ton in fiscal 2003, attributable to a strong demand from China, rising alumina prices, expectations of US recovery and increased fund demand. An unprecedented 5% appreciation in the value of Indian Rupee against the US Dollar and a 5% cut in import tariff on aluminium in January 2004 affected
188

HINDALCO INDUSTRIES LIMITED


landed cost of imports and hence the pricing power. On the back of increasing realizations on primary aluminium and improving demand for downstream products, we have been able to realise better prices in the value-added product segments as well. Copper: Revenues from our copper business increased by 23% from Rs.26,202.1 million in fiscal 2003 to Rs.32,125.8 million in fiscal 2004. Total cathode production stood at 186,611 metric tons in fiscal 2004 compared to 180,876 metric tons in fiscal 2003. Our production of value-added continuous cast rods rose from 76,766 metric tons to 91,380 metric tons, enriching the product mix. We successfully commissioned an expanded smelter in February 2004, raising the installed capacity to 250,000 metric tons per annum. The new smelter contributed marginally towards volumes. Aggregate copper sales volume grew by 6% to 192,570 metric tons, despite a decline in domestic sales volumes, from 83,916 metric tons in fiscal 2003 to 78,395 metric tons in fiscal 2004. A steep fall in demand from the Jelly Filled Telecom Cable (JFTC) sector, the biggest user segment in India, deterred growth. Though other user segments performed well, they could not compensate for the loss from the JFTC entirely. A surge in imports from Sri Lanka also put pressure on domestic volumes. Amidst difficult market conditions, we leveraged our strong brand, product quality, LME accreditation and locational advantages to penetrate deeper into the deficit markets of Asia, especially South East Asia and the Far East. Our aggregate exports grew 16% from 98,534 metric tons in fiscal 2003 to 114,175 metric tons in fiscal 2004. We enriched our product mix, with value-added continuous cast rods accounting for 48% of copper sales volumes in fiscal 2004 as against 42% in fiscal 2003. Reflecting a positive change in the product mix, rising LME and higher premiums, our average copper realizations grew by 20% to Rs.112,959.5 per metric ton, though a significant part of thiswas a complete pass through in nature and thus had little impact on business profitability. We are a custom copper smelter and are dependent on TcRc for profits. Although cost effective conversion, premium over LME, value from by-products and the differential duty between raw material and finished goods add strength, TcRc remains the key determinant of profitability. Average spot TcRc dropped from US$144 (Rs. 6,579.4) per metric ton in fiscal 2003 to US$67 (Rs. 3,061.2) per metric ton in fiscal 2004. Though the extent of fall was relatively lower in case of average contract TcRc, it still slipped from an estimated US$360 (Rs. 16,448.4) per metric ton in fiscal 2003 to an estimated US$276 (Rs. 12,610.4) per metric ton in fiscal 2004. This affected the profitability of custom copper smelters globally and was caused by the unfavourable supply situation resulting from the ongoing consolidation in global copper concentrate markets. However, through our strategy of sourcing a majority of our concentrate requirements through long-term contracts, we were able to minimize the effect of the TcRc meltdown. The average copper prices on the LME increased from US$1,642 (Rs. 75,023.0) per metric ton in the first quarter of fiscal 2004 to US$2,731 (Rs. 124,779.4) per metric ton in the last quarter of fiscal 2004-an increase of 66%. Notwithstanding a sharp rise in LME copper during fiscal 2004, the PBIT margin of our copper business fell from 15% in fiscal 2003 to 10% in fiscal 2004. As mentioned, LME prices are a pass-through in nature and in fact have an indirect negative impact due to the base effect. A significant reduction in conversion costs, improved operational efficiencies and benefits of the low cost brownfield expansion, helped contain the fall. Our Precious Metal Refinery produced 6,908 kilograms of gold and 31,513 kilograms of silver - a growth of 27% and 3% respectively. Profitability of our precious metals business remained negative due to higher import duty on concentrates than finished goods, both for gold and silver. The production of phosphatic fertilisers was scaled down consciously from 315,785 metric tons in fiscal 2003 to 231,903 metric tons in fiscal 2004. This was due to a significant reduction in subsidy on fertilizers by the Government, which made its manufacture unviable using imported phosphoric acid, as done by us. Other Income Our other Income increased by 25% from Rs.1,917.2 million in fiscal 2003 to Rs.2,400.1 million in fiscal 2004 as improved availability of surplus funds was deployed in short term investments, aided by interest received on income tax refunds and higher dividend receipts. Our other income also included profits realised on the sale of entire stake in Indo Gulf Fertilisers Limited, another company of the Aditya Birla Group.

189

HINDALCO INDUSTRIES LIMITED


Interest Our gross interest charges increased marginally by approximately 2% from Rs.1,949.8 million in fiscal 2003 to Rs.1,983.9 million in fiscal 2004. In accordance with the Accounting Standard (AS - 16), we capitalised a sum of Rs.212.4 million and thus charged a net interest of Rs.1,771.5 million to the revenue account in fiscal 2004. Depreciation Our depreciation charges rose 20% from Rs.2,642.2 million in fiscal 2003 to Rs.3,174.5 million in fiscal 2004. A significant portion of the increase was attributed to charges associated with the commissioning of the brownfield expansion in our copper smelter at Dahej and expansion of our existing capacities relating to our aluminium business. We added a sum of Rs.10,037.8 million to the gross block during fiscal 2004. Current and Deferred Tax As a result of the recently completed brownfield expansions in aluminium and copper, we were able to bring down effective current tax rate from 23.7% in fiscal 2003 to 20.9% in fiscal 2004. Consequently, current taxes grew only by 3% to Rs.2,606.4 million in fiscal 2004. We made an additional provision of Rs.1,461.0 million towards deferred taxes during the year. Net Profit As a result of the above, our net profit increased from Rs.5821.4 million in fiscal 2003 to Rs.8389.3 million in fiscal 2005. Our earnings per share adjusted for exceptional items rose by 13% to Rs.90.71 per share in fiscal 2004 as compared to Rs. 80.58 per share in fiscal 2003. Liquidity and Capital Resources The following table sets forth selected information from our cash flow statement for the periods indicated: Selected Cash Flow Statement Year Ended March 31, 2003 2004 (Rs. Rs. millions) in million) (in Sources of cash Cash from operations Non-operating income Net debt inflows Extraordinary Items (Share call money received & sale of Investment) Total Application of Cash Net capital expenditure Investment in subsidiaries Other treasury investments (Net) Interest charges and lease rentals Dividend payout Equity buy back of equity shares Total Increase/ (Decrease) in cash and cash equivalents 9,836.3 4,303.5 380.5 1,156.9 1,580.6 553.2 17,811.0 (1,921.5) 6,961.2 431.9 5,583.5 1,636.9 1,408.3 0.0 16,021.9 (1,528.8) 11,205.2 587.9 10,357.2 1,740.3 1,725.2 0.0 25,615.9 1,481.0 8,825.7 1,332.3 5,520.0 211.5 15,889.5 11,128.7 1,316.8 2,047.4 0.1 14,493.1 17,609.3 2,060.9 7,426.8 0.0 27,097.0 2005(1)

(1) Includes the full year financial results of the aluminium business of Indal which was demerged into us with effect from April 1, 2004.

190

HINDALCO INDUSTRIES LIMITED


Year Ended March 31, 2005 Sources of Cash Cash from operations Strong aluminium and copper prices combined with a better product and market mix significantly improved our realizations during fiscal 2005. As a result, the year ended with a sizeable Rs.17,609.3 million in cash generated from operations. Non-operating income We manage a large treasury surplus, giving due considerations to safety, liquidity and returns in that order. It turned in a cash inflow of Rs.2,060.9 million, constituting just approximately 8% of aggregate cash flows. Net debt inflows To finance our on going expansion projects, we tied up a 10 year loan facility for Rs.49,500 million, out of which the first tranche of Rs.4,950 million was drawn down in March 2005 Our net debt inflows during the years were at Rs.7,426.8 million. Application of Cash Capital Expenditure We made investments to the tune of Rs.11,205.2 million towards expansions and efficiency improvement projects. Investment in Subsidiaries We made net investments of Rs.587.9 million in subsidiary companies. A sum of Rs.981 million was invested in equity shares of Birla Minerals Resources Pty Limited, towards providing finance for the development of the Nifty andMt.Gordon mines. A sum of Rs.281 million was received from subsidiaries as repayment of loan. The balance is accounted for by the cash and cash equivalents of the demerged Indal net of expenditure on the merger. Other Investments Our net investments rose by Rs.10,357.2 million primarily in the form of bonds and units of debt schemes of domestic mutual funds. Interest Interest and finance charges amounted to Rs. 1,699.6 million during the year, while the total payment towards these charges was Rs. 1,740.3 million. Dividend During the year, we paid Rs. 1,725.2 million towards dividend and dividend tax for fiscal 2004, which included Rs. 1,721 million towards dividend (incl. Dividend tax) for fiscal 2004 and the balance for earlier years. Year Ended March 31, 2004 Sources of Cash Cash from operations Our cash from operations rose to Rs.11,128.7 million, accounting for 77% of total source of cash in fiscal 2004. This was achieved on the back of higher volumes in both businesses and improved realisations in aluminium. Non-operating income Approximately 9% of our aggregate cash flows were accounted for by non-operating income comprising of dividend on long term as well as short term investments and interest on short term Investments. Net debt inflows We raised approximately Rs.2,300 million through External Commercial Borrowing (ECB) at benchmark rates for general corporate requirements. Long term debts worth Rs.2,233.5 million were repaid. Net of repayments, debt inflows were at Rs.2,047.4 million in fiscal 2004. Notwithstanding this, debt-equity ratio was maintained at 0.36 in fiscal 2004 compared to 0.37 in fiscal 2003. Net of cash and cash equivalents, gearing fell from 0.20 in fiscal 2003 to 0.14 in fiscal 2004.
191

HINDALCO INDUSTRIES LIMITED


Application of Cash Capital Expenditure The aggregate capital expenditure of Rs.6,961.2 million, including Rs.212.3 million of interest capitalised, accounted for 43% of cash utilisation in fiscal 2004. Investment in Subsidiaries During the year, we made an additional investment of Rs.906.6 million in subsidiary companies. A sum of Rs.49.9 million was invested in equity shares of Indian Aluminium Company, Limited, towards increasing holding further from 95.9% to 96.5% in fiscal 2004. Further, for acquisition of additional copper mines in Australia, an additional sum of Rs.752.5 million was invested in Birla Mineral Resources Pty Limited, our wholly owned subsidiary. An additional sum of Rs.104.3 million was invested in the equity shares of Bihar Caustic and Chemicals Limited, which became our subsidiary. A sum of Rs. 474.7 million was received from subsidiaries as repayment of loan. Other Investments We sold our entire holding of 3,915,871 equity shares of Indo Gulf Fertilisers Limited for an aggregate value of Rs.293.5 million through open market transactions during the year. Net investment grew by Rs.5,583.5 million and was primarily in the form of bonds and units of debt schemes of domestic mutual funds. Interest and Lease Rents We effected interest payments (net of capitalised interests) of Rs.1539.7 million, accounting for approximately 10% of aggregate cash utilisation in fiscal 2004. Total interest accrued but not due as at the year-end was Rs.557.3 million, as against Rs.582.5 million in the previous year. Lease rentals of Rs.97.3 were also paid. Dividend A sum of Rs.1,408.3 million was utilised for payment of dividend and corporate tax on dividend for fiscal 2003. Indebtedness Our total indebtedness as on September 30, 2005 stood at Rs. 43,221.7 million compared to Rs. 38,000.0 million in fiscal 2005, Rs. 25,645.9 million in fiscal 2004 and Rs.23,950.2 million in fiscal 2003. While our total debt to equity ratio rose from 0.36 in fiscal 2004 to 0.47 in fiscal 2005, the ratio, when adjusted for cash and cash equivalents, actually declined from 0.14 to 0.07. We tap both the domestic and offshore markets for our long term funding needs. Since we have sizeable imports and exports, we access both import and export credits, based on cost effectiveness, both in the Rupee and Foreign Currencies, to take care of our short term fund requirements. We have both secured and unsecured borrowings, with our secured borrowings being generally Rupee denominated bonds. The following table presents our secured debt as of September 30, 2005 : S. No. Secured Debt as of September 30, 2005 Amount Outstanding (in Rs. (Rs. in millions) millions) 1. 2. 3. 4. 5. 6. 7. Secured Redeemable Non-Convertible Debentures Term Loans from Government/ Government Agencies Cash Credit and Export Credit Accounts Rupee Term Loans from Scheduled Banks Rupee Term Loans from Financial Institutions Foreign Currency Term Loans from Banks Foreign Currency Term Loans from Financial Institutions Total Secured Debt
192

% of total secured debt

15,486.8 0.7 1,020.0 4,956.7 79.8 5,889.0 243.7 27,676.7

56.0% 0.0% 3.7% 17.9% 0.3% 21.3% 0.9% 100.0%

HINDALCO INDUSTRIES LIMITED


The following table presents our unsecured debt as of September 30, 2005: S. No. Unsecured Debt as of September 30, 2005 Amount Outstanding (Rs. in (in Rs. millions) millions) 1. 2. 3. 4. 5. Fixed Deposits Rupee Loans from Banks Foreign Currency Loans from Banks Foreign Currency Loans from Financial Institutions Buyers Credit Total Unsecured Debt 269.8 42.8 2,143.8 0.0 13,088.6 15,544.9 % of total secured debt

1.7% 0.3% 13.8% 0.0% 84.2% 100.0%

The following table presents details of our outstanding debt as of September 30, 2005 with corresponding maturities in the fiscal years indicated: S.No. Fiscal 2006 Fiscal 2007 Maturities of Outstanding Debt Fiscal 2008 Fiscal 2009 Fiscal 2010 Beyond Fiscal 2010

(Rs. in millions) (in million Rs.) 1. 2. Secured Debt Unsecured Debt 3,659.3 15,544.9 4,038.6 0.0 7,059.3 0.0 2436.2 2,436.2 0.0 3722.8 3,722.8 0.0 6760.5 6,760.5 0.0

For further detail on our indebtedness, see the section titled Description of Certain Indebtedness in this Letter of Offer. Capital Expenditures The following table sets forth our capital expenditures by segments for the years ended March 31, 2003, 2004 and 2005 and the capital expenditures in each segment as a percentage of our total capital expenditures in such years : Historical Capital Expenditure in each Segment Year ended March 31, 2003 Rs. Percent 2004 Rs. Percent 2005 Rs. Percent Total

(in million Rs., except percentages) (Rs. in millions except percentages) Aluminium Copper Total 7,699.5 2,673.6 10,373.1 74% 26% 100% 3,486.9 3,203.4 6,690.3 52% 48% 100% 4,980.5 5,990.1 10,970.6 45% 55% 100% 16,166.8 11,867.2 28,034.0

We expect to spend approximately Rs.58,125.0 million in capital expenditures during fiscal 2006, 2007 and 2008 and Rs. 60,825.0 million beyond fiscal 2008 on the following projects, which are covered under Objects of the Issue: increase the capacity of our alumina refinery in Muri from 110,000 metric tpa to 450,000 metric tpa, which we expect to complete in fiscal 2007; increase the capacity of our aluminium smelter in Hirakud, Orissa, from 65,000 metric tpa to 146,000 metric tpa, which we expect to complete in fiscal 2008;

193

HINDALCO INDUSTRIES LIMITED


increase the capacity of our alumina refinery in Belgaum from 350,000 metric tpa to 650,000 metric tpa, which we expect to complete in fiscal 2008; develop a greenfield alumina facility in Utkal, Orissa in a joint venture with Alcan Inc. which will have alumina production capacity of 1000,000 metric tpa to 1,500,000 metric tpa upon completion. This facility is currently expected to start commercial production in March 2009. We are entitled to 55% of the output, pursuant to our joint venture agreement; develop an integrated greenfield aluminium project in Orissa, with a capacity to produce 1000,000 metric tpa of alumina (expandable to 1,500,000 metric tpa) and 260,000 metric tpa of aluminium (expandable to 325,000 metric tpa) upon completion. This will be supported by a 650 megawatt dedicated power plant, backed by dedicated coal mines. The project is expected to start commercial production in March 2010. Further to the above, we also have certain other expansion plans, which though conceived have not yet been firmed up. For details of these projects please refer to Our Business Our Aluminium Business Our Expansion Projects and Our Business Our Copper Business Expansion Projects. As regards working capital in respect of the project we have existing banking relationships with two consortium of banks for our aluminium business with sanctioned fund based limit of Rs.5,500 million and with 14 banks for our copper business with drawals not exceeding Rs. 25,800 million as approved by the Board, which is adequate to meet our existing requirements. In the normal course of operations, we submit and would continue to submit a detailed assessment of working capital on an annual basis to these banks. We believe this would be sufficient to meet the annual requirement, including the enhanced needs of working capital arising out of the implementation of the Project. We do not foresee any difficulty whatsoever in doing so. The following table sets forth our estimated capital expenditures for each of the years ended March 31, 2006, 2007 and 2008: Estimated Capital Expenditure in each Segment Year ended March 31, 2006 Rs.
(1)

2007 Rs.
(1)

2008 Rs.
(1)

Percent

Percent

Percent

(in in millions (Rs.million Rs., except percentages) Aluminium Copper Total


(1) Estimated

14,870 2,480 17,350

86% 14% 100%

24,915 190 25,105

99% 1% 100%

30,220 20 30,240

100% 0% 100%

Actual capital expenditures may differ materially from these planned amounts. We may adjust the amount of our capital expenditures based on our cash flow from operations, the progress of our expansion plans and market conditions. Our anticipated cash flows from operations are dependent on a number of factors beyond our control, such as aluminium and copper prices quoted on the LME, TcRc prices, prevailing economic conditions in the industries which consume aluminium and copper and the costs of our principal inputs. We may, therefore, need to raise additional capital. If so, we may not be able to raise additional capital on terms acceptable to us or at all. Further, any sale of our equity or equity-linked securities may result in dilution to our shareholders. We may also have to revise our business plan from time to time and consequently its funds requirement may also change. This may include rescheduling of capital expenditure programs, starting non-planned new projects, more actively developing projects that may currently be at a nascent stage, terminating projects currently planned and increase or decrease in the capital expenditure for a particular business unit vis--vis current plans at the discretion of the Management. For more details on our planned expansion projects, please see Objects of the Issue, Our Business Our Aluminium Business Our Expansion Projects and Our Business Our Copper Business Expansion Projects.

194

HINDALCO INDUSTRIES LIMITED


Significant Developments Subsequent to the Last Financial Year Six Months Ended September 30, 2005 Compared with Six Months Ended September 30, 2004 Our first half for fiscal 2006 ended on September 30, 2005. The paragraphs below provide the managements discussion and analysis of the audited stand-alone financials for the six months ended September 30, 2005 compared with the unaudited stand-alone financial statements for the six months ended September 30 2004 for which the auditors have performed a limited review in accordance with applicable standards in India. The following table sets forth selected information from our results of operations for the periods indicated: Selected Results of Operations Six Months Ended September 30, 2004 (Rs.(in million Rs.) in millions) Net Sales & Operating Revenues Total Expenditure Operating Profit Other Income Interest Depreciation Profit before Tax Provision for Current Tax Provision for Deferred Tax Provision for Fringe Benefits Tax Net Profit 45,175.4 35,159.4 10,016.0 1,580.2 878.6 2,142.7 8,575.0 2,476.0 763.0 0.0 5,336.0 48,686.2 37,763.7 10,922.5 1,263.4 1,000.2 2,453.8 8,732.0 2,262.5 411.7 43.6 6,014.2 2005

The following table sets out selected financial information on our aluminium and copper business segments for the periods indicated: Selected Results of Operations Six Months Ended September 30, 2004 2005 (Rs. million Rs.) (in in millions) Aluminium Business Segment Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed Return on Capital Employed (%) PBIT Margin (%) Copper Business Segment Operating Revenues %age share Profit Before Interest & Tax (PBIT) %age share Capital Employed Return on Capital Employed (%) PBIT Margin (%) Unallocables Unallocable Income (Net of Expenses) Total Operating Revenues Profit Before Interest & Tax (PBIT) PBIT Margin (%)
(1) Annualised

24,509.8 54% 6,904.4 73% 53,089.1 26% 28% 20,665.6 46% 1,102.0 12% 33,774.1 7% 5% 1,447.2 45,175.4 9,453.6 21%

27,544.7 57% 8,729.0 90% 58,877.8 30% 32% 21,141.5 43% (163.0) -2% 43,932.5 -1% -1% 1,166.2 48,686.2 9,732.1 20%

195

HINDALCO INDUSTRIES LIMITED


Net Sales &Operating Revenues and Segmental Profitability Our net sales & operating revenues increased by approximately 8% from Rs. 45,175.4 million for the six months ended September 30, 2004 to Rs. 48,686.2 million for the six months ended September 30, 2005. Our aluminium segment accounted for 57% of our revenues in the six months ended September 30, 2005 as compared to 54% in the six months ended September 30, 2004. The revenues from each of our business segments for the six months ended September 30, 2004 and in the six months ended September 30, 2005 are as follows : Segment Revenues Six Months Ended September 30, 2004 (in Rs. (Rs. in million) millions) As a percentage of Net Sales & Operating Revenues 6% 21% 25% 2% 54% (in Rs. (Rs. in million) millions) 2005 As a percentage of Net Sales & Operating Revenues 7% 21% 26% 3% 57%

Aluminum: Alumina Primary aluminum Value-added aluminium products Others


(1)

2,601.6 9,671.3 11,452.2 784.7 24,509.8

3,435.5 9,999.6 12,828.4 1,281.3 27,544.7

Total aluminium revenues Copper: Copper Precious metals Phosphatic fertilizers Sulphuric acid Others
(1)

15,642.1 1,676.2 2,036.6 189.5 1,121.2 20,665.6 45,175.4

35% 4% 5% 0% 2% 46% 100%

16,919.5 2,009.9 1,647.9 205.5 358.7 21,141.5 48,686.2

35% 4% 3% 0% 1% 43% 100%

Total copper revenues Net Sales & Operating Revenues

(1) Others includes net export incentives & miscellaneous receipts & claims, conversion charges, trade sales and miscellaneous items

Aluminium: Revenues from our aluminium business increased by 12% from Rs. 24,509.8 million for the six months ended September 30, 2004 to Rs.27,544.7 million for the six months ended September 30, 2005. Enlarged volumes, improved realisations assisted by buoyancy in the LME prices and a richer product mix, were the key drivers for growth. Average LME prices increased by approximately 7% compared to the previous period and were at US$ 1,822 (Rs. 83,247.2) per metric ton for the six months ended September 30, 2005. Aluminium production increased considerably, driven by de-bottlenecking of our expanded capacities at Renukoot and synergies from integrated Hindalco-Indal operations. However, our aluminium business faced cost pressures due to unilateral reduction in coal linkages by the Ministry of Coal necessitating purchases from e-auctions at higher prices, significantly higher caustic soda prices compared to the previous period, a steep rise in furnace oil prices mirroring the upward trend in global oil prices and appreciation in the value of the Indian Rupee against the US Dollar. Inspite of these cost pressures, the PBIT for our aluminium segment increased by 26% from Rs.6,904.4 million for the six months ended September 30, 2004 to Rs.8,729.0 million for the six months ended September 30, 2005 primarily due to better operating efficiencies and focused cost control measures. The PBIT margin increased from 28% for the six months ended September 30, 2004 to 32% for the six months ended September
196

HINDALCO INDUSTRIES LIMITED


30, 2005, while the return on capital employed increased from 26% to 30% on an annualized basis. Our alumina production stood at 586,055 metric tons for the six months ended September 30, 2005 as compared to 569,734 metric tons for the six months ended September 30, 2004. Inspite of increased captive consumption of alumina, sales tonnage increased by 21% to 181,052 metric tons compared to 149,935 metric tons in the previous period. Revenues from external sale of our alumina were Rs.3,435.5 million reflecting an improved average realisation of Rs.18,975.1 per metric ton for the six months ended September 30, 2005 compared to Rs.17,351.5 per metric ton for the six months ended September 30, 2004. Realisations were positively impacted by the increased sale of alumina specials during the period, which is consistent with our strategy of optimizing our product mix in favour of value-added products. Our primary metal production, consisting of aluminium ingots and billets, was at 213,368 metric tons for the six months ended September 30, 2005 compared to 197,283 metric tons for the six months ended September 30, 2004. Consistent with our endeavor of utilizing primary metal for more profitable downstream value added products, the sales tonnage at 73,635 metric tons for the six months ended September 30, 2005 was approximately 2% less compared to the six months ended September 30, 2004. Inspite of this, the revenues from our primary metal sales increased marginally on the back of improved price realisation per metric ton. This was achieved primarily on account of improvement in the average realisation, which grew by 4% from Rs.88,804.7 per metric ton for the six months ended September 30, 2004 to Rs.92,173.2 per metric ton for the six months ended September 30, 2005. The realisations were higher on account of the stronger LME prices for the period, which was partly offset by import duty reduction and appreciation of the Indian Rupee against the US Dollar. Our production of redraw rods increased by 7% to 33,628 metric tons for the six months ended September 30, 2005 compared to 31,549 metric tons for the six months ended September 30, 2004. The stable demand from the electrical sector helped increase the total sales tonnage by 4% to 33,320 metric tons while revenues increased by 8%. Realisations increased by 4% to Rs.96,411.8 per metric ton from Rs.92,859.2 per metric ton during the previous period. In line with our strategy, value-added products continued to account for a large portion of our aggregate metal sales during the six months ended September 30, 2005. Our rolled product sales volume (net of captive consumption) increased to 72,442 metric tons for the six months ended September 30, 2005 compared to 68,463 metric tons for the six months ended September 30, 2004 with production at 93,043 metric tons against 85,815 metric tons. The realisations grew by 5% resulting in revenues of Rs.8,502.9 million representing 37% of our total metal revenues for the period. Aggregate sales volume of our foils business climbed up to 12,983 metric tons garnering Rs.2,353.6 million in revenues. Meanwhile, average realisation moved up 6% from Rs.170,455.7 per metric ton for the six months ended September 30, 2004 to Rs.181,281.4 per metric ton for the six months ended September 30, 2005. The higher realisations reflected our efforts in product development and deeper penetration into profitable, high growth segments such as the packaging sector. Production remained more or less stable at 13,189 metric tons compared to the previous period. The total production of our extruded products stood at 15,206 metric tons per metric ton for the six months ended September 30, 2005 reflecting an increase of 12% over the previous period. Assisted by increasing demand from the construction and automobiles sectors, a wide product range and niche capabilities, sales volume increased by 12% to 14,872 metric tons. Average realisation improved by 7% compared to the previous period and increased revenues from extruded products to a new high of Rs.1,826.5 million. Our sales of alloy wheels increased by 50% to 76,166 pieces for the six months ended September 30, 2005 compared to 50,746 pieces for the six months ended September 30, 2004 reflecting improved market acceptance of our product ranges and brands in this category. Production also doubled from 47,929 pieces to 85,979 pieces. Revenues from alloy wheels increased by 65% from Rs. 87.9 million for the six months ended September 30, 2004 to Rs. 145.3 million for the six months ended September 30, 2005 with a 10% increase in average realisations. Copper: Revenues from our copper business marginally increased by approximately 2% from Rs.20,665.6 million for the six months ended September 30, 2004 to Rs.21,141.5 million for the six months ended September 30, 2005. Despite benefiting from higher TcRc and LME prices, our copper business faced challenging conditions due to import duty reduction, appreciation in the Indian Rupee against the US Dollar and production shortfall and
197

HINDALCO INDUSTRIES LIMITED


consequent backwardation losses compared to the previous period. The unprecedented floods in Gujarat, underperformance of our 180,000 metric tpa smelter I at Dahej due to temporary shutdowns resulting from furnace related issues and lower than anticipated utilization of our 70,000 metric tpa smelter II due to refractory life stabilisation issues, resulted in a shortfall in the production. Furthermore, the performance of our copper business was also impacted by the slow ramp-up process associated with the commissioning of our new 250,000 metric tpa copper smelter III at Dahej. We expect these refractory life stabilisation issues to continue into the third quarter of this fiscal. Ramping-up of our copper smelter III will also continue into the third quarter of this fiscal. The shortfall in production resulted in revenue and contribution loss, which along with expenses relating to the ramp up phase of our smelter III and high backwardation prevailing throughout the period impacted our results adversely. Consequently, our copper business incurred a loss before interest and tax of Rs. 163.0 million for the six months ended September 30, 2005 compared to a profit before interest and tax at Rs. 1,102.0 million for the six months ended September 30, 2004. Net production of copper cathode fell 10% from 62,074 metric tons for the six months ended September 30, 2004 to 55,801 metric tons for the six months ended September 30, 2005. Our production of continuous cast rods declined by approximately 9% to 42,282 metric tons for the six months ended September 30, 2005 compared to 46,237 metric tons for the six months ended September 30, 2004. The declines in production were primarily due to underperformance in our copper I and II smelters. Volumes from the sale of copper cathodes decreased by 10% to 55,664 metric tons while that from the sale of continuous cast rods fell by 10% to 41,520 metric tons. However, inspite of the decline in volumes, revenues from the sale of copper cathodes increased by 10% to Rs.9.172.5 million and that from the sale of continuous cast rods increased by 6% to 7,747.0 million for the six months ended September 30, 2005 compared to the previous period primarily on account of better realisations. We sold 122,302 metric tons of phosphatic fertilizers for the six months ended September 30, 2005 compared to 152,342 metric tons for the six months ended September 30, 2004. The sales tonnages for the said period reflected the production trends with total production falling from 145,502 metric tons to 124,900 metric tons. Revenues declined by 19% from Rs.2036.6 million for the six months ended September 30, 2004 to Rs.1,647.9 million for the six months ended September 30, 2005. Revenues from the sale of gold and silver increased by approximately 21% and 6% respectively for the six months ended September 30, 2005 compared to the previous period with sales tonnage rising by 19% and 3% respectively. Gold production was at 2.838 metric tons in the current period as compared to 2.676 metric tons in the previous period, while production of silver declined to 16.109 metric tons from 17.659 metric tons. We also sold 117,852 metric tons of sulphuric acid aggregating Rs.205.5 million in revenues for the six months ended September 30, 2005 compared to 132,164 metric tons of sulphuric acid sold for the six months ended September 30, 2004 aggregating Rs.189.5 million in revenues. Other Income Our other income declined by 20% to Rs.1,263.4 million for the six months ended September 30, 2005 compared to Rs.1,580.2 million for the six months ended September 30, 2004, notwithstanding better yields and higher income on treasury investments. The decline was primarily on account of higher one time income during the six months ended September 30, 2004, which was in the form of interest on income tax refund. Interest Our gross interest and finance charges increased by approximately 17% to Rs. 1,191 million for the six months ended September 30, 2005 from Rs. 1,022 million for the six months ended September 30, 2004 consequent to increase in working capital requirement relating to our copper business necessitated by the rising LME prices. Our net interest expense witnessed an increase of approximately 14% from Rs.878.6 million for the six months ended September 30, 2004 to Rs.1,000.2 million for the six months ended September 30, 2005. Depreciation Our depreciation charges increased by 15% from Rs.2,142.7 million for the six months ended September 30, 2004 to Rs.2,453.8 million for the six months ended September 30, 2005 primarily owing to capitalization of Hirakud power plant and Dahej copper smelter expansions.

198

HINDALCO INDUSTRIES LIMITED


Taxes Our total effective tax rate declined from 38% for the six months ended September 30, 2004 to 31% for the six months ended September 30, 2005. The effective current tax rate declined from approximately 29% in the for the six months ended September 30, 2004 to 26% for the six months ended September 30, 2005. These declines were primarily due to increased depreciation and interest expenditure and a decline in the marginal tax rate compared to the previous period. Fringe benefits tax to the extent of Rs.43.6 million was also incurred for the six months ended September 30, 2005. Net Profit Despite the various adverse factors enumerated above relating to our copper business, our net profit increased by 13% from Rs.5,336.0 million for the six months ended September 30, 2004 to Rs.6,014.2 million for the six months ended September 30, 2005 against the backdrop of improved performance of our Aluminium Segment, both in terms of volume and realisations. Comparison of Liquidity and Capital Resources The following table sets forth selected information from our cash flow statement for the periods indicated: Selected Cash Flow Statement Six Months Ended September 30, 2004 (Rs. in millions) (in million Rs.) Sources of cash Cash from operations Non-operating income Net debt inflows Extraordinary Items (Share call money received & sale of Investment) Total Application of Cash Net capital expenditure Investment in subsidiaries Other treasury investments (Net) Interest charges and lease rentals Dividend payout Equity buy back of equity shares Total Increase/ (Decrease) in cash and cash equivalents Sources of Cash Cash from operations Our net cash generated from operations declined by approximately 59% from Rs. 11,721.4 million for the six months ended September 30, 2004 to Rs. 4,852.8 million for the six months ended September 30, 2005. This was primarily due to an increase in working capital requirement for our copper business necessitated by the rising LME. The cash generated from operations for the six months ended September 30, 2004 was higher on account of refunds of income tax. 6,506.1 1,232.4 7,298.7 946.8 1,725.2 0.0 17,709.2 (651.4) 5,105.2 915.9 (1,832.4) 1,181.5 2,115.7 0.0 7,485.9 3,481.5 11,721.4 1,112.7 4,223.7 0.0 17,057.8 4,852.8 892.4 5,222.2 0.0 10,967.4 2005

199

HINDALCO INDUSTRIES LIMITED


Non-operating income Our non-operating income declined by approximately 20% from Rs.1,112.7 million for the six months ended September 30, 2004 to Rs.892.4 million for the six months ended September 30, 2005 due to higher refunds of income tax during the previous period. Net debt inflows Our net debt inflows were at Rs.4,223.7 million for the six months ended September 30, 2004 compared to Rs.5,222.2 million for the six months ended September 30, 2005. The net debt inflows for the period were primarily on account of the working capital requirements of our copper business. Application of Cash Capital Expenditure We made investments to the tune of Rs.5,105.2 million for the six months ended September 30, 2005 compared to Rs.6,506.1 million for the six months ended September 30, 2004 towards expansions and efficiency improvement projects. Investment in Subsidiaries We made net investments of Rs.915.90 million for the six months ended September 30, 2005 compared to Rs. 1,232,4 million for the six months ended September 30, 2004 in subsidiary companies. Purchase of shares of subsidiaries for the period consisted of Rs. 244.60 million in Utkal, Rs. 537.7 million in Birla Mineral Resources Private Limited and Rs. 2.3 million in Bihar Caustic and Chemicals Limited. Other Investments Net cash outflow from other investments was Rs.1,832.4 million primarily from the sale of bonds and units of debt schemes of domestic mutual funds. Interest Interest and finance charges amounted to Rs.1,181.5 million for the six months ended September 30, 2005, compared to Rs. 946.8 million for the six months ended September 30, 2004. Dividend For the six months ended September 30, 2005, we paid Rs.2,115.7 million towards dividend for fiscal 2005 and dividend tax as compared to Rs.1,725.2 million for the six months ended September 30, 2004 for fiscal 2004. Other key developments subsequent to the last financial year Stock Split On August 6, 2005 the shareholders of the Company approved the subdivision of Equity Shares of the Company from Rs. 10 per share to Re 1 per share. Consequent to the subdivision of Equity Shares, the authorised share capital of the Company changed from 145 million Equity Shares of Rs. 10 each to 1450 million Equity Shares of Re. 1 each. Our Equity Shares commenced trading ex-split with effect from August 30, 2005. Purchase of assets of Sangam Aluminium Limited On September 8, 2005 we together with nominees, purchased certain assets of Sangam Aluminium Limited- a company under liquidation with its factory located at Kalukondapalli, Honsur-Thally Road, P .O.: Belgagondapalli 635 115, Dist. Dharmapuri, Tamil Nadu, for a consideration of Rs.49 million. The High Court, Chennai appointed an official liquidator for the winding up of Sangam Aluminium Limited. We incurred 80% of the total consideration for purchase of certain plant and machinery including an extrusion press manufactured by CELCIM of France and ancillary equipment, while nominees incurred the remaining 20% for purchase of immovable assets including land and building as well as residual plant and machinery. The plant and machinery purchased would be used at our existing facilities and would not be used as part of the project forming the Objects of this Issue. We the directors of Hindalco Industries Limited hereby state that in our opinion there have not arisen any circumstances since the date of the last financial statements as disclosed in the prospectus which materially and adversely affect or is likely to affect the trading or profitability of the our company, or the value of its assets, or its ability to pay its liabilities within the next twelve months.
200

HINDALCO INDUSTRIES LIMITED


Information as required by Government of India, Ministry of Finance, Circular No. F2/5/SE/76 dated February 5, 1977 as amended vide their circular of even number dated March 8, 1977 is given below: 1. Working Results of the Company Audited financial results for the six months ended September 30, 2005 : (Rs. million) (Rs. in millions) Total Sales Other Income Total Income PBDIT Interest Provision for Depreciation Profit/(Loss) Before Tax Provision for Tax Estimated /(Loss)Net Profit 2. 48,686.2 1,263.4 49,949.6 12,185.9 1,000.2 2,453.8 8,732.0 2,717.8 6,014.2

Save as stated elsewhere in the Letter of Offer, there are no material changes and commitments, which are likely to affect the financial position of the Company since September 30, 2005 (i.e. last date up to which audited information is incorporated in the Draft Letter of Offer) a) Week end prices of Equity Shares of the Company for the last four weeks on the BSE and NSE are as below: Week ended on October 28, 2005 November 4, 2005 November 11, 2005 November 18, 2005 b) Closing Rate BSE (Rs) 118.05 120.70 130.65 136.50 Closing Rate NSE (Rs) 118.00 120.70 130.80 136.55

3.

As per the notice no. 20051114-18, issued by the BSE, the transactions in the equity shares of the Company would be done on an ex-right basis with effect from November 21, 2005. The closing Price of the Equity Shares of the Company on the BSE and NSE on November 21, 2005 was Rs. 125.20 per equity share and Rs. 125.30 per equity shares (ex-rights Price) respectively. Highest and Lowest Price of the Equity Share of the Company on BSE and NSE during the period November 22, 2004 to November 21, 2005 (for the last year): BSE Market Price High Low NSE Market Price High Low Rs. 164.45 Rs. 106.70 Date September 20, 2005 June 2, 2005 Rs. 165.00 Rs. 106.60 Date September 19, 2005 June 2, 2005

c)

Note : Market Prices have been adjusted for stock split where applicable.

Defaults in the payment/refunds of debentures, fixed deposits, interest on fixed deposits, debenture interest and institutional dues There are no defaults, non-payment/ overdues of statutory dues, institutional/Company dues and dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, etc, other than unclaimed liabilities of the Company, its subsidiaries, its other ventures, promoters, Group companies and companies promoted by the promoter.
201

HINDALCO INDUSTRIES LIMITED MATERIAL DEVELOPMENTS


Stock Split
On August 6, 2005 the shareholders of the Company approved the subdivision of Equity Shares of the Company from Rs. 10 per share to Re. 1 per share. Consequent to the subdivision of Equity Shares, the authorised share capital of the Company changed from 145 million Equity Shares of Rs. 10 each to 1450 million Equity Shares of Re. 1 each. Our Equity Shares commenced trading ex-split with effect from August 30, 2005.

Purchase of assets of Sangam Aluminium Limited


On September 8, 2005 we together with nominees, purchased certain assets of Sangam Aluminium Limited a company under liquidation with its factory located at Kalukondapalli, Honsur-Thally Road, P .O.: Belgagondapalli 635 115, Dist. Dharmapuri, Tamil Nadu, for a consideration of Rs.49 million. The High Court, Chennai appointed an official liquidator for the winding up of Sangam Aluminium Limited. We incurred 80% of the total consideration for purchase of certain plant and machinery including an extrusion press manufactured by CELCIM of France and ancillary equipment, while nominees incurred the remaining 20% for purchase of immovable assets including land and building as well as residual plant and machinery. The plant and machinery purchased would be used at our existing facilities and would not be used as part of the project forming the Objects of this Issue.

202

HINDALCO INDUSTRIES LIMITED INFRASTRUCTURE


Property We have several premises which are owned, leased or rented in various locations in India and abroad. Office Premises of our Company: We have various offices, including in Kolkata, Ahmedabad, Bangalore, Bhubaneswar, Chennai, Coimbatore, Hyderabad, Mirzapur, Mumbai, New Delhi, Pune, Belgaum, Ernakulam, Ranchi, Raigad, Howrah, Thane, Sambalpur, Kolhapur, Allahabad, Lucknow, Secunderabad and Lohardaga. . These premises are held by us on freehold and leasehold basis. Residential Premises of the Company: We have various residential properties at Kolkata, Bangalore, Chennai, Coimbatore, Hyderabad, Mumbai, New Delhi etc. which are on leasehold and freehold basis. We have guest houses and holiday homes which are on leasehold and freehold basis in various places including Goa, Gurgaon, Mumbai, Bangalore, Kolkata, Digha, Puri and Agrapara for use by our senior management and officers. Commercial Premises of our Company: A summary of our properties in India is given below. (i) Manufacturing Facilities The following table sets forth information regarding our manufacturing plants and related facilities: Name of the Plant Alupuram Location Kerala Nature of Holding Owned Leased Belgaum Karnataka Owned Leased Muri Belur Kalwa Hirakud Jharkhand West Bengal Maharashtra Orissa Owned Owned Owned Owned Leased Taloja Renukoot Maharashtra Uttar Pradesh Leased Owned Leased Renusagar Uttar Pradesh Owned Leased Dahej Gujarat Owned Leased Silvassa Dadra & Nagar Haveli Owned Area (in Acres) 121.14 0.88 1112.92 60.46 333.51 12.27 34.6 24.38 375.69 102 98.99 1609.53 378.45 284.42 4 .25 517.859 93.78

203

HINDALCO INDUSTRIES LIMITED


(ii) Mines The following table sets forth the details of our mines: SL. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. State Chhattisgarh Chhattisgarh Chhattisgarh Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Maharashtra Maharashtra Maharashtra Maharashtra Maharashtra Orissa Name of Mine Kudag Samri Tatijharia Amtipani Bagru Bhusar Chiro Kukud Gurdari Hisri (new) Hisri (old) Jalim & Sanai Kujam-I Kujam-II Orsapat Pakhar Pakhar (38.50) Pakhar (84.38) Pakhar (96.25) Serengdag Shrengdag Dhangarwadi Durgmanwadi Kasarsada Mogalgad Nagartaswadi Talabira-I Area in Acres 931.88 5,304.73 3,011.62 471.85 186.34 161.38 377.01 1,449.08 35.95 33.06 29.99 199.83 388.89 764.02 284.34 38.49 19.99 86.81 346.09 385.01 303.01 504.09 271.82 39.54 103.78 420.83 Nature of Mine Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Coal

204

HINDALCO INDUSTRIES LIMITED


The Company has made applications for the following mines, which are various stages of the approval process: State Lease Name Area in Acres Chhattisgarh Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Jharkhand Maharashtra Maharashtra Maharashtra Orissa Orissa Orissa Jokapat Amptipani-Narama Amtipani-Chirodi Hanrup Kechki Koira-Bimrala Pakhar Tuimu Dhangarwadi (part) Iderganj Udgiri Lakharshi Kodingamali Maliparbat 760.17 229.88 406.34 703.95 946.36 750.01 270.61 44.55 1,752.82 1,195.99 1,490.22 590.71 1,766.98 662.51 Nature of Mine Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite Bauxite

205

HINDALCO INDUSTRIES LIMITED DESCRIPTION OF CERTAIN INDEBTEDNESS DESCRIPTION OF CERTAIN INDEBTEDNESS


Short Term Borrowings
Our short term unsecured borrowings outstanding as of September 30, 2005 are as follows : (Rs. in millions) (In in million) (Rs. Rs.millions) S. No. 1. 2. 3. 4. 5. Particulars Employees and other deposits Rupee Loans from Banks Foreign Currency Loans from Banks Foreign Currency Loans from Financial Institutions Buyers Credit Total Short Term Borrowings Amount Outstanding as of September 30, 2005 269.8 42.8 2,143.8 13,088.6 15,544.9 Interest Fixed Fixed Fixed Fixed

Long Term Borrowings


a) Our foreign currency long term borrowings outstanding as of September 30, 2005 are as follows: (In in million) (Rs. Rs. millions) S. Particulars No. 1. 2. 3. 4. BA Asia Ltd SCB and BOA HSBC HSBC Currency USD USD JPY JPY Amount Outstanding as of September 30, 2005 351.9 399.5 594.0 2,300.0 Interest Annual USD LIBOR plus 55 basis points per annum 6 Months USD LIBOR plus 77.5 basis points per annum 6 Months JPY LIBOR plus 90 basis points per annum 6 Months JPY LIBOR plus 33 basis points per annum 5. 6. 7. BNP Paribas BNP Paribas Leonia Corporate Bank Plc 8. Sub Total 6,132.7 JPY JPY USD 1,119.3 1,124.3 243.7 6 Months JPY LIBOR plus 60 basis points per annum 6 Months JPY LIBOR plus 60 basis points per annum 5.95% per annum Fixed Rate

206

HINDALCO INDUSTRIES LIMITED


b) Our long-term rupee borrowings outstanding as of September 30, 2005 are as follows : (Rs. Rs.millions) (In in million) S. No. 1. 2. Particulars IDBI Bank Limited syndicated Term Loan Term Loan from Government of Uttar Pradesh under subsidised Housing Scheme for Industrial Workers 0.7 Weighted Average Rate of 9.97% 3. 4. 5. 6. 7. UTI Bank UTI Asset Management Co. Ltd. IDBI IIBI Limited Subtotal 6.69 2.2 75.4 2.2 5,037.19 15.17% 15.17% 11.00% 15.30% Amount Outstanding as of September 30, 2005 4,950.0 Interest 7.07%

Secured Redeemable Non-Convertible Debentures (In in million) (Rs. Rs. millions) S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Particulars 11.20 % NCD 9.75 % NCD 9.00 % NCD 7.95 % NCD 7.20 % NCD 7.20 % NCD 6.40 % NCD 9.95% NCD 6.6% NCD 6.39% NCD 12.75% NCD 8.70% NCD 8.10% NCD 6.20% NCD 5.95% NCD 6.5% NCD Subtotal Amount Outstanding as of September 30, 2005 1,500.0 2,000.0 500.0 600.0 250.0 500.0 1,050.0 500.0 486.8 1,000.0 600.0 2,000.0 1,000.0 500.0 500.0 2,500.0 15,486.8 Interest 11.20% 9.75% 9.00% 7.95% 7.20% 7.20% 6.40% 9.95% 6.6% 6.39% 12.75% 8.70% 8.10% 6.20% 5.95% 6.50%

207

HINDALCO INDUSTRIES LIMITED OUTSTANDING LITIGATIONS AND DEFAULTS


Except as described below, there are no outstanding litigation, suits or criminal or civil prosecutions, proceedings or tax liabilities against our Company, our Directors, our Promoters or group companies and there are no defaults, non payment of statutory dues, over dues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues payable to holders of any debentures, bonds or fixed deposits, issued by our Company (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956). The following are the outstanding or pending litigations or suits or proceedings against the Company involving a claim of Rupees One million and more, and criminal complaints or cases, defaults, non-payment or overdues of statutory dues, proceedings initiated for any economic or civil offences and disciplinary action taken by SEBI or stock exchanges against the Company, its subsidiaries and other group companies and the outstanding or pending litigations or suits or proceedings against the subsidiaries and other group companies. The compiled position of claims against the Company involving an amount of less than Rupees One million are given separately.

I. A.
(a) 1.

The Company Criminal cases


Criminal cases filed against the Company The Central Excise Department., Madurai has launched prosecution in CCZ26/99 against Indal and Mr. A. Jayagopal, Manager, Indal for alleged evasion of excise duty in the Sessions Court, Madurai. Indal filed an application under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as CrPC) in Crl 17682/02 in the Madras High Court to quash the said proceedings. A stay order with respect to the proceedings in the Sessions Court has been granted by the Madras High Court on July 26, 2002. The proceedings in the High Court have been transferred to the Madurai bench. The next date of hearing has not been listed. The State of Jharkhand has filed case bearing No. Crl 221/92 in the Court of the Sessions Judge, Ranchi in relation to private land transfer in the Lohardaga. The case has been filed against the Mines Manager of the Company. No proceedings have commenced in this regard. Deolal Sahu has filed a case bearing compensation case No. 216/99 against the Company on December 8, 1999 in the Court of the additional District and Sessions Judge, Lohardaga under Section 140 of the Motor Vehicles Act for compensation of Rs. 25,000 due to loss caused in a jeep accident. The matter is pending for hearing in the Court. The next date of hearing is yet to be listed. The Mining Officer, Lohardaga, Jharkhand has filed criminal case No. 1/1999 in the Sessions Court against the Company for alleged encroachment of public road in the mines. The Company moved the Jharkhand High Court in Crl Misc No. 8892/1999. The matter is pending in the High Court. The next date of hearing has not been listed. The Deputy Commissioner, Lohardaga has filed separate proceedings in relation to the alleged encroachment, which was decided against the Company. The Company appealed against the aforesaid order to the Commissioner, which was also rejected. The Company has filed Writ Petition No. 3/2002 in the High Court of Ranchi against the aforesaid order of the Commissioner. The matter is pending. The District Forest Officer, Kolhapur has filed a criminal case No. 78/1998 in the Radhnagiri Court, Maharashtra against the Mines Manager and others for alleged breach of forest laws while mining. The matter is pending. The Inspector of Factories launched prosecution against the Company in Crl No. 15240/87 in the Court of the Magistrate, Thane under the Factories Act, 1948 for failing to appoint a Welfare Officer as required by the statute. The matter is pending. The Inspector of Factories filed criminal prosecution in Crl. No. 893/1988 under the relevant provisions of the Factories Act, 1948 against the Company pursuant to an explosion in the powder section of the Kalwa plant. The said matter is pending in the Court of the Chief Judicial Magistrate, Thane. Bitain Nagesia and Sangeeta Nagesia have filed compensation case No. 24/04 and 27/04 respectively against the Company in the Court of the District and Sessions Judge, Lohardaga under Section 140 of the Motor Vehicles Act claiming a compensation of Rs. 50,000 on account of the fact that their family member was killed in a motor accident caused by a dumper truck belonging to the Company. The matter is pending for appearance of the claimants witnesses.
208

2.

3.

4.

5. 6.

7.

8.

HINDALCO INDUSTRIES LIMITED


9. R. N Tiwari and dismissed Badli workmen of Potroom Plant II have filed Crl.Misc. No. 5479/2000 against the Company, the State and others in the Allahabad High Court. Before this, a criminal complaint No.2361/99 was filed by the Company against the said R.N Tiwari under Section 630 of the Companies Act, 1956 in the Court of the Spl. CJM, Allahabad on grounds of encroachment of land of the Company. The concerned workman challenged the maintainability and proceedings of the said case by challenging summoning order dated September 25, 1999 in Criminal Revision No. 116/2000 before the Sessions Judge Allahabad, which was rejected by the Court vide order dated July 25, 2000. Aggrieved by the said order, he filed the present petition under Section 482 of the CrPC challenging the orders dated September 25, 1999, July 25, 2000 and January 6, 2000 passed by the Sessions Judge Allahabad. The High Court Allahabad stayed the proceedings in Case No. 2361/99 vide order dated October 10, 2000. Counter has been filed. The matter is pending.

10. Ram Lal Rajbhar has filed a Crl. Misc. Petition No. 4301/2001 against the State of Uttar Pradesh and the Company in the Allahabad High Court challenging the order of the Additional Sessions Judge, Allahabad in criminal revision no. 1801/2001 which went against the Petitioner. The petitioner, formerly a workman in the Company, was the accused in Crl. Complaint No. 2360/99 filed in the Court of Spl. CJM Allahabad under Section 630 of the Companies Act by the Company on the grounds that the concerned workman encroached upon the Companys land after his dismissal. He challenged the summoning order dated September 25, 1999 and the maintainability of the same in criminal revision 1801/2001 before Addl. Session Judge Allahabad on the ground that the land in question has been purchased by his wife and she is in possession over the land as owner. The said revision was rejected by the Court vide order dated July 25, 1999. Aggrieved by the order of Addl. Session Judge Allahabad, the petitioner has filed the instant case. The wife of Ram Lal Rajbhar has also filed a civil suit No. 25/93 before Civil Judge (Senior Division) Sonbhadra, which is pending. The High Court vide its interim order dated August 16, 2001 stayed the proceedings before the magistrate. A counter affidavit has been filed in this regard, but no rejoinder has been filed. The matter is pending. 11. The State of Uttar Pradesh has filed Criminal Case No. 569/90 before the Munsif-Magistrate, Dudhi against I.N Kapoor, who is the Factory Manager of the Renusagar Power Division on the grounds of non-compliance of standing orders of the Company in respect of classification of workmen, termination of service and notification on notice board of the name of officers appointed for granting leave of absence to workmen. The said I.N. Kapoor has filed Cri. Misc. App. No. 14722/92 in the Allahabad High Court. The High Court has issued a stay order staying the proceedings in 569/90 vide order dated November 18, 1992. The matter has not been listed for further hearing. 12. The State of Uttar Pradesh has filed Criminal Case No. 1834/91 before the Munsif-Magistrate, Dudhi against the Mr. I.N. Kapoor and Mr. S.S. Kothari as Occupier of the Renusagar Power Division for non-compliance rules relating to methods of work as prescribed and causing the fatal accident of Late Prabhat Chander Sharma on April 10, 1990. Mr. Kothari and factory manager of the Company have filed Cri. Misc. App. No. 14721/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1834/91 vide order dated November 18, 1992. The matter was not listed for further hearing. 13. The State of Uttar Pradesh has filed Criminal Case No. 1866/91 against Mr. I.N. Kapoor and Mr. S.S. Kothari for non-compliance of Sections 7 (A) and 36 of Factories Act and U.P Rules 1950 leading to the fatal accident of Late . Shankar Dayal Sharma on December 13, 1990. Mr. Kothari and factory manager of the Company have filed, Cri. Misc. App. No. 14736/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1866/91 vide order dated November 18, 1992. The matter has not been listed for further hearing. 14. The State of Uttar Pradesh has filed case No. 3658/2003 in the Court of the CJM, Sonbhadra at Robertsganj against Colonel Pushpendra Singh and others on the grounds that on May 24, 2003, the accused, who are security guards in the Company attacked some miscreants who were attempting to hinder the task of repairing the boundary wall of the Company. Cross FIRs were filed by both sides. A charge sheet against the Company Security Officers was filed under Sections 147, 148, 149, 307, 504, 506 and 427 of the I.PC. The CJM, vide order dated August 5, 2003 issued summons to the said security officers. Against this order, the Company Security Officials filed Criminal Revision No. 3194/2003 before the Allahabad High Court, which vide its order dated November 5, 2003 stayed the operation of order dated August 5, 2003 passed by CJM. Against this order, the Company Security Officials filed writ petition No. 3057 of 2003, which vide its order dated June 5, 2003 stayed the operation of order dated August 5, 2003 passed by CJM. By order dated July 12, 2004 the matter before the High Court is to be listed in next cause list. The stay order issued in criminal revision has been extended till the
209

HINDALCO INDUSTRIES LIMITED


hearing of the writ petition. At present the proceedings of the case at C.J.M court has been stayed and matter before the High Court is to be listed in next cause list. In a related case, the Civil Judge (Junior Division) Sonebhadra, has passed an ad interim injunction against the interference with the property of the Company against the respondents in the abovementioned petition. 15. The State of Uttar Pradesh has filed case No. 1484/94 against K.K. Rathi in the court of the C.J(JD)-Dudhi. The matter arose because the security guard Tribhuvan Singh killed a Kabari by firing at him with a company gun. He was acquitted by Sessions Court on December 22, 1993. A criminal case was subsequently filed against K.K.Rathi, who is the licensee of the gun on behalf of the Company. The Court of C.J.M.,-Sonbhadra vide order dated March 19, 1991 summoned K.K Rathi for appearance before the court. K.K Rathi filed Criminal Revision No. 454/ 91 before the High Court at Allahabad against this order of summons by the CJM and for quashing of proceedings. The High Court at Allahabad vide order dated October 7, 1995, stayed the operation of the order of CJM exempting personal appearance before the court. The order is effective till date and case is pending before Munsif, Dudhi for trial. 16. The State of Jharkhand has filed Case No. F 23/99 against N.K.Birla and twelve others of Manduapat Mines on July 16, 1999 in the Court of the SDJM, Lohardaga under Sections 26 and 63 of the Indian Forests Act and 2, 3A, and 3B of Forest Conservation Act for illegal mining and loading of illegally mined out bauxite on a truck from expired lease area of Manduapat mines on the instructions of N.K.Birla and the Mines Manager. A criminal miscellaneous No.7767/99(R) was filed by the accused in the Jharkhand High Court to pray for the quashing of the said proceedings in the SDJM on October 12, 1999. The Cr. Misc was heard and admitted on April 18, 2000, whereby the High Court stayed the proceedings of lower court. The next date for hearing is December 4, 2005. 17. The State of Jharkhand has filed case No. F 32/2001 and F 37/2001 against V. K Agarwal and others of Pakhar Mines on November 10, 2001 under Sections 25 and 26(d) of I.F Act and F.C. Act in the Court of the CJM . Lohardaga alleging that the Company loaded various trucks with bauxite inside the Pakhar Bauxite Mines despite the letter from District Forest Officer (DFO) bearing No. 722 dated February 13, 2001, which directed the Company not to transport bauxite out of the said mine. The matter is pending for cross examination of prosecution witnesses. 18. The State of Jharkhand has filed case No. F 42/2001 against N.K.Birla and others of Pakhar Mines. On November 10, 2001 in the Court of the CJM, Lohardaga under Sections 26 and 63 of Indian Forests Act and 2 and 3(c) of Forest Conservation Act on grounds of making roads and dumping in Pakhar reserve forest. On February 20, 2004, the Company filed Cr. Rev. No. 01/03 in the Court of the District and Sessions Judge Lohardaga, wherein it prayed to drop the proceedings of the order taking cognizance because it was time barred. But it was rejected on the ground of Sec. 470(3) of Cr.P Subsequently, on March 04, 2004, the Company filed W.P .C. .(Cr.) No.86/04 in the Jharkhand High Court for the quashing of the order of District Judge and Cognizance order. The case was heard on September 02, 2004 and the HC stayed the proceedings of the case pending in CJM Court, Lohardaga. The matter is pending. 19. The State of Jharkhand has filed a case in F 17/02 in the Court of the CJM, Lohardaga against NK Birla and others on June 12, 2002 under Section 33 of I.F.Act and 2, 3A and 3B of F Act on the grounds that a Culvert Pipe was .C. being set illegally after cutting nala on Kasiyadih- Pakhar Forest Road near Ledra Tongri. The Company filed W.P .(Cr.) No.204/05 on June 20, 2005 in the Jharkhand High Court at Ranchi against the order dated May 28, 2005 of A.D.J. Lohardaga, cognizance order dated October 29, 2002 and for quashing of entire criminal proceedings as the order taking cognizance is time barred. The High Court partly heard the case on July 18, 2005 and ordered that the proceedings of this case in CJM court to be stayed till further order. The matter is pending. 20. The State of Jharkhand has filed a case in C I 12/2001 in the Court of the CJM, Gumla against R Mishra and others of Gurdari mines on February 18, 2001 under Section 33, 41 and 42 of I.F Act for illicit felling of Sal Tree and . loading on Dumper. The Court is awaiting sanction of D.F because the forest department had only sent the .O. offence report in the court of CJM for information of the case. The CJM can take cognizance only after sanction of D.F which is still awaited. .O, 21. The State of Jharkhand has filed a case in C I 43/2001 in the Court of the CJM, Gumla against Aikat and others of Jalim and Sanai Mines and others on May 9, 2001 under Section 33 of the IF Act on the grounds of illegal mining from Jalim P . Plot No.562, outside lease area and loading on a truck. On February 20, 2002, the Company filed .F a quashing petition No. Cr.M.P No.252 of 2002 in the Jharkhand High Court at Ranchi which was heard and .
210

HINDALCO INDUSTRIES LIMITED


admitted on July 29, 2002 whereby the Court stayed the proceedings of lower Court. Now the quashing petition is pending at Jharkhand High Court at Ranchi for final hearing. The next date for hearing is October 22, 2005. 22. The D.F Ranchi West Division has filed two confiscation cases in No. 7/2000 against V.K. Agarwal on February .O 18, 2001 and 1/2005 against G.M.(M.O) and others on March 3, 2005 under Section 52 of the IF Act on the grounds of illegally loading firewood from forest area on a Dumper and alleging Forest offence under 33 of I.F .Act and 2 of F .C.Act committed by using Dumpers respectively before the District Forest Officer (DFO), Ranchi. 7/2000 is pending for hearing in D.F Court, Lohardaga. With respect to the matter bearing No. 1/2005, .O. the Company had filed W.P .(Cr) No.146/05 in the Jharkhand High Court, Ranchi on April 19, 2005 against the order dated March 3, 2005 of the D.F This writ petition was partly heard on May 12, 2005 and the High Court .O. ordered to stay the confiscation proceedings of case No.01/05 pending in the court of D.F .O. Now the writ petition is pending in High Court for further hearing. 23. The State of Jharkhand has filed case no. C I 06/05 against A.K. Sinha and others on February 26, 2005 u/s. 33 of I.F .Act and Sec.2 of F .C.Act in the Court of the CJM, Gumla on the grounds that the said AK Sinha and others were constructing a road in Kathupani P .of Gurdari after clearing bushes. The CJM is awaiting sanction of D.F as he .F .O cannot take cognizance of the offence without the sanction of the DFO. 24. Sri Radhey Shyam, who was a worker in the Industrial Engineering Department (painting section), died due to a fall from a height of 20 feet on March 27, 1978 on the factory premises. The factory Inspector made the necessary investigations and launched a prosecution case No. 665/80 in the Court of the Judicial Magistrate Dudhi against D.N Himmatramka as the occupier of the Factory on grounds of violation of several provisions of the Factories Act. The Magistrate decided the matter in favour of the said D.N Himmatramka vide order dated May 20, 1981. The State has filed an appeal against the said order in GA No. 2764/81 in the High Court of Allahabad. The matter is pending before the High Court. 25. R.P Chaubey has filed criminal Application No. 2466/2004 under Section 482 of the CrPC in the Allahabad High Court. The matter is relating to the death of Amrit Chaubey, an employee of the Company on October 17, 2001 who met with a fatal accident in Remelt shop. The brother of the deceased employee, filed an application under Section 156(3) of CrPC in the Court of CJM, Sonbhadra stating that that the Crane Operator RP Chaubey deliberately caused the death of the deceased in collusion with Senior officials of the Company and therefore, directions be issued for registration of case by Police for investigation. By order dated December 24, 2001, the CJM directed the Police to investigate the matter. A criminal misc application No. 4886 was filed by the Company before the CJM, Sonbhadra. Allowing the application, the judge stayed the arrest of the accused till the police had filed a report under Section 173(2) of the CrPC vide order dated May 20, 2002. On the basis of the investigation report, the Police registered a chargesheet only against the applicant and exonerated the other named officers of the Company on January 17, 2002. Subsequently, case No. 2046/02 was registered under Sections 287 and 304A of IPC against Shri RP Chaubey in the Court of CJM, Sonbhadra. RP Chaubey filed Application No. 2466/2004 under Section 482 of the CrPC challenging the registration of the chargesheet and named the officials of the Company as one set of respondent parties. The Court, vide its order dated March 26, 2004 has stayed the proceedings in the case No. 2046/2002 pending before CJM Court, Sonbhadra till further orders. A counter affidavit has been filed by the Respondent No. 2, Shri Nagehswar Chaubey in the month of May 2004. The Company has filed its rejoinder affidavit in the second week of July 2004. The matter is pending. (b) 1. Criminal cases filed by the Company The Company has filed case no. 2360/99 against an ex-employee Ram Lal Rajbhar on September 9, 1999 before the court of Special Chief Judicial Magistrate (Spl CJM), Allahabad under Section 630 of the Act on grounds of encroachment of Companys land and unauthorized construction by the accused, who was dismissed from service by the Company. The special C.J.M issued summons to the accused. Against this summoning order Ramlal filed Criminal Misc. Appl. No. 4301/2001 u/s 482 Cr. P before the High Court of Allahabad. The High .C Court vide order dated August 16, 2001 stayed the proceedings before the Special C.J.M. The Company has filed a counter affidavit in this regard, but no rejoinder has been filed. The matter was last listed on October 6, 2004 and has not been listed since then. The Company has filed case No. 2361/99 against Rabindra Nath Tiwari on September 9, 1999 in the Court of Special. Chief Judicial Magistrate, Allahabad. under Section 630 of the Companies Act on grounds of encroachment of Companys land and unauthorized construction by the accused, who was dismissed from service by the
211

2.

HINDALCO INDUSTRIES LIMITED


Company. The Magistrate court issued summons to the accused. The accused filed Criminal Misc. Appl 5479/ 2000 before the Allahabad High Court- against this summoning order. The High Court has issued a stay order dated October 10, 2000 in this case. The matter is pending. 3. The Company has filed case No. 125/89 in the Court of the Special Chief Judicial Magistrate, Allahabad on March 28, 1989 under Section 630 of the Companies Act against Thakurji Pandey who was dismissed from services on November 16, 1988. The case was filed on the grounds that he failed to vacate the quarters allotted to him. The court issued summons for appearance of the accused. Against this order, the accused filed Criminal Misc. Appl. No. 3761 of 2000 in the Allahabad High Court for cancellation of complaint and obtained a stay order against trial court proceeding. The said writ petition was dismissed ex-parte. The stay order granted in Criminal Misc. Appl. No. 3761 of 2000 for stay of trial court proceeding was vacated by an order dated November 27, 2003. The said order has been filed before the Special Chief Judicial Magistrate Allahabad. At present the proceedings before the court of Special Chief Judicial Magistrate Allahabad have started. The matter is listed for hearing on November 20, 2005. The Company has filed case No. 673/93 under Section 630 of the Companies Act in the Court of the Special Chief Judicial Magistrate (Spl CJM) on October 29, 1993 against Shivajee Singh, who was dismissed from services on April 10, 1993. The case was filed on grounds of failure to vacate quarters allotted to him upon dismissal from service. The said Shivajee Singh filed a Writ Petition in the Allahabad High Court for cancellation of complaint on April 12, 1994 and obtained stay. The said Writ Petition was dismissed on May 16, 1997. He also filed Criminal Misc. Application No. 1083 of 1999 and obtained stay order. The appeal was dismissed by an order dated January 27, 2003, which was filed before the Special CJM. Shivajee Singh appeared before the Court. A nonbailable warrant has been issued against the accused and the next date of hearing has been fixed for November 22, 2005. The Company has filed four cases bearing Nos. 735/94, 171/95, 46/96 and 49/96 against former employees of the Company in the Court of the Special CJM, Allahabad under Section 630 of the Act on the grounds of failure to vacate houses allotted to them despite being dismissed from service. In each of these cases, the Court has recorded the Companys statement and has issued a non-bailable warrant against the accused persons. The Company has filed three cases bearing No. 301/97, 222/94 and 2359/99 against former employees of the Company in the Court of the Special CJM, Allahabad under Section 630 of the Act against on grounds of encroachment of Companys land and unauthorized construction. In each of these cases, the Companys statement has been recorded and the accused has appeared before the Court. Non-bailable warrants have been issued against the accused in both the cases and the matters are due to come up for hearing on October 27, 2005 and November 22, 2005 respectively. The Company has filed two cases No. 1860/98 and 1867/98 against former employees of the Company under Section 630 of the Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate quarters allotted to them despite being dismissed from service. In both these cases, the Companys statement has been recorded and non-bailable warrants have been issued for the appearance of the accused. The matters are pending. The Company has filed case No. 273/2001 in the Court of the Special CJM, Allahabad on March 20, 2001 under Section 630 of the Act against Mustafa Khan on grounds of failure to vacate the house allotted to him despite being terminated from service. The Companys statement has been recorded and the accused has made application challenging maintainability of case. The case is due to come up for disposal on November 11, 2005. The Company has filed case No. 801/2001 on May 30, 2001 against Smt. Nirmala Singh under Section 630 of the Companies Act in the Court of the Special Chief Judicial Magistrate, Allahabad on grounds of failure to vacate premises allotted to her late husband by the Company despite the death of her husband. The Companys statement has been recorded and summons have been issued to the accused. The accused has not yet appeared before the Court. The next date of hearing has been fixed for November 20, 2005.

4.

5.

6.

7.

8.

9.

10. The Company has filed four cases No. 2809/2002, 3859/2002, 1865/2003, and 412/2005 against former employees of the Company under Section 630 of the Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate houses allotted to them despite being dismissed from service. In 2809/2002 and 3859/2002, summons have been served on the accused. In 412/2005, the Companys statement under Section 200 of the CrPC and summons have been issued to the accused. In case No. 2809/2002 and Case No. 3859/2002 the matter is pending
212

HINDALCO INDUSTRIES LIMITED


for the appearance and recording of statement of the accused. In 412/2005, the Companys statement under Section 200 of the CrPC and summons have been issued to the accused. The accused has filed Criminal Misc. Appl. No. 7120/2005 under Section 482 for quashing the whole proceedings of Companys complaint No. 412/ 2005 before the Allahabad High Court which has issued notice fixing September 27, 2005 for the disposal aforesaid application. In Case No. 1865/03 the statement of Company has been recorded and November 22, 2005 has been fixed for appearance of the accused. 11. The Company has filed case No. 1124/2003 in February, 2003 against Vinod Kumar under Section 630 of the Companies Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate the house allotted to him despite being dismissed from service. The accused filed a Criminal Misc. Appl. No. 5227/2004 under Section 482 of the Code of Criminal Procedure before the High CourtAllahabad for quashing the proceedings . The High Court has granted stay order, whereby the proceedings of the trial court has been stayed. 12. The Company has filed two cases bearing No. 1659/2002 and 1864/03 against former employees of the Company under Section 630 of the Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate the houses allotted to them despite having resigned from the Company. In 1659/2002, the Companys statement has been recorded and summons have been issued. The accused has not appeared in both the cases. In case no. 1864/2003 court has fixed November 22, 2005 for the appearance of the accused. The next hearing of 1659/2002 is yet to be fixed. 13. The Company has filed four cases bearing No. 1424/2004, 303/2005, 416/2005 and 415/2005 against former employees of the Company under Section 630 of the Act in the Court of the Special CJM, Allahabad on grounds of failure to vacate the houses allotted to them despite having retired from the Company. In each of these cases, the Companys statement under Section 200 of the CrPC has been recorded. These matters were due to come up for hearing on August 6, 2005. In case No. 1424/2004 court has fixed September 26, 2005 and in Case No.303/ 2005 and in Case No.416/2005 court has fixed September 22, 2005 for appearance of accused and Case No. 415/ 2005 has been finally disposed off as the accused has vacated the Companys quarters. The others cases are pending hearing. 14. The Company has filed two cases No. 1982/2003 and 1984/2003 against former employees of the Company on grounds of failure to vacate the houses allotted to them despite having retired from the Company under Section 630 of the Companies Act in the Court of the Special CJM, Allahabad. Summons have been issued to the accused in this regard. The matters are pending. 15. The Company has filed case No. 704/2005 in June 2005 against Renu Singh and others under Section 630 of the Act in the Court of the Special Chief Judicial Magistrate, Allahabad on grounds of encroachment of Company land and unauthorized construction. An earlier case bearing No. 2450/99 was filed on September 25, 1999 against one S. P Singh, who was dismissed from services of the Company. The said case abated due to the . death of the said S.P Singh. Therefore a fresh case was filed against his legal heirs. The Companys statement has been obtained under Section 200 of the CrPC and summons have been issued to the accused. The next date of hearing is November 16, 2005 for the appearance of the legal heirs of the original accused. 16. The Company has filed case No. 3861/2002 on November 16, 2002 against Vijai Kumar Singh under Section 630 of the Act in the Court of the Special Chief Judicial Magistrate, Allahabad on grounds of failure to vacate quarters despite expiry of sanction. The summons were not served as the said quarters were locked. The accused filed a Criminal Misc. Application. No 5229/2004 u/s 482 Cr. P for quashing the proceedings under Companys complaint .C No. 3861/2002. The High Court has granted a stay, which is presently in force and the matter is pending. 17. The Company has filed two cases bearing No. 2557/98 and No. 2560/98 against wives of former employees of the Company under Section 630 of the Companies Act for wrongfully withholding Companys property, i.e. quarters allotted to their husbands. The said matters are pending in the Court and are listed for hearing on December 13, 2005 for non-bailable warrant. 18. The Company filed an FIR in the Police Station Lohardaga against Sri Vinod Kumar Tiwary and others on August 10, 1999. Based on the same, proceedings were initiated bearing No. G.R.293/99 in the Court of the CJM, Lohardaga on September 28, 1999 under Sections 341, 379 and 323/34 of the IPC on grounds that the personnel officer of the Company was assaulted by the accused while he was entering the Companys office premises during the period of an agitation and strike on September 28, 1999. The case is pending in the Court of the CJM, Lohardaga for deposition of prosecution witnesses. The matter is pending.
213

HINDALCO INDUSTRIES LIMITED


19. The Company has initiated proceedings in Cr. Misc. No.7767/99(R) against the State of Bihar and Cr.M.P No.252/ . 02, Cr.M.P No.1100/02 and W.P . .(Cr.) No. 86/2004 against the State of Jharkhand in the Jharkhand High Court, Ranchi under Section 482 of the CrPC for quashing criminal proceedings commenced against the Company and its personnel in several cases, namely forest case No. F23/99, forest case No. C I 43/01, G.R. No.274/00 and order dated February 20, 2004 (including the cognizance order) made by District and Sessions Judge, Lohardaga in Cr. Rev. No.01/03. In Cr. Misc. No.7767/99(R), Cr.M.P No.252/02 and W.P . .(Cr.) No. 86/2004, the Court heard and admitted the applications and stayed the proceedings of the lower Court on April 18, 2000, July 29, 2002 and September 2, 2004 respectively. In Cr.M.P No.1100/02, hearing of the matter is pending before the High Court . and on August 8, 2003, the High Court passed an order not to take any coercive steps against the Company. The cases are pending for final hearing in the High Court. 20. The Company has filed WP (Cr) 146/05 on April 19, 2005 and W.P (Cr.) No. 204/05 on June 20, 2005 in the . Jharkhand High Court for quashing of criminal proceedings in confiscation case No. 01/05 and for quashing order dated April 13, 2005 passed by DFO West Division, Lohardaga whereby the authority had directed the Company to surrender the vehicle within a week in WP (Cr) 146/05 and for quashing of order dated May 28, 2005 passed by the A.D.J., Lohardaga in Cr. Rev. No.04/03 and also for quashing for entire criminal proceedings and cognizance order in Forest case No. 17/02, as the case is time barred in W.P (Cr.) No. 204/05. In the first matter, . the Court heard the matter on May 12, 2005 for issue of notice to opposite party and stayed the proceedings in the lower court. In the second matter, the Court heard the same on July 18, 2005, stayed the proceedings of the lower Court and ordered the State to file counter affidavit within 4 weeks. The matters are pending. 21. The Company has filed a criminal writ petition bearing No. 7259/2004 against the State of Uttar Pradesh praying for the quashing of FIR dated August 27, 2004 in Crime No. 178/2004 under Section 447 of the IPC in Sonebhadra Police Station. The Writ Petition was filed praying that the Court direct the State not to harass the Company in the said criminal case as the boundary wall of coal reject area is situated on the land of Renusagar Power Division which has been constructed as per joint measurement done in presence of Govt. Revenue Officials, staff of Rihand Reservoir and representatives of RPD and subsequently a no-objection certificate was issued in this regard by the DRO, Rihand Bandh. On September 18, 2004, the High Court stayed the arrest of the officials of the Company till the date of the further listing of the writ petition. Further, the counter affidavit on behalf of the Investigating Officer, Anpara was filed in the Court. The case is yet to be listed for hearing. 22. The State of Uttar Pradesh has filed three cases against one Sarvjeet Singh for offences committed as a worker of CITU in the Court of the Chief Judicial Magistrate, Robertsganj on the basis of complaints made by the Company. Case No. 2656/2001 has been filed on the grounds of having attacked the houses of Shri G.P Singh, Dy GM . (P&IR) and Shri T.C. Prasad, Chief Engineer (Oprn) and Case No. 3578/94 and Case No. 2683/2001 have been filed on grounds of forcible occupation of Control Room (Plant) by CITU. All the said matters are pending and are posted for evidence by witnesses. All the aforesaid matters are pending before the Court of the Chief Judicial Magistrate, Robertsganj. 23. The Company has also filed Case No. 3579/94 against Vinod Tiwari in the on the basis of a complaint made by the Company on grounds of having attacked the houses of Shri G.P Singh, Dy GM (P&IR) and Shri T.C. Prasad, . Chief Engineer (Oprn). The said matter is pending with a hearing every month. The matter is pending for evidence by witnesses. 24. Based on a Complaint made by the Company, the State of Uttar Pradesh has filed case No. 2708/94 against Tarkeshwar Ojha (Parasi Village) on grounds of Blockade of road near village Parasi and Gherao of Mr. C.P . Harlalka, Vice President, Mr. V.K. Sharma, Vice President and Mr. I.N. Kapoor, Factory Manager on November 20, 1991 and Case No. 2740/94 against R. Antony on grounds of Criminal assault on Shri I.N. Kapoor, Factory Manager on April 3, 1991 in the Court of the Chief Judicial Magistrate, Robertsganj. The cases are pending and are posted for hearing almost every month. Both these matters are pending. 25. The State has filed Case No. 49/92, 4786/94, 67/99 Tarkeshwar Ojha and other CITU activists in the Court of the Munsif Magistrate, Dudhi on grounds of threatening and abusing Shri D.R. Mishra, Assistant at Time Office. The said matter is pending. 26. The security officials of the Company filed Cr. Revision No. 3194/2003 against the State of Uttar Pradesh in the Allahabad High Court. The matter arose as a result of an FIR being lodged against Company officials resulting from a situation where the boundary wall of the Company was being repaired and some miscreants tried to
214

HINDALCO INDUSTRIES LIMITED


hinder the work. The security officers who tried to restrain the miscreants were assaulted and attacked in response to which crime No. 205/03 was registered at Renukoot Police outpost, P Pipri, District Sonbhadra under Sections .S. 147, 148, 149, 307, 392, 323, 504 and 506 of IPC against the security officers. A charge was framed upon completion of investigation upon deletion of Section 392 from the charge and a Case No. 3658/03 was registered against Company officials in the Court of CJM, Sonbhadra. Criminal Revision No. 3194/2003 under Sections 397 and 401 of the Code of Criminal Procedure was filed for quashing the charge framed against the Companys security officials. The criminal revision has been admitted and the summons issued by the Trial Court for the appearance of the accused has been stayed vide order dated November 11, 2003. On July 12, 2004, and later on August 28, 2005 the stay was extended by the High Court, Allahabad till listing of the case in the next cause list. 27. Cases bearing No. 2021/2000 and 2022/2000 are cross cases of each other filed in the Court of the CJM, Sonbhadra under Section 323 read with 147 of the I.P as a result of an assault that took place on the night of October 3, .C 1999 between Companys security guards and encroachers over Company land. Another cross case has been filed with respect to the same incident in 3657/2003 where the charge is under Sections 147, 336, 427 and 504. Next date to be fixed for prosecution evidence. 28. The State of Uttar Pradesh has filed case No. 4788/2004 against one Shiromani in the Court of the CJM, Sonbhadra. The cause of action arose when the Company Gypsy Jeep, while on official duty, met an accident on September 11, 2004 near Robertsganj, which was rashly hit by a truck that was being driven by Shiromani, (the accused in the present case) resulting injury to the Company driver. A charge-sheet has been filed against the truck driver under Sections 279, 337, 338 and 427 of the I.P The case is pending hearing. .C. 29. Criminal case No. 4494/99 has been filed before the Sessions Judge, Bangalore against Agents Aluminium Company Ltd. for the recovery of Rs. 3.7 million. An order was passed in favour of Indal in 2004. The opposite party has preferred an appeal. 30. Criminal case No. 147/98 has been filed before the Sessions Court in Hyderabad against Zephyr Containers Pvt. Ltd. involving Rs. 1.4 million. The trial court has decreed the matter in favour of the Company. The opposite party has appealed this decision. 31. Mr. S.S. Kothari, director of the Company and another officer of the Company have filed Criminal Miscellaneous Application No. 15369/92 under Section 482 of the CrPC in the High Court of Allahabad against the Munsiff Magistrate, Dudhi and the Additional Inspector, Factories, Dudhi praying for the quashing of proceedings in complaint case No. 1819/81 pending on the file of the Munsiff Magistrate, Dudhi. The said proceedings in complaint case No. 1819/1981 were filed under various Sections of the Factories Act alleging that the employees of a dairy in the Company were not included on the rolls and were not given leave cards. The High Court stayed the proceedings before the Magistrate. The matter is pending and there have been no further orders as to listing. 32. The Company has filed W.P (Cr.) 5633/04 against the Company in the High Court at Ranchi against the order of . D.C. Latehar dated July 24, 2004 which directed the Company to pay five times penalty of the deficit amount paid towards stamp duty on the deeds executed in the year 1999. The High Court, vide stay order dated October 15, 2004, directed the D.C. Latehar not to take coercive step against the petitioner company. The matter is pending before the High Court. 33. The Company has filed thirty-three cases under Section 138 of the Negotiable Instruments Act, 1881 amounts aggregating Rs. 11.49 million.

B.
(a) 1.

Labour suits
Labour cases filed against the Company Thirty-six contract workers at the Taloja plant canteen filed ULP No. 637 of 1998 in the Industrial Tribunal, Thane claiming permanence of employment. The Industrial Court passed an order dated February 16, 2004 rejecting their complaint and the contact labourers moved Bombay High Court vide appeal No. 2999 of 2004. The High Court has granted a stay against the order of the Industrial Tribunal. The case is pending final hearing at the Bombay High Court. The Company meanwhile, has filed Writ Petition No. 573/04 challenging the notification dated October 10, 2003 issued by the Government of Maharashtra due to which engagement of contract labour in the canteen of Taloja plant had to be abolished. The matters are pending in the Bombay High Court along with the above matter.
215

HINDALCO INDUSTRIES LIMITED


2. A workman at the Belgaum plant was dismissed for sabotage and filed a petition No. 39617 in the Karnataka High Court claiming reinstatement with back-wages amounting to approximately Rs. 1.5 million. The case is pending at the Karnataka High Court. The Company declared a lock-out on April 29, 1980 as a consequence of an illegal strike by issuing a notice of lockout. Thereafter the Labour and Conciliation Officer issued a notice dated April 30, 1980 commencing conciliation proceedings and as the conciliation ended in a failure, a failure report was sent to the Government of Karnataka which passed an order of reference dated June 10, 1980 referring the dispute to the Industrial Tribunal, Hubli for adjudication. The tribunal passed an award dated December 14, 1999 holding that the Company was justified in declaring the lock-out and that the workmen were not entitled to any wages. The Indal Potroom Workers Union challenged the award of the Industrial Tribunal by filing W.P No. 6339 of 1991. The learned Single . Judge passed an order dated February 7, 2005 reversing the findings of fact recorded by the tribunal and declared that the lock-out declared by the Company was illegal and unjustified and directed the Company to pay 50 per cent wages for the period of lockout. The Company has filed a writ appeal No. 2104 of 2005 before the Karnataka High Court against this order dated February 7, 2005. Certain workmen at the Belgaum plant were dismissed in connection with the lock-out in 1980 and filed WP No. 2549/2005 and 32819/02 in the Karnataka High Court claiming reinstatement with back-wages amounting to approximately Rs. 4.5 million. The cases are pending at the Karnataka High Court. An industrial dispute arose between the Company and its workmen from the Alupuram plant over the issue of justifiability of the lay off of workmen and the quantum of lay off compensation. The Government of Kerala issued an order dated March 27, 1996 referring the dispute for adjudication before the Industrial Tribunal, Alappuzha. The Government of Kerala issued another order dated March 30, 2004 invoking Section 10B of the Industrial Disputes Act directing the Company to provide alternative work for the maximum number of workmen who had been laid off and make payment to those workmen who were laid off at the rate of full monthly salary which they were entitled to for the month of January 1996 treating the 50% share as an ex gratia. The Company has filed a writ petition No. 6384 of 1996 dated April 6, 1996 before the High Court of Kerala at Ernakulam against these orders. The petition is pending disposal. The aggregate claim of the workmen against the Company is approximately Rs. 3 million. An employee at Alupuram plant filed a complaint No. 16/1999 in the Industrial Tribunal. The Tribunal passed an order in favour of the Company. Aggrieved by the award of Industrial Tribunal, the workman filed OP No. 10704/ 2003 in the Kerala High Court claiming an aggregate amount of Rs. 1.5 million against the Company. An industrial dispute arose between the Company and its workmen from the Alupuram plant over the issue of confirmation of twelve temporary and casual workers from the Alupuram plant. The Government of Kerala issued an order dated December 6, 2003 referring the dispute for adjudication before the Labour Court, Ernakulum. The Labour Court has registered Industrial Dispute No. 16/2003 and the matter is pending disposal. The workers have claimed wages aggregating to Rs. 1.2 million. The Employees State Insurance Corporation issued a notice of demand dated September 20, 1997 to the Company demanding an aggregate Rs. 1.56 million plus interest at the rate of 15 per cent from June 1, 1997 for the same on account of Employee State Insurance for the period July 1994 to November 1996. The Company filed a writ petition No. 3022 of 1997 before the Patna High Court at Ranchi for quashing the notice and for restraining the Employee State Insurance Corporation from realizing any amount as per the notice. The High Court passed order dated December 16, 1997, staying the demand of Rs. 1.56 million on the condition that the Company deposit a sum of Rs. 0.5 million. and further directed that Company was to furnish security other than cash and bank guarantee to the satisfaction of the Court. The matter is pending disposal. V.N. Pandey was discharged from the services of the Company due to long absence. He filed a case against the Company before District Judge, Mirzapur that was decided in favour of the Company. Aggrieved by this he filed a petition against the order of District Judge and second appeal No. 2840/86 in the Allahabad High Court. The matter is pending before the High Court. Purshottam, a former workman, was terminated from service. The Labour Court upheld the termination and the workman filed W.P No. 8503 of 1982 in the Allahabad High Court against such order of termination. The Company . served a notice to the workman to hand over the quarter allotted to him. On failure of the workman to vacate the premises, the Company filed a civil suit praying for eviction of workman. The suit was decreed in favour of
216

3.

4.

5.

6.

7.

8.

9.

HINDALCO INDUSTRIES LIMITED


Company and the first appeal filed by the workman against the order was also dismissed. Aggrieved by the orders of the lower court the workman filed a second appeal No. 972/90 before the Allahabad High Court claiming that he was a tenant and not a licensee. The matter is pending before the High Court. 10. The Government enhanced the E.S.I. coverage to the employees drawing wages Rs.6500/- per month vide notification dated December 23, 1996. The Dakshanichal Majdoor Kalyan Samiti, challenged this notification in W.P No. 14987/97 in the Allahabad High Court claiming that the Company should be exempted from the said . notification and that the court should direct the Company not to curtail the existing medical facilities. The High Court in its interim order dated May 5, 1997 directed the Company to not to reduce in any manner, directly or indirectly, the perquisites and facilities including medical facilities of employees except as provided by regulation. The matter is pending before the High Court. 11. The Company issued a charge sheet in the name of one Mohan Lal Soni for not vacating Companys quarters as ordered. An enquiry was held and he was dismissed from the service of the Company with effect from March 11, 1987. The Labour Court, Allahabad decided Adjudication Case No.23/88 against the workman. Aggrieved by the award of Labour Court, the workman filed W.P No. 34221/99 in the Allahabad High Court inter alia on the ground . that the enquiry violated principles of natural justice and that the punishment was disproportionate and has prayed for reinstatement with back wages. The matter is pending before the High Court. 12. Hindalco Workers Union raised a dispute in adjudication case No.14/89 regarding regularization of 150 temporary workmen of the construction division, who were employed for the expansion of the Factory. The Industrial Tribunal, Allahabad (I) rejecting the claim of the trade union, passed an award dated March 26, 1998 that trade union was not competent to espouse the cause and that the Company could not be forced to create new posts. Aggrieved by the award, the trade union filed W.P No. 41851/98 in the Allahabad High Court. The case is pending . at the High Court and no interim order has been passed. 13. Seventeen staff members were terminated due to anti-management activities. Eight of the staff members settled their cases, while the remaining 9 staff members contested their cases through the Hindalco Staff Association on grounds of unfair dismissal and prayed for continuity of service. The Industrial Tribunal (I), Allahabad passed an award dated June 25, 1999 in adjudication case No. 25 of 91 rejecting the claim of the staff members on the ground that they were not workmen under the Uttar Pradesh Industrial Disputes Act, 1947. Aggrieved by the said order, the staff members filed W.P No. 21357 of 2000 in the Allahabad High Court asking for the setting aside of . the order dated March 26, 1998 and continuity in service. The matter is pending before the High Court. 14. Sukhranjan Haldar was appointed as junior labour supervisor in the construction division on sanction from time to time. After expiry of the sanction, he was discharged on January 18, 1989. He challenged the termination and raised a dispute which was referred to the Labour Court. The Labour Court in its award dated September 7, 1998 held that it being a fixed term appointment, there was no retrenchment. The workman filed W.P No. 7150/ 2000 . in the Allahabad High Court, challenging the award of the Labour Court on the ground that the principle of last come first go has not been followed and that his work was of permanent nature and has prayed for regularization of work. The case involves the issue of applicability of 2 (oo) (bb) of Industrial Disputes Act, 1947. 15. One Fula Devi has filed W.P No. 16331/2002 against the Life Insurance Corporation, the Company and others in . the Allahabad High Court on the ground that she is entitled to the insurance amount as the beneficiary of the three life insurance policies taken by her husband, Parasnath Yadav, a workman in the Company, who died in August 2001. The petitioner claimed that the premium was deducted from her husbands salary by the Company, but the Company failed to remit the same to Life Insurance Corporation of India. Hence the petitioner contends that the default in payment of insurance premium is the fault of the Company. The matter is pending before the High Court. 16. Hindalco Pragatisheel Mazdoor Sabha has filed W.P No. 16760 (C) of 85 in the Allahabad High Court challenging . the award dated May 16, 1985 passed by the Industrial Tribunal, Allahabad I in Adjudication Case No. 29/83 wherein the tribunal rejected their contention that contractor labourers working in the Company canteen should be allowed wages and other facilities similar to those available to other workmen of the establishment of the Company. Counter and rejoinder to the same have been filed. The matter has been part heard and the next date of listing has not been fixed.

217

HINDALCO INDUSTRIES LIMITED


17. Fifty-one contract workers have filed Civil Misc. WP No. 10063/1987 in the Allahabad High Court, through the Hindalco Workers Union against the Company and others on the grounds of termination of service due to the fact that the contract given out to M/s Doodh Nath Prasad came to an end on March 25, 1987. Counter and rejoinder have been filed. The next date of hearing is yet to the decided. 18. Shanker Upadhyay, worked as substitute workman of the Company and was taken on probation for six months in the post of U Man. His services were terminated on account of unsatisfactory work. He raised an industrial dispute and a settlement was arrived at, to take him back into employment on probation for a further period of three months. His services were again terminated with effect from December 11, 1987 and he was reverted back to the post of substitute workman (Badli). His services were again terminated from the post of a U Man with effect from March 15, 1988. He raised an industrial dispute in Adj. 280/88 challenging this in the Labour Court, Varanasi on the grounds that it amounted to termination of service. The Labour Court held that since he was on the roll of the Company his services were not terminated. The workman challenged the award in the High Court in WP 24044/92 before the Allahabad High Court. The Allahabad High Court held that there was no provision in the Standing Order under which a Badli could be promoted to the post of U Man, and therefore held that his appointment as U Man was a fresh appointment and hence his reversion to the post of Badli amounted to termination. The High Court has remanded the case back to the Labour Court to decide the case on merits. The case is pending before the Labour Court at Varanasi. 19. There are thirteen cases in the Labour Court, Allahabad under adjudication filed by workmen, challenging their termination on various grounds. 20. There are seven cases in the Labour Court, Allahabad under adjudication filed by contract labourers, challenging their termination of services by the concerned contractor on various grounds. The Company is a party to these proceedings. 21. There are three cases filed before the Industrial Tribunal (I) at Allahabad, by workmen raising industrial disputes in respect of their dismissal by the Company. 22. There are twenty cases filed by former workmen of the Company on various grounds, all of which are pending before the Labour Court, Varanasi. 23. There are four cases filed before the Labour Court, Bharuch by former security guards, challenging termination of their service by the contractor and claiming an aggregate amount of approximately Rs. 3.48 million. There is one case filed before the Labour Court, Bharuch by a security supervisor in respect of resignation from service and claiming an aggregate amount of Rs. 3.84 million. 24. The President of CBW Union raised a dispute before Assistant Labour Commissioner (C), Ranchi regarding payment of wages for the alleged lock-out period from May 17, 2000 to June 10, 2000. After failure of conciliation before Assistant Labour Commissioner the case was forwarded to Secretary, Ministry of Labour, Govt. of India. The case bearing No. L 43011/3/2000/IR(M)is now pending before the CGIT, Dhanbad. 25. A restoration application in case No. CGIT/LC/M/2/2003 was filed by the Joint Secretary CBW Union for restoration of original case No.R/83/2000 relating to termination of the services of a workman, wherein an award was issued in favour of the Company in terms of settlement with CBW Union. The case is in the process of settlement with the applicant workman. 26. Seven cases have been filed by person who allegedly worked at Katni bauxite mine. The claimants contend that they were taken on work for quality check of bauxite at Katni up to February 1996. These persons were later relieved from work and have initiated conciliation proceedings before Conciliation Officer. After failure of conciliation, the Central Government has referred the matter for adjudication before Industrial Tribunal cum Labour Court, Jabalpur. 27. The Government of Karnataka has by order of reference No. 265 dated December 2, 1998 transferred a labour complaint filed by an association of 218 employees who have been retired under the voluntary retirement scheme demanding better benefits than those offered under the Scheme to the Additional Labour Court Hubli. By its reply dated September 18, 2000, the Company has disputed the legality of the reference. The Company has filed its affidavit of evidence on April 29, 2003. 28. The Deputy Director, Employee State Insurance, Kanpur confirmed a demand of Rs. 2.05 million on account of
218

HINDALCO INDUSTRIES LIMITED


payments made for Hindalco Dairy, Vishram Griha (Allahabad) and Building Construction Department vide order dated August 12, 2005. The Recovery Officer has issued Recovery Notice dated September 26, 2005 for recovery of said amount along with interest of Rs. 2.29 million. The Company has filed an appeal on October 19, 2005 before the ESI Court at Mirzapur after depositing 50 per cent of the demand amount and interim stay has been granted till October 29, 2005. The case is pending hearing. Labour cases filed against the Company for claims under Rs. 1 million In addition to the above cases, there are sixty-three labour related cases which have been filed against the Company for claims aggregating to Rs. 17.45 million, which are pending in various fora. (b) 1. Labour cases filed by the Company Twenty-seven contract labourers from the Kalwa plant filed complaint No. 132 dated March 6, 1996 in the Industrial Court, Thane, claiming permanence of work. The Industrial Tribunal in its order dated October 15, 1998 allowed the plea of the complainants. The Company filed a writ petition before a single judge of the High Court challenging the order of the Industrial Court. The Single Judge passed an order dated January 25, 1999 rejecting the writ petition at the admission stage. The Company filed Letters Patent Appeal No. 58 of 1999 before a Division Bench of the Bombay High Court, challenging the order of the Honble Single Judge. The Division Bench vide its order dated March 22, 1999 rejected the appeal of the Company. The Company filed a special leave petition No. 9244 of 1999 in the Supreme Court. The Supreme Court passed an order dated October 25, 1999 allowing the appeal and remitting the matter back to the High Court for deciding the Letters Patent Appeal on merits. The Division Bench of the High Court summarily dismissed the Letters Patent Appeal by an order dated January 20, 2000. The Company filed special leave petition No. 2560 of 2000 and No. 6410/2000 in the Supreme Court. The Supreme Court has granted a stay against the order of the Industrial Tribunal. The case is pending final hearing at the Supreme Court. An industrial dispute arose between the Company and its workmen from the Alupuram plant over the issue the justifiability of the lay off of workmen and the quantum of lay off compensation. The Government of Kerala issued an order dated March 27, 1996 referring the dispute for adjudication before the Industrial Tribunal, Alappuzha. The Industrial Tribunal, Alappuzha proceeded with the adjudication and passed an order dated March 10, 1999 against the Company. The Company filed writ petition No. 33450 of 2000 before the High Court of Kerala at Ernakulum against these orders. The petition is pending disposal. An industrial dispute arose between the Company and its workmen from the Alupuram plant over the issue of a charter of demands for long term settlement which ultimately resulted in a strike. The Government of Kerala issued an order dated November 24, 2004 referring the dispute for adjudication before the Industrial Tribunal, Alappuzha. On the recommendation of the Labour Commissioner, Thiruvananthapuram the Government of Kerala issued an order dated November 24, 2004 prohibiting the continuance of the strike as well as an order dated November 24, 2004 invoking Section 10B of the Industrial Disputes Act directing the Company to pay an interim relief of Rs. 1,600 per month per worker till the passing of the award by the Industrial Tribunal in the dispute on the condition that Rs. 1,600 per month is to be fully adjusted towards the revision of emoluments to be effected as per the award of the Industrial Tribunal. The Company has filed a writ petition No. 426 of 2004 dated December 27, 2004 before the High Court of Kerala at Ernakulam against these orders. The petition is pending admission. The Company has filed a writ petition challenging the award passed by Industrial Tribunal (I), Allahabad in Adjudication Case No. 40/89 dated April 29, 1991 directing the Company to pay 10% of the basic salary as house rent allowance to permanent workmen who have not been allotted accommodation. The tribunal ordered that house rent allowance be paid from the date of their appointment till accommodation is provided. The writ petition has been filed on the ground that the service conditions do not provide for giving any housing accommodation. A certain workman was absent from duty and accordingly lost his claim to his original post and was placed as a substitute workman with effect from December 21, 1991 under clause 15(4) (h) of the Certified Standing Orders of the Company. The Labour Court, Varanasi in Adjudication Case No. 291/92 directed the Company to reinstate him with full back wages on the ground that neither domestic enquiry was held nor charge sheet nor explanation was issued while removing him from the rolls of permanent workman. The Company filed WP No. 3332/98 in the Allahabad High Court, challenging the order of the Labour Court. He filed a case before the Labour Court, Varanasi
219

2.

3.

4.

5.

HINDALCO INDUSTRIES LIMITED


which was decided in the favour of the Company. He has filed Writ Petition No. 48328/99 challenging the said order of the Labour Court, Varanasi, which was dismissed vide order dated March 20, 2002. However, the workman filed a petition for restoration, which was accepted by the Court. Vide an interim Order dated April 2, 2004 the High Court kept the question of current wages open and left the same at the liberty of the Company. 6. Services of the staff in Super Bazaar were terminated after paying retrenchment compensation, due to closure of the medicine counter of Super Bazaar. The Labour Court, Varanasi in Adjudication Case No. 100/91 passed an award on February 13, 1998 holding that the principle of last come first go has been violated and that required approval under Chapter V B of Industrial Disputes Act, 1947 was not taken and therefore held that the termination was illegal and ordered reinstatement of the workmen with back wages. The Company filed WP 39143/98 challenging the award of the Labour Court, on the ground that the Super Bazaar and the Company are two separate entities and hence the provisions of Chapter V B of Industrial Disputes Act, 1947 and principle of last come first go are not applicable. The Allahabad High Court vide its interim order dated February 1, 1999 has stayed the award of the Labour Court, on the condition that (i) 50% of the back wages, amounting to Rs. 0.08 million be deposited with the Labour Court, which shall invest it in an interest bearing account; (ii) that the workman be paid wages from the date of award till January 1999 amounting to Rs. 0.02 million and (iii) that the Company complies with Section 17 B Industrial Disputes Act, 1947. The Company in compliance with the order of the High Court has deposited the back wages amounting to Rs. 0.08 million as directed above in the form of a bank draft with the Labour Court for depositing it in an interest bearing account. However, the Labour Court has returned the same and has asked the Company to make a fixed deposit receipt. The Company has filed an application in the High Court to direct the Labour Court to accept the bank draft in compliance with the orders of the High Court. A particular workmans services were terminated with effect from February 1, 1989 after enquiry on grounds of absence from duty. The workman raised an industrial dispute that his services were terminated orally. The Labour Court in its award dated March 31, 1998 decided the case in favour of the workman. Aggrieved by the award, the Company filed W.P No. 7328/99 in the Allahabad High Court challenging the competency of the . Presiding Officer of the Labour Court on the ground that an I.A.S. officer is not competent to hold the post of Presiding Officer of the Labour Court. The Company filed a civil suit for eviction against the Pragatishel Mazdoor Sabha for eviction from a building owned by the Company that was being used by the union as its office as licencee. The licence was terminated by a notice dated March 17, 1982. The civil suit was decided against the Company and an appeal was preferred before District Judge Mirzapur. The District Judge vide its order dated December 3, 2003 rejected the appeal holding that the unless the union was derecognized by the Labour Court in accordance with the provisions Indian Trade Unions Act, 1926 it could not be evicted from the building as per agreement dated December 10, 1973 arrived at between the Company and the union. Aggrieved by the order the Company filed a second appeal bearing case No. 19/2002 before the Allahabad High Court. The matter is pending.

7.

8.

C.

Tax proceedings

(a) Income Tax


The Company does not have any material contingent liability in respect of the following Income tax proceedings.

Before the Income Tax Appellate Tribunal


(i) Appeals filed by the Company before the Income Tax Appellate Tribunal The Company has filed the following major appeals before the Income Tax Appellate Tribunal (ITAT), for amounts aggregating approximately Rs. 1,805.01 million, which are as follows: 1. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1986-87 aggregating tax impact of approximately Rs. 6.04 million, inter alia upholding the order of the assessing officer on the issues of disallowance of certain expenses and deductions made under Section 80 I of the IT Act, deductibility of profits from export of vanadium sludge and gallium metal under Section 80 HHC of the IT Act for all. This appeal is pending. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1987-1988 aggregating tax impact of Rs. 0.35 million, inter alia on the issues of deductibility of profits from
220

2.

HINDALCO INDUSTRIES LIMITED


export of vanadium sludge and gallium metal under Section 80 HHC of the IT Act, allowance of certain expenses. The matter is pending before the ITAT. 3. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1988-89 aggregating tax impact of Rs. 100.02 million, inter alia on the issue of applicability of Section 115 J of the IT Act, to the profits of the Company for the relevant assessment year. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of CIT(A) for the assessment year 198990 aggregating tax impact of Rs. 1.70 million, inter alia on the issues of disallowance of deductions made under Section 80 I of the IT Act. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1990-91 aggregating tax impact of Rs. 9.04 million, inter alia on the issue of allowance of benefit under Section 32AB of the IT Act and some disallowances. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1991-92 aggregating tax impact of Rs. 1.92 million, inter alia on the issue of calculating the deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1992-93 aggregating tax impact of Rs. 11.75 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1993-94 aggregating tax impact of Rs. 73.64 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1994-95 aggregating tax impact of Rs. 71.71 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT.

4.

5.

6.

7.

8.

9.

10. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1995-96 aggregating tax impact of Rs. 127.56 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT. 11. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1996-97 aggregating tax impact of Rs. 165.32 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and deduction under Section 80 I of the IT Act. The matter is pending before the ITAT. 12. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1997-98 aggregating Rs. 22.30 million, inter alia on the issue of disallowance of deduction under Section 80 O in respect of royalty received and the issue on disallowance of depreciation and expenses. The matter is pending before the ITAT. 13. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1998-99 aggregating tax impact of Rs. 25.08 million, inter alia on the issue deduction under Section 80 HHC of the IT Act and issue of disallowance of deduction under Section 80 O in respect of royalty received. The matter is pending before the ITAT. 14. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1999-2000 aggregating tax impact of Rs. 32.48 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT. 15. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2000-2001 aggregating tax impact of Rs. 10.14 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT. 16. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2001-2002 aggregating tax impact of Rs. 453 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and issue of disallowance of certain expenses. The matter is pending before the ITAT.
221

HINDALCO INDUSTRIES LIMITED


17. The Company has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2002-2003 aggregating tax impact of Rs. 367.53 million, inter alia on the issue of deduction under Section 80 HHC of the IT Act and disallowance of certain expenses. The matter is pending before the ITAT. 18. The Company has filed an appeal before the ITAT, against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2003-2004 aggregating tax impact of Rs. 233.77 million, inter alia upholding the order of the assessing officer on the issues of disallowance of write off of Inter Corporate Deposits, deduction under Section 80 HHC of the IT Act and disallowance of certain expenses. The matter is pending before the ITAT. 19. The Company has filed appeals before the ITAT, on the issue of withholding tax on the GDR issue expenses aggregating tax impact of Rs. 48.43 and 43.13 million for the assessment year 1994-95 and 1995-96 respectively. The matter is pending before the ITAT. In addition, the Company has also filed appeals with the ITAT on the issue of withholding tax on the remittances of fees and expenses to foreign parties. In addition, appeals have been filed against the orders of the tax / appellate authorities in respect of the erstwhile Renusagar Power Company for the assessment years 1979-80 and 1980-81. (ii) Appeals filed by the Department before the Income Tax Appellate Tribunal The Department has filed the following major appeals before the Income Tax Appellate Tribunal (ITAT) , for amounts aggregating Rs. 8,009.43 million. 1. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1986-87 aggregating tax impact of Rs. 2.86 million, inter alia on the issue of allowance of depreciation on roads, construction and mobile equipment, trucks and tractors and additional depreciation and grant of investment allowance. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1986-87 aggregating tax impact of Rs. 6.65 million, on the issues of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act, commission paid to stockists and allowance of deductions under Section 80 M of the IT Act. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1987-88 aggregating tax impact of Rs. 1.34 million, inter alia on issues of allowance of certain expenses and deletion of disallowance of sales tax under Section 43 B of the IT Act. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1987-88 aggregating tax impact of Rs. 7.60 million, inter alia on commission paid to stockists and the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1988-89 aggregating tax impact of Rs. 10.58 million, inter alia on issues of deletion of addition on account of Modvat credit and deletion of income under Section 41(1) of the IT Act. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1988-89 aggregating tax impact of Rs. 11.98 million, inter alia on commission paid to stockists, deduction under Section 80 M and on the issue of deduction on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1989-90 aggregating tax impact of Rs. 17.48 million, inter alia on issues of deletion of addition on account of Modvat credit, deletion of income under Section 41(1) of the IT Act and set off of loss. The matter is pending before the ITAT. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1989-90 aggregating tax impact of Rs. 18.99 million, inter alia on commission paid to stockists, deduction under Section 80 M and on the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of
222

2.

3.

4.

5.

6.

7.

8.

HINDALCO INDUSTRIES LIMITED


the IT Act. The matter is pending before the ITAT. 9. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1990-91 aggregating tax impact of Rs. 29.80 million, inter alia on issues of deletion of addition on account of in Modvat credit and set off of losses. The matter is pending before the ITAT.

10. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the reassessment year 1990-91 aggregating tax impact of Rs. 31.64 million, inter alia on commission paid to stockists, deduction under Section 80 M and on the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 11. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1991-92 aggregating tax impact of Rs. 9.18 million, inter alia on issues of deletion of addition on account of Modvat credit. The matter is pending before the ITAT. 12. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1992-93 aggregating tax impact of Rs. 9.04 million, inter alia on issues of deletion of addition on account of Modvat credit and depreciation. The matter is pending before the ITAT. 13. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1992-93 aggregating tax impact of Rs. 138.08 million, inter alia on issues of deductions under Section 80 I of the IT Act, deduction under Section 80 M of the IT Act and on the issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 14. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1993-94 aggregating tax impact of Rs. 158.35 million, inter alia on issues of deletion of addition on account of Modvat credit and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 15. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1994-95 aggregating tax impact of Rs. 133.07 million, inter alia on issues of commission paid to stockists and issue of deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 16. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1995-96 aggregating tax impact of Rs. 141.90 million, inter alia on issues of deletion of addition on account of Modvat credit and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 17. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1996-97 aggregating tax impact of Rs. 121.83 million, inter alia on issues of deletion of addition on account of Modvat credit commission paid to stockists, deductions under Section 80 M of the IT Act and deduction of interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 18. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1997-98 aggregating tax impact of Rs. 169.36 million, inter alia on issues of deletion of addition on account of Modvat credit commission paid to stockists, deductions under Section 80 M of the IT Act and interest on borrowed fund under Section 36(1) (iii) of the IT Act. The matter is pending before the ITAT. 19. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1998-99 aggregating tax impact of Rs. 140.39 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. 20. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 1999-2000, aggregating tax impact of Rs. 993.74 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. 21. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2000-2001, aggregating tax impact of Rs. 1543.64 million, inter alia on issues of allowance of claim under Section 80 IA interest on borrowed funds and computing deduction under Section 80 HHC of the IT Act.
223

HINDALCO INDUSTRIES LIMITED


The matter is pending before the ITAT. 22. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2001-2002, aggregating tax impact of Rs. 2276.48 million, inter alia on issues of deletion of addition on account of Modvat credit, allowance of claim under Section 80 IA interest on borrowed funds, deduction of interest capitalization and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. 23. The Department has filed an appeal before the ITAT, against the order of the CIT(A) for the assessment year 2002-2003, aggregating tax impact of Rs. 2035.45 million, inter alia on issues of deletion of addition on account of Modvat credit, allowance of claim under Section 80 IA interest on borrowed funds, deduction of interest capitalization and computing deduction under Section 80 HHC of the IT Act. The matter is pending before the ITAT. In addition, the Department has filed seven appeals in respect of the erstwhile Renusagar Power Company against the orders of the Assessing Officer, for the assessment years 1978-79, 1979-80, 1980-81 and 1988-89. Income Tax Proceedings in respect of demerged undertaking of Indian Aluminium Company Limited Pursuant to a Scheme of Arrangement approved by the High Courts of Kolkata and Mumbai, all businesses of Indal with the exception of business pertaining to the foils plant at Kollur, Andhra Pradesh were demerged into us with effect from April 1, 2004. (a) Appeals filed before the High Court and Supreme Court 1. For assessment years 1974-75 and 1979-80, the Supreme Court in a matter relating to Section 80 J of the IT Act and aggregating Rs. 17.37 million in favour of the Income Tax Department. The Department order is pending which will follow after the Income Tax Appellate Tribunal relays the judgment. For assessment year 1987-88, the Company filed a writ petition in the Calcutta High Court questioning the applicability of special audit under Section 142(2A) of the IT Act. The matter is pending before the High Court and the assessment is also pending. For assessment year 1990-91, the company filed a reference application before the Calcutta High Court against the order of the ITAT aggregating to Rs. 33.45 million on various grounds including deduction under Section 80 HHC, deduction under Section 80I, deduction under Section 32AB and prior year expenditure. The matter is pending before the High Court. For Assessment Year 1981-82, the department filed an application u/s 256(2) with the Calcutta High Court on the issue of allowability of transit house expenses for Rs. 0.48 million. The matter is pending before the High Court.

2.

3.

4.

(b)

Appeal filed with the ITAT The Company has filed an appeal with the ITAT for assessment year 1995-96 against an order passed by the Commissioner of Income Tax under Section 263 of the IT Act for an amount of Rs. 8.5 million on account of alleged excess deduction allowed under Section 80M of the IT Act. The matter is pending before the ITAT.

(c)

Appeals filed with the Commissioner of Income Tax (Appeals) Six appeals have been filed with the Commissioner of Income-tax (Appeals), details of which are given below: 1. 2. 3. 4. For assessment year 1996-97, the assessing officer disallowed Rs. 26.7million towards excise duty under Section 147 of the IT Act. The matter is pending before the Commissioner of Income Tax (Appeals). For assessment year 1997-98 the assessing officer disallowed Rs. 32.04 million towards excise duty under Section 147 of the IT Act. The matter is pending before the Commissioner of Income Tax (Appeals). For assessment year 1998-99 the assessing officer disallowed Rs. 24.6 million towards excise duty under Section 147 of the Income-tax Act. The matter is pending before the Commissioner of Income Tax (Appeals). The Company has filed an appeal against the regular assessment order of the assessing officer for assessment year 2000-01 aggregating to Rs. 231 million on various grounds including disallowance for current repairs, VRS expenses, bad debts written off, etc. The matter is pending before the Commissioner
224

HINDALCO INDUSTRIES LIMITED


of Income Tax (Appeals). 5. The Company has filed an appeal against the regular assessment order of the assessing officer for assessment year 2001-02 aggregating to Rs. 284 million on various grounds including disallowance for current repairs, deduction under Section 80IA and 80IB of the IT Act, interest on borrowing for construction, etc. The matter is pending before the Commissioner of Income Tax (Appeals). The Company has filed an appeal against the regular Assessment Order of the Assessing Officer for assessment year 2002-03 aggregating to Rs. 858 million on various grounds including disallowance under Section 80IA and 80IB, deduction under Section 80HHC, deduction on account of commission, current repairs, etc. The matter is pending before the Commissioner of Income Tax (Appeals).

6.

(b)

Wealth Tax

There are wealth tax appeals in respect of the Company for claims of less than Rs. 1 million. (c) 1. Central Excise The Commissioner of Central Excise & Customs, Vadodora II has issued a Show Cause Notice (SCN) to the Company for the amount of Rs. 1.64 million that is sought to be recovered from the Company under Section 11A of the Central Excise Act, 1944. The Commissioner has also sought to impose penalty under Section 11AC and charge interest at the rate as fixed by the Board under Section 11AB of the Central Excise Act, 1944. The Company had allegedly not reversed the credit amounting to Rs. 0.82 million, which it had originally availed, and which was in excess of the correctly admissible credit of duty. The Commissioner determined that an amount of Rs. 0.82 million in terms of Section 11A of the Central Excise Act, 1944, imposed a penalty of Rs. 0.82 million were payable and ordered payment of interest. The Additional Commissioner confirmed the order of the Commissioner vide Order-in-Original No. 48/Demand/ADC/D-BRH/03 dated August 26, 2003. The Commissioner (Appeals), Central Excise and Customs, Vadodara, vide Order-in-Appeal Commr.(A)/31/VDR-II/2004 dated January 30, 2004 allowed the appeal and set aside the order of the Additional Commissioner. The Commissioner, Central Excise & Customs, Vadodara II has now filed a Memorandum of Appeal before the Customs Excise and Sales Tax Appellate Tribunal (CESTAT), against this Order-in-Appeal. The Company has filed cross-objections against this appeal on May 17, 2004. The matter is pending before the CESTAT. The Deputy Commissioner of Central Excise (Rebate), Mumbai I, has issued deficiency memo-cum-SCN-cumcall for personal hearing F No. V(15)/Reb/Ch.-74/2004/3072 dated November 10, 2004 on 37 rebate claims for . the months of July and August 2004 on the grounds that the Company has not submitted final assessment certificate issued by the Assistant Commissioner, Bharuch as well as duty payment certificate and duplicate ARE-1 was not submitted in the tamper proof sealed covers. Personal hearing was held on December 22, 2004. The Company has submitted a letter to the Deputy Commissioner requesting him to settle the rebate claims keeping in abeyance the cess amount, till appropriate clarifications issued by the Central Board of Excise & Customs, New Delhi. The rebate claim on the cess amount will be allowed thereafter. The Deputy Commissioner, Central Excise, Raigad has issued two Order-in-Original Nos. 419/05-06/D.C.(R)/RAIGAD and 420/05-06/D.C.(R) / RAIGAD both dated June 16, 2005 settling thereby the rebate claims for the period July, 2004 to November, 2004 amounting to Rs. 945.9 million without education cess amounting to Rs. 8.13 million, stating that education cess paid during July 10, 2004 to September 6, 2004 cannot be allowed as rebate. The Company has filed appeals before the Commissioner of Excise (Appeals), Mumbai and presentation for issuing clarification is pending before the Central Board of Excise & Customs, New Delhi. The Commissioner, Central Excise & Customs, Vadodara II, has confirmed the demand of Excise Duty of Rs. 1.09 billion being the duty payable on the clearances of the gold bars for the period from May 2000 to February 2003. The Commissioner ordered the appropriation of the amount of Rs. 634.34 million already paid by the Company and ordered the Company to pay the differential amount of Rs. 459.35 million and imposed a penalty of Rs. 1.09 billion as well as interest. The Company filed an appeal along with an application for a stay and a request for early hearing with CESTAT, Mumbai on July 21, 2003. Personal hearing on the stay application was held on July 31, 2003 and an unconditional stay was granted. Personal hearing was held on October 19, 2004 and October 20, 2004 at CESTAT, Mumbai and written arguments have been submitted on November 24, 2004. An order has since been delivered in June 2005, wherein one member of CESTAT has not confirmed the demand whereas the other member has confirmed the demand of duty but set aside the penalty. In view of the difference of opinion, the matter will be referred to a third member.
225

2.

3.

HINDALCO INDUSTRIES LIMITED


4. The Additional Commissioner, Central Excise, has issued a SCN No. V Ch.74(4)80/R-IV/D-Brh/Commr/2003 dated June 27, 2003 demanding an aggregate amount of Rs. 3.08 million at the rate of 16 per cent on gold manufactured and cleared without payment of duty in respect of which supplementary invoices were issued in March 2003. Subsequently, the Additional Commissioner, Central Excise issued an Order-In Original dated December 22, 2003 confirming the SCN and further imposed a penalty of Rs. 3.08 million. The Company filed an appeal dated March 11, 2004 before the Commissioner (Appeals). Personal hearing was held on March 22, 2004. The Commissioner (Appeals) granted an unconditional stay till the decision of the matter before the CESTAT, Mumbai in the case (3) above. Personal hearing was held on June 17, 2004 where the Company requested the Commissioner (Appeals) to issue the necessary directions to be operative till the matter was pending before the CESTAT, Mumbai. The matter was decided against the Company on February 25, 2005. The Company filed an appeal along with an application for stay before the CESTAT, Mumbai on April 29, 2005. The department has issued a letter regarding the recovery of dues against confirmed demand on June 17, 2005. The CESTAT, Mumbai has granted a stay on the recovery of dues on June 21, 2005. The case is pending hearing. The Assistant Commissioner, Central Excise, Mirzapur, served a demand notice No. V (3) 16-demand /94/257 dated February 16, 1994 on the Company calling upon it to pay a sum aggregating Rs. 145.9 million in respect of excise duty on the electricity purchased by the Company from Renusagar on the ground that the excise on manufacture of electricity by Renusagar has been included in the prices of aluminium from time to time fixed by the Central Government in the relevant period. The demand notice stated that out of the total sum of Rs. 145.9 million of the demand dated September 30, 1984, the Company has made provision for Rs. 54.70 million in its accounts and the balance amount has been sequestered in the Aluminium Regulation Account constituted under the Aluminium (Control) Order, 1970 which ought to have been deposited to the credit of the Central Government as envisaged under the provisions of Section 11D of the Central Excise Act, 1944. The Company has filed Writ Petition No. 1175/1994 in the Delhi High Court on March 8, 1994. The Court, allowed the petition on July 9, 1993 and vide order dated August 5, 1994 found that the Respondent in the writ petition did not file a reply despite being given two opportunities to do so and therefore stayed the demand notice dated February 16, 1994 till final orders were passed in the writ petition. The Commissioner, Central Excise & Customs, Vadodara II has issued a SCN No. V.Ch.74(4)43/R-IV/D-BRH/ Commr./2004 dated April 13, 2004 to the Company in respect of the amount of Rs. 16.34 million that is sought to be recovered from the Company under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944. The Commissioner has also sought to impose penalty under Rule 13 of the Rules and charge interest at the rate as fixed by the Board under Section 11AB of the Central Excise Act, 1944. The Company had allegedly not reversed the credit amounting to Rs. 16.34 million which they had originally availed, and which was in excess of the correctly admissible credit of duty. Hearing was held on February 21, 2005. The Commissioner Central Excise and Customs dropped the proceedings against the Company vide order dated February 22, 2005. This SCN was confirmed by Additional Commissioner, vide order-in-original No.48/Demand/ADC/D-BRH/03 dated August 26, 2003 which was reversed by the Commissioner (Appeal), vide Order-in-Appeal No. Commr (A)/31/ VDR-II/04 dated January 30, 2004. The Commissioner of Central Excise & Customs, Vadodara-II has now filed a Memorandum of Appeal in CESTAT, Mumbai against this Order-in-Appeal. Cross objections against the appeal have been filed by the Company on May 17, 2004 in CESTAT, Mumbai. The matter is currently pending in CESTAT, Mumbai. The Commissioner, Central Excise has issued a SCN dated March 7, 2003 to the Company in respect of an amount aggregating Rs. 4.23 million on account of the reversal of the Cenvat credit availed of on a conveyer belt installed at the jetty. The Company has submitted its response on June 2, 2003. The matter is pending before the Commissioner, Central Excise, Vadodara. The Commissioner, Central Excise, Vadodara has issued a SCN dated July 13, 2001 demanding an aggregate amount of Rs. 5.16 million along with a penalty of equal amount and interest in relation to Modvat credit on reduced CVD on import of copper cathodes at Mumbai. The Company filed its reply on September 25, 2001. Personal hearings have been held on October 24, 2001 and September 25, 2003. The matter is pending before the Commissioner, Central Excise, Vadodara. The Commissioner, Central Excise, has issued a SCN dated October 5, 1996 to the Company demanding an amount aggregating Rs. 1.38 million in respect of the alleged irregular Modvat credit taken on furnace oil by the
226

5.

6.

7.

8.

9.

HINDALCO INDUSTRIES LIMITED


Company. The Company filed an appeal before the CESTAT, New Delhi, which passed an order No. 848/04-NBA dated August 3, 2004 remanding the matter back to the adjudicating authority. 10. The Assistant Commissioner, Central Excise, issued an order dated March 27, 2002 confirming the demand for an aggregate sum of Rs. 2.21 million and imposed a penalty of Rs. 2.2 million in respect of Modvat credit on capital goods taken by the Company. The Company filed an appeal before the Commissioner (Appeals), who passed an order dated October 31, 2003 disallowing Modvat credit of Rs. 0.2 million and imposed penalty of Rs. 2 million. The Company filed an appeal before the CESTAT, New Delhi, which passed an order No. 286/04-NB (A) and SO 252/04-NB(A) dated March 29, 2004 remanding back the matter to the Assistant Commissioner for fresh adjudication. 11. The Joint Commissioner, Central Excise, issued a SCN to the Company for an aggregate amount of Rs. 1.88 million in respect of the alleged Modvat credit taken on short received quantity of inputs and raw materials by the Company. The Company filed an appeal before the Commissioner who passed an order dated March 29, 2004 and the order was upheld by the Joint Commissioner (Appeals) on August 17, 2004. The Company filed an appeal before the CESTAT, New Delhi, which passed an order dated December 16, 2004 granting a stay on the order of the Commissioner (Appeals). The CESTAT has passed an order No. 235/05 dated August 10, 2005 granting an extension of the stay order dated December 16, 2004. 12. The Joint Commissioner, Central Excise, issued a SCN to the Company for an aggregate amount of Rs. 1.29 million in respect of the alleged short payment of duty on re-packing and financial charges charged by the consignment agent. The Company filed an appeal before the Commissioner (Appeals) who passed and order dated September 6, 2004 upholding the order of the Joint Commissioner. The Company filed an appeal before the CESTAT, New Delhi, which passed an order dated January 27, 2005 admitted this appeal and granted stay of the order of the said Joint Commissioner. The Company made a further application for renewal of the stay order, which was granted by the CESTAT vide Misc. Order No. 226/05 dated August 8, 2005. 13. The Commissioner, Central Excise, Allahabad, issued a demand-cum-SCN No. 13/Commr.Alld./2004 for the assessment period 2001-2002 dated February 16, 2004 to the Company demanding an aggregate sum of Rs. 16.71 million in respect of the alleged non-inclusion of interest element while arriving at the cost of production of rolled product for captive consumption as per valuation rules. The reply to the SCN has been submitted and a hearing held on July 13, 2004. The matter is pending with the Commissioner, Central Excise, Allahabad. 14. The Commissioner, Central Excise, Allahabad, issued a SCN No. 17\Commr\all\2004 dated March 18, 2004 to the Company demanding an aggregate sum of Rs. 8.16 million for the assessment period 2002-2003 in respect of the notional interest alleged to have been earned on the credit balance of the buyers shown in the annual report. The matter is pending with the Commissioner, Central Excise, Allahabad. 15. The Commissioner, Central Excise, Allahabad, issued a SCN bearing No. 21\Commr\all\2004 dated April 6, 2004 to the Company demanding an aggregate sum of Rs. 10.59 million for the assessment period 2000-2001 in respect of the alleged non-inclusion of interest element while arriving at the cost of production of rolled product for captive consumption as per valuation rules. The matter is pending with the Commissioner, Central Excise, Allahabad. 16. The Commissioner, Central Excise, Allahabad, issued a SCN bearing No. 18\Commr\all\2004 dated March 18, 2004 to the Company demanding an aggregate sum of Rs. 8.08 million for the assessment period 1998-1999 in respect of the alleged non-inclusion of interest element while arriving at the cost of production of rolled product for captive consumption as per valuation rules. The matter is pending with the Commissioner, Central Excise, Allahabad. 17. The Commissioner (Appeals), Central Excise, Bangalore, issued an Order-in-Appeal No. 579/2002 CE dated September 30, 2002 to the Company demanding an aggregate amount of Rs. 3.1 million as excise duty and penatly in respect of the valuation of aluminium rolling ingots cleared by the Company between February, 1998 and December, 1998. The Company filed an appeal No. E/29/2003 before the CESTAT, Bangalore, which passed an order dated December 30, 2003 granting a stay to the Order-in-Appeal No. 579/2002. The stay was extended for a period of six months vide an order dated February 2, 2002. The matter is pending. 18. The Joint Commissioner, Central Excise & Customs, Bhuvaneshwar II issued a SCN dated August 19, 2002 demanding an aggregate amount of Rs. 1.24 million as excise duty on the sale of different types of M.S. Scrap,
227

HINDALCO INDUSTRIES LIMITED


A1 Scrap and other miscellaneous scrap between July 2001 and March 2002. Personal hearing was held on October 12, 2004 and the Company submitted a grouping statement on December 6, 2004. The matter is pending before the Joint Commissioner. 19. The Commissioner, Central Excise, Bhuvaneshwar-II issued a Demand-cum-SCN No. V(76)15/SCNMC/SBP-II/35/ 2003/9433A dated June 17, 2005 to the Company demanding an aggregate amount of Rs. 110.96 million, penalty under Section 11AC of the Central Excise Act, 1944 and interest under Section 11AB of the Central Excise Act, 1994 in respect of the alleged under-valuation of ingots and cast coils transferred to other units between July 1, 2000 to March 31, 2002, invoking the extended period of limitation. Pursuant to an application made by the Company to extend time for submission of the reply to the SCN, the Superintendent (Adjudication) has granted an extension of time allowing the Company to submit a reply on or before September 5, 2005 before the Commissioner, Central Excise, Bhuvaneshwar-II. The matter is pending. 20. The Commissioner, Central Excise, Belapur passed an Order-in-Original dated February 23, 2005 against the Company demanding an aggregate amount of Rs. 7.6 million (duty of Rs 3.8 million with penalty of Rs. 3.8 million) in respect of the alleged non-inclusion of loading charges and freight upto the premises of the buyer for the ex-factory sale of scrap on as is where is basis. The Company filed an appeal before the CESTAT, Mumbai, which has granted an unconditional stay on the recovery of the amount by an order dated June 23, 2005. A copy of this order is awaited. In addition to the abovementioned demand, on the same issue, there are two unconfirmed demands by the Joint Commissioner of Central Excise against the Company that are pending adjudication: SCN No.F .No.V/Adj/(SCN) 15-294/JC/03/Bel/749 and SCN No.F.No V/Adj/(SCN)15-146/JC/04/BEL/491 dated March 4, 2005 aggregating Rs. 1.28 million. These demands are pending adjudication. 21. The Director General of Anti-Evasion issued SCN dated April 11, 1997 to the Company demanding an aggregate amount of Rs. 20.2 million in respect of the alleged clandestine manufacture and removal of excisable goods. The Company filed a reply dated September 28, 1998 before the Commissioner of Central Excise (Adjudication), Mumbai, who passed an order dated March 23, 2005, dropping a major portion of the demand and charges of clandestine removal but confirmed the demand in respect of some differences between the physical stock of scrap and stock as reflected in the excise records. The Commissioner passed an order for payment of duty, penalty and redemption fine aggregating Rs. 8.75 million. The Company has filed an appeal dated June 23, 2005 along with an application for stay before the CESTAT. Stay order dated September 13, 2005 has been received and the final hearing is awaited. 22. SCNs dated September 4, 1998 and January 14, 1999 were issued to the Company demanding an aggregate amount of Rs. 3.1 million in respect of the assessable value of rolling ingots which the department contended could not be calculated by comparison with aluminium slabs. The Company filed an objection to this demand before the Assistant Commissioner, who passed an order-in-original dated August 19, 2000 upholding the demand. The Company filed an appeal against this order before the Commissioner (Appeals), who passed an order dated October 11, 2002 rejecting the appeal. The Company has filed an appeal dated January 10, 2003 before the CESTAT, Bangalore against the order of the Commissioner (Appeals) which is pending disposal. A pre-hearing deposit of Rs. 0.5 million has been made.

23. The Joint Commissioner, Central Excise passed an order dated March 29, 2004 against the Company and imposed a penalty of Rs. 1.9 million in respect of the alleged short receipt of inputs and raw materials during the period from April 1996 to March 2000. The Company filed an appeal before the Commissioner (Appeals), Central Excise, Allahabad who passed an order dated August 17, 2004 upheld the order of the Joint Commissioner. The Company filed an appeal dated November 17, 2004 before the CESTAT which granted a stay on December 12, 2004. 24. A SCN has been issued to the Company dated February 28, 2005 to the Company demanding an aggregate sum of Rs. 12.8 million in respect of the notional interest alleged to have been earned for the period 2003-04 on the credit balances of the buyers. The reply to this notice is yet to be filed. 25. The Central Excise department issued SCNs Nos. 1211/91 dated August 6, 1991, 2303/91 dated November 20, 2001, 868/92 dated April 20, 1992, 1277/92 dated July 10, 1992, 1768/92 dated October 22, 1992, 103/93 dated January 12, 1993,1/93-94 dated June 16, 1993 and 7/93-94 dated November 15, 1993 against the Company demanding a sum of Rs. 2.158 million after disallowing Modvat credit claimed by the Company on inputs used in the manufacture of aluminium by electrolysis during the assessment years 1991-92, 1992-93 and 1993-94. The
228

HINDALCO INDUSTRIES LIMITED


Assistant Commissioner confirmed the demand by order Nos: 36/92 dated April 27, 1992, 100/92 dated. September 17, 1992, 45/93 dated April 13, 1993 & 14/94 dated April 18, 1994. The Appeals preferred before the Commissioner (Appeals) and the Tribunal have also been rejected vide orders Nos. 154/92 dated July 20, 1992, 198/92 dated October 30, 1992,242,243 dated December 29, 1992, 114/93 dated August 16, 1993 & 110/94 dated July 15, 1994, 825/94 dated November 10, 1994 and 594/96 dated April 15, 1996. Since the dispute involves a question of law and involves interpretation of Rule 57 A, a Reference Application was filed and the matter was heard by the Tribunal. The case has been referred to the Kerala High Court. The Company has submitted their paper book before the High Court and the matter is pending. 26. The Central Excise Department, Bangalore issued two SCNs demanding a payment of duty of Rs. 1.197 million on Aluminum scrap to LME and Indal, Bangalore. The department alleged that the Company was the manufacturer of the extrusions and therefore was bound to pay the differential duty over and above what was paid by LME. The Commissioner, Bangalore, confirmed the demand. Further a penalty was also imposed. The Company took the defence that it was the supplier of raw material and LME, by virtue of use of labour and machinery etc., was the manufacturer. The Company filed a stay application and an appeal before CEGAT, Madras on July, 1994. The prayer for a stay was refused and the Company was asked to pre-deposit Rs. 1.19 million which was paid by the Alupuram division. The said order of the CEGAT has been challenged by filing a Reference Application in accordance with Section 35G of the Central Excise Act, 1994, which has been admitted on the grounds that questions of law arise out of the said order. The matter has been referred to the Karnataka High Court by the CEGAT, Madras. The matter is pending. 27. The Central Excise Department and the Commissioner vide SCN No. 6/INDAL/155/EKM I/2005 dated June 17, 2002, O-I-O No. 97/2002 dated July 24, 2002 and O-I-A No. 595/2002 dated December 12, 2002 denied Cenvat credit in respect of returned goods on the grounds that after remelting, the same type of goods were not given to the same customer, as per the Rule 16(2) of the Cenvat Credit Rules 2001 and demanded a sum of Rs. 1.39 million as duty. Based on the insertion of the term removal with effect from March 1, 2002 in Rule 16 (2), the Company states they need not give fresh goods to the same customer during the period from July 1, 2001 to February 28, 2002. The Company filed an appeal in the CESTAT in this regard, which was rejected vide an order No 482/ 2005 dated March 27, 2005. The Company has decided to file an appeal in the High Court under S. 35G of the Central Excise Act against the said order as it involves a substantial question of law. Payment of the demanded amount had been made as pre-deposit before the hearing at CESTAT. Consequent to the merger of the Company units in March 2005, the Department issued a demand dated March 16, 2005 to pay the balance amount, with interest before issuing a fresh registration in favour of the Company. The balance amount along with Rs. 0.77 million as interest has been paid under protest. 28. Disputes with respect to classification of closure sheets amounting to Rs. 39.85 million are pending before the Commissioner, Central Excise, Kolkata-II. The cases have not proceeded after show cause proceedings in July 1996. The Company has attended a personal hearing for cases amounting to Rs.15.86 million before Commissioner, Central Excise, Kolkata-II on March 15, 2005 and an order with respect to the same is awaited. 29. The Assistant Commissioner, Central Excise (Adj), has issued SCNs to the Company demanding a sum of Rs. 11.4 million in respect of input credit against dross clearance. The matter is pending before the Commissioner of Central Excise (Adj). 30. The Assistant Commissioner/Commissioner, Central Excise (Adj), has issued SCNs to the Company demanding a sum of Rs. 27.1 million in respect of dross removed without payment of excise duty and education cess. Out of Rs. 27.1 million, CESTAT had issued an order of Rs. 10.2 million in favour of the Company. Excise Authorities have challenged this order in the Calcutta High Court. No hearings have taken place before the High Court. With regard to the balance Rs. 16.9 million, the matter is pending before the Commissioner of Central Excise (Adj). 31. The Department of Central Excise has issued two SCNs dated December 1, 1995 and February 29, 1996 demanding a sum of Rs. 1.19 million in respect of disallowance of Modvat credit on material returned/ defective invoices raised by stock point. The matter is pending before the Assistant Commissioner, Central Excise. 32. The Assistant Commissioner, Central Excise issued SCNs demanding an aggregate amount of Rs. 1.41 million on the ground that the Company executed job work on behalf of IFL on 1:1 basis and should therefore reverse the Modvat credit taken on excess materials dispatched. The matter is pending with the Assistant Commissioner, Central Excise.
229

HINDALCO INDUSTRIES LIMITED


33. The Assistant Commissioner, Central Excise issued a SCN No. V-76(15) 164-CE/CAL-II/ADJN/99/1930 dated July 4, 2001 to the Company demanding an aggregate amount of Rs. 1.29 million in respect of Modvat taken on oil, grease, rubber hose etc. for the period July 23, 1996 to February 28, 1998 as capital goods on the ground that Modvat is inadmissible as these are revenue expenditure. The matter is pending before the Joint Commissioner, Central Excise. 34. The Commissioner, Central Excise, issued a SCN No.V-Ch76(15)154-CE/Kol-II/Adjn/2002/1828 D dated April 4, 2003 demanding an aggregate amount of Rs. 2.2 million on the ground that freight and insurance charged by the Company should be part of assessment value for calculation of excise duty. The matter is pending before the Commissioner, Central Excise. 35. The Commissioner, Central Excise, issued a SCN No. V-CH-76(15)198-CE/KOL-II/ADJN/2002/3142-45-A dated November 10, 2003 to the Company demanding an aggregate amount of Rs. 1.03 billion on the ground that the Company had already availed of Cenvat credit on the inputs received on stock transfer basis from its other unit during the period April 1, 2000 to September 30, 2002. The matter is pending before the Commissioner, Central Excise. Similarly the Commissioner, Central Excise has issued a SCN No.V-Ch.76(15)198-CE/KOL-II /Adjn/2002/ 4971 dated July 16, 2004 to the Company demanding an aggregate amount of Rs. 249.22 million on the ground that the Company availed of Cenvat credit on the inputs received on stock transfer basis from its other units for the period January 1, 2002 to March 31, 2003. The matter is pending before the Commissioner, Central Excise. 36. The Commissioner, Central Excise issued a SCN No. V-CH.76(15)146/CE/KOL-II/ADJN/2003/3229-32-A dated November 24, 2003 to the Company demanding an aggregate amount of Rs. 3.51 million on the ground that the Company had collected freight charges from its customers for the period April 2001 to February 2003 through its invoice but not on an actual basis. The matter is pending before the Commissioner, Central Excise. 37. The Commissioner, Central Excise issued a SCN No.C-Ch.76(15)19/CE/KOL-II /Adjn/2004/975-78-A dated July 21, 2004 to the Company demanding an aggregate amount of Rs. 1.08 million on the ground that the Company had collected freight charges from their customers for the period July 2003 to May 2004 through their invoice but not on actual basis. The matter is pending before the Commissioner, Central Excise. 38. The Excise Department issued a SCN No.7/93-94 dated July 20, 1993 to the Company demanding an aggregate amount of Rs. 1.11 million on the ground that the Modvat credit was taken on Al. Sheet exceeding 0.20 mm at the rate of 35% in March 1993 while the Finance Bill 1993 prescribed uniform rate of duty at the rate of 25%. The Company attended a personal hearing before Joint Commissioner of Central Excise on February 7, 2005. The order of the Joint Commissioner is awaited. 39. The Assistant Commissioner, Central Excise issued a SCN No.4337-A dated June 6, 2005 to the Company demanding an aggregate amount of Rs. 1.05 million on the ground that the Company had collected freight charges from its customers for the period June 2004 to November 2004 through their invoice but not on actual basis. The matter is pending before the Assistant Commissioner. 40. The Joint Commissioner, Central Excise issued a SCN No.755-F dated September 9, 2005 to the Company demanding an aggregate amount of Rs. 1.3 million on the ground that the Company had collected freight charges from its customers for the period December 2004 to May 2005 through their invoice but not on actual basis. The Company is yet to file a reply to the SCN. 41. The Commissioner, Central Excise issued a SCN No. 294 dated August 5, 2005 to the Company demanding an aggregate amount of Rs. 20.7 million on the ground that the Company considered lower cost of input materials for valuation of products despatched to other units of the Company during the period July 2002 to December 2004. The Company is in the process of replying to this SCN. 42. The Assistant Commissioner, SPB-II Divn issued a letter no. C/NO.IV(4) MODVAT/ SBP/94/15958 dated December 13, 1995 to the Company demanding an aggregate amount of Rs. 14.2 million on the grounds of disallowance of Modvat credit on Al. rod, htgs steel wire and steel/wooden drum used for production and packing of ACSR moose conductor for the years 1995-96 and 1996-97. The Assistant Commissioner alleged that the Company was not carrying out any manufacturing activity inside the factory and hence they are not entitled to the benefit of Rule 57F (3) of the Central Excise Rules, 1944. The Company filed a writ petition before the Orissa High Court December 22, 1995. The said Court allowed the Company to avail MODVAT credit on the aforesaid Inputs and
230

HINDALCO INDUSTRIES LIMITED


benefit of Rule 57F (3) and also allowed to clear the goods on furnishing 50 per cent of duty by cash by passing Interim Order O.J.C. No.9506/1995 dated December 28, 1995. The balance accumulated Modvat credit of Rs. 7.41 million remained unutilised from December, 1998 onwards in RG23A Part-II maintained for ACSR Moose Conductor. The case came up for hearing on March 16, 2005 before the Orissa High Court and the matter was part heard. The next date is yet to be fixed. 43. The Additional Commissioner of Central Excise and Customs, BBSR-II, Commissionerate issued a SCN No. V(76) 15/SCNMC/ SBP-II/ 31/2001/ 7724A dated June 4, 2001 to the Company demanding excise duty amounting to an aggregate of Rs. 1.13 million as duty payable on removal/ sale of different types of M.S. Scrap and aluminium scrap during the period between May, 1996 and May, 1999. The Additional Commissioner of Central Excise and Customs, BBSR-II passed order no. CCE/ BBSR-II/ NO.11-ADDL. COMMR/ 2001 dated September 28, 2001 ruling in favour of the Department. The Commissioner (Appeals), Central Excise, Kolkata upheld the said order vide order dated December 18, 2002. The CESTAT, Kolkata remanded the matter to the Adjudicating Authority vide order No. S-714/A-855/KOL/2003 dated November 14, 2003. A personal hearing was held on July 12, 2004 before the Joint Commissioner of Central Excise and Customs, BBSR-II who vide OIO No CCE/BBSR-II/NO.61JOINT COMMR./2004 dated August 30, 2004. An appeal against the said order along with stay petition was filed before the Commissioner (Appeals) on November 19, 2004. The Commissioner (Appeals) vide OIA No. 01/ STAY/ BBSR-I/ 04 dated December 15, 2004 directed the Company to pre-deposit the duty amount and waived the pre-deposit of penalty. The final hearing of the matter was held on March 15, 2005 and vide final OIA No.27/ B-II/2005 dated March 28, 2005, the Commissioner (Appeals) set aside the impugned order and allowed the appeal. The Department filed an Appeal against the said order along with stay petition before the CESTAT, Kolkata on July 11, 2005 (SP-508/05 & EDM-354/05). The matter is pending before the said CESTAT, Kolkata. 44. The Additional Commissioner of Central Excise and Customs, Bhuvaneshwar-II issued SCN No. V(76) 15/ SCNMC/ SBP-II/ 75/ 2001/ 15577A dated September 16, 2002 and SCN no. V(76) 15/ SCNMC/ SBP-II/ 74/ 2002/ 12303A dated August 19, 2002 demanding duty aggregating to an amount of Rs. 2.01 million in addition to interest and penalty in relation to removal/ sale of different types of M.S. scrap, Al Scrap and other miscellaneous scrap during the periods June, 1998 to June, 2001 and July 2001 to March 2002 respectively. The Company submitted a reply against both the SCNS on November 30, 2002 before the said Additional Commissioner. The Joint Commissioner, Central Excise and Customs Bhuvaneshwar-II passed an order-in-original No. CCE/ BBSR-II/ NO. 81-82-JOINT COMMR./2004 dated December 31, 2004. The Company filed an Appeal and stay petition before the Commissioner of Central Excise (Appeals), Bhuvaneshwar on March 3, 2005 who heard the matter on May 31, 2005. The matter is pending before the Commissioner of Central Excise (Appeals), Bhuvaneshwar. 45. The Additional Commissioner of Central Excise and Customs, Bhuvaneshwar-II issued a SCN C.No. V (26) 15/ SCNMC/ SBP-II/ 67/ 2001/ 16749A dated November 12, 2001 demanding payment of duty and penalty of an amount aggregating to Rs. 2.5 million in addition to interest in relation to sale of aluminium dross and skimmings from October, 2000 to June, 2001 on the ground that the same is classifiable under chapter and sub-heading No. 2620.00. The Company submitted a reply on January 12, 2002. The Additional Commissioner heard the Company and passed order No. CCE/ BBSR-II/NO. 13-ADDL. COMMR/ 2002 dated March 28, 2002. The Company filed an appeal and stay petition before the Commissioner of Central Excise (Appeals), Kolkata on June 3, 2002, who issued OIA No. 01/ BBSR-II/ 2003 dated January 6, 2003 in favour of the Department. An Appeal and stay petition has been filed before CESTAT, Kolkata on April 25, 2003. The file is transferred to CESTAT, New Delhi on April 21, 2004. The matter was heard on June 25, 2004 and Final Order No. 645/04-NB (A) dated June 25, 2004 was passed by the CESTAT, New Delhi in favour of the Company. The Department has filed petition of appeal (Civil Appeal No. 240 of 2005) before the Honble Supreme Court and listed for hearing before the said Court on January 3, 2005. The counter affidavit has been filed by the Company before the said Court and thereafter the matter is pending. 46. The Additional Commissioner of Central Excise and Customs, Bhuvaneshwar -II issued SCN C.NO+B19. V(26) 15/ SCNMC/ SBP-II/ 12/ 2002/ 11265A dated July 31, 2002 to the Company demanding duty of an amount aggregating Rs. 1.91 million in relation to sale of aluminium dross and skimmings during the period from July 2001 to May 2002. The Company submitted a reply to the SCN on November 19, 2002 before the Additional Commissioner, Central Excise and Customs and the matter was heard on December 19, 2002. The hearing was then rescheduled for November 27, 2003 before the Joint Commissioner of Customs and Central Excise, Bhuvaneshwar -II, before whom the matter is now pending.
231

HINDALCO INDUSTRIES LIMITED


47. The Joint Commissioner, Central Excise and Customs, Bhuvaneshwar-II issued a SCN C. No. V(76) 15/ SCNMC/ SBP-II/53/2004/ 20738A December 3, 2004 to the Company demanding an amount aggregating to Rs. 1.77 million in relation to Cenvat credit on capital goods, which was taken in November 2003, December 2003, January 2004, March 2004 and April 2004. The Company has submitted a reply on June 27, 2005 before the Joint Commissioner, Central Excise and Customs, Bhuvaneshwar -II. The matter is pending. 48. The Joint Commissioner, Central Excise and Customs, Bhuvaneshwar -II issued a SCN C. No. V(76) 15/SCNMC/ SBP-II/ 57/ 2004/ 22095A dated December 30, 2004 to the Company demanding an amount aggregating to Rs. 1.11 million in relation to Cenvat credit on capital goods taken during December 2003, January 2004, and March 2004 to June 2004. The Company has submitted a reply on June 29, 2005 before the Joint Commissioner, Central Excise and Customs, Bhuvaneshwar -II. The matter is pending. 49. The Commissioner of Central Excise and Customs, Bhubaneswar II issued a SCN C.No. V (76) 15/SCNMC/SBPII/35/2003/9433A dated June 17, 2005, demanding Rs.110.96 million for alleged undervaluation of rolling ingots and sheets cleared to another unit of the same company during the period July 1, 2000 to March 31, 2002, invoking the provisions of extended period of limitation alleging wilful suppression of fact with the intent of evading duty. 50. The Commissioner of Central Excise, Kolkata II Commissionerate issued a SCN C.No. V-Ch.76(15) 39-CE/Kol-II/ Adjn./2005/294 dated August 5, 2005 demanding Rs.20.74 million for alleged undervaluation of stock transfer to other factories of the same company during the period July 1, 2000 to December 31, 2004, invoking the provisions of extended period of limitation alleging wilful suppression of fact with the intent of evading duty. 51. The Directorate of Central Excise Intelligence, Mumbai issued a SCN-cum-demand notice dated June 1, 2001 to the Company demanding duty amounting to an aggregate of Rs. 472.2 million on the ground of wrongly availing the benefit of the exemption contained in Notification no. 6/2000-CE dated March 1, 2000, thereby manufacturing and clearing precious metal, gold without payment of duty. Excise Cases under Rs. 1 million Apart from the cases described hereinabove there are approximately 70 other excise related cases filed against the Company. The approximate amounts in these cases aggregate to Rs. 18.64 million. (d) 1. Customs The Collector of Customs, Calcutta issued a SCN No. S2-9/92-SIB dated April 23, 1992 to the Company invoking a bank guarantee for recovery of refund aggregating Rs. 62.1 million on the ground that coal tar pitch is being manufactured by the process straight run method attracting duty at 15 per cent, whereas the Company contended that the coal tar pitch was manufactured by the cut-back method and attracted duty at Rs. 100 per ton. The Company filed Writ Petition No. 3498 of 1993 in the Calcutta High Court. The Court, vide order dated September 7, 1994 allowed the appeal, thereby quashing the SCN. The Collector of Customs, Calcutta filed Appeal No. 620 of 1994 before the Division Bench of the Calcutta High Court. The matter is yet to be listed. The Deputy Commissioner, Customs, Kandla vide Order-in-Original No. KDL/DC-GP-I/9/2000 dated December 22, 2000 confirmed the differential duty demand for 6 Bills of Entry amounting to Rs. 40.45 million considering the CIF value as FOB value and adding the cost of freight and insurance for assessment. The Company filed an appeal with the Commissioner (Appeals) who, vide order dated April 28, 2003, set aside the Order-in-Original dated December 22, 2000 remanded the case back to the Deputy Commissioner for reconsideration of the issues following the principles of natural justice. The Company has received a fresh Demand cum SCN F No. S/ 5-20/1867 Gr-I dated August 16, 2004 from the Deputy Commissioner, Customs, Kandla. The Company has submitted its reply to the SCN and personal hearing has been held on November 24, 2004. The matter has been decided in favour of the Company. The Department is yet to file an appeal against the order of the Deputy Commissioner, Customs. The Assistant Commissioner, Customs, Calcutta has issued a SCN dated June 1, 2000 to the Company seeking to include the CIF value of Rs. 40.90 million in the price of equipment imported from KHD Humboldt Wedag AG, Germany for the production of green anode used in the process of electrolysis for production of aluminium metal, to confiscate technical manuals valued at Rs. 40 million imported from VAW Aluminium Technologies GmbH, Germany (VAW) and to impose a penalty under Section 112 of the Customs Act, 1962. VAW sent the
232

2.

3.

HINDALCO INDUSTRIES LIMITED


manuals to the Company vide airway bill dated June 15, 2000. The Company filed a Bill of Exchange for clearance of the manuals on June 21, 1999. The Company filed a writ petition before the Delhi High Court seeking release of material on April 6, 2000 the Court ordered the release of the manuals on the Company furnishing a bank guarantee for Rs. 5 million and a Provisional Duty Assessment bond (P Bond) for Rs. 7 million. The Company .D. furnished the bank guarantee and P bond as ordered by the Court and the manuals have been released. The .D. bank guarantee has been extended upto March 31, 2006. The Company replied to the SCN on January 31, 2001. The date of personal hearing is yet to be fixed. 4. The Assistant Commissioner, Customs, Mumbai, has issued an order dated June 14, 1996 finalising the assessment in respect of 400 metric tonnes of Synthetic Cryolite and requiring the Company to pay a duty of Rs. 18 million by enforcing the P bond given by the Company at the time of the provisional assessment. A duty of Rs. 4.55 .D. million as provisionally assessed was paid to get the goods cleared in May 1994. The Company filed an appeal against the order of the Assistant Commissioner before the Commissioner of Customs (Appeals) who allowed the appeal on January 5, 1998 and remanded the matter to the Assistant Commissioner. The Assistant Commissioner heard the matter on April 16, 1998 and reserved orders. The order has not so far been released. The Assistant Commissioner, Customs, Calcutta, issued an order dated July 26, 1988 rejecting the Companys contention that the conform extrusion press imported by the Company was a Hydraulic Extrusion Press and denied the benefit of the provisional duty paid aggregating Rs. 8 million. The Company filed an appeal against this order before the Commissioner of Customs (Appeals) who passed an order dated December 20, 1989 setting aside the order-in-original and remanding the matter for de-novo examination. The Assistant Commissioner, after de-novo examination by an order dated February 1, 1999 once again rejected the Companys contention. The Company filed an appeal against this order before the Commissioner of Customs (Appeals) who allowed the appeal on March 10, 2000 and remanded the matter back to the Assistant Commissioner for passing a speaking order after providing personal hearing. The matter was heard on January 11, 2001 and written submission filed on February 3, 2001. The orders of the Assistant Commissioner are awaited. The Assistant Commissioner, Customs, Calcutta, issued an order dated December 16, 1988 rejecting the Companys contention that the Cut-to-Length Extrusion Machine imported by the Company was a Hydraulic Extrusion Press and denied the benefit of the provisional duty paid aggregating Rs. 5.70 million. The Company filed an appeal against this order before the Collector of Customs (Appeals) who rejected the appeal on June 9, 1989. The Company filed an appeal against the order of the Collector of Customs (Appeals) with the CEGAT. The CEGAT allowed the appeal on October 23, 1997 and remanded the matter back to the Collectorate of Customs, Calcutta. This matter is linked with the matter at case no. 5 above and will be decided along with the same.

5.

6.

Custom Cases under Rs.1 million Apart from the cases described hereinabove there are 3 cases filed against the Company. The approximate amounts in these cases aggregate to Rs. 1.33 million. (e) 1. Sales Tax The Commercial Taxes Department has issued SCNs No. NBZ/07/02/01-02, NBZ/07/02/02-03 and NBZ/07/02/0304 dated August 11, 2004 to the Company for an amount aggregating Rs. 14.22 million in respect of the denial of set-off of taxes paid on inter-state purchases of various inputs used in the manufacturing of aluminium foils which are subject to the interstate sales tax and set off as provided GO 667 dated October 11, 2001 for the assessment years 2001-02, 02-03 and 03-04 respectively. The department also issued subsequent notices dated November 2, 2004 and November 10, 2004 The Company has filed Writ Petition no. 21775/2004 before the High Court of Andhra Pradesh against the notices. The petition has been admitted by the Court. Vide an order dated February 17, 2005, the High Court admitted the petition and directed the Department not to take any action with respect to the assessment years 2001-02 and 02-03 pending disposal of the petition, with a specific direction to the Company to file its objections to the SCN in relation to the assessment year 2003-04. The writ petition is pending disposal. With respect to the assessment year 2004-05, the Company has written to the department disputed that the matter is sub-judice and will be addressed after the decision in the writ petition. The Flying Squad Unit, Ahmedabad has issued a demand notice in provisional assessment dated September 11, 2001 for an aggregate amount of Rs. 218.9 million for non-payment of sales tax on leased assets. The Company has filed a writ petition before the Gujarat High Court at Ahmedabad against this provisional assessment. The
233

2.

HINDALCO INDUSTRIES LIMITED


Court admitted the writ petition and granted a stay against recovery proceeding in 2001. The next hearing is awaited. 3. The Flying Squad Unit, Ahmedabad has issued a demand notice in provisional assessment dated June 11, 2001 for an aggregate amount of Rs. 212.3 million for non-payment of sales tax on leased assets. The Company has filed a writ petition before the Gujarat High Court at Ahmedabad against this provisional assessment. The Court admitted the writ petition and granted a stay against recovery proceeding on November 18, 2001. The next date of hearing is yet to be fixed by the High Court. Meanwhile, regular sales tax assessment for the relevant year 1997-98 has been passed. In the interim, the Deputy Commissioner, Sales Tax, Bharuch has passed an order for final assessment and regularized the revised demand of Rs. 260.5 million. An order of assessment under Section 15B of the Gujarat Sales Tax Act was made for assessment years 19981999 demanding sales tax of an amount of Rs. 10.8 million together with interest, etc. The Company filed an appeal dated May 5, 2003 before the Assistant Commissioner Sales Tax (Appeal), Vadodara against the demand, but the appeal was rejected. The Company has appealed to the Tribunal which has granted a stay on September 17, 2003 till the hearing of the appeal. The hearing was fixed for April 11, 2005 but was adjourned. An order of assessment under Section 15B of the Gujarat Sales Tax Act was made for assessment years 19992000 demanding sales tax of an amount of Rs. 5.5 million together with interest and penalty. The Company has filed an appeal dated November 5, 2003 with the Assistant Commissioner (Appeals), against the demand. The Assistant Commissioner (Appeals) rejected the appeal on November 24, 2003. The Company filed a second appeal dated December 11, 2003 before the Sales Tax Tribunal, Ahmedabad on December 16, 2003, which has granted a stay till the hearing of the appeal. The hearing was fixed for April 11, 2005 but was adjourned. The case has not been listed as yet. An order of assessment was made against the Company under Section 15B of the Gujarat Sales Tax Act for assessment years 20002001 demanding sales tax of an amount of Rs. 2 million together with interest and penalty. The Company has filed an appeal dated April 28, 2005 with the Assistant/Joint Commissioner Sales Tax (Appeals), Vadodara, against the demand. The Assistant Commissioner, Appeals, rejected the appeal on May 18, 2005. The Company is submitting a further application with the Sales Tax Tribunal at Ahmedabad. A second appeal is filed in the Sales Tax Tribunal, Ahmedabad on May 27, 2005. The matter is pending. The Assistant Commissioner, Commercial Taxes, Ranchi, issued an assessment order dated February 1, 2005 to the Company for an aggregate amount of Rs. 30.8 million for the assessment year 2000-01 in respect of nonsubmission of Form F for alumina sent to the Company for conversion and in respect of TOT & Surcharge. The Company filed an appeal on March 14, 2005 with the Joint Commissioner (Appeals), Ranchi. The hearing of the appeal was completed on June 10, 2005 and the Commissioner (Appeals) passed an order dated July 26, 2005 remanding the matter to the Deputy Commissioner, Ranchi with directions. The Assistant Commissioner, Sales Tax, Sambalpur on receipt of the report from the intelligence wing of the commercial tax department started the re-opening proceedings under Section 12(8) of the Orissa Sales Tax Act for the year 1999-2000 and served a demand notice on April 26, 2005 in respect of an aggregate sum of Rs. 3.20 million on account of the alleged 70 metric tonnes of aluminium ingots supplied to Orissa Extrusion Ltd. by the Company during the year 1999-2000 and not accounted in the books of the Company. An appeal along with stay application has been filed with the Additional Commissioner, Sales Tax on August 1, 2005. The Company has been asked to make a pre-deposit Rs. 2 million within October 2005 and the balance demand has been stayed till disposal of the appeal by the order dated September 20, 2005. The Department of Sales Tax, Thane, Maharashtra passed an Assessment Order dated March 30, 2005 for the financial year 1999-2000 for an aggregate demand of Rs. 1.56 million under the Bombay Sales Tax Act, 1959 in relation to defining entry under the said Act for the Companys laminated, coated aluminium foil products. The Department was of the view that the said products would attract 8 per cent Sales tax while the Company valued the tax at 4 per cent. The Assessing Authority raised an additional demand of Rs. 26.49 million in respect of nonsubmission of C forms and interest. The Company has filed an appeal dated April 21, 2005 before the Deputy Commissioner, (Appeals), Thane for classification of entry and rate of tax, as well as for reassessment on account of non-submission of C Forms and interest. The Appeal has been allowed on August 29, 2005 both under the Bombay Sales Tax Act, 1859 and the Central Sales Tax Act (CST Act). By virtue of the Appeal, under the Bombay Sales Tax Act, 1859, a refund of Rs. 1.67 million has been granted to the Company as against the
234

4.

5.

6.

7.

8.

9.

HINDALCO INDUSTRIES LIMITED


demand of Rs. 1.56 million. Under the CST Act, the demand has been reduced from Rs. 26.49 million to Rs. 8.48 million. The aforesaid refund has been adjusted against the CST demand. The said demand of central sales tax is in respect of the non-submission of Form C and interest. As per the provisions of the CST Act (TC No. 4T dated January 7, 2003), the Company has already filed the administrative relief with the sales tax authorities on April 25, 2004 for granting administrative relief as per the provisions of the CST Act. With the consideration of administrative relief, the final order will turn into a refund of around Rs. 2 million for sales tax both under the Bombay Sales Tax Act, 1859 and the Central Sales Tax Act. 10. The Directorate of Commercial Taxes has - passed an assessment order dated June 24, 2004 demanding an aggregate amount of Rs. 6.5 million as sales tax along with interest on the ground that Central Sales Tax on sale of flat circular sheets for the year 2001-02 is to be paid at a rate of 4 per cent per annum and not at the rate of 2 per cent per annum. The Company has filed an appeal which has been heard by Dy. Commissioner of Commercial Taxes. The order is awaited. 11. The Directorate of Commercial Taxes passed an assessment order dated July 10, 2001 demanding an aggregate amount of 17.1 million as sales tax along with interest for the assessment year 1998-99 under the West Bengal Sales Tax Act, 1994. The amount demanded includes disallowance of credit notes, higher demand for sales tax with respect to sale of import licences and sale of assets, extra demand against stock transfer and non-production of forms. The Company went on appeal against the said order of the Department to the Deputy Commissioner. The matter is being heard. 12. Assessment order No. STA 298/99 dated October 20, 2002 was issued to the Company demanding an aggregate amount of Rs. 7.4 million as sales tax and Rs. 0.5 million as interest for the assessment year 1998-99 under the Central Sales Tax Act, 1944. The amount demanded includes disallowance of credit notes, issues relating to Freight Charges and non-production of C Forms. 13. The Assistant Commissioner issued an assessment order No. STA 217/98 dated March 16, 1998 to the Company demanding an aggregate amount of Rs. 1.34 million as central sales tax during the assessment year 1991-92 in relation to the consignment transfer and non-submission of C & H forms. The Company filed an appeal against this order of the Assistant Commissioner before the Deputy Commissioner (Appeals), which was dismissed vide order dated January 17, 2000. However, the Company has received no further demand in this regard from the sales tax authorities. 14. The Assistant Commissioner of Commercial Taxes filed a claim of Rs. 2 million as outstanding dues for the assessment year 1999-2000. The state sales tax claimed was Rs. 1.6 million and Rs. 0.4 million was claimed as central sales tax. Initially a demand was made for the above amount of Rs. 2 million by making ex parte order against the Company. The Company appealed against this order before the Dy. Commissioner where the claim was reversed, and a refund of Rs. 0.8 million was awarded to the Company. The case has been remanded for reassessment before the Revisional Board on Companys petition for further refunds. Hearings are yet to take place. 15. The Deputy Commissioner, Trade Tax has issued notices bearing Nos. 1084 to 1087 dated September 15, 2005 alleging that the transfer of goods on stock transfer basis is not a consignment sale but a direct sale. As per the notices, the stock transfer is Rs. 2.3 billion in April 2005, Rs. 2.55 billion in May 2005, Rs. 2.4 billion in June 2005 and Rs. 2.5 billion in July 2005. The matter is pending. Sales Tax Cases under Rs.1 million Apart from the cases described hereinabove there are 18 other sales tax related cases filed against the Company. The approximate amounts in these cases aggregate to Rs. 7.52 million. (f) 1. Service Tax Liability to pay service tax was initially imposed on the persons availing the services of Goods Transport Operator and Clearing and Forwarding Agents. As the Company was availing the services, it got itself registered and paid service tax till 1999. The Supreme Court of India, vide its judgment dated August 27, 1999 in the Laghu Udyog Bharti case, directed that any tax which had been paid by the customer or client of a Goods Transport Operator or Clearing and Forwarding Agents was to be refunded within 12 weeks of them making a demand. The Company also sought the refund of Rs. 4.92 million in September and October 1999 which was rejected by the
235

HINDALCO INDUSTRIES LIMITED


Assistant Commissioner on June 19, 2000 and Rs. 10.21 million in December 1999 and January 2000 which was rejected by the Assistant Commissioner on February 6, 2001. However, the provisions were amended to nullify the effect of the judgment and the authorities rejected the claim on the basis of those amendments. The Company filed an appeal before the Commissioner (Appeals) who passed an order dated December 24, 2001 rejecting the appeal. The Company filed an appeal before the CEGAT, New Delhi against this order, which was rejected by an order dated June 4, 2003. The Company has filed an SLP in the Supreme Court against this order of the CEGAT. Two writ petitions bearing Nos 328 and 329 of 2004 were filed in the Supreme Court challenging the amendments made vide Sections 116 and 117 of the Finance Act 2000 to the provisions of the Service Tax Act, 1994. The writ petitions further challenged the validity of Section 158 of the Finance Act, 2003 by which the provisions of Chapter V of the Finance Act, 1994 as modified by Section 116 of Finance Act, 2000 have been retrospectively amended and validated in respect of services rendered by the goods transport operators and clearing and forwarding agents. Both the aforesaid writ petitions were dismissed vide order dated March 17, 2005. The SLP is pending disposal. 2. The Assistant Commissioner has issued a SCN dated July 4, 2004 to the Company demanding an amount of Rs. 18.7 million as service tax leviable in respect of the consulting engineering / technical know how received from a firm which does not have an office in India. The Assistant Commissioner, Central Excise Division, Mirzapur has issued a SCN dated December 29, 2004 to the Company demanding an amount of Rs. 19.4 million as service tax leviable in respect of the consulting engineering / technical know how received from a firm which does not have an office in India. The reply to the same is yet to be filed. An SCN dated October 11, 2002 was issued to the Company demanding an amount of 5.6 million as service tax leviable in respect of the commission paid to consignment agents. The Company has submitted its reply to the SCN. The Assistant Commissioner, Central Excise, Mirzapur, issued a SCN dated June 4, 2004 to the Company demanding an aggregate sum of Rs. 18.7 million in respect of the alleged non-payment of service tax on consulting engineering services/know-how from non-resident firms. The sum demanded has been subsequently revised. The Company has filed its reply and the matter is pending with the Assistant Commissioner, Central Excise, Mirzapur. Other taxes, fees and cesses The State of Madhya Pradesh has imposed a transit fee at the rate of Rs. 7 per ton on coal (including 4 per cent sales tax thereon) under the Madhya Pradesh (Forest Produce) Rules, 2000. The General Manager, Northern Coalfields Ltd. issued demand notices no. NCL:SGR:Sales:SR:02: 260 and 261 both dated March 1, 2002 and notice no. JRD/AFM/Supply.bill/Transp.fee/2001-02/962 dated March 23/27, 2002, notice No. JRD/AFM/Supply.bill/ Transp.fee/2002-03/218 dated June 19/22, 2002, notice No. JRD/AFM/Supply.bill/Transp.fee/2001-02/219 dated June 19, 2002, notice no. coal/credit/transit fee/RSTPP/2002-2003/148 dated June 10, 2002, notice No. coal/ credit/transit fee/RSTPP/2002-2003/148 dated June 10, 2002 and notice no. coal/credit/transit fee/RPD/20022003 dated July 10, 2002 demanding the said duty of a sum amounting to an aggregate of Rs. 30.31 million to the Company. The Company has filed Writ Petition No. 4115/2002 before the High Court of Madhya Pradesh at Jabalpur challenging the aforesaid demand notices as well as the constitutional validity of order No. F-5/9/10-3/ 2001 dated May 28, 2001 issued by the State of Madhya Pradesh to the Chief Conservator of Forests and notification dated May 28, 2001 fixing the transit fee and letter No. 327/sidhi dated February 2, 2002, as illegal, arbitrary and without jurisdiction. The petition further challenged the constitutional validity of the relevant provisions of the Madhya Pradesh Transit (Forest Produce) Rules, 2000 and Sections 2(4)(b)(iv) and 41 of the Indian Forest Act, 1927. The Company has paid Rs. 114.9 million (upto June, 2005) (recurring) under protest and subject to the judgment in the writ petition. The hearing was concluded on February 24, 2004 and written arguments have been submitted. Orders have been reserved. The State of Madhya Pradesh has imposed a transit fee at the rate of Rs. 7 per metric ton (including 4 per cent sale tax) on bauxite under the Madhya Pradesh (Forest Produce) Rules, 2000. Katni Bauxite Pvt. Ltd. and C.R. Mittal & Co. have issued demand notices dated December 17, 2002 and December 16, 2002 demanding the said fee of amounts aggregating Rs. 0.58 million from the Company for the bauxite supplied to the Company. The Company has filed a writ petition No. 612/2003 before the High Court of Madhya Pradesh at Jabalpur challenging
236

3.

4.

5.

(a) 1.

2.

HINDALCO INDUSTRIES LIMITED


the aforesaid demand notices in addition to challenging the constitutional validity of the order no. F-5/9/10-3/ 2001 dated May 28, 2001 issued by the State of Madhya Pradesh to the Chief Conservator of Forests, notification dated May 28, 2001 issued by the State government fixing the transit fee as well as the relevant provisions of the Madhya Pradesh Transit (Forest Produce) Rules, 2000 and Sections 2(4)(b)(iv) and 41 of the Indian Forest Act, 1927. The Company has paid Rs. 2.1 million (upto May, 2005) under protest and subject to the judgment in the writ petition. The hearing was concluded on February 24, 2004 and written arguments have been submitted. Orders have been reserved. 3. The Janpad Panchayat, Kusmi, district Surguja has, vide resolution dated February 11, 1999 under Section 77 of the Madhya Pradesh Panchayat Raj Adhiniyam, 1993, levied tax at the rate of Rs. 5 per tonne on the transportation of bauxite from bauxite mines situated from Tehsil Kusmi, with effect from January 1, 1999. The Panchayat issued order No. J.P/99 dated February 12, 2002 confirming the said resolution and imposed the said levy on the Company. A demand was made to the Company to pay the said tax for an amount aggregating Rs. 0.38 million. The Company had filed Writ Petition No. 32/2000 challenging the aforesaid levy before the High Court of Madhya Pradesh at Jabalpur which has since been transferred to the High Court of Chattisgarh at Bilaspur. The challenge was on the ground that the levy of the said tax was not within the legislative competence of the State Government or the Janpad Panchayat. The Company is liable to pay tax of an amount aggregating Rs. 5.87 million as calculated upto January 2005. The petition was listed in the last week of February, 2004 but could not be taken up for hearing. The next date of hearing is yet to be fixed. The Divisional Forest Officer, Renukoot has, in exercise of power under Section 41 of the Indian Forest Act, 1927 and Rule 5 of the Uttar Pradesh Transit of Timber and other Forest Produce Rules, 1978, imposed a transit fee at the rate of Rs. 5 per tonne on bauxite being brought by trucks from Madhya Pradesh to Renukoot and on coal moved by the Company by trucks from Madhya Pradesh to Renusagar and also within district Sonebhadra at the rate of Rs. 38 per tonne with effect from June, 2004. The Company has paid a transit fee on coal amounting to Rs. 2.56 million from July 20, 1999 to January 17, 2000 and a transit fee on bauxite amounting to Rs. 0.28 million from July 19, 1999 to January 24, 2000. A transit fee of Rs. 1.12 million has been imposed on bauxite from January, 2000 to May, 2005 and Rs. 145.7 million on coal upto June 2005. The Company has filed Writ Petition No. 40 of 2000 challenging the said imposition before the Allahabad High Court on the ground that the D.F .O, Renukoot does not have the legislative competence to impose the said levy and has further challenged the constitutional validity of Sections 2(4)(b)(iv) and 41 of the Indian Forest Act, 1927. In response to stay application no. 2000 in WP No. 40 of 2000, the Court, vide order dated January 18, 2000, issued a stay on the levy on the condition that if the writ petition fails, the amount will be payable with interest at 18 per cent per annum. The Zilla Panchayat, Sonebhadra has, under the provisions of the Uttar Pradesh Kshetra Panchayat and Zilla Parishad Adhiniyam, 1961, levied a transport/toll tax on the transportation of coal by the Company from the collieries to its factories at Renukoot and Renusagar at the rate of Rs. 30 per truck. The Company has filed Writ Petition No. 587/2003 before the Allahabad High Court challenging the levy. The Petition also challenged the constitutional validity of the said Zilla Parishad Adhiniyam, 1961 on grounds that Zilla Panchayat does not have the legislative competence to frame the impugned bye laws. The realization of the levy has been stayed by the High Court vide order dated April 10, 2003. Vide order dated May 22, 2003, the petition has been clubbed with another writ petition no. 18035 and referred to a Full Bench of the High Court. The order dated April 10, 2003 also directs Petitioner to make necessary changes in their petition and the Respondents to file counter within one month. The Respondents have not filed counters. The petition has been fixed for day to day hearing on November 16, 17 and 18, 2005. Shaktinagar Special Area Development Authority imposed a cess at the rate of Rs. 5 per ton on coal purchased by the Company from Northern Coalfields Ltd. Northern Coalfields Ltd. has demanded the said levy aggregating Rs. 33.2 million (as on June 2005) from the Company. The Company has paid an amount of Rs. 2.4 million. The Company has filed a writ petition No. 791 of 1997 dated April 4, 1997 against the State of Uttar Pradesh and others before the Allahabad High Court challenging the demand. The Company has further challenged the constitutionality of the said levy on several grounds including legislative competence and arbitrariness. The imposition was stayed by the Court on December 19, 1997 with directions not to press the demand for the impugned cess in pursuance of bills raised and also not to raise any further demand for the cess pending further orders. The Respondent Government has filed its counter. The petition was listed on August 11, 2004 and was adjourned. The next date of listing is yet to be announced.
237

4.

5.

6.

HINDALCO INDUSTRIES LIMITED


7. As the monitoring agency for the collection of Research and Development Cess, IDBI demanded the payment of Rs 12.8 million in connection with the import by the Company of TG Sets from ABB Germany. The Company filed an application dated March 14, 2002 with Technology Development Board, the subsequent monitoring agency. The agency refused the refund of the cess paid. The Company has challenged this order through a Writ Petition filed before the Delhi High Court. The Commercial Taxes Department has issued demand notices in Form II dated November 22, 2004, December 23, 2004, January 22, 2005, March 1, 2005, March 22, 2005 and May 10, 2005 to the Company demanding an aggregate sum of Rs. 8155.1 million as the Special Entry Tax in respect of the furnace oil procured by the Company by way of import and indigenously from the State of Karnataka imposed under the provisions of the Karnataka Special Tax on Entry of Certain Goods Act, 2004. The Company filed a writ petition No. 45866/2004 dated November 19, 2004 before the High Court of Karnataka against this notice. The High Court passed an order granting a stay on the proceedings of collection of the Special Entry Tax for the periods April and May 2005. However, the Company is yet to receive the orders certifying the same. The demand notices for April 2005 to July 2005 have been received vide notices dated May 31, 2005, June 23, 2005 and September 2, 2005 and are awaiting a stay in relation to the same. No provision was made for the month of August 2005 as the entire furnace oil was purchased within the State. The date of hearing is yet to be announced. The Directorate of Revenue Intelligence, Gandhidham Regional Unit, has issued a SCN dated July 27, 2004 to M/s. Trisun Chemical Industry, Gandhidham, for alleged irregularity in export along with all importers who have used the duty entitlement pass books (DEPB) issued for these exports. The Company has received a demand of Rs. 3.43 million for utilization of 4 DEPBs at Dahej. The Company has filed its reply on September 14, 2004. There has been no further progress in this matter and it is still pending before the Commissioner of Customs, Kandla.

8.

9.

10. The Director General of Foreign Trade has issued a SCN to the Company in respect of non-submission of export obligation against EPCG License. The reply is under preparation. A personal hearing was held on February 15, 2005. 11. The Dy. Commissioner, Trade, Tax, Sonbhadra has issued SCN dated July 20, 2005 to the Company levying Entry Tax amounting to Rs. 2.5 million for the months of April, May and June 2005 on coal, cement and petroleum products on the ground that Industrial Township is included in the definition of Local Area by virtue of the amendment dated March 24, 2005 made to Section 2 of the Uttar Pradesh Trade Tax Act, 1948. The Company has filed its reply. The Company has deposited an amount of Rs. 5.6 million under protest on August 31, 2005. The Company has sought a legal opinion on the matter, which is pending.

D.
(a) 1.

Civil cases
Cases filed against the Company Bombay Environmental Action Group and Shyam Chainani have filed Writ Petition No. 959 of 1998 on March 16, 1998 before the High Court of Judicature at Bombay seeking to restrain Indal from carrying any mining activity or any other activity of any nature whatsoever in the Iderganj area of Radhanagari Taluka, Kolhapur District on the alleged ground that the mine is within the Radhanagari Sanctuary and the mining activity is carried out by Indal without obtaining the necessary permissions for the same from the relevant authorities and that grave and irreparable harm, loss and injury would be caused to the environment and topography of the Radhanagari Reserve Sanctuary. The High Court has granted a stay order dated April 1, 1998 restraining Indal from carrying on any mining activity in the Iderganj area of Radhanagari, Kolhapur, till further orders. The stay order is still in force. Bombay Environmental Action Group and Shyam Chainani have filed Writ Petition No. 2244 of 98 before the High Court of Judicature at Bombay seeking cancellation of the renewal of mining lease granted to Indal in the Iderganj area allegedly within the Radhanagari Sanctuary in Kolhapur. Stay on the renewal of the lease is in force. The total value of the mining rights which have been affected through these cases was Rs. 22.05 million. The Estate Officer, Air India Limited issued an Eviction Notice dated April 19, 1999 to the Company purporting to act under Section 4 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 claiming that the Company was in unauthorized occupation of an area of 10496.80 sq. ft. on the 15th floor of the Air India Building,
238

2.

3.

HINDALCO INDUSTRIES LIMITED


situated at Nariman Point, Mumbai, and seeking to evict the Company therefrom. The Company filed its reply dated October 4, 1999 before the Estate Officer who passed an order dated October 3, 2001 holding that the Company was in unauthorized occupation of the premises and ordered it to vacate the same. The same officer passed an order on the same day staying the eviction for a period of four weeks in the interests of justice. The Company filed an appeal dated October 11, 2005 before the Principal Judge, Bombay City Civil Court, against this order dated October 3, 2001. The appeal is pending disposal. 4. The Estate Officer, Air India Limited issued a SCN dated November 21, 2003 to the Company purporting to act under Section 7 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 demanding an aggregate of amount of Rs. 320 million as damages in respect of the alleged unauthorized occupation of the Company of an area of 10496.80 sq. ft. on the 15th floor of the Air India Building, situated at Nariman Point, Mumbai, and interest thereon. The Company filed its reply dated December 29, 2003 before the Estate Officer. The Estate Officer passed an order dated March 4, 2004 adjourning the hearing of the matter till further notice. The matter is pending disposal. The Centre for Public Interest Litigation has filed Interim Application No. 152 of 2003 dated May 13, 2003 in Civil Writ Petition No. 202 of 1995 before Central Empowered Committee (CEC) constituted by the Supreme Court in the case of T.N. Godavarman Thirumalpad v. Union of India inter alia alleging that the Company encroached on forest land in Renukoot resulting in loss of flora and fauna of the area which is in violation of the Forest Act, the Forest (Conservation) Act and the Wildlife Act. The Interim Application also alleged that the Company has transferred some of the land allotted to it without requisite sanction, which is also violative of the aforesaid Acts. The complaint has been filed on the basis of internal reports of the Forest Department. The Company filed a counter in reply where it, inter alia took the preliminary objection that the Supreme Court, had earlier, vide order dated August 26, 2002, rejected writ petition No. 238 of 2002, which was filed on identical issues by one Mr. N.K Jain and another, and hence the interim application must be dismissed. The Complainant has filed a rejoinder on December 3, 2003, which refuted the reply by the Company, inter alia on the grounds that the dismissal of the said writ petition was on grounds of the same being misconceived, motivated and belated and therefore did not affect the admissibility of the interim application. The first effective hearing was held on January 5, 2004 where the CEC took note of the preliminary objection filed by the Company as well as the rejoinder and directed the complainant to file an affidavit on two points- namely that the present matter is not covered by the Writ Petition decided by the Supreme Court and that the CEC can entertain the matter despite the dismissal of the earlier writ petition. The date of disposal of the preliminary objection will be fixed after the filing of the said affidavit by the Complainant. Centre for Public Interest Litigation has filed Writ Petition No. 2145 of 99 before the Delhi High Court against the Union of India and Ministry of Environment and Forest seeking issuance of directions by the High Court to the Union of India and its agencies to ensure that the fly ash generated as industrial waste by thermal power plants is utilized for the purpose of making cement or bricks and other building materials. The Petitioner also sought suitable directions from the Court to give effect to the objectives of the draft Notification dated May 22, 1998 under the Environment (Protection) Rules, which aims to prevent the dumping and disposal of fly ash in landfills. The notification was brought into force on September 14, 1999, in pursuance of, inter alia, the order of the Delhi High court dated August 25, 1999 in the aforesaid writ petition directing the Central Government to publish the final notification. Subsequently, the Court has issued directions vide several orders to ensure the compliance of the aforesaid notification. The Company has filed an affidavit on August 22, 2003 certifying that it has reported compliance with the notification vide letter no. P&IR/HRD/5308/10827 dated August 12, 2000 to the Uttar Pradesh Pollution Control Board, letter no. HR/Env/1714/29049 dated March 12, 2002 to the Central Pollution Control Board, New Delhi and letter no. P&IR/Env/6020/11383 to the Ministry of Environment and Forest, Lucknow. The High Court had asked the Union of India to file an affidavit on the implementation of the objectives of the notification by concerned thermal power stations as well as by the State Pollution Control Boards. The Ministry of Environment and Forest in turn asked various thermal power stations including the Company (Renusagar) to file report on the status of the implementation of the aforesaid notification to it. The Company vide letter no. P&IR/Env/1323 dated February 26, 2004, furnished the requisite details to the Ministry of Environments and Forests. The Union of India filed the requisite affidavit on July 14, 2004 before on the Delhi High Court. The next date is fixed on October 26, 2005.

5.

6.

239

HINDALCO INDUSTRIES LIMITED


7. Surendra Nath Dubey has filed Civil Miscellaneous Writ Petition No. 4926 of 2002 dated November 20, 2001 before the Allahabad High Court against the Company seeking to restrain the Company from constructing an ash dam in district Sonebhadra on the ground that such construction would allegedly cause air and water pollution. Notices have been issued by the Court but have not been served on the Company. The Company has completed the construction of the ash dam. The next date for hearing is yet to be fixed. Prakriti Seva Sansthan has filed Civil Miscellaneous Writ Petition No.14403 of 2002 dated April 8, 2002 against, inter alia, the State of Uttar Pradesh and the Company alleging that enquiry by the Sub-divisional Magistrate, Sonbhadra into an accident that took place at the ash dam in 1996 was strongly influenced by the management of the Hindalco Group and therefore was not properly conducted. The Writ Petition also alleges that the ash dam being built by the Company is in breach of applicable environmental norms and therefore has prayed that the Court direct the Respondents to construct a permanent ash dam with professional expertise and advise and take all preventive and ecologically friendly measures to safeguard the environment of the area. In addition, the petitioner also sought an ad interim order directing the Respondent to conduct a fresh enquiry into the accident. The Allahabad High Court admitted the Writ Petition vide order dated April 12, 2002. The Court further directed the District Magistrate, Sonbhadra to personally make a local spot inspection in relation to the incident that took place in 1996 and submit his report. The District Magistrate submitted a report of his findings to the Court on May 22, 2002. Notice has to be issued in this case, which has not been listed thereafter. M/s Trimax Industries Ltd. filed Writ Petitions No.4290 and 4312/02 of 2002 against the Union of India, the Company and others before Orissa High Court challenging an order dated September 18, 2002 in Revision Application No. 22/(II)/2001-R-C-I passed by the Central Government under Section 30 of the Mines and Minerals (Development and Regulation) Act, 1957 and Rule 55 of the Minerals Concession Rules, 1960 in favour of the Company. The impugned order had allowed the revision preferred by the Company against the order of the State Government dated February 14, 2001 rejecting application of the Company and Trimax for bauxite mining lease in Orissa. A similar application for revision by Trimax had been rejected by Central Government vide order dated September 18, 2002. The Court, vide interim order dated October 24, 2002 issued a stay on the revision passed by the Central Government. The High Court vide its order dated May 8, 2003 vacated the stay order. The Court directed the Union of India to file a counter to the Writ Petition. On August 23, 2005 M/s Trimax got its second WP No. 4312/02 dismissed as withdrawn and on August 24, 2005 filed a new WP No. 10756 of 2005 challenging the recommendation and approval of Central Govt. to grant mining lease in favour of Hindalco. The matter was listed on October 4, 2005 and is listed next on November 9, 2005. Similarly, M/s Gimpex Industries Ltd. has challenged an order dated September 9, 2004 issued by the State of Orissa recommending granting mining lease in favour of the Company by filing revision petition no. 22 (8) 2004/RC-I dated November 16, 2004 before the Mines Tribunal, New Delhi. Gimpex Industries has asked for a stay to be imposed on the mining activity. The reply to this application has been filed on January 13, 2005. The matter was finally heard on June 28, 2005 and orders are reserved.

8.

9.

10. Ram Shankar Singh, Shital Shiv Nandan and Abhay Lal have filed Civil Miscellaneous Writ Petition No. 5241 of 2002 dated January 25, 2002 before the Allahabad High Court inter alia against the Government of India and the Company seeking to restrain them from interfering with the possession of the petitioners over certain plots of land in District Sonebhadra. The petitioners have alleged that compensation has not been paid to them in respect of the acquisition of these plots of land by the Government of India under the provisions of the Coal Bearing Areas (Acquisition & Development) Act, 1957. After acquisition, the Government handed over the land to Northern Coalfields Ltd. The Company has taken permission and possession from Northern Coalfields Ltd. for laying of a pipeline. The petitioners have challenged the acquisition of the land as well as the subsequent grant of permission to the Company from Northern Coalfields Ltd. On an interim application filed in March, 2005 the Court ordered that in case the possession of the land is still with the petitioners, they should not be dispossessed. The matter is yet to be listed for hearing. 11. Agnorpeth Shri Sarveshwari Samooh filed Civil Misc. Writ Petition No. 3800 of 2001 dated November 21, 2001 against the State of UP the Company and others before Allahabad High Court alleging that peaceful possession , of the land occupied by the Ashram managed by the Petitioner society, is being disturbed by officials of the Company, who dispute the Petitioners ownership and possession of the Ashram premises. The petitioner also filed a stay application No. 3800 of 2001 asking the Court to direct the Respondents not to interfere in the peaceful possession and functioning of the Petitioner society and further direct them to permit the free flow of
240

HINDALCO INDUSTRIES LIMITED


goods in the Ashram premises and further to direct the Respondents to allow the Petitioner to construct a tube well on its premises. The Company has filed its counter affidavit before the High Court. The next date for hearing is yet to be fixed. 12. Indian Bank has filed O.A. No. 66 of 1994 against the erstwhile Renusagar Power Company, its directors and the Company before Debt Recovery Tribunal, Calcutta claiming differential interest amounting to Rs.6.5 million in relation to a term loan of Rs. 34.5 million with an interest of 4.5 per cent per annum over the official rate of the Reserve Bank of India with a minimum of 13.5 per cent per annum from the date of execution of documents till the date of payment in full, availed by the erstwhile Renusagar Power Company under a term loan agreement dated June 23, 1981. The Indian Bank has alleged that the Company, as guarantor of the said loan has failed to make the payment of interest in accordance with the terms of the disbursement. Subsequently, the name of the Company was substituted as Respondent no. 1 vide order of the Debt Recovery Tribunal dated July 5, 2002. The matter was fixed for judgment on February 2, 2004. However, the Presiding Officer could not deliver the judgment and retired. The matter was adjourned for arguments on August 22, 2005 after which it has been further adjourned for arguments till November 16, 2005. 13. Md. Hussain and others, who are residents of the Nagar Panchayat, Renukoot have filed Writ Petition No. 39739 of 2000 dated August 20, 2000 against the State of Uttar Pradesh, the Company and others before the Allahabad High Court challenging the Notification dated April 7, 2000 which declared the property held by the Company in Renukoot, Uttar Pradesh as an Industrial Township by virtue of the power given to the Governor of Uttar Pradesh under Article 243-Q of the Constitution. The petition was filed on the grounds that the notification is based on information including information that no service within the area has been rendered by the Nagar Panchayat Renukoot, the population of the area and the area and size of the Hindalco establishment, all of which is incorrect and unsubstantiated. Further, the petition alleges that a hearing has not been provided to the general public of Renukoot or the elected Nagar Panchayat Committee before the making of such notification. The petition alleges that the objective satisfaction of the Governor in declaring the area as an Industrial Township is not supported by any evidence or material and that the Governor has not applied his mind in issuing such notification. Notices have been issued to the Respondents. The Company is yet to file its counter. 14. Yogendra Knitting Mills has filed Civil Suit No. 812 of 2000 against the Company for possession of the godown premises situated at Najafgarh Road, New Delhi, which was leased to the Company vide lease deed dated May 23, 1972 and recovery of damages/mesne profit of Rs 0.16 million per month with effect from April 1, 2000 till the date the possession of the suit property is handed over to the Plaintiffs on the ground that the lease had expired and tenancy was accordingly terminated, vide legal notice dated December 1, 1999. The Plaintiff in the present case alleged that despite repeated notices, the Company failed to vacate the said godown premises, and is in illegal and unauthorized possession and use of the said property. The Company has filed counter claims stating, inter alia, that there is a valid and subsisting lease agreement between the parties. The Plaintiff had filed Interim Application No. 3880 of 2000 in the aforesaid suit under Section 151 of the Code of Civil Procedure, 1908 asking the Court to direct the Company to pay damages and mesne profits pending disposal of the suit. The Company has filed counter to the same. The next date fixed in the matter is to be fixed. 15. Six cases have been filed wherein parties have made representation to have small plots of land held by the Company, recorded as their ownership in the revenue records in Mirzapur District. The tehsildar and subsequently the Assistant Record Officer passed orders in favour of the Plaintiffs. The Company filed revision petitions before the Commissioner, Mirzapur and the Board of Revenue which are still pending. 16. In Appeal No. 3501 of 1994, similar to those mentioned hereinabove, filed by Nokhai, the Assistant Record Officer vide order dated April 22, 1994 ordered mutation of the revenue records in the name of Nokhi, deleting the name of the Company, in respect of certain plots, recorded in the name of the Company. These lands had been purchased by the Company through a sale deed registered under the Government Grants Act, 1895. The Company has filed an appeal before the Record Officer, Sonebhadra against this order. The date of hearing is yet to be fixed. 17. Five cases have been filed against the Company seeking an order of permanent injunction against the construction of an ash pipeline by the Company. The cases have been filed on the premise that the construction is interfering with their enjoyment of their property. The Company is in the process of erecting an ash dam, pipeline and roads on these properties. In some of the cases temporary injunction against the demolition of contested property has
241

HINDALCO INDUSTRIES LIMITED


been passed. These cases are still being heard at the court of the Civil Judge. 18. Ashok Kumar and others have filed Civil Miscellaneous Writ Petition No. 18683 of 2005 before the Allahabad High Court against the Company. The Company had filed Civil Suit No. 33 of 1987 before the Court of the Civil Judge (Junior Division), Dudhi for permanent injunction and demolition of unauthorized construction made by the petitioners on the Companys land in District Sonebhadra. To comply with the condition imposed in the Environment Management Plan (EMP) to upgrade the existing Effluent Treatment Plant (ETP)/Sewage Treatment Plant (STP) to ensure zero discharge, a pipeline from STP to Alumina Plant was laid by the Company. A portion of the pipeline also passed beneath the land on which the Petitioners unauthorized construction exists. The Petitioners moved an application before the Court of the Civil Judge on September 14, 2004 seeking to restrain the Company from passing the pipeline from underneath the construction of the petitioners and from utilizing the pipeline for drainage. The trial court allowed the application on December 24, 2004 and restrained the Company from using the pipeline. Aggrieved by this order of the trial court, the Company filed a miscellaneous appeal before the District Judge, who allowed the appeal on February 8, 2005 and vacated the injunction order passed by the trial court. Aggrieved by the aforesaid order, the Petitioners filed the instant writ petition. The petition was taken up by the High Court on March 3, 2005. No interim order was made by the Court against the Company. The matter is to be listed in the next cause list. 19. Twelve shopkeepers of Birla Market filed O.S. No. 13 of 90 on May 22, 1990 before Civil Judge (S.D), Robertsganj against the Company for permanent injunction against demolition of their property and for declaring them as tenant of their respective shops on the basis of rent receipts issued to them by the Company. The Company has contended that the Plaintiffs are mere licensees of the shops. Another similar suit was filed by Gulab Chand Baid in OS. No. 138 of 2004 of October 5, 2004 against the Company asking for the same relief with respect to the same property. The matters are pending before the Civil Judge (S.D.), Robertsganj. 20. In respect of the same property, the Company has filed cases Nos. O.S. 57 - 64 of 2001 dated July 6, 2001 and O.S. No. 27 of 1991 dated April 27, 1991 before Civil Judge (S.D.) Robertsganj for eviction of the shop keepers of the Birla Market. In a related matter, the Company filed Civil Contempt No. 46 of 2003 before Civil Judge (S.D.), Dudhi against the attempt of the Plaintiff to violate the stay order of court in Case No. 13 of 1990 dated September 18, 1990 by making construction over the shop in question. The matters are pending disposal. 21. Three cases have been filed on January 21, 1993, January 22, 1993 and May 28, 1996 before Civil Judge (S.D) Robertsganj for permanent injunction against encroachment by Company by construction of hutment over land near Junior Type quarters. Company has filed an eviction suit against defendant. An application for consolidating these cases has been filed. 22. Shivachal filed O.S. No. 99 of 1999 on August 11, 1999 before Civil Judge (S.D.), Robertsganj for permanent injunction against the Company claiming himself to be owner of land lying on the north side of the cinema hall in Roberstganj. The Company has asserted that land in question is part of land comprised in a sale-deed dated January 29, 1985 executed by Government of Uttar Pradesh in favour of Company. The matter is pending disposal. 23. Dharmu filed O.S. No. 90 of 1997 on October 1, 1997 before Civil Judge (J.D.), Dudhi for permanent injunction. Plaintiff claims that the Company has illegally constructed a road in his land. The matter is pending disposal. 24. Jaimati Devi filed suit O.S. No 60 of 1998 on July 6, 1998 before Civil Judge (S.D.), Robertsganj for declaration and permanent injunction against Company, claiming her right and title over the impugned land lying opposite to a cinema hall in Roberstganj. The Company has moved for declaration and permanent injunction against encroachment by Jaimati Devi on the Companys landed property which has been constructed by the Company for its labourers. Both parties have given evidence. The matter is pending disposal. 25. Mahendra Singh filed O.S. No. 61 of 1998 dated September 13, 1999 claiming to be in charge of Renukoot Private Bus Stand before Civil Judge (J.D.),Dudhi and has sought permanent injunction order against Satyanarain, for restraining him from making any unauthorised construction over the structure of bus stand. On October 23, 2003 the Court found that as per revenue record on the land in question, the name of the Company is recorded as owner of the land and ordered plaintiff to make the Company a party to the suit. Hence the Company was made party to the suit as defendant and summons were issued to the Company for appearance before the Court on May 31, 2004. The Company has appeared in the case by filing its vakalatnama. The matter is pending disposal.
242

HINDALCO INDUSTRIES LIMITED


26. Ram Yash filed O.S. No. 36 of 2004 on April 16, 2004 before Civil Judge (J.D.), Dudhi for permanent injunction against his eviction from Companys quarters. Ram Yash, an assistant teacher in the school had without authorization occupied Companys quarter No. L-217. Court has granted an injunction order against defendants vide order dated April 16, 2004. The matter is pending disposal. 27. Two cases have been filed before Civil Judge (S.D.), Robertsganj for permanent injunction by ex-employees of the Company alleging wrongful dismissal and seeking permanent injunction against the Company, restraining it from eviction from the Companys quarter HH-86. Court has dismissed Interim Injunction on May 28, 2005 earlier granted in Plaintiffs favour. The Company has filed its written statement. The matter is pending disposal. 28. A civil suit bearing No. 17 of 2002 has been filed by Pragat Krishi Sadhan Kendra on October 5, 2002 at Shahada Court, Nandurbar on the ground of loss of profit amounting to an aggregate of Rs. 1.15 million. A hearing was held on October 21, 2002 and the Company has filed its reply on November 22, 2002. The Civil Judge, Shahada court has decided the case against the Company. A Writ Petition has been filed by the Company on August 9, 2004 before the Aurangabad bench of the Bombay High Court. The High Court has stayed the proceedings in the civil suit. The Writ Petition has not come on Board. 29. Gopal Pushkaran filed O.S. No. 77 of 1994 on October 21, 1994 before Civil Judge (S.D.), Robertsganj praying to restrain the Company from transferring his shares in the Company to another person and for directions to the Company to issue him duplicate shares. The Company has filed an affidavit stating that M/s Parley Product, Mumbai has lodged these shares for transfer. The plaintiff died in the course of proceedings and an application for substitution of his legal representatives has been filed. The Company has filed its objection to this application. The matter is pending disposal. 30. Adi Nath Pandey, Ramnaval Singh and Jagdish Prasad jointly filed O.S. No. 69 of 1994 dated September 1, 1994 against the Company before Civil Judge (S.D.), Robertsganj for permanent injunction restraining the Company from transferring their shares, which they allege have been lost. The above suit was dismissed in default of the Plaintiffs appearance. A restoration application has been moved by Adi Nath Pandey by means of Misc Case. No. 8 of 2004 dated April 16, 2004. The Company has filed its objection against the restoration on August 4, 2004. The matter is pending disposal. 31. Adwait Gyan Mandal has filed O.S. No.54 /1986 against the Uttar Pradesh Chalchitra Nigam and the Company. The case was filed on May 30, 1985 before Additional District Judge. Some property belonging to the Company was given to the Uttar Pradesh Chalchitra Nigam with sanction from Uttar Pradesh Government to construct a picture hall. When construction was started, the above suit was filed by Adwait Gyan Mandal for injunction to restrain Uttar Pradesh Chalchitra Nigam. The Company has become party to the suit because the land belonged to it. Originally, suit was filed on October 17, 1979. Due to mistake in pecuniary jurisdiction, it was returned and re-numbered as 54 of 1986. The proceeding is stayed vide order of High Court dated May 7, 1992. In the same matter, Civil Misc. Contempt Petition No. 887 of 1992 was filed by Mr. R.D. Singh. The matter is pending disposal. 32. The Company and Grasim had purchased 50% of the undivided share of immovable property at plot No. 216A Annie Beasant Road, Worli, Mumbai in a sale auction by the recovery officer, Debt Recovery Tribunal I, Mumbai. The sale was confirmed on March 10, 2005. M/s Worli Enterprises Limited claims to be a tenant in possession in premises situated in the above property and had filed RA Declaration Suit Nos. 940, 941 and 942 of 1996 in the Court of Small Causes, Mumbai and has impleaded the Company and Grasim as parties to the case vide Interim Notice No. 1143 of 2005. The company and Grasim have orally undertaken to the Court that they will not demolish any structures on the property till the next date of hearing. The matter is pending before the Small Cause Court. 33. Pursuant to resolution dated June 17, 2005 passed by Mines & Geology Department, Government of Jharkhand, the District Mining Officer, Lohardaga has issued six demand notices dated August 18, 2005 (three notices) and September 2, 2005 (three notices) amounting to Rs. 32.1 million towards payment of increased surface rent with effect from January 1, 2005 on the mining leases for bauxite situated in Lohardaga and Gumla. The Company has replied to the same vide reply dated September 9, 2005 for Lohardaga and September 21, 2005 for Gumla. Civil cases filed against the Company for claims under Rs. 1 million Apart from the cases described hereinabove there are 2 civil cases filed against the Company for amounts aggregating

243

HINDALCO INDUSTRIES LIMITED


to Rs. 1.7 million. (b) 1. Cases filed By the Company A claim for anode slime insurance at Noranda has been filed and admitted by National Consumer Forum for Rs. 28.4 million on August 3, 2004. A hearing was held on November 10, 2004. M/s. New India Assurance Co have submitted their replies. National Consumer Forum is yet to determine the next hearing date. Company filed O.S. No. 50 of 1981 on December 18, 1981 before Civil Judge (J.D.), Dudhi against unauthorised construction by Jai Singh over the Companys land lying on western side of the metal road. The Company moved an application for exhibiting certified copy of the sale deed of 1962 filed by it which was executed 30 years ago. Trial court rejected this application on November 30, 2000. Company filed a Revision Petition against this order, and the same was allowed on December 2, 2002 with direction to trial court to decide the application again. However, the trial court rejected the application on February 17, 2003. Hence the Company filed Revision Petition No. 3 of 2003 before the court of Civil Judge against the order. In a similar case against Shankar (O.S. No. 18/1985 on January 28, 1985) before the Civil Judge (J.D.), Mirzapur, proceedings have been stayed since 1993 pursuant to an order issued by the High Court dated October 14, 1993 passed in Writ Petition No. 25/ 1993 filed by the Defendant in the O.S. No. 18/ 1985. The matter is due to be listed before the High Court. The Company has filed four cases against encroachment over the Companys land lying adjacent to the metal and other roads in Robertsganj belonging to the Company before the Civil Judge, Dudhi. In these cases, the trial court has passed orders against the Company. The Company has subsequently preferred appeal in the Allahabad High Court. The Company filed O.S. No. 25 of 1983 on July 17, 1983 against Jahangir on August 18, 1988 before Civil Judge (J.D.), Dudhi for eviction from and demolition of unauthorised construction over the Companys land near Atithigirh behind the Zila Parishad Shops. The Defendant filed his written statement on February 24, 1993. Evidence of the Company has been concluded. Evidence of the Defendant is yet to be adduced. The matter is pending disposal. The Company filed O.S. No. 4 of 1984 on March 13, 1984 for eviction from and demolition of unauthorised construction by an ex-employee over the Companys land lying to the north of the petrol pump owned by the Company. Judgment was pronounced against the Company on September 24, 2001. The Company filed an appeal against this order on November 8, 2001. In a similar case, the Company has also filed O.S. No. 35 of 1999 on March 24, 1999 against Shakantha which is pending trial. The Company filed O.S. No. 30 of 1984 against Dwarika on October 31, 1984 before Civil Judge (J.D.), Dudhi for permanent injunction on and demolition of unauthorized construction of two rooms by Dwarika Singh and Lallan Rai on Company land adjacent to Janta School, pleading that the Company is the owner of the land and the school building in question. Two school managing committees appeared before the court for impleadment. Owing to this technical issue, steps were taken by the Company to withdraw the suit with liberty to file fresh suit and an application was moved on September 12, 2000 for conditional withdrawal. This application was dismissed on November 7, 2000 for non-appearance of the party. A restoration application has been moved. The matter is pending disposal. The Company has filed two cases against Barkat (OS. No. 82 of 1994) and Ramdei (C.A. No. 36 of 1996) before Civil Judge (J.D.), Dudhi and Addl. District Judge, Robertsganj against unauthorized construction on Company land. Ramdei filed suit OS. No. 7 of 1971 for permanent injunction against Company on January 1, 1971 and in response the Company filed suit for eviction & demolition on November 26, 1984. Both the cases were consolidated and disposed off on September 12, 1996 by common judgment in favour of the Company. Ramdei filed an appeal against the judgment. Court dismissed the appeal on August 18, 2004 in default of appearance of the Appellant in favour of the Company. The Company has filed Execution Application No. 2 of 2004 on December 22, 2004. The final order is pending. The Company has filed four cases for permanent injunction against encroachment on Companys land lying on south of Kali Mandir and Cinema Hall before the District Judge, Sonbhadra at Robertsganj. These cases are all pending at various stages of hearing. The Company has filed two cases before the Second Addl. District Judge, Robertsganj for eviction & demolition of encroachment by appellant over the Companys land lying on east of Public Works Department road. One of
244

2.

3.

4.

5.

6.

7.

8.

9.

HINDALCO INDUSTRIES LIMITED


the cases, Bhola vs. the Company (C.A. No. 23 of 1999 filed on September 21, 1999), was decreed on August 12, 1999 in favour of the Company. An appeal dated September 21, 1999 against this order has been filed before the Court of the District Judge, Sonbhadra, which is pending disposal. 10. The Company has filed two suits, O.S. No. 143 of 1999 dated September 30, 1999 and O.S. No. 144 of 1999 dated November 11, 1999 before Civil Judge (S.D.), Robertsganj for permanent injunction against encroachment by defendant over Companys land lying on southern side of the Uttar Pradesh Roadways bus stand. These cases are in various stages of trial. 11. Two cases for permanent injunction in O.S. No. 8 of 2000 filed on February 2, 2000 against Mohd. Naeem and O.S. No. 14 of 2000 of February 9, 2000, against Ranglal have been filed by the Company before Civil Judge (S.D.), Robertsganj against encroachment by Defendants over the Companys land lying near the Companys petrol pump towards western side of metal road. In O.S. No. 8 of 2000, an amendment to the Company plaint map has been allowed. In O.S. No. 14 of 2000, the Company has moved an application for issue of process against the Defendant through publication. 12. Four cases have been filed by the Company for eviction and demolition orders against encroachment over the Company land near the Companys Petrol pump on western side of metalled road before Civil Judge (S.D.), Robertsganj. In O.S. No. 143 of 2002 of November 14, 2002 against Satyanarain, an application for substitution has been moved. In O.S. No. 144 of 2002 of November 14, 2002 against Lallan Rai, an amendment application was moved by Company which was allowed. In O.S. No. 9 of 2003 of January 14, 2003 against Lalman, the Court has ordered for issuing process through the Gazette against the Defendant. In O.S. No. 10 of 2003 of January 14, 2003 against Hublal, publication against the defendant has been carried out. 13. Three cases have been filed by the Company against encroachment by the Defendant over Company land near junior type quarters before Civil Judge (S.D.) Robertsganj on August 6, 2001. These cases are pending disposal. 14. Two cases have been filed by the Company against Shiv Pratap for permanent injunction against unauthorised construction over Companys land lying on western side of Aditya Birla Public School before Civil Judge (S.D.), Robertsganj being O.S. No 10 of 2004 of January 23, 2004 and O.S. No. 113 of 2004 of August 11, 2004. These cases are pending disposal. 15. Two cases have been filed by the Company before Civil Judge (J.D.) against the encroachment of land held by the Company by Triveni Bai. In one of these cases, the Company has sought injunction against the establishment of a deity on the disputed land. The case was filed on January 7, 1986 and the next hearing on evidence is fixed for October 10, 2005. 16. Eight ejectment suits have been filed by the Company against encroachment over the Companys land towards the east side of the metal road, Pipri-Shaktinagar Marg before the Civil Judge, (S.D). In two of these cases, the Company has received favourable orders and in the other orders the suit has been decreed ex parte and the ex parte argument is pending. 17. Eighteen ejectment suits filed against encroachment over the Companys land towards the eastern side of the metal road Pipri-Shaktinagar Marg before Additional Civil Judge (S.D.) on January 1, 1988 bearing O.S. Nos. 1/ 1988 to O.S. No.18/1988. In all these cases the suit has been decreed ex parte and the ex parte argument is pending. With regard to the same property, an injunction suit has been filed before Civil Judge, (S.D.). This suit was dismissed for default and thereafter, Restoration Petition is pending. For the same property, four suits for demolition and possession have been filed before Civil Judge, (S.D.) which are pending at various stages of trial. Two cases have been filed with regard to removal of illegal possession on this property before Civil Judge (Jr. Div.). The matters are pending. 18. The Company has filed O.S. No. 97 of 1983, before Civil Judge, Dudhi on July 5, 1983 against Pragatisheel Mazdoor Sabha claiming ownership over the building housing the office of the Trade Union of the Company. The civil suit was decided against the Company and an appeal was preferred before District Judge, Mirzapur. The District Judge vide order dated December 3, 2003 rejected the appeal holding that unless the union was derecognized by the Labour Court in accordance with the provisions Indian Trade Unions Act, 1926 it could not be evicted from the building as per agreement dated December 10, 1973 arrived at between the Company and the Union. Aggrieved by the order the Company filed a second appeal bearing No. 19 of 2002 before the Allahabad
245

HINDALCO INDUSTRIES LIMITED


High Court. The matter is pending disposal. 19. The Company had filed Writ Petition CWJC No. 2945 of 96 (R) before the Ranchi High Court for refund of excess cess on royalty paid at 500 per cent instead of 133.33 per cent between June, 1985 and April, 1988. The amount involved is Rs. 24.7 million. On December 23, 2003 the Writ Petition was dismissed by the Ranchi High Court. The Company filed SLP No. 10367 of 2004 dated April 5, 2004 against this judgment in the Supreme Court. On July 8, 2004, the SLP was admitted and notice was issued to the State. The matter is pending disposal. 20. The Company filed a case of libel against Dr. S.R. Jindal and others (Civil Suit No. 1202 of 2002) dated July 24, 2002 before the Delhi High Court for recovery of Rs. 14.5 million as damages for the loss of reputation of the Aditya Birla Group. Written statement has been filed by the Defendants. The case was posted on August 8, 2005 for admission and denial of the documents. The next date of hearing is fixed on October 28, 2005 for filing of the documents. 21. The Company has filed a Writ Petition No. 33744 of 2004 dated August 10, 2004 before the Allahabad High Court against the orders of Additional District Judge, Obra dated February 2, 2003, November 18, 1992 and January 30, 1993 whereby the learned judge upheld the possessory rights of Awadhot Bhagwan Ram Ashram over land plot No. 169 (old) in village Jokahi in favour of the Ashram. The Company contends that this land rightfully belongs to the Company and had been transferred to it by way of sale in 1971 and in 1976 this ownership and possession had been reconfirmed by declaration of the Revenue Officer under the Uttar Pradesh Zamindari Abolition and Land Reforms Act. On August 10, 2004, a stay application against the impugned order has been filed. By order dated August 20, 2004 the High Court had issued notice to the Respondents to file counter affidavit which has yet not been filed. 22. The Company has filed Writ Petition No. 4630 of 2000 dated July 31, 2000 in the Jabalpur High Court against the decision of South Eastern Railway to retrospectively revise plot rents such that a claim of Rs 5.1 million is due from the Company. On August 9, 2000, the Jabalpur High Court granted stay in favour of the Company. The case has since been transferred to Bilaspur High Court and is to be listed for arguments. 23. The Company has filed two cases against the Syndicate Bank for non-payment against letters of credit issued in respect of a sum of Rs.2.52 million owed to the Company by M/s.Ramakrishna Metals Pvt. Ltd. and M/s. Ishwar Metals. The required documents were lodged with the Syndicate Bank against the letters of credit, but were rejected by the Bank. The matters are pending disposal. 24. The Company has filed a civil suit against Ramesh Chand Industries for an amount aggregating to Rs. 5.3 million. The next hearing of the case is on December 5, 2005. 25. The Company filed Complaint Case No. 71/SC/1997 against the Managing Director of UP Airways and others before the State Consumer Disputes Redressal Commission, Uttar Pradesh claiming refund on purchase of tickets, interest and compensation amounting to an aggregate of Rs. 1.35 million on grounds that the flights operated by the Respondent on the Delhi-Allahabad-Muirpur-Lucknow route were irregular and flights on the aforesaid route were completely stopped by the Respondent on May 7, 1996, thereby leaving the Company with 172 valid unused tickets, which according to the terms of issue of the tickets, were to be used by June 30, 1996 and 39 tickets for flights which were cancelled. The complaint alleged that the Respondent failed to revalidate the tickets or refund the amount of money spent on the cancelled tickets. The Commission, vide an order dated May 13, 2004 decided the matter in favour of the Company and awarded them a sum of Rs. 0.66 million as refund due to the discontinuance of service along with an interest of 6 per cent from the date of deposit of the amount by the Complainant to the date of refund. The Managing Director, UP Airways and UP Airways filed First Appeal No. 6 of 2005 against the aforesaid order of the State Commission, before the National Consumer Disputes Redressal Forum, inter alia on the grounds that the State Commission, Lucknow had no jurisdiction to try the case, the dispute is not a consumer dispute and the Company is not a consumer within the meaning of the Consumer Protection Act, 1986 and that the Company breached its obligations under the contract of purchase of tickets and cannot claim benefit from its own default. The National Commission admitted the appeal vide order dated February 11, 2004 and also directed that notice be issued. Notice has been issued to the Company on February 25, 2005. According to the notice, the matter was due to be listed on April 23, 2005. However, the matter is yet to be listed. 26. The Company has filed a series of Writ Petitions against the orders passed by the Uttar Pradesh Pollution Control
246

HINDALCO INDUSTRIES LIMITED


Board under Section 13 of the Water Cess (Prevention and Control of Pollution) Act, 1977 which had alleged wrongful use of water from the Rihand lake. The total amount that has been paid by the Company under protest is Rs. 8.17 million. The Writ Petitions have been admitted but no further date of hearing has been given by the Court. 27. The Company has filed cases against Somaru and Atma Ram before the Civil Judge, Dudhi against the act of encroachment on the Company land and obstruction of use of the same. In the case against Somaru (CA No 15/ 2000) an adverse order was passed on July 17, 2000 against the Company which has been appealed at the level of the District Judge. In the other case, temporary injunction has been passed in favour of the Company on April 20, 2000. An execution application has been filed by the Company which is scheduled for ex parte hearing. 28. The Company has also filed summary suits bearing numbers 4879 of 2002 against Swastik Corporation, 4880 of 2001 against Adarsh Metal Industries, Bombay and 623 of 2003 against Ruby Coach Industries, Ltd., Mumbai in the Bombay High Court inter alia on grounds of default in payment against supply of sheets. The values of the cases are Rs. 25 million, Rs. 15 million and Rs. 5.4 million respectively. In the first two matters, the trial is in progress and the matter is pending listing in 623 of 2003. The said Adarsh Industries is a sister concern of Swastik metal Corporation and is owned by the same owner. Both these parties have closed their business, are insolvent and have no property. In respect of Ruby Coach Industries, an out of Court settlement process is going on with the said party. The matters are pending disposal. Civil cases filed by the Company for claims under Rs. 1 million Apart from the cases described hereinabove there are 95 cases filed by the Company. The approximate amounts in these cases are an aggregate of Rs. 31.59 million.

E.
(a) 1.

Miscellaneous Cases
Cases filed against the Company Three cases have been filed under Section 5 and 26 of the Indian Forest Act, 1927 (Forest Act) before the Magistrates Court by the Divisional Forest Officer, Renukoot alleging encroachment upon forest land by the Company through incorrect construction of boundary wall. In each of these cases, the Investigating Officer has recommended that an application for invocation of Section 63 of Forest Act be made. Eight cases have been filed before the Judicial Magistrate at Lohardaga for breach of Sections 25, 26 and 33 of the Forest Act by the Company. It is alleged in these cases that the Company has engaged in activities not permitted in the forest area such as mining, construction of road and transportation of bauxite. In three of these cases, the High Court has admitted a petition for quashing the proceedings and has stayed the proceeding in the lower court. In three other cases, the lower court is hearing the case. In two of the cases, the sanction of the Deputy Forest Officer for continuing the proceedings is awaited. Two cases have been filed against the Company under Section 52 of the Forest Act before the Divisional Forest Officer for the confiscation of materials illegally collected from the forest. One of these cases is pending hearing before the Divisional Forest Officer. In the other case, an adverse order was passed by the Officer on March 3, 2005. Against this order, Writ Petition (Cr) No.146 of 2005 was filed at Jharkhand High Court, Ranchi on April 19, 2005 and the order of the lower court was stayed vide order dated May 12, 2005. Two certificate cases 01 (RL) 2001-2002 & 11 (RL) 2001-2002 were filed before the Ranchi Certificate Office by the District Mining Officer, Lohardaga claiming royalty on Vanadium Sludge. The first case involves royalty amounting to Rs. 6 million for the period 1990 2000 and second case involves royalty amounting to Rs. 2.9 million including interest for substantially the same period. In the first case, the Certificate Office has ruled against the Company. The Company has preferred an Appeal No. 18 of 2001 on August 25, 2001 before the District Court, Lohardaga and has deposited 40 per cent of the amount. In the second case, the Company has filed an objection before the Certificate Officer stating that the manner of calculation of royalty is wrong. No date for hearing has yet been fixed. The Assistant Mining Officer, Gumla filed certificate case No. 07/GR/2003-04 dated August 19, 2003 in the court of Certificate Officer, South Chhotanagpur Anchal, Ranchi for realization of Rs. 6.01 million against cost of mineral bauxite allegedly illegally mined and despatched from out of the lease area of Jalim and Sanai Mines by the Company. The Company has filed denial petition under Section 9 of Bihar and Orissa Public Demands Recovery
247

2.

3.

4.

5.

HINDALCO INDUSTRIES LIMITED


Act, 1914 on September 19, 2003 before the Certificate Officer Court, Ranchi. The case is pending for final hearing in the court of Certificate Officer, Ranchi. 6. The Assistant Mining Officer, Lohardaga, issued a demand notice dated January 5, 2002 directing the Company to pay an amount aggregating Rs, 19.55 million (together with Mines & Minerals Ltd.) in respect of the alleged arrears of royalty on vanadium sludge payable by the Company and interest thereon till December 31, 2001. The Company disputed its liability and the matter was referred to the Certificate Officer (Mines), Ranchi, who commenced certificate proceedings under a notice dated January 15, 2002. The Company filed Writ Petition No. 6839 of 2002 before the Allahabad High Court challenging the notice dated January 5, 2002 and January 15, 2002. The High Court passed orders dated February 14, 2002 and March 22, 2002 holding that in case the Company deposited 50 per cent of the aggregate amount and furnished a bank guarantee for the remaining amount, any further action including the certification proceedings pursuant to the demand notice would remain stayed. The Company has complied with the aforesaid conditions. The Assistant Mining Officer, Gumla vide Notice dated June 13, 2005 demanded royalty on Vanadium amounting to Rs. 13.8 million for the period 1991-92 to 2000-01 with interest of Rs 26.7 million calculated upto March 31, 2005. The Company has furnished a reply to this notice denying the liability. The Certificate Officer has issued notice to the Company on July 25, 2005 for realization of the dues. The Company has denied its liability to pay vide August 25, 2005. The reply from the Assistant Mining Officer has also been filed before the Certificate Officer on September 6, 2005. The matter is pending disposal. The Company has filed Revision Application dated January 21, 2002 under Section 54 of the Mineral Concession Rules, 1960 before the Revisional Tribunal, Mines, Delhi against the order of the Government of Maharashtra dated February 16, 2002, granting mining lease rights to Mr. RM Mohite in Kolhapur copper mines of area 1312.41 hectares. Revision hearing was held on June 13, 2004 and was concluded on June 20, 2004. The order of the tribunal is awaited. The Company has filed Title Suit No. 174 of 1999 in the court of the Civil Judge Sambalpur against the encroachment of land held by the Company at Hirakud against Mrs. B. Kanta and others. The case is posted for hearing.

7.

8.

9.

Miscellaneous cases under Rs. 1 million Apart from the cases described hereinabove there are 6 other cases filed against the Company. The approximate amounts in these cases are an aggregate of Rs. 1.87 million. (b) 1. Cases filed by the Company The Company has filed a Writ Petition No 2530 (MB) of 1994 on May 18, 1994 in the Allahabad High Court against the order of the Uttar Pradesh State Electricity Board (UPSEB) dated July 8, 1993 claiming an additional Rs. 35.7 million as water rates for the withdrawal of water from the Rihand Reservoir on account of retrospective revision of water charges for the period from 1989-90 to 1992-93. An order staying recovery has been passed on May 18, 1994. This case has been tagged with writ petition no. 2219 of 2001 below and has not been listed for hearing after July 2001. The Company has filed a Writ Petition No 2219 of 2001 in Allahabad High Court on May 9, 2001 against the claim of Rs. 5.1 million in arrears by the Uttar Pradesh Jal Vidyut Nigam Ltd. due to retrospective revision of water charges for water drawn from upstream and down stream of Rihand Reservoir from January 14, 2000 to January 31, 2001. Stay was granted for arrears on May 11, 2001.The case has been tagged with Writ Petition No. 2530(MB) of 1994 and has not been listed after July 2001. The Deputy Officer, Mines Department, Sonbhadra, vide citation to appear dated February 12, 2000 has demanded a royalty of Rs. 9.1 million on minor mineral illegally mined and utilized by the Company on its factory premises. The Company has challenged the said levy vide Suit No 19/2000 dated before Civil Judge (Sr. Div.), Sonbhadra. The demand has been stayed vide conditional stay order dated May 9, 2000 which required deposit of the demand amount by way of fixed deposit in a nationalized bank for period specified in the order. The Company has paid the said amount. The case is fixed for disposal of preliminary issues on maintainability of the suit. The date of hearing is yet to be fixed.

2.

3.

248

HINDALCO INDUSTRIES LIMITED


4. The Company filed Writ Petition O.P No.10472 of 1998 dated June 6, 1998 before the Kerala High Court against . the demand/disconnection notice of May 27, 1998 which followed the decision of the Kerala State Electricity Board of February, 1998 to withdraw the facility of clubbing of electricity availed by the Company. Amount involved is Rs.66.3 million for the period between February 1998 to June 1998.The Kerala High Court has stayed proceedings on September 24, 1998 for recovery of the disputed amount and directed the Board not to disconnect power supply till disposal of the matter. Hearing is awaited. The Company has filed a Review Application (Case No 3 of 2002) before the Deputy Commissioner, Lohardaga against the order dated September 3, 2001 citing encroachment by the Company on a public road passing through the leasehold area in Lohardaga Mine. A criminal complaint had also been filed which the Company has prayed be rescinded in this application. Review petition was filed with Deputy Commissioner in October 2001. The said matter is pending before the Deputy Commissioner. The Company filed a Writ Petition No. 5633 of 2004 dated October 8, 2004 before the Jharkhand High Court against the order of the District Commissioner, Latehar dated July 24, 2004 directing the Company to pay five times penalty of the deficit amount paid towards stamp duty on certain deeds executed in the year 1999. The case was heard on October 15, 2004 and the High Court directed the District Commissioner, Latehar not to take coercive steps against the Company. This case was last heard on October 15, 2004 and is pending for final hearing. The Company imported six consignments of copper concentrate and since they were unable to produce a final invoice after filing the bills of exchange, they sought the provisional clearance of the imported goods on PD Bonds. Subsequently, they filed the final invoice. The DC (Grade I) and the Company sought to value the goods for the purpose of customs duty at different rates. The Commissioner of Customs has issued an order-in-original no. KDL/DC/Gr-I/NK/02/2005 dated March 18, 2004 dropping the proceedings in favour of the Company. The Department is yet to file an appeal in this regard. The Company had filed Writ Petition No. 1032 of 2004 before the Jharkhand High Court, Ranchi challenging two orders of the Deputy Forest Officer vide letters dated November 21, 2003 and January 17, 2004 prescribing confiscation and stoppage of transportation work of bauxite from mines at Latehar, Lohardaga, Palamau and Gumla pending approval of the Central Government. By order dated June 21, 2004 a Single Judge Bench dismissed this Writ Petition. Thereafter the Company has filed a Letters Patent Appeal against this order of dismissal and vide order dated May 12, 2005, the High Court has allowed Interim Application No. 787 of 2005 permitting the continuation of transportation activities till further orders are passed.

5.

6.

7.

8.

F.
1.

Arbitration Proceedings
The Company initiated arbitration proceedings for failure of Uttar Pradesh State Electricity Board (UPSEB) to supply electrical energy in terms of Agreement dated October 29, 1959. For the period 1971 to 1973, the amount claimed was Rs. 20.5 million and for 1973 to 1975, the amount claimed was Rs. 69.1 million. UPSEB moved the lower Court challenging the reference to Arbitration, which was rejected. Hence UPSEB has filed Revision Nos. 6 &7 of 1980 dated January 1, 1980. Stay was granted on January 18, 1980 The Company has filed an application for vacation of stay. The matter was last listed on May 20, 2005 when the court directed the cases to be listed before the appropriate regular court. The Company has been involved in arbitration proceedings with IFFCO. The Presiding Arbitrator endorsed the awards of IFFCOs Arbitrator against the Company. An amount of Rs. 71.9 million along with interest at 10.25 per cent from January 15, 2001 was awarded to IFFCO. The Company has filed an appeal in the Delhi High Court on October 10, 2004 against this arbitration award. A hearing was held on December 1, 2004 and notices were issued. The next date for hearing is on September 10, 2005. Court directed both parties to file synopses and listed the matter for hearing on November 22, 2005. The Company initiated arbitration proceedings for Rs. 15.3 million and Rs. 11.7 million on the grounds of failure of UPSEB to supply electrical energy in terms of agreement dated November 30, 1976. UPSEB filed miscellaneous cases before the Civil Judge, Lucknow, which were dismissed for default. The application for restoration and condonation of delay were also dismissed by order dated February 5, 1993, UPSEB filed FAFO Nos. 105 of 1993 and 107 of 1993 was filed by UPSEB. Arbitration proceedings were stayed by High Court vide order dated May 20, 1993. The next date of hearing is yet to be fixed.
249

2.

3.

HINDALCO INDUSTRIES LIMITED


4. The Company initiated three arbitration proceedings for failure of UPSEB to supply electrical energy in terms of Agreements dated October 29, 1959 and September 30, 1976. The amounts claimed were Rs. 26.4 million for the period September 1973 to November 30, 1977, Rs. 61.62 million for the period April 7, 1977 to September 18, 1977 and Rs. 62.21 million for the period December 1, 1977 to May 7, 1978. UPSEB moved the lower Court challenging the references to Arbitration. The lower court partly allowed the applications holding that the arbitration clauses were valid and the dispute were covered by the arbitration clauses but the references to arbitration were unilateral and hence invalid. Against these orders the Company filed Revision Nos. 339, 340 and 341 of 1979 while UPSEB filed Revision Nos. 10, 11 and 40 of 1980. Restraint orders have been granted against the arbitrator from proceeding in these arbitrations. Revisions are being listed for final hearing. The matters were listed on May 20, 2005 and the Court directed these to be listed before the appropriate Court. The Company initiated arbitration proceedings for failure of UPSEB to supply electrical energy in terms of the agreements dated October 29, 1959 and November 30, 1976. The amount claimed was Rs. 41.93 million for the period March 8, 1978 to September 30, 1978. UPSEB filed suit No. 58 of 1979 before Civil Judge (S.D.) Lucknow for permanent injunction against the arbitration proceedings and for declaration that the dispute did not come within the purview of the arbitration clause. The said suit was allowed vide order dated September 28, 1998. Against this order of the Civil Judge Civil Revision No. 122 of 1998 has been preferred by the Company. In this proceeding, the High Court vide its order dated January 18, 1999 stayed the operation of the impugned order of the Civil Judge. The matter came up for hearing on July 25, 2003 and was dismissed due to non-appearance of counsels. Restoration application has been filed on July 31, 2003. The High Court ordered restoration of the case to its original number and continuation of the existing stay order on March 4, 2004. The case was listed last in July 9, 2004 and adjourned. A further date of hearing is yet to be fixed. The Company had initiated arbitration proceedings against UPSEB in respect of the refund of Rs. 3.64 million paid under protest on account of wrongful demand based on minimum consumption guarantee. The UPSEB declined to appoint an arbitrator and challenged the appointment of sole arbitrator before the District Court in the Unnao District of Uttar Pradesh. The Court vide its order dated April 10, 1992 rejected the challenge and UPSEB filed a Writ Petition No. 1232 of 1992 against the said Order. The writ petition was dismissed for default on December 4, 2000. The sole arbitrator passed an award on December 15, 2000 which was made Rule of Court in the year 2001. UPSEB filed an application No. 6179 of 2000 for recall of the order dated December 4, 2000 and for restoration of the Writ Petition No. 1232 of 1992. The application is pending disposal. UPSEB had revised its general rates from July 1, 1978 and had worked out an increase of 4.1647 paisa /unit over and above the average rate of 11 paisa/unit by ignoring the effect of fuel cost valuation adjustment charges in calculating the proportionate increase in terms of power agreement. The Company had paid a sum of Rs. 11.7 million under protest and had initiated arbitration proceedings on April 17, 1981. The arbitrator made an award for Rs. 3.59 million, which was made Rule of Court on August 27, 1990. Against the order of making the award the Rule of Court, FAFO No. 47 of 1991 dated March 26, 1991 has been filed by the UPSEB in respect of an amount of Rs. 1.73 million. The appeal was admitted on August 16, 1994. Proceedings are pending and no further date has been fixed.

5.

6.

7.

G.
1.

Notice
The Company was allotted 64 acres, 30 guntas extent of land in Kangrali Industrial Area by the Karnataka Industrial Areas Development Board (KIADB) vide an allotment letter dated April 4, 1973. The Assistant Secretary, KIADB, Belgaum passed an order dated January 18, 2000 terminating the allotment letter and resuming the land on account of the alleged non-compliance with the conditions contained in the allotment letter. The Company, by a letter dated January 18, 2000, requested the KIADB to withdraw its letter dated January 18, 2000 and consider its proposals submitted in an earlier letter dated August 6, 2000. The KIADB, by its letters dated January 28, 2000 and January 31, 2000 revoked the order dated January 18, 2000 and kept the same in abeyance. By its letter dated February 1, 2000, the KIADB withdrew the order. The Company made an exchange proposal to the KIADB. The exchange proposal was accepted by KIADB. However, the same would not be implemented due to various practical problems such as stamp duty and surrender of our own land. Matter is pending with KIADB.

250

HINDALCO INDUSTRIES LIMITED


II.
(a) 1.

Group Companies
Material litigation involving our top five Group Companies is as provided below: Grasim Industries Limited A show cause notice for an amount of Rs.104.0 million was issued stating that the spinning and weaving units of Bhiwani Unit is not a composite mill. The matter is pending in CEGAT. A notice was issued disallowing Modvat credit of Rs.70.6 million. There are 107 other minor cases aggregating Rs.663.1 million of excise duty which are pending at different levels of appeals. Demand of Rs.108.1 million has been raised towards custom duty on import technical know-how and other services against which a bank guarantee of Rs.56.8 million has been furnished. The matter is pending in appeal with the Bombay High Court. Penalty of Rs.75.0 million has been imposed by the customs authorities for nonsubmission of bill of entry, against which an appeal is being filed in the Delhi High Court. Demand of Rs.86.8 million has been raised towards stamp duty and lease transfer charges on the transfer of Gwalior property. There are 3 other minor cases aggregating Rs.45.2 million at different levels of appeals. Madhya Pradesh State Electricity Board (MPSEB) has raised a demand of Rs.392.8 million on the basis of an order of the Madhya Pradesh Electricity Regulatory Commission imposing a condition to use boards minimum power to the extent of 50% of requirement and surcharge thereon, against which a stay has been obtained from Madhya Pradesh High Court. A demand of Rs.75.3 million has been raised by MPSEB towards minimum tariff charges. The matter is pending before the Madhya Pradesh High Court. An appeal against a demand of electricity tax of Rs.72.3 million made by CEIG is pending with Energy Secretary for disposal. There are two other minor cases amounting to a sum of Rs.56.4 million pending before different levels of appeals. Two cases aggregating to Rs.35.4 million with regard to Mineral Area Development Cess & Royalty, 61 cases aggregating to Rs.234.3 million with regard to sales tax and entry tax, six cases aggregating to Rs.61.5 million with regard to land compensation, 69 cases aggregating to Rs.29.9 million with regard to labour disputes, eight cases aggregating to Rs.35.5 million with regard to freight disputes, one case for Rs.5.7 million with regard to betterment fees, two cases aggregating to Rs. 2.1 million with regard to service tax matters, four cases aggregating to Rs.9.0 million with regard to property & road tax matters, four cases aggregating to Rs.9.3 million with regard to water cess, four cases aggregating to Rs.24.3 million with regard to price difference due to weight loss, 35 cases of claims from parties aggregating to Rs.23.3 million and 17 miscellaneous cases aggregating to Rs.80.3 million are pending before the appropriate authorities. Ultra Tech Cement Limited There is one case pending in civil court against the company for recovery of an amount of Rs.38.0 million for alleged breach of contract for supply of clay. There is one arbitration matter pending in the Bombay High Court, claiming demurrage amount of Rs. 12.0 million arising out of contract for supply of coal. There are eight cases pending against the Company in consumer courts. These are mainly against alleged quality of cement supplied. The amount of contingent liability in these cases is around Rs. 7.55 million. Commissioner of Sales Tax, Orissa has challenged the Assessment Order passed by the first Appellate Authority. The aggregate amount involved is Rs. 89.3 million. The matter is pending appeal. Indo Gulf Fertilisers Limited The state has filed a complaint under Section 7 of the Essential Commodities Act, 1955 read with the Fertilizer (Control) Order, 1985 against the company and Mr. B.N. Puranmalka, a former managing director and other officers, in the court of special judge, Moga. The complaint was filed on the ground that a sample of fertilizer drawn by the compost inspector on analysis was found to be substandard fertilizer in violation of Clause 19 of the Fertilizer (Control ) Order, 1985. Taxes and other dues aggregating to an amount of Rs. 6.8 million have been claimed on sale of urea, trading materials and on secondary freight under the West Bengal Sales Tax Act, 1994.

2.

3. 4.

5.

(b) 1. 2. 3. 4. (c) 1.

2.

251

HINDALCO INDUSTRIES LIMITED


3. Hindustan Petroleum Corporation Limited (HPCL) has made a claim for amount aggregating Rs. 20.8 million deducted by the company for certain disputes relating to poor quality of products and shortages. The company filed a counter claim amounting to Rs.25.38 million against HPCL. The case is pending in the District Court, Sultanpur. Demand by the Assistant Director, Electric Safety towards interest aggregating Rs. 0.3 million in connection with captive power generation. The matter is pending before the Lucknow High Court. Claims aggregating Rs. 5.9 million have been made by ex-employees of the Company pending in various courts. Claims aggregating Rs. 1.7 million have been made against the company for recovery towards staff cost, siding inspection charges, etc. of personnel deployed by the Indian Railways at the Companys private siding. Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) The Excise department has made a demand of Rs.55.1 million in respect of imported readymade garments purchased in bulk and repacked in small quantity for sale, considering this activity as manufacturing. The company has submitted that this activity does not amount to manufacture and no excise duty is payable. The Excise Department has made a demand of Rs.97.6 million in respect of excise duty levy on MRP basis instead of Nil rate of duty. There are also other excise demands made by the department against the company aggregating Rs. 210.6 million. There are various customs related cases against the company for claims aggregating Rs. 15.3 million. The Income Tax Department has filed an appeal before the Income Tax Appellate Tribunal against the Company in connection with favourable order received by the Company from CIT(A) for the Assessment Year 1995-96 for amount aggregating Rs. 55.7 million. The Income Tax Department has also filed appeal before Appellate Tribunal against the Company in connection with favourable order received by the Company from CIT(A) for the Assessment Year 1997-98 for amount aggregating Rs. 175.9 million. There are other income tax related cases pending for claims aggregating Rs. 116.3 million. There are various labour related cases against the company for claims aggregating Rs. 59.2 million. There are various sales tax related cases against the company for claims aggregating Rs. 56.2 million. There are various service tax related cases against the company for claims aggregating Rs. 5.0 million. The company entered into a contract with a party for supply of hardware accessories to UPSEB. The party failed to supply the hardware accessories and so the company procured the accessories from an alternative supplier. In response, the party has filed a suit against the company and UPSEB for compensation amounting to Rs.58.2 million. The Company has also filed a suit against the party for Rs.16.2 million additional costs incurred. Other than the above there are various civil cases pending against the company for claims aggregating Rs. 88.8 million. Birla Global Finance Limited A criminal case of cheating has been filed against Dr. K.M. Birla, Mr. S.K. Mitra and Mr. Ashish Goel (Lucknow branch employee) in the Kanpur Court by one hirer Mr. Charanjeet Singh. The Allahabad High Court has issued a stay on the proceedings at the Kanpur Court. The stay is still in force and there are no further developments in the case. A case under Section 138 of the Negotiable Instruments Act, 1881 against the company and its managing director has been filed at the Delhi Court by one fixed depositor, Mr. B N Sharma. The Company has filed a revision petition in the Delhi High Court. SEBI has issued a letter to the company alleging violation of Regulation 6(2) of the Takeover Code in the year 1997 and the company has agreed to settle the same by settlement by consent order. Penalty of Rs. 75,000 was imposed by SEBI on Birla Mutual Fund for non-compliance of disclosure requirements under Regulation 7(1) and 7(2) of the Takeover Code pursuant to acquisition of 161,200 shares representing 5.01% of the paid up capital of Subex Systems Ltd. on October 18, 1999.

4. 5. 6. (d) 1.

2.

3. 4.

5. 6. 7. 8.

9. (e) 1.

2.

3. 4.

252

HINDALCO INDUSTRIES LIMITED


III.
A.

Subsidiaries
Bihar Caustic and Chemicals Limited 1. Mr. Dilip Kumar Sharma filed criminal complaint against a contractor of the company and the managing director of the company. Mr. Kumar had rented a machine to the contractor for carrying out work in the companys premises. The full amount of rent was not paid by the contractor and Mr. Kumar filed the criminal complaint. The court took cognizance of the complaint and issued a bailable warrant against the contractor and the managing director of the company. The company filed a criminal miscellaneous application to quash the order before the Jharkhand High Court at Ranchi, and the High Court has issued a stay against the proceedings of the trial court. The criminal miscellaneous application is pending for final disposal. The Jharkhand State Electricity Board (JSEB) raised an annual minimum guarantee bill of Rs. 21.4 million, which was challenged by the company before the High Court. The High Court directed the JSEB to issue a revised bill, which was issued for an amount aggregating Rs. 158.9 million. The revised bill included fuel surcharge and other charges. The matter is sub-judice before the High Court. The amount in dispute aggregates approximately Rs. 615 million. A fuel surcharge bill of Rs. 378.2 million was raised by the JSEB and challenged by the company on the ground of wrong calculation. The disputed amount involved is approximately Rs. 12.82 million and is pending before the Supreme Court of India. The company filed a writ petition in the High Court in respect of the companys entitlement to an interest free sales tax loan of Rs. 100 million under the industrial policy of the Bihar Government. The company was however only reimbursed Rs. 10 million and aggrieved by the same has filed the instant writ petition. The company has made an insurance claim for Rs. 2.2 million, which has been allowed by the single judge of the Calcutta High Court. The insurance company has filed an appeal challenging the order of the single judge. The company filed an appeal before CEGAT, Kolkata against adjudication order No. 122-178/Ran/C.E/Appeal/ 2004 dated August 31, 2004 relating to levy of excise on excess charges realised from transporters amounting to Rs. 7 million. The case was heard on July 21, 2005 and the CESTAT has granted full stay. The case is fixed for final hearing on September 27, 2005. The State Bank of India has filed a suit before the debt recovery tribunal for recovery of Rs. 39.5 million. The case is pending before the tribunal.

2.

3.

4.

5.

6.

7. B.

Indian Aluminium Company, Limited 1. 2. Sales tax related claims in respect of set off on purchases under G.O 667 are pending before the High Court of Andhra Pradesh writ petition no 21775 of 2005, for amounts aggregating Rs. 14.22 million. The Income Tax Department has raised a demand for Rs. 4.57 million in respect of assessment year 200203 on account of disallowance of depreciation and minimum alternate tax. The company is in appeal before CIT(A) against the order of the department.

C.

Minerals and Minerals Limited 1. District Forest Officer, Ranchi West Division, Lohardaga filed complaint case against the former general manager of the Company and other officers in the court of CJM, Lohardaga for illegal mining and loading of illegally mined bauxite from expired lease in Manduapat mine. The CJM, Lohardaga by an order dated July 16, 1999 had been taken cognizance for the offence under Sections 26 and 63 of the Indian Forest Act, 1927 and Section 2, 3(a), 3(b) of the Forest Conservation Act, 1980. An application under Section 482 of the Code of Criminal Procedure was heard and allowed by the High Court at Ranchi and the proceedings have been stayed against the officers of the company. The case is pending final hearing at the High Court of Ranchi. Mr. Arbind Bhai Patel, Director of the Mahuamilan Karanpura Coal Mines Ltd. (Mahuamilan) filed a title suit No. 28/92 in the Civil Court, Gumla on August 10, 1992 for a declaration that Mahuamilan is the statutory lessee under Bihar State and the lease of Mahuamilan granted in the year 1948 by the maharaja of Chhotanagpur was subsisting at the time of vesting of estate and that State Government be restrained from
253

2.

HINDALCO INDUSTRIES LIMITED


making settlement of the leased area to any one else. The company is impleaded as a defendant to the suit as it had filed an application on December 23, 1968 for grant of mining lease for bauxite over an area of 1475 acres land in villages Bimarla, which is claimed to be a part of area earlier held by Mahuamilan. The case is pending before Sub-Judge-1 Court, Gumla for filing documents and production of witnesses. 3. An application for compensation under Section 140 of the Motor Vehicles Act, 1988 has been filed on August 10, 2004 by mother of deceased who died in a motor accident by a dumper belonging to the company. An amount of Rs. 50,000 has been claimed as compensation. The case is pending in the court of District and Sessions Judge, Lohardaga. General Secretary, CBW Union has raised a dispute before the CGIT, Dhanbad on December 14, 1999 regarding refusal of the company to accept the 33 point charter of demand presented by the union. Assistant Mining Officer, Lohardaga filed certificate case No. 10/RL/01-02 on January 15, 2002 in the Court of Certificate Officer, South Chhotanagpur Anchal, Ranchi for realization of Rs. 3.69 million against royalty and interest due on vanadium mineral for the period 1991-92 to 2000-01. The company has filed a denial petition on January 28, 2002 before the Certificate Officer at Ranchi. The case is pending for final hearing/ order in the Court of Certificate Officer, Ranchi. The Company has filed SLP No. 10860 of 2004 on April 5, 2004 in the Supreme Court of India against the dismissal order dated December 23, 2003 passed in CWJC No. 2943 of 1996 by the Jharkhand High Court and praying for a refund of Rs. 2.14 million against mineral cess which was collected as excess amount between the period of June 21, 1985 and April 30, 1988 at the rate of 500 per cent after adjusting the cess payable at 133 1/3rd per cent for the relevant period until April 4, 1991. The case is pending final hearing. The company filed civil appeal No. 328 of 03 in the Calcutta High Court, against the order passed by the CESTAT, Kolkata dismissing the appeal No. E-516/02. The company filed the aforesaid appeal against the order in appeal No. 0/A No. 173/JSR/CEX/Appeal/02 passed by the commissioner of Central Excise and Customs, Patna whereby refund claim of about Rs. 219,780 filed by the company was rejected. The appellant filed the aforesaid refund claim as service tax deposited during the period November 1997 to June, 1998 in regard to service provided by goods transport operators.

4. 5.

6.

7.

D.

Lucknow Finance Company Limited 1. The Income Tax Department has imposed a penalty of Rs. 5.1 million and Rs. 4.6 million under Section. 271(1)(c) of the IT Act, 1961 on March 31, 2005 and March 30, 2005 in respect of assessment years 2000-01 and 2002-03. The Company is in appeal before CIT(A) against the impositions of this penalty

E.

Renuka Investments & Finance Limited 1. The State of Uttar Pradesh filed case against the Company in respect of land purchased from M/s Gwalior Properties and Estates Limited in village Kharpatar, Dudhi, on the ground that the land had been purchased for commercial purposes and as no commercial rates have been notified for the area therefore the duty should have been paid at the price reserved for residential plots. The Collector after inspecting the plot on November 28, 2002 imposed stamp duty of Rs. 0.18 million and a penalty of equal amount. The Company has filed appeal No. 33600/2003 before the Commissioner, Mirzapur and has deposited one third of the total amount demanded. Mr. S. K. Mitra has filed O.S. No 21 of 2001-02 in the Court of SDM Dudhi, against the Company alleging that an area of 0.1265 hectares in plot no. 392 (405 old) situated in village Murdhawa Pargana & Tehsil Dudhi, belonging to him has wrongly been recorded in the name of the company and requested the Court to declare him the Bhumidhar of the plot and that records be accordingly rectified by deleting the name of the Company. The matter is fixed for disposal of objections on the report of the lekhpal with respect to the location and area of the plot. Declaratory suit O.S. No. 16 of 2002 in the Court of SDM, Dudhi has been initiated by State of Uttar Pradesh through Collector Sonebhadra against the company, alleging that the transfer of certain plots in favour of the Company has taken place beyond the provisions of U.P .Z.A. Act, and therefore have prayed that the court declare the State as owner of the plots in question. Matter is pending before the court for framing of issues.
254

2.

3.

HINDALCO INDUSTRIES LIMITED


F . Birla Mt. Gordon Pty Limited 1. There are two labour related claims raised against the company. The first is in respect of an employee of the company who has been off work for approximately two years is claiming AUD 400,000 in terms of compensation for future income due to loss caused by injury sustained at work. The other dispute has been raised by an employee of a caterer to the company, who is claiming compensation against the company for personal injuries sustained in the course of work.

G.

Indal Exports Limited 1. The Commercial Taxes Officer has raised demands under the West Bengal (Sales Tax) Act, 1994 for the assessment year 1995-1996 for tax, interest and penalty amounting to Rs. 0.22 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998. The Commercial Taxes Officer has raised demands under the Central Sales Tax Act, 1956 for the assessment year 1995-1996 for tax and penalty amounting to Rs. 0.17 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998. The Commercial Taxes Officer has raised demands under the West Bengal (Sales Tax) Act, 1994 for the assessment year 1996-1997 for tax, interest and penalty amounting to Rs. 0.22 million. The demand has been set aside by the Assistant Commissioner of Commercial Taxes, in his order dated August 30, 1998.

2.

3.

H.

Utkal Alumina International Limited 1. Ms. Badli Naik has filed MJC 2/2005 before the Civil Judge (Senior Division), Rayagada, claiming compensation as granddaughter of original khatadar in respect of land acquired for the Company. She has filed the case for her share of compensation and subsequent payment of ex gratia which is being paid by the company as per the award under the Land Acquisition Act. Ghenu Halwa has filed TS 6 of 2005 before the Civil Judge (Senior Division), Rayagada disputing the ownership of certain land acquired for the company. The petitioner is claiming a potion of ex gratia which is being paid by the company as per the award under the Land Acquisition Act. Ghasiram Dambo has filed OJC 4482 of 2000 in the Orissa High Court challenging the acquisition of land under Khata No. 368 in village Koral for the company. Mr. Dambo claims a share in the land acquired and has challenged the validity of the land acquisition proceedings and has prayed for reversal of the land in his favour. The President of the Village Development Committee, Koral representing the residents of Upper Sahi of Koral, has filed WP (2)-5971 of 2005 in the Orissa High Court. The writ has been filed on the grounds that though the Lower Sahi has been acquired for the Company, the upper sahi has not been acquired, thus discriminating between lower sahi and upper sahi. The petitioner claims that since the factory will be installed close to upper sahi, it poses a potential health hazard and further that the acquisition of agricultural land leaves the residents with no alternate means of livelihood. The petitioners have prayed for acquisition of homestead lands in upper sahi and provision of alternate housing. The High Court has ordered that the villagers of upper sahi shall not be obstructed from access to their land. A labourer of the contractors constructing the Companys factory, met with a fatal accident. The mother of the deceased labourer filed has made a claim in WCC 17 of 2005 before the Deputy Commissioner Workmens compensation cum Deputy Commissioner, Jeypore against the contractor and the Company. Mr. B. Naik has filed suit bearing No. T.S. 16/2005 before the Civil Judge (Senior Division), Rayagada claiming ex-gratia amount payable in respect of land bearing plot No. 616, under khata No. 76 of Dwimundi mouaza acquired for the Company. Ms. Goudo has filed suit bearing No. T.S. 9/2005 before the Civil Judge (Senior Division), Rayagada claiming ex-gratia amount payable in respect of land bearing plot Nos. 3, 15, 4, 84, 120 and 121 under khata No. 16 of Dwimundi mouza acquired for the Company.

2.

3.

4.

5.

6.

7.

Except as stated above there are no outstanding litigations, defaults, etc., in relation to our subsidiaries pertaining to matters likely to affect operations and finances of the Company, including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII to the Companies Act, 1956 (1 of 1956).
255

HINDALCO INDUSTRIES LIMITED


IV.
1.

Directors
The State of Uttar Pradesh has filed Criminal Case No. 1834/91 before the Munsif Magistrate, Dudhi against Mr. S.S. Kothari as Occupier of the Renusagar Power Division and others for non-compliance of rules relating to methods of work as prescribed and causing fatal accident of one Prabhat Chander Sharma, Rigger on April 10, 1990. Mr. Kothari and the factory manager of the Company have filed Cri. Misc. App. No. 14721/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1834/91 vide order dated November 18, 1992. The matter has not been listed for further hearing. The State of Uttar Pradesh has further filed Criminal Case No. 1866/91 against Mr. S.S. Kothari and others for non-compliance of Sections 7 (A) and 36 of Factories Act and U.P Rules, 1950 leading to the fatal accident of . Late Shankar Dayal Sharma on December 13, 1990. Mr. Kothari and the factory manager of the Company have filed, Cri. Misc. App. No. 14736/92 in the Allahabad High Court, which has issued a stay order staying the proceedings in 1866/91 vide order dated November 18, 1992 . The matter has not been listed for further hearing. A criminal case of cheating has been filed against Dr. K.M. Birla, Mr. S.K. Mitra and Mr. Ashish Goel (Lucknow branch employee) in the Kanpur Court in relation to Birla Global Finance Limited, by one hirer Mr. Charanjeet Singh. The Allahabad High Court has issued a stay on the proceedings at the Kanpur Court. The stay is still in force and there are no further developments in the case. A proceeding under Section 138 of the Negotiable Instruments Act has been pending against Baroda Rayon Corporation Limited and its directors which included Mr. E.B. Desai. Mr. E.B. Desai is no longer serving on the board of Baroda Rayon Corporation. Certain proceedings under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques, have been pending against REPL Engineering Limited (REPL) and its directors which included Mr. C..M. Maniar. Mr. C..M. Maniar was a non-executive director of REPL and resigned from the Board of REPL on August 28, 1997. Some of these proceedings filed under Section 138 against Mr. C.M. Maniar in his capacity as a director of REPL have been quashed by the Bombay High Court and the Madhya Pradesh High Court, Indore Bench on review under Section 482 of the Criminal Procedure Code. However, certain proceedings under Section 138 against Mr. C.M. Maniar in his capacity as a director of REPL are still pending before various other lower courts. Some proceedings under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques, have been pending against Pharmaceutical Products of India Limited (PPIL) and its directors which included Mr. C. M. Maniar. Mr. C.M. Maniar was a non-executive director of PPIL and resigned from the Board of PPIL on April 24, 2001. These proceedings against Mr. C.M. Maniar in his capacity as a director of PPIL are still pending before various lower courts.

2.

3.

4.

5.

6.

Except for the criminal and civil cases stated above, where the Directors and Officers of the Company have been named as parties or respondents, there are no, outstanding litigation, disputes, overdues to banks/financial institutions, defaults against banks/financial institutions, proceedings initiated for any economic/civil/ any other offences, involving the Directors or Officers of our Company.

V.

Promoters

BGHPL has filed an appeal before ITAT on April 21, 2004 against the order passed by CIT(A) in relation to disallowance under Section 14A of the IT Act, in respect of net interest paid by the company and administrative and other expenses. Apart from what is stated above, there are no outstanding litigation, disputes, overdues to banks/financial institutions, defaults against banks/financial institutions, proceedings initiated for any economic/civil/ any other offences, involving our Promoter.

256

HINDALCO INDUSTRIES LIMITED


VI. Joint Ventures
Except as stated below, there are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/financial institutions, defaults against banks/financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits and arrears on cumulative preference shares issued by the company, defaults in creation of full security as per terms of issue/other liabilities, proceedings initiated for any economic/civil/ any other offences, involving our joint ventures: (a) Tanfac Industries Limited 1. 2. 3. 4. There are various sales tax related cases pending against the company for claims aggregating Rs. 6.49 million. There is a customs case pending against the company for a claim of an approximate value of Rs. 1.08 million in relation to duty on fluorspar shipment in the assessment year 1998-99. There are several central excise cases pending against the company for claims aggregating Rs. 0.46 million. There is an Income tax case pending against the company for a claim of an approximate value of Rs. 24.37 million in relation to deduction under Section 80 HHC & 80I of the IT Act during the assessment year 1996-97. The company has filed Writ Petition No. 619/2000 against the Regional Provident Fund Commissioner in the Madras High Court in relation to coverage of trainees. The amount involved is approximately Rs. 30,000. The matter is scheduled to come up for the first hearing in the second week of September 2005. An industrial dispute is pending against the Company on the ground of dismissal of service. The matter is pending and is scheduled to come up for hearing in October 2005.

5.

6. (b)

Idea Cellular Limited 1. 2. 3. 4. 5. 6. 7. There are six Income Tax cases pending against the Company across circles for amounts aggregating to Rs. 6.77 million on various grounds of assessment during various assessment years. There are ten SCNs and cases pending against the Company across circles on various grounds for claims aggregating to an amount of Rs. 360.93 million. These matters are pending before the relevant authorities. There is one excise case pending against the Company for a claim aggregating to an amount of Rs. 3.86 million. There are eighty consumer cases filed against the Company in various fora for claims amounting to an aggregate of Rs. 4.33 million. There are forty six civil cases pending against the Company on various grounds in various fora for amounts aggregating Rs. 2.96 million. There are six labour cases which have been filed against the Company and are pending in various fora for claims amounting to an aggregate of Rs. 13.98 million. The Department of Telecommunications has raised claims aggregating to an amount of Rs. 259.63 million against the Company on grounds including penalty and interest charged on short payment of licence fees, royalty etc. There is one criminal case filed against the Company in the High Court against the order of the lower Court, dismissing applications to drop proceedings. The aggregate value of the claim is Rs. 0.067 million. Ten other miscellaneous cases have been filed against the Company on various grounds including recovery of dues and stamp duty. These claims amount to an aggregate of Rs. 21.54 million.

8. 9.

10. There are approximately seven thousand one hundred and twenty one cases (7121) filed by the Company against subscriber defaulters under Section 138 of the Negotiable Instruments Act for sums amounting to an aggregate of Rs. 24.6 million.

257

HINDALCO INDUSTRIES LIMITED GOVERNMENT APPROVALS


In view of the approvals listed below, we can undertake this Issue and our current business activities and no further material approvals are required from any Government authority or the RBI to continue such activities. We have received the following Government approvals that are material to our business:

General
PAN Number AAACH1201R

RBI
1. Approval No. EC.CO.FID (I) 1467/252 (Euro-Equity) Hindalco-II 93/94 dated November 11, 1992 from RBI to the Company granting permission under Section 19 (1) (d) of the Foreign Exchange Regulation Act, 1973; i ) make an international offering of rupee denominated equity shares of the Company to be subscribed in US dollars upto USD 110 million through Global Depositary Receipts (GDRs); ii) list the GDRs on one or more stock exchanges including the stock exchange at Luxemburg. This permission was to be valid for three months from the date of issue. Approval No. FID(I)/4/48/252 (Euro-Equity) Hindaco-II 93/94 dated June 10, 1994 from RBI to the Company granting permission under Section 19 (1) (d) of the Foreign Exchange Regulation Act, 1973 i) for making an international offering of rupee denominated equity shares to be subscribed in US dollars upto USD 100 million through Global Depositary Receipts mechanism. ii) to list the GDRs on one or more stock exchanges including the stock exchange at Luxemburg. This permission was to be valid for three months from the date of issue. Approval No. BYWAZ200300054 (Ref No. EC. CO. OID/19.08.114/2002-03) dated February 20, 2003 from RBI to the Company approving: i) acquisition of a wholly owned foreign subsidiary in Australia, Straits Nifty Pty Ltd. which was a subsidiary of Straits Resources Pty Ltd. for a gross consideration of AUD 148.82 million; ii) incorporation of a wholly owned subsidiary in Australia of the Company named Birla Maroochydore Pty Ltd. and iii) the acquisition of 50% of stake in Straits Exploration Pty Ltd. through a remittance of AUD 89,820,000 and issue of a guarantee of AUD 69 million. Permission for these cash remittances was valid upto February 19, 2004. Approval (Ref. No. Mumbai. FID-II/04.02.10/2002-2003) dated March 21, 2003 from RBI to the Company granting general permission for allotment of shares pursuant to the scheme of arrangement between the Company and Indo Gulf Fertilisers Limited and Indo Gulf Corporation Limited.

2.

3.

4.

Factory Approvals
(A) Belgaum Factory Approvals relating to manufacture 1. 2. Factory license number MYS/BGM/404 issued by the Labour Department, Karnataka and amended in the name of the Company following the demerger of Indal. This application has been renewed till December 31, 2006. Central Excise Registration Certificate dated March 23, 2005 issued by the Office of the Assistant Commissioner of Central Excise, Belgaum under Rule 9 of the Central Excise Rules, 2002, registering the Belgaum factory for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks; the factory was allotted the Excise Registration No. AAACH1201RXM007. VAT allotment letter dated March 30, 2005 from the Office of the Deputy Commissioner of Commercial Taxes, Belgaum allotting the VAT No. 29950323033 to the Company which would be valid and subsisting from April 1, 2005. This VAT No. is subject to the formal permission given by the Commissioner of Commercial Taxes, Bangalore. Letter dated April 5, 2005 has been filed with the Asst. Labour Commissioner, Belgaum for a further update of the list in the Schedule to Certificate carrying Registration Number CLA/18/75-76 under Contract Labour (Regulation and Abolition) Act, 1970, issued on July 26, 1975 permitting contact labour to be employed in tasks of loading and unloading raw materials and finished products, cleaning of ducts and tanks, sweeping and cleaning of colony and plant. The Schedule specifying the contractor and the number of workers and nature of work has last been updated on August 4, 2003. The license has been updated and granted in the name of the Company on March 15, 2005.
258

3.

4.

HINDALCO INDUSTRIES LIMITED


5. Applications dated April 22, 2005 to the Deputy Chief Controller of Explosives for the amendment in the license certificates due to change in the company name to Hindalco Industries Limited Belgaum Works, Belgaum following the demerger of Indal. The change has been made in respect of licenses comprising: (a) License No. P-12(22)-322/MYS 1770 to store petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on April 4, 1970, with an approved usage plan upto December 12, 2004. License No. P-12(22)-332/MYS 1802 to store petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on December 10, 1970, with an approved usage plan upto December 12, 2005. License No. P-12(22)-332/MYS 1761 to store petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on January 1, 1970, with an approved usage plan upto December 12, 2005. License No. P/SC/KA/15/232(P38716) dated August 8, 2001 to store petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal, which shall remain in force till December 31, 2007. License No. P/SC/KA/14/32(P29716) dated August 8, 2001 to store petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal, which shall remain valid till December 31, 2007 after being updated on October 21, 2004.

(b)

(c)

(d) (e)

6.

Certificates for Use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting Indal to use the following WT boilers: (a) (b) (c) Boiler Registry No. MYS 1149 for a period extending from December 20, 2004 to December 19, 2005 by a certificate dated December 20, 2004. Boiler Registry No. MYS 1296 valid from December 10, 2004 to December 9, 2005 by a certificate dated December 10, 2004. Boiler Registry No. MYS 1875 valid from January 18, 2005 to January 17, 2006 by a certificate dated January 18, 2005.

7.

Certificate dated April 16, 2005 for use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting the Company to use WT Boiler Registry No. MYS 1150 valid from April 16, 2005 to April 7, 2006. Certificate dated May 10, 2005 for use of a Boiler issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting the Company to use WT Boiler Registry No. MYS 1151 valid from May 10, 2005 to May 4, 2006. Certificates for Use of an Economiser issued by the Deputy Director of Boilers, Belgaum Division of the Karnataka State Boiler Inspection Department permitting Indal to use the following Economisers: (a) (b) (c) Economiser Registry No. KTK-E-75 by a certificate dated June 4, 2004 valid from June 4, 2004 to March 6, 2006. Economiser Registry No. KTK-E-80 by a certificate dated July 7, 2004 valid till July 6, 2007. Economiser Registry No. KTK-E-82 by a certificate dated July 11, 2005 valid till February 28, 2007.

8.

9.

10. Letter dated December 3, 2004 from the Additional Director, Ministry of Environment and Forests issuing environmental clearance to the proposed expansion of Belgaum factory to 587 KTPA alumina plant, under Environmental Impact Assessment Notification dated January 27, 1994. 11. Authorisation No. KSPCB/HWMC/AEO-2/DEO-3/SEO1/2000-01/513 issued under Rule 5 of the Hazardous Wastes (Management and Handling) Rules 1989 and Amendment Rules, 2003 issued on July 18, 2001 with regard to the disposal of cathode residues and system oil. The authorization was renewed till June 30, 2008 vide letter dated August 19, 2005. 12. Consent granted under the Air (Prevention and Control of Pollution) Act, 1981, and Water (Prevention and Control of Pollution) Act, 1974, before the Environmental Officer of the Karnataka State Pollution Control Board bearing
259

HINDALCO INDUSTRIES LIMITED


No. CFE CELL/IACL-256/NEIA/2005-2006/115 dated October 1, 2005 for expansion of the existing 270 KTPA plant to capacity of 587 KTPA alumina plant and for establishing and operating new facilities of specialty grade alumina/hydrate This consent is valid for 3 years from the date of issue.

Certification
1. Certificate of ISO 14001: 1996 (No. 157270) awarded by Bureau Veritas Quality International for quality in environmental management system to the Company, Belgaum for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks on July 24, 2004 which is valid till May 15, 2006. Certificate No. 139597 awarded by Bureau Veritas Quality International to Hindalco Industries Limited, Belgaum on November 5, 2003 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 in the manufacture and supply of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks and research and development of all ores, intermediate products and final products of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks. This certificate is valid till November 4, 2006. Certificate No. 129897 awarded by Bureau Veritas Quality International on December 19, 1996 for quality management system to Hindalco Industries Limited, Belgaum of ISO 9001:2000 in manufacture and supply of alumina hydrate, calcined alumina, special alumina hydrates and special calcined aluminas, carbon blocks and paste which is renewed till May 10, 2006.

2.

3.

Applications Pending
1. Application for renewal of consent order No. KSPCB/17-CAT/APC/INDAL/2003-04/172 dated September 22, 2003, for operation of the industrial plant in the air pollution control areas under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by Deputy Environmental Officer, Karnataka State Pollution Control Board filed on February 7, 2005. This consent was to be valid till June 30, 2004. Application for renewal of consent Order No. KSPCB/WPC/INDAL/17-CAT/2003-04/276 granted on December 15, 2003 by the Environmental Officer, Karnataka State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974, authorising the industrial plant to discharge effluents and sewage filed on February 7, 2005. Consent was to be valid till June 30, 2004. Application for renewal of consent Order No. KSPCB/WPC/INDAL/17-CAT/2003-04/97 granted on August 3, 2004 by the Environmental Officer, Karnataka State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising the industrial plant to discharge effluents and sewage filed on February 7, 2005. Consent was valid till June 30, 2005. Application for renewal of consent order No. KSPCB/17-CAT/APC/INDAL/2004-05/89 dated August 3, 2004 for operation of the industrial plant in the air pollution control areas under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by the Environmental Officer, Karnataka State Pollution Control Board filed on February 7, 2005. This consent was valid till June 30, 2005. Kalwa Factory

2.

3.

4.

(B)

Approvals to carry out manufacture 1. Letter dated October 14, 2004 to the Deputy Director, Industrial Safety and Health at Thane requesting renewal of the factory license No. 64459 for 2005. Under the Maharashtra Factories Rules, 1963, renewal is deemed to have been effected. Central Excise Registration Certificate issued under Rule 2 of the Central Excise Rules, 2002, by the Office of the Assistant Commissioner of Central Excise, Belapur registering the Kalwa factory for the manufacture of excisable goods on March 24, 2005. The factory was allotted the Excise Registration No. AAACH1201RXM008. Certificate of Registration issued under Section 22/22A of the Bombay Sales Tax Act, 1959 and Rule 8 of the Bombay Sales Tax Rules, 1959 by the Sales Tax Officer, Thane Division issued on March 28, 2005 bearing No. 400605/S/1798 and coming into effect since March 7, 2005 and recognizing the sale of aluminium, aluminium products and by-products and foil products.

2.

3.

260

HINDALCO INDUSTRIES LIMITED


4. License No. P/HQ/MH/15/254(P5611) issued on February 21, 1978, to store petroleum renewed on December 31, 2004 under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal to remain in force till December 31, 2007. License No. P/HQ/MH/15/48(P783) to store petroleum under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on February 21, 1978, and renewed on May 16, 2005 to remain in force till December 31, 2007. Certificate dated June 1, 2005 allowing renewal of license till September 30, 2010, bearing No. MR/TH/GCS - 133 to store compressed gas in cylinders under Rules 57 and 58 of the Indian Explosives Act, 1884 and allotted it the new license No G/W/MH/06/1668 (G18027). This certificate was initially issued by the Chief Controller of Explosives at Bombay permitting upto 130 units of Carbon Dioxide cylinders to be stored in a storage shed on the factory premises on October 25, 1993. Certificate dated June 2, 2005 allowing renewal of license bearing No. MR/TH/LPG_S.115 till September 30, 2009 and allotted it the new license No. G/WC/MH/06/94. This certificate was issued on October 25, 1993 to store compressed gas in cylinders under Rules 57 and 58 of the Indian Explosives Act, 1884 by the Chief Controller of Explosives at Bombay permitting upto 600 kgs of gas cylinders to be stored in a storage shed on the factory premises. Consent No. BO-RO/Thane/R/CC-950 dated December 12, 2002 issued by the Maharashtra Pollution Control Board to operate under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 and under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and Hazardous Wastes (Management and Handling) Rules, 1989 and Amendment Rules, 2003 to Kalwa Factory. Consent is valid till December 31, 2006. The Company has applied for changes in the consent order incorporating the changes pursuant to the merger with Indal. Consent No. BO-RONM/Raigad-156-183/04/0/CC-186 dated October 7, 2004 issued by the Maharashtra Pollution Control Board granting consent to operate under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 and under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and Hazardous Wastes (Management and Handling) Rules, 1989 and Amendment Rules, 2003 to Kalwa Factory. Consent is valid till June 30, 2007.

5.

6.

7.

8.

9.

Applications Pending Letter dated March 30, 2005 to the Joint Director, Industrial Safety and Health at Thane requesting the transfer of the factory license in the name of the Company following the demerger of Indal. (C) Alupuram Factory

Approvals relating to manufacture 1. Registration and license to work a factory issued by the Joint Inspector of Factories, Ernakulum to the Company, Alupuram Smelter Metal and Carbon Divisions bearing Registration No. AWY/03/18/88 (NIC Code Number 27203) in the district of Ernakulum employing not more than 900 persons on any day of the year and using power not exceeding 32558.47 K.W for operating this factory. This license is valid till December 31, 2005. Registration and license to work a factory issued by the Joint Inspector of Factories, Ernakulum to the Company, Aluminium Extruded Section bearing License No. AWY/03/462/97 (NIC Code No. 27203) in the district of Ernakulum in favour of Hindalco Industries Limited. This license is valid till December 31, 2005. Central Excise Registration Certificate issued by the Office of the Deputy Commissioner of Central Excise, Ernakulum division under Rule 9 of the Central Excise Rules, 2002, registering the Kalamassery factory for the manufacture of excisable goods on March 17, 2005; the factory was allotted the Excise Registration No. AAACH1201RXM006. Central Excise Registration Certificate (form ST 2) issued by the Superintendent of Central Excise, Aluva West Range under Section 69 of the Finance Act, 1994 and Section 32 of the Finance Act, 1944, registering the Kalamassery factory for payment of service tax on services availed from goods transport agencies on April 12, 2005; the factory was allotted the Registration No. GTA/ALY-W/23/2005. Certificate of Registration issued under Rule 5 of the Kerala General Sales Tax Rules, 1963 by the Asst.
261

2.

3.

4.

5.

HINDALCO INDUSTRIES LIMITED


Commissioner of Commercial Taxes at Ernakulum, on March 15, 2005 bearing No. 23050981/15-03-2005 recognizing the storage of goods at Alupuram and Kalamassery and manufacture of aluminium ingots and extrusions. This certificate is valid from March 15, 2005 till cancelled. Consequent to implementation of value added tax (VAT), certificate of registration was issued under Rule 17(7) of the Kerala Value Added Tax Rules, 2005 by the Asst. Commissioner, KVAT, Special Circle-III, Ernakulam, on April 1, 2005, issuing the local sales tax registration No. TIN 3207 0404 575005 recognizing the storage of goods at Alupuram and Kalamassery and manufacture of aluminium ingots and extrusions. This certificate is valid from April 1, 2005 till cancelled.Certificate of Registration issued under Rule 5 of the Central Sales Tax (Registration and Turnover) Rules, 1957 by the Asst. Commissioner of Commercial Taxes at Ernakulum, on March 22, 2005 bearing No. 23055981 permitting the manufacture, wholesale and retail distribution of aluminium and its alloys and the resale of aluminium and carbon electrode. This certificate is valid from March 15, 2005 till cancelled. Consequent to the VAT implementation in Kerala, Central Sales Tax registration number has been changed to CST 0704 C 000 457 effective April 1, 2005. 6. Consent Renewal order No. PCB/A/R6/8/2003 dated August 27, 2000, to produce 1190 tonne/month of Aluminium metal under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by the Kerala State Pollution Control Board on December 3, 2003. This consent is to be valid till December 31, 2005. The application for the renewal of consent has been submitted on September 3, 2005. Consent Renewal order No. PCB/A/R2/832/2002 to make chimney of height of 21 m above ground level under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by the Kerala State Pollution Control Board on November 15, 2002. This consent is to be valid till December 31, 2005. A renewal application has been submitted to Kerala State Pollution Control Board on September 27, 2005. Authorisation of the Kerala State Pollution Control Board bearing number PCB/HWMAR2/44 /2001 under Rule 5 of the Hazardous Wastes (Management and Handling) Rules 1989 issued on May 23, 2001 with regard to the disposal of cathode residues and system oil. The authorization is valid till May 23, 2006. Authorisation of the Kerala State Pollution Control Board bearing No. PCB/HWMA/R1/41/2001 under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 issued on May 14, 2001 with regard to the collection, storage, treatment and disposal of lubricants and system oil. The authorization is valid till May 14, 2006.

7.

8.

9.

10. Consent Order No. W/07/93 granted on September 6, 1993 by the Environmental Officer, Kerala State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising the industrial plant to discharge effluents and sewage. Consent is to be valid till December 31, 2007. 11. Consent Order No. W/07/354/99 granted on August 7, 1999 by the Environmental Officer, Kerala State Pollution Control Board under the Water (Prevention & Control of Pollution) Act, 1974. Consent is to be valid till December 31, 1995. This consent was extended to December 31, 2004. Consent is to be valid till December 31, 2007. 12. Permission for manufacturing activity given to the aluminium extruded section of the Alupuram unit by Secretary, Eloor Grama Panchayath bearing license No. H-43/2005-06. This license is valid up to March 31, 2006. 13. Certificate for Use of a Boiler issued by the the Inspector of Factories & Boilers Grade I, Aluva, Ernakulum District permitting Hindalco Industries Limited to use WT Boiler Registry No. K-608, FTB. 14. Licence for operating Radio Remote Control of EOT Cranes in the plant bearing No. EOT 48/1-4 issued under The Indian Telegraph Act 1885 by Ministry of Communications & IT on July 16, 2003 and renewed till March 31, 2006. 15. Exemption order granted by Government of Kerala under sub-section (3)(a) of Section 81 of Kerala Land Reforms Act, 1961 (1 of 1964) vide Noification No. 76751/N2/2000/RD dated May 15, 2002 exempting 37 acres of land from ceiling provisions of the Kerala Land Reforms Act. This exemption notification is valid till May 29, 2006. Certifications 1. Certificate awarded by Bureau Veritas Quality International No. 81299 to the Company (Alupuram Extrusion) on May 31, 2001 on being found to comply with the environmental management system standard ISO 14001:1996 for the manufacture and supply of aluminium extrusions. This certificate is valid till June 3, 2007.

262

HINDALCO INDUSTRIES LIMITED


2. Certificate awarded by Bureau Veritas Quality International No. 153001 to the Company (Alupuram Extrusion) on November 22, 1997 on being found to comply with the quality management system standard ISO 9001:2000 in the manufacture and supply of aluminium extrusions. This certificate is valid till April 28, 2007. Certificate awarded by Bureau Veritas Quality International of No. 145279 to the Company (Alupuram Extrusion) on January 13, 2004 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 for the manufacture and supply of aluminium extrusion. This certificate was valid till January 13, 2007. Certificate awarded by Bureau Veritas Quality International No. 152902 to the Company (Alupuram Smelter) on May 28, 2005 on being found to comply with the environmental management system standard ISO 14001:1996 for the development, manufacture and supply of Aluminium billets, Aluminium rods, Aluminium Alloy ingots. This certificate is valid till May 15, 2006. Certificate awarded by Bureau Veritas Quality International No. 142266 to the Company (Alupuram Smelter ) on May 28, 2005 on being found to comply with the Quality management system standard ISO 9001:2000 for the manufacture and supply of Aluminium alloy billets, electrical conductor grade Aluminium wire rods, Aluminium Alloy wire rods, Aluminium ingots and Aluminium Alloy ingots. This certificate is valid till December 4, 2006. Taloja

3.

4.

5.

(D)

Approvals relating to manufacture 1. Certificate of Registration under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970, issued by the office of the Registering and Licensing Officer, Thane on October 17, 1973 permitting the use of certain number of contract labour updated till December 31, 2005. An application for renewal has been submitted. Certificate of Registration issued under Rule 5 of the Central Sales Tax (Registration and Turnover) Rules, 1957 by the Asst. Commissioner of Commercial Taxes at Ernakulum, on March 22, 2005 bearing No. 400025 C-112 permitting the manufacture, reselling and distribution of non-ferrous metal, aluminium, stainless sheets and hardware products. This certificate is valid from December 15, 1995 till cancelled. Certificate of Registration issued under Section 22/22A of the Bombay Sales Tax Act, 1959 and Rule 8 of the Bombay Sales Tax Rules, 1959 by the Sales Tax Officer, Thane Division on March 28, 2005 to the Company bearing No. 410208/S/1 and coming into effect since March 7, 2005 and recognizing dealing in aluminium sheets and foils. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise, Belapur under Rule 9 of the Central Excise Rules, 2002, registering the Companys Taloja factory for the manufacture of excisable goods; the factory was allotted the Excise Registration No. AAACH1201RXM005. Certificate of Registration issued by the Superintendent of Service Tax Division of Service Tax Commissionerate of Mumbai under Section 69 of the Finance Act, 1994, registering the Kalamassery factory for collecting service tax on goods transport agency, technical testing, analysis and inspection for the Companys factory at Taloja on March 23, 2005; the factory was allotted the Registration No. ST/GTA-TIC/BEL/3062/2004-05. The certificate is valid for as long as the holder carries on the specified activity on the mentioned premises. Letter of allotment of Tax Deduction Account Number (TAN) to the Companys unit at Taloja under the Income Tax Act, 1961 by the Income Tax Department dated March 28, 2005. The number allotted is PNEH04840D. Certificate of Registration dated April 1, 2005, under Section 5(2) of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 by the Profession Tax Officer of Navi Mumbai registering the Principal Officer of the Company as an employer under the abovementioned Act. License No. P-12(7)-4284/MR. Kol.52 to store petroleum in a Class C Storage tank issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on April 29, 1997, renewed till December 11, 2007. License No. P-12(7)-1876/MR/Kol/133 for bulk storage of 45 Kilolitres of petroleum issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal issued on January 2, 1978, renewed till December 31, 2007.

2.

3.

4.

5.

6. 7.

8. 9.

263

HINDALCO INDUSTRIES LIMITED


10. License for bulk storage of 20 kilolitres of petroleum issued under the Petroleum Act, 1934 by the Jt. Chief Controller of Explosives to Indal with License No. P/WC/MH/15/79(P56433) issued on July 8, 1994, renewed till December 31, 2007. 11. Agreement for Power Supply, between Indal and the Government of Maharashtra under Section 6A(1)(a) of the Bombay Electricity Special Powers Act, 1946, dated September 7, 1971, wherein the government undertook to supply a 8500 KV of electricity to the plant with effect from April 15, 1972. 12. Supplementary Agreement for Additional Power, between Indal and the Maharashtra State Electricity Board, dated February 11, 1985, wherein MSEB undertook to supply 27,192 KWA to the Taloja unit. 13. Letter dated November 27, 2004 extending membership and registration in the Mumbai Waste Management Ltd. till March 31, 2006 bearing registration No. MWML-HzW-TAL-175. This license is valid till March, 2006. 14. Consent Order No. BO/MPCB/PCI-II/EIC-182-05/CC-09 granted on June 14, 2005 by the Maharashtra State Pollution Control Board to operate under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 and under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and Authorisation under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 2003 to the Aluminium Recycling Project in Taloja. The consent is valid upto June 30, 2007. 15. License to import petroleum in an installation issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal with License No. P-12(7)-1315/MR.Kol.102 issued on September 30, 1977, renewed till December 31, 2007. 16. Certificate for Use of a Boiler issued by the Director of Boilers of the Bombay State Boiler Inspection Department permitting Indal to use WT Boiler Registry No. MR 13585 valid till May 5, 2006 vide letter dated May 2, 2005. Certification 1. Certificate awarded by Bureau Veritas Quality International for quality management system to the Companys unit at Taloja of ISO 9001:2000 (No. 161500) in design, manufacture and supply of unalloyed and alloyed aluminium plates, coils sheets and foil on July 8, 1995 which is valid till September 30, 2007. Certificate awarded by Det Norske Veritas No. 00026-2004-S-NDE to Indal (Taloja Works) on March 18, 2004 on being found to comply with the Occupational Health and Safety management system standard ISO 18001:1999 in the development, manufacture and dispatch of aluminium ingot, plates, coils, sheets and foil forms. This certificate was valid till March 18, 2007. Certificate awarded by Det Norske Veritas No. RIN350-AE-1150 to Indal (Taloja Works) on March 26, 2002 on being found to comply with the environmental management system standard ISO 14001:1996 in the development, manufacture and dispatch of aluminium in plates, coils, sheets and foil forms. This certificate is valid till May 15, 2006. Belur Factory

2.

3.

(E)

Approvals relating to manufacture 1. Registration and license to work a factory issued by the Chief Inspector of Factories (Govt of West Bengal) in favour of Hindalco Industries Limited with effect from March 7, 2005, bearing factory license No. 165, registration No. 229-HW/X which had been given in favour of Indal on July 18, 1941 under the Factories Act, 1948. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise under Rule 9 of the Central Excise Rules, 2002, registering the Companys Belur factory for the manufacture of excisable goods; the factory was allotted the Excise Registration No. AAACH1201RXM010. Registration Certificate issued by the Superintendent, Central Excise under Section 69 of the Finance Act, 1994, registering the Belur factory for collecting service tax on goods transport agency (consignee/consignor) for the Company on April 8, 2005; the factory was allotted the Registration No. 59/GTA/SB02/KEL/2005-06. The certificate is valid for as long as the holder carries on the specified activity on the mentioned premises. Letter dated March 11, 2005 from the Office of the Deputy Commissioner of Commercial Taxes, Commercial Division at Kolkata allotting to the Company, the VAT number 19200127039, the State Sales Tax Act No. 19200127136 and CST Act No. 19200127233, incorporating the name Hindalco Industries Limited which would
264

2.

3.

4.

HINDALCO INDUSTRIES LIMITED


be valid and subsisting from March 11, 2005. 5. Letter dated March 28, 2005 from the Dy. Controller of Explosives, East Circle Office of Kolkata transferring license No. P/EC/WB/14/1685(P27401) for Petroleum Class B retail outlet/service station/consumer pump at Belur to the Company and extending the validity of this license till December 31, 2007. Letter dated June 5, 2003 from the Dy. Controller of Explosives transferring license number P/EC/WB/14/ 1685(P27401) dated March 8, 2005 to the Company. for the storage of 13.6 kilolitre of Petroleum Class B in tanks on the licensed premises under Petroleum Act, 1934. This license is valid till December 31, 2007. Letter dated March 28, 2005 from the Dy. Controller of Explosives transferring license No. P/HQ/WB/15/2400 (P932) dated April 24, 2003 to the Company. for the installation of Petroleum Class B & C Units under Petroleum Act, 1934. This license is valid till December 31, 2007. Renewal of Consent order No. CO19/10-PCB/HOW/65-97 dated October 31, 2002, vide certificate dated December 22, 2004 for operation of the industrial plant of Indal and for the release of gaseous and liquid effluents under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and under Section 25 and 26 of the Water (Prevention & Control of Pollution) Act, 1974, issued by the West Bengal State Pollution Control Board. This consent is valid till December 31, 2005. Certificate of Enlistment from the Bally Municipality in Howrah to the Company for the business of aluminium rolling mill for the year 2005-06 issued on April 20, 2005.

6.

7.

8.

9.

10. Food License for the Indal (Canteen) from the Bally Municipality (Health Department) under the West Bengal PFA Rules, 1957 vide receipt dated June 23, 2004. 11. License dated September 6, 2005 issued by the Deputy Secretary and Collector, Fire Service License Section to the Company to store hazardous materials under the West Bengal Fire Services Act, 1950 which is valid till April 17, 2006. Certifications 1. Certificate awarded by Bureau Veritas Quality International No. 169168 to the Companys unit at Belur on April 18, 2002 on being found to comply with the environmental management system standard ISO 14001:1996 for the development, manufacture and supply of alloyed and unalloyed aluminium coils and sheets. This certificate is valid till May 15, 2006. Certificate of compliance with ISO 9001:2000 quality standards by Bureau Veritas Quality International to the Companys unit at Belur on December 16, 1995 for the manufacture and supply of aluminium foil, foil and nonfoil based plain, printed, coated, laminated and extruded substrates for packaging purposes. The certificate number is 169169 and is valid till March 11, 2006.

2.

Pending Applications 1. Letter dated March 15, 2005 to the West Bengal State Pollution Control Board requesting the transfer of name on Consent order No. CO19/10-PCB/HOW/65-97 dated October 31, 2002 from Indal to the Company following the merger of these companies. Certificate of compliance with ISO 9001:2000 quality standards by Bureau Veritas Quality International to the Companys unit at Belur on November 20, 2001 for the manufacture of I-20K aluminium ingots, rolling ingots, cast coils and carbon paste. The certificate number is 169169 and is valid till November 21, 2004. Application for renewal is pending. Hirakud Complex

2.

(F)

Approvals relating to manufacture 1. Certificate of Registration under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970, issued by the office of the Registering and Licensing Officer, Government of Orissa on February 18, 2004 specifying the maximum number of contract labour that may be employed from each contractor for specified services. Central Excise Registration Certificate issued by the Office of the Assistant Commissioner of Central Excise, Belgaum under Rule 9 of the Central Excise Rules, 2002, registering the Hirakud complex for the manufacture of excisable goods on April 1,2005; the factory was allotted the Excise Registration No. AAACH1201RXM011.
265

2.

HINDALCO INDUSTRIES LIMITED


3. Certificate of registration issued to Indal under Section 9/9A and 9/C of the Orissa Sales Tax Act, 1947 by the Sales Tax Officer conferring registration No. SA I-2587 with effect from November 1, 1957 permitting the manufacture of all aluminium related products and resale of chemicals, scrap and carbon blocks. This certificate was amended in favour of the Company on March 7, 2005 and was renewed on March 29, 2005 for 2005-06. Certificate of Registration issued under Rule 5 of the Central Sales Tax (Registration and Turnover) Rules, 1957 by the Asst. Commissioner of Commercial Taxes at Ernakulum, on September 9, 2004 bearing number SA I (Central) 345. The certificate was amended upto March 7, 2005 issuing the certificate in favour of the Company instead of Indal. This certificate is valid from March 15, 2005 till cancelled. This certificate lists the material and equipment that may be utilized in the mine as well as the factory and enlists the items that can be put up by the complex for sale, leasing and resale. Certificate of assignment of Taxpayer Identification No. 2160170134 for Indal at Hirakud in lieu of the existing Orissa Sales Tax No. 2587 by the Commercial Tax Officer, Sambalpur. License to store 159 KL of Class C Petroleum bulk petroleum in an installation issued under Form XV of the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal, Hirakud with License No. P-12(14)59/OR-480 initially issued on February 26, 1990, which shall remain in force till December 31, 2006. License to store petroleum in tank or tanks in connection with pump outfit for fuelling motor conveyances under Form XIV under the Petroleum Rules, 2002 by the Dy. Chief Controller of Explosives, Rourkela to Indal, Hirakud with License number OR-991 initially issued on November 11, 2005, which shall remain in force till December 31, 2006. Authorisation for collection, treatment, storage, transport and disposal of hazardous waste bearing No. IND/IV/ HW 050(23) 21395 issued by the Orissa State Pollution Control Board under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 and Amendments thereof issued on November 13, 2000. The authorization was expiring on November 13, 2005. The Director of Factories and Boilers, Orissa vide letter No. 16244 dated October 1, 2005 has issued certificates for use of boilers having registration Nos. OR/484 and OR/489 respectively. The certificates were issued with effect from August 20, 2005 and are valid till August 19, 2006.

4.

5. 6.

7.

8.

9.

Certifications 1. Certificate awarded by Det Norske Veritas No. RIN350-AE-1042 to Indal (Hirakud Smelter) on December 27, 2000 on being found to comply with the environmental management system standard ISO 14001:1999 for aluminium smelting, production of aluminium pigs, rolling ingots, cast coils and carbon paste. This certificate was valid till December 27, 2003. Certificate awarded by Bureau Veritas Quality International of No. 149968 to the Companys unit at Belur on March 16, 2004 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 for the manufacture and supply of unalloyed and alloyed aluminium coils and sheets. This certificate was valid till March 16, 2007.

2.

Approvals Pending 1. Registration issued on May 31, 2002 to Indal to work a factory by the Chief Inspector of Factories, Orissa in the district of Hirakud employing not more than 2500 persons on any day of the year and using power not exceeding 1,20,000 K.W. The certificate was to expire on December 31, 2004. Application for change in the name of Company in whose favour the factory is registered is pending with the Directorate of Factories, Orissa. Consent Order No. 10920 SPCB/BBSR-I-IND(C0N)/32 dated March 31, 2005, under Section 25 and 26 of the Water (Prevention & Control of Pollution) Act, 1974 to Indal, Hirakud Smelter for the release of trade effluents, issued by the Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending. Consent Order No. 10922 SPCB/BBSR-I-IND(C0N)/32 dated March 31, 2005, under Section 21 of the Air (Prevention & Control of Pollution) Act, 1981 to Indal for the release of trade effluents, issued by the Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending.

2.

3.

266

HINDALCO INDUSTRIES LIMITED


4. Letter dated December 6, 1992 from the Regional Provident Fund Commissioner, Orissa allowing Indal, Hirakud Power to extend the application of Employees Provident Funds and Miscellaneous Provisions Act, 1952 to the establishment. The code number allotted was OR/4630. Letter dated April 27, 1994 from the Regional Director, Employees State Insurance Corporation, Bhuvaneshwar, extending the operation of the Employees State Insurance Act, 1948 to the Hirakud Power Co. vide Notification No. IVS-4-43/82-20069/LE with effect from September 4, 1993. The code number allotted to the factory is 443308-95.

5.

(G) Hirakud Power Approvals relating to manufacture 1. Registration and license to work a factory by the Chief Inspector of Factories, Orissa to Indal bearing registration No. SB-230 in the district of Hirakud employing not more than 2000 persons on any day of the year and using power not exceeding 18,000 K.W. for a factory for generating electrical power. This license is valid till December 31, 2005 License to store upto 6 Chlorine Tonners and 2 Chlorine cylinders under Rules 57 and 58 of the Indian Explosives Act, 1884, bearing No. GC(OG)3-130/OR/A issued by the Chief Controller of Explosives at Bombay permitting Indal, Hirakud Power issued on June 26, 1998 and renewed till March 31, 2007. License to store petroleum in two above ground Petroleum Class C Storage tanks issued under the Petroleum Act, 1934 by the Chief Controller of Explosives to Indal, Hirakud Power with License No. P-12(14)397/OR-1524 initially issued on March 2, 1993, to remain in force till December 31, 2005. License No. OR-1596 to store petroleum in a tank issued under the Petroleum Rules, 2002 by the Dy Chief Controller of Explosives, Rourkela to Indal, Hirakud issued on March 29, 1995, duly renewed till December 31, 2005 vide letter dated March 13, 2003. Authorisation for collection, treatment, storage, transport and disposal of hazardous waste bearing number IND/ IV/HW 050(23) 21386 issued by the Orissa State Pollution Control Board to Indal, Hirakud Power under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 and amendments thereof issued on November 13, 2000 with regard to the disposal of oily sludge, spent resin, used oil and batteries. The authorization is expiring on November 13, 2005.

2.

3.

4.

5.

Approvals Pending 1. Consent Order No. 20740/SPCB/BBSR-I-IND(CON)/1411 granted on June 25, 2004 by the Environmental Officer, Orissa State Pollution Control Board under Section 25 of the Water (Prevention & Control of Pollution) Act, 1974 authorising to Indal, Hirakud Power to discharge domestic effluents. Consent is to be valid till March 31, 2005. Application for renewal is pending. Consent order No. 20742/SPCB/BBSR-I-IND(CON)/1411 dated June 25, 2004 to Indal, Hirakud Power for operation in air pollution control area and specifying the nature of gaseous release permitted and the nature of chimneys that have to be utilised under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, issued by Deputy Environmental Officer, Orissa State Pollution Control Board. This consent was to be valid till March 31, 2005. Application for renewal is pending.

2.

(H) Renusagar Approvals relating to manufacture 1. 2. 3. License No. SBR -132 issued under Section 6 of Factories Act, 1948 by the Director of Factories, Uttar Pradesh. The license has been renewed for year ending December 31, 2005. Registration under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978. License bearing No. PV(NC)S- 88/UP69/PVS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 16 Te units of Ammonia to be stored on the premises. This license was renewed till March 31, 2007. License bearing No. UP- 302(L) to store compressed gas in cylinders under the Indian Explosives Act, 1884,
267

4.

HINDALCO INDUSTRIES LIMITED


issued by the Deputy Chief Controller of Explosives at Agra permitting upto 2000 kilograms of liquefied petroleum gas to be stored on the premises. This license was renewed till March 31, 2006. 5. License bearing No. 18- 297/ CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting liquefied petroleum gas to be stored on the premises. This license was renewed till March 31, 2006. License bearing No. UP- 1200/CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 1200 kilograms of liquefied petroleum gas to be stored on the premises. This license was renewed till March 31, 2007. License to import and store petroleum class A and class B under Form XIII of the Petroleum Act, 1934 by the Chief Controller of Explosives, Agra with License No. UP-1726. This approval is valid till December 31, 2005. License to import and store HSD oil pertaining to petroleum class B under Form XIII of the Petroleum Act, 1934 by the Chief Controller of Explosives, Agra with License No. P-12(17)665. This approval is valid till December 31, 2005. Certificates for use of a Boiler issued by the Deputy Director of Boilers, Kanpur Division permitting the Company to use boilers for the following: (a) (b) (c) (d) (e) Certificate dated January 28, 2005 permitting the working of boiler registry No. UP 4870 for a period extending from January 28, 2005 to January 27, 2006. Certificate dated May 20, 2004 permitting the working of boiler registry No. UP 5445 for a period extending from May 20, 2004 to May 19, 2006. Certificate dated April 6, 2005 permitting the working of boiler registry No. UP 5869 for a period extending from April 6, 2005 to April 5, 2006. Certificate dated December 9, 2004 permitting the working of boiler registry No. UP 5902 for a period extending from August 29, 2005 to August 28, 2006. Certificate dated June 20, 2005 permitting the working of boiler registry No. UP 5537 for a period extending from June 20, 2005 to June 19, 2006.

6.

7. 8.

9.

10. Consent Order No. F34506 dated July 16, 2004 from the Uttar Pradesh Pollution Control Board for obtaining consent to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is valid till December 31, 2005. 11. Consent Order No. F34505 dated July 16, 2004 from the Uttar Pradesh Pollution Control Board to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is valid till December 31, 2005. 12. Authorisation letter bearing No. 703/Auth/AB-16-1-2002 dated January 9, 2002 issued by the Uttar Pradesh Pollution Control Board under Rule 5 of the Hazardous Wastes (Management and Handling) Rules, 1989 and Amendment Rules, 2003 with regard to the collection and storage of waste oil and used batteries. The authorization is valid till January 7, 2007. 13. Mobile Station License No. P-472/1-17 issued by the Ministry of Communications and IT dated December 22, 2004. The license is valid upto December 31, 2006. 14. Wireless Station License No. P-1173/1-39 issued by the Ministry of Communications and IT. The license is valid upto September 30, 2005. 15. Mobile Station License No. RP-52/1-124 issued by the Ministry of Communications and IT dated December 20, 2004. The license is valid upto December 31, 2005. 16. Mobile Station License No. P-4077/1-17 issued by the Ministry of Communications and IT. The license is valid upto September 30, 2005. 17. Registration Certificate No. CTV/MZP-124/03 issued by the Head Post Master, Mirzapur for running a cable television network. 18. Registration No. UP 38/5 issued under Rule 5 of the Uttar Pradesh Motor Transport Workers Rules, 1962. The registration is valid till December 31, 2007.
268

HINDALCO INDUSTRIES LIMITED


19. One time bulk consumer license No. 43 issued under UP Scheduled Commodities Dealer (License and Control on Hoardings) Order, 1989 by the licensing authority, Uttar Pradesh on December 2, 1994. 20. Mandi Samiti license bearing No.M-442 issued on June 16, 2001 licensing authority Uttar Pradesh. Approvals Pending 1. 2. 3. (I) Letter dated October 9, 2005 applying for renewal of factory license No. I/1167/SDH/2m(I) for the year ending December 31, 2005 made to Director, Industrial Health and Safety, Madhya Pradesh. Letter dated October 30, 2005 applying for renewal of factory license No. MPR-67 for the year ending December 31, 2005 made to Assistant Director of Factories, Uttar Pradesh. Application to renew license No. E-25(17)-460/UP-355/E to possess explosives for use, for the period ending March 31, 2006 made to the Joint Chief Controller of Explosives, Agra vide letter dated January 20, 2004. Renukoot

Approvals relating to manufacture 1. Plant I factory license bearing No. SBR-86 issued under the Factories Act, 1948 by the Deputy Chief Inspector of Factories, Uttar Pradesh vide certificate dated November 29, 1997. The license has been renewed upto December 31, 2005. Plant II factory license bearing No. MPR-92 issued under the Factories Act, 1948 by the Deputy Chief Inspector of Factories, Uttar Pradesh vide certificate dated March 5, 2002. The license has been renewed upto December 31, 2005. Plant I registration certificate No. 4 under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978, being a one time registration. Plant II registration certificate No. 5 under Contract Labour (Regulation and Abolition) Act, 1970, issued on January 19, 1978 being a one time registration. Sales tax registration No. MI-10 issued under the Uttar Pradesh Trade Tax Act, 1948. Sales tax registration No. RG-5006130 issued under the Central Sales Tax Act, 1956. License No. UP-5799 to store upto 15 kiloliters of petroleum class A and class B under the Petroleum Act, 1934, issued by the Controller of Explosives, Agra This approval is valid till December 31, 2005. Central Excise registration No. AAACH1201RXM002 issued by the Central Excise Division, Mirzapur on December 18, 2001 under Rule 9 of the Central Excise Rules, 2002, registering the Renukoot factory for the manufacture of excisable goods. Service tax registration No. AAACH1201RST005 for service of cable operators. The Company has also applied to register itself for the services of Mandap Keeper, health and fitness, goods transport agency and consulting engineer services.

2.

3. 4. 5. 6. 7. 8.

9.

10. License No. P-12(17)2589/UP-3598 dated May 4, 1994 to store upto 1135.05 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Agra. The license has been renewed till December 31, 2005. 11. License No. UP 702/ CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting compressed gas to be stored on the premises. This license was renewed till March 31, 2006. 12. License No. UP 1357/ CGS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting carbon dioxide gas to be stored on the premises. This license was renewed till March 31, 2006. 13. License No. P/HQ/UP/15/1364(P8765) dated October 23, 2000 to store upto 92 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives. The license has been renewed till December 31, 2006. 14. License No. P/HQ/UP/15/4259(P53699) dated September 8, 2003 to store upto 50 kilo liters of petroleum class C
269

HINDALCO INDUSTRIES LIMITED


under the Petroleum Act, 1934, issued by the Chief Controller of Explosives. The license has been renewed till December 31, 2006. 15. License No. PV(CC)S- 314/UP205/PVS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 8.4 MT of Propane to be stored on the premises. This license was renewed till March 31, 2007. 16. License No. PV(CC)S- 314/UP205/PVS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 8.4 MT of Propane to be stored on the premises. This license was renewed till March 31, 2007. 17. License No. PV(CC)S- 315/UP206/PVS to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Deputy Chief Controller of Explosives at Agra permitting upto 8.4 MT of Propane to be stored on the premises. This license was renewed till March 31, 2007. 18. License No. S/HO/UP/03/267(S20867) to store compressed nitrogen gas in three pressure vessels, issued under the Indian Explosives Act, 1884, by the Deputy Chief Controller of Explosives on September 21, 2004. This license is valid till March 31, 2007. 19. Consent No. F27422/C2/A-259/2004 dated February 10, 2004 from the Uttar Pradesh Pollution Control Board for obtaining consent to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is valid till December 31, 2005. 20. Consent No. F27421/C2/480/2004 dated February 10, 2004 from the Uttar Pradesh Pollution Control Board for obtaining consent to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is valid till December 31, 2005. 21. Authorisation letter bearing No. 604/AUTH/HINDALCO 2002 dated January 9, 2002 issued by the Uttar Pradesh Pollution Control Board under Rule 5 of the Hazardous Wastes (Management and Handling) Rules 1989 and Amendment Rules, 2003 with regard to collection, reception, treatment, storage, transport and disposal of hazardous wastes. The authorization is valid till January 7, 2007. 22. Authorisation granted by the regional officer, Uttar Pradesh Pollution Control Board under the Bio-Medical Waste (Management & Handling) Rules, 1998 for the period January 11, 2005 to December 31, 2007 vide letter dated June 23, 2005. 23. Environmental clearance granted by the Ministry of Environment and Forests, Government of India for the 40 MW co-generation power project at Renukoot, Uttar Pradesh. 24. Consent No. F 50284C-2/Vayu Pradushan/567/05 dated September 5, 2005 read with Consent Order letter No. 03/C2/Sahmati(Vayu) Adesh/05 dated 5.9.2005 valid from January 1, 2005 to December 31, 2005 under Air (Prevention & Control of Pollution) Act, 1981 from U.P Pollution Control Board, Lucknow. . 25. Consent No. 50283C-2/Sahmati Jal/934/05 dated September 5, 2005 read with Consent Order letter No. 103/C2/ Sahmati Jal Adesh/05 dated September 5, 2005 valid from January 1, 2005 to December 31, 2005 under Water (Prevention & Control of Pollution) Act, 1974 from U.P Pollution Control Board, Lucknow. . 26. No Objection Certificate and approval from UP Pollution Control Board for Red Mud/ Ash disposal on 69 hectare land in the Companys existing premises and located on South of Water Treatment Plant, Renukoot vide letter No. F50102/NOC/3310/2005 dated August 30, 2005. 27. Registration Certificate No. CTV/MZP-116/2002 issued by the Head Post Master, Mirzapur for running a cable television network. The certificate is valid upto December 16, 2005. Certification 1. Certificate of registration No. 1479 issued by Moody International Certification on January 1, 2004 certifying that the environmental management systems of the Company have been assessed and registered against the ISO 14001 standard.

270

HINDALCO INDUSTRIES LIMITED


Applications Pending 1. License No. P/HQ/UP/15/4352(P53693) dated June 8, 2004 to store upto 183 kiloliters of petroleum class C under the Petroleum Act, 1934, issued by the Joint Chief Controller of Explosives. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P/HQ/UP/15/435(P105554) dated June 8, 2004 to store upto 156 kiloliters of petroleum class C under the Petroleum Act, 1934, issued by the Joint Chief Controller of Explosives. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P-12(17)383/UP-1775 dated December 19, 1984 to store upto 4950 kiloliters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Agra. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P-12(17)615/UP-1777 dated January 31, 1978 to store upto 46 kiloliters of petroleum class B under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Agra. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P-12(17)1854/UP-1792 dated July 15, 1986 to store upto 62-83 kiloliters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Agra. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P/HQ/UP/15/693(P8085)/UP-1793 dated July 15, 1986 to store upto 226.57 kiloliters of petroleum class B under the Petroleum Act, 1934, issued by the Deputy Chief Controller of Explosives, Agra. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007. License No. P-12(17)2596/UP-4112 dated September 25, 1995 to store upto 92 kiloliters of petroleum class C under the Petroleum Act, 1934, issued by the Deputy Chief Controller of Explosives, Agra. The Company has vide its application dated November 17, 2004 applied to renew the license for the period January 1, 2005 to December 31, 2007.

2.

3.

4.

5.

6.

7.

(J) Dahej Approvals relating to manufacture 1. 2. Factory license issued under the Factories Act, 1948 by the Chief Inspector of Factories. The license has been renewed upto December 31, 2005. Certificates for use of a Boiler issued by the Gujarat Boiler Inspection Department, permitting the Company to use the following boilers: a. b. c. d. e. f. 3. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3962 for a period extending from May 17, 2005 to May 16, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 4063 for a period extending from June 7, 2005 to June 6, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3879 for a period extending from May 10, 2005 to May 9, 2007. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 3880 for a period extending from May 10, 2005 to May 9, 2007. Certificate dated May 4, 2005 permitting the working of boiler registry No. MP 4059 for a period extending from February 26, 2005 to February 25, 2006. Certificate dated August 28, 2005 permitting the working of boiler registry No. GT 4429 for a period extending from May 10, 2005 to May 9, 2007.

Letter from the Employees Provident Fund Organisation, dated October 22, 2002 allotting separate code DL/ 7233 to Indo-Gulf Corporation Limited, Unit Birla Copper at Dahej. Letter requesting a change of name has been submitted.
271

HINDALCO INDUSTRIES LIMITED


4. Central Excise registration No. AAACH1201RXM003 issued by the Central Excise Division, Bharuch on March 30, 2004 under Rule 9 of the Central Excise Rules, 2002, registering the Dahej factory for the manufacture of excisable goods. Sales tax registration No. 2107000691 issued under the Gujarat Sales Tax Act, 1969. Sales tax registration No. GJ-15G-74 issued under the Central Sales Tax Act, 1956. Service tax registration No. GTO/VAD-II(BRH)19/HIL/2005 issued by the Central Excise and Customs Commissionerate, Vadodara - II on January 19, 2005 under Section 69 of the Finance Act, 1994 for goods transport operator services. License No. GJ/BRO-407 to store upto 20 kilo liters of petroleum class A and class B in tanks on the premises, issued under the Petroleum Act, 1934, by the Joint Controller of Explosives, Navi Mumbai. This approval is valid till December 31, 2006. Certificates for use of a Boiler issued by the Gujarat Boiler Inspection Department, permitting the Company to use Boiler registry number GT 4676 for a period extending from January 4, 2005 to January 3, 2006 vide certificate dated January 4, 2005.

5. 6. 7.

8.

9.

10. License No. P/HQ/GJ/15/1813(P12167) dated October 21, 1997 to store upto 659 kiloliters of petroleum class A and 452 kilo liters of petroleum class C under the Petroleum Act, 1934, issued by the Chief Controller of Explosives. The license has been renewed till December 31, 2007. 11. License No. P-12(25)3272 dated October 21, 1997 to store upto 25 kilo liters of petroleum class B under the Petroleum Act, 1934, issued by the Deputy Chief Controller of Explosives, Baroda. The license has been renewed till December 31, 2007. 12. Licence No. S/HO/GJ/03/356(s1682) to store compressed gas in cylinders under the Indian Explosives Act, 1884, issued by the Joint Chief Controller of Explosives, Navi Mumbai permitting upto 350 cubic meters of liquefied petroleum gas to be stored on the premises. This license was renewed till March 31, 2008. 13. Consent Order No. 3565 dated August 9, 2004 from the Gujarat Pollution Control Board to operate under the Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981 and the Hazardous Wastes (Management and Handling) Rules, 1989. The consent is valid till February 19, 2009. 14. Mobile Station License No. P-4404/1-17 and 4405/1-17 issued by the Ministry of Communications and IT dated March 23, 2005. The licenses are valid till March 31, 2006. 15. Permission from the Gujarat Maritime Board vide its letter dated March 30, 2005 permitting Dahej Harbour and Infrastructure Limited to use its captive jetty for handling commercial cargo. The permission has been renewed till December 31, 2005. (K) Silvassa Approvals to carry out manufacturing 1. 2. 3. Factory license bearing No. 631 issued under the Factories Act, 1948 by the Chief Inspector of Factories, Silvassa vide certificate dated January 28, 1998. The license has been renewed upto December 31, 2005. Factory license bearing No. 1151 issued under the Factories Act, 1948 by the Chief Inspector of Factories, Silvassa vide certificate dated September 16, 1999. The license has been renewed upto December 31, 2005. Central Excise registration No. AAACH1201RXM001 issued by the Central Excise Division, Silvassa on January 19, 2003 under Rule 9 of the Central Excise Rules, 2002, registering the Silvassa factory for the manufacture of excisable goods. Service Tax Code No. AAACH1201RST006 for goods transport operators and business auxiliary services, issued by the Assistant Commissioner of Central Excise, Silvassa on February 9, 2005. Allotment of Tax Deduction Account No. SRTH0059F issued under Section 203A of the I.T. Act, by the Income Tax Officer - TDS, Surat on June 17, 2003. Sales Tax registration No. DNH/ST/2045 issued under the Dadra and Nagar Haveli Sales Tax Regulation, 1978.
272

4. 5. 6.

HINDALCO INDUSTRIES LIMITED


7. Sales tax exemption certificate No. ADM/DNH/EXEMPT/ST/98/424 dated June 29, 1999 and amendments dated March 15, 2003 and July 5, 2003 issued by the Assistant Commissioner of Sales Tax, Silvassa. The Company is exempt from payment of sales tax under the Dadra and Nagar Haveli Sales Tax Regulation, 1978 in respect of paper poly laminated, paper coated aluminium sheet and strips of thickness exceeding 0.2 mm alloyed and nonalloyed for the period December 31, 1999 to March 5, 2013; and in respect of road wheels and parts and accessories thereof for the period September 28, 1999 to September 27, 2014. License No. P-12(9)213 SIL-71 to store upto 20 kiloliters of petroleum class B and 40 kiloliters of petroleum class C on the premises, issued under the Petroleum Act, 1934, by the Chief Controller of Explosives. This approval is valid till December 31, 2005. Authorisation letter No. PCC/DDD/O-607/HW/KU/96-97/526 dated December 16, 2004 issued by the Pollution Control Committee, Daman & Diu & Dadra and Nagar Haveli under the Hazardous Wastes (Management and Handling) Rules, 1989 and Amendment Rules, 2003 with regard to collection, storage, transport and disposal of hazardous wastes. The authorization is valid till February 28, 2006.

8.

9.

10. Consent No. PCC/DDD/O-607/HW/KU/96-97/525 dated December 16, 2004 issued by the Pollution Control Committee, Daman & Diu & Dadra and Nagar Haveli to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is valid till February 28, 2006. 11. Consent No. PCC/DDD/O-607/HW/KU/96-97/524 dated December 16, 2004 issued by the Pollution Control Committee, Daman & Diu & Dadra and Nagar Haveli for consent to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is valid till February 28, 2006. Certifications 1. Certificate Registration No. 04111 20053 issued by the Certification Body for QM-Systems of RWTUV Systems GmbH, certifying that the Wheel Division at Silvassa has established and applies a quality system for design, manufacture and supply of aluminium alloy wheel rims, that is compliant with ISO/TS 16949:2002. This certificate is valid till May 14, 2006. Membership No. WR/MH/05/588 of the Automotive Component Manufacturers Association of India, for the period 2004-2005. Certificate Registration No. 04104 2002 522-E3 dated January 14, 2002 issued by the Certification Body for QMSystems of RWTUV Systems GmbH, certifying that the environmental management systems of the unit are assessed and registered as meeting ISO 14001 standard. Certificate Registration No. 04100 2002 0053-E3 dated January 14, 2002 issued by the Certification Body for QMSystems of RWTUV Systems GmbH, certifying that the manufacturing systems of the unit are assessed and registered as meeting ISO 9001 standard.

2. 3.

4.

(L) Muri Approvals to carry our manufacturing 1. 2. Certificate of registration No. 9 issued under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970 to Indal, Chotamuri on December 19, 1973 for the employment of 1001 persons as contract labour. Central Excise registration No. AAACH1201RXM009 issued to the Company by the Central Excise Division, Ranchi on March 24, 2005 under Rule 9 of the Central Excise Rules, 2002, registering the Dahej factory for the manufacture of excisable goods. State sales tax registration No. RN(S) 2437(R) issued to the Company, under Section 14 of the Bihar Finance Act, 1981. The certificate is renewed up till May 31, 2008. Registration No. Jharkhand (S) 2173 (C) issued to the Company, under the Central Sales (Registration and Turnover) Rules, 1957. License No. P-12(6)891/Bi-3048 dated February 18, 2004 issued under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Hazariba. The license is valid till December 31, 2005. Provisional orders under Section 9 of the Indian Boilers Act, 1923 issued by the Inspectorate of Boilers, Ranchi
273

3. 4. 5. 6.

HINDALCO INDUSTRIES LIMITED


Division permitting the Company to use the following boilers: (a) (b) (c) 7. Certificate dated July 8, 2004 permitting the working of water tube boiler registry number BR/6940. Certificate dated July 25, 2004 permitting the working of water tube boiler registry number BR/8314. Certificate dated May 21, 2004 permitting the working of water tube boiler registry number BR/8403.

Discharge Consent Order No. RA/0139/W/C-1190 dated October 16, 2004 from the Jharkhand State Pollution Control Board issued to Indal, to operate under the Water (Prevention and Control of Pollution) Act, 1974. The consent is deemed as renewed till December 31, 2005. Emission Consent Order No. RA/0027/A/C-1191 dated October 16, 2004 from the Jharkhand State Pollution Control Board issued to Indal, to operate under the Air (Prevention and Control of Pollution) Act, 1981. The consent is deemed as renewed till December 31, 2005.

8.

Certifications 1. Certificate awarded by Det Norske Veritas no. 00002-2003-AS-DNV to Indal (Chota Muri unit) on August 8, 2003 on being found to comply with the Occupational Health and Safety management system standard OHSAS 18001:1999 for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks. This certificate was valid till August 8, 2006. Certificate awarded by Bureau Veritas Quality International for quality management system to the Companys unit at Chota Muri of ISO 9001:2000 (No 145393) for the manufacture of Alumina Hydrate, Calcined Alumina, Carbon Electrode Paste and Cathode Carbon Blocks on May 29, 1997 which is valid till January 27, 2007. Certificate awarded by Det Norske Veritas No. 00162-2004-AE-BOM-RaV to Indal (Chota Muri unit) on April 5, 2001 on being found to comply with the environmental management system standard ISO 14001:1999 for the manufacture of Alumina Hydrate, Calcined Alumina, special alumina hydrates and special calcined aluminas. This certificate was valid till April 5, 2007.

2.

3.

Applications Pending 1. Factory license registration No. 1612/RCH issued to Indal under the Factories Act, 1948 by the Inspector of Factories, Ranchi vide certificate dated August 24, 2004. The license was valid till December 31, 2004. An application for renewal of factory licence was made on December 30, and is 2004, still pending with the authorities. License for storing explosive substances bearing No. BI-3534 dated September 16, 1993 issued under the Petroleum Act, 1934, issued by the Chief Controller of Explosives, Hazaribag. Payment for renewal of this license till December 31, 2005 has been made. The confirmation of the extension is awaited.

2.

(M) Aditya Aluminium 1. 2. Memorandum of Manufacturer has been acknowledged by Ministry of Industry on August 8, 1997 for manufacture of 500,000 MT of calcined alumina at Kansariguda, Rayagada, Orissa. Memorandum of manufacturer has been acknowledged by Ministry of Industry on August 8, 1997 for the manufacture at the facility of aluminium with captive base power plant for capacity of 250,000 MT which includes 60,000 MT aluminium wire. Registration certificate has been issued by the Assistant Labour Officer for the Aditya Aluminium Project under Shops and Establishments Act on December 31, 1997 and this registration is valid up to December 31, 2005. No Objection Certificate has been accorded by the State Pollution Control Board Orissa for establishment of 1.0 Mln.T capacity Alumina Refinery at Kansariguda Rayagada, 260,000 T capacity Aluminium Smelter Plant at Lapanga and 5 X 130 MW Captive Power Plant at Lapanga, Sambalpur and have been revalidated vide order No.17817 dt.27.05.2004. State Govt. in Water Resources Department has accorded permission to draw 52.73 cusec water in favour of Aditya Aluminium Project provisionally and advised to sign the agreement for the same. Approval for drawal of construction power from SOUTHCO has been obtained for Bauxite Mines & Alumina Refinery site (Kansariguda) and approval for drawal of construction power from WESCO has been obtained for Aluminium Smelter and Power Plant Project site (Lapanga).
274

3. 4.

5. 6.

HINDALCO INDUSTRIES LIMITED


7. 8. In principle approval granted to Aditya Aluminium Project to draw 11.25 Cusec from Patagarha River by the Orissa Government through the Additional Secretary vide letter dated May 15, 1998 for the alumina refinery. A recommendation has been made and sent by Industrial Promotion and Investment Corporation of Orissa Limited to Industrial Development Corporation of Orissa for acquisition of 3324.09 acres for aluminium smelter & captive power plant and 2095.29 acres for alumina plant and accordingly land is being acquired.

Applications Pending 1. Applications for environment clearance has been made to the Ministry of Environment and Forest for alumina refinery and aluminium smelter dated July 28, 2004 and for captive power plant dated March 3, 2005 and the Expert Committee Meetings already held. The final clearance is awaited from the Ministry of Environment and Forest.

(N) Utkal Alumina International Limited Utkal Alumina was incorporated on September 29, 1993 and subsequently became a subsidiary of Indal. Pursuant to the Scheme of Arrangement inter alia the entire shareholding interest of Indal in Utkal Alumina was transferred to the Company. Approvals in respect of this project of Utkal Alumina in Orissa, were initially applied for in the name of Indal or through its subsidiary, Utkal Alumina. Approvals in respect of the project 1. Permission granted to Utkal Alumina under Section 44(1) of the Indian Electricity Supply Act, 1948 for installation of a coal based co-generation power plant of 80 MW capacity by the Orissa Electricity Regulatory Commission on June 11, 1997. Permission to widen road to Utkal Alumina from Tikri Junction to Koral Junction from the Works Department, Government of Orissa, dated May 22, 2001. In principle approval granted to Indal by the Department of Irrigation, Government of Orissa for drawing water from the Indravati Reservoir vide letter dated May 1, 1993. Administrative clearance granted to Utkal Alumina by the Department of Water Resources, Government of Orissa for the drawing of water from the Indravati Reservoir vide letter dated November 18, 2002. The Collectors of Rayagada and Kalahandi district have granted surface rights over land in Kashipur and Rampur vide letters dated May 25, 2004 and October 5, 2004. These surface rights are valid till December 17, 2028. In-principle approval granted for the proposed mining site for Utkal Alumina at Baphlimali, District Rayagada, subject to certain conditions, by the Ministry of Environment and Forest on July 4, 1994. In-principle approval granted for the establishment of an aluminium plant producing I million tonne of aluminium at Rayagada by the Orissa State Pollution Control Board vide letter dated June 19, 1995 subject to certain conditions. Environmental clearance was granted for the Baphalimali bauxite mine of Utkal Alumina subject to certain conditions by the Ministry of Environment and Forest on September 25, 1995. Environmental clearance was granted to the proposed alumina plant and the captive power plant of Utkal Alumina subject to certain conditions by the Ministry of Environment and Forest on September 27, 1995.

2. 3. 4. 5. 6. 7.

8. 9.

Approvals Pending 1. The approval for the project was granted by the Ministry of Industry Department of Industrial Development, SIA under SIA registration No. E.O. 294(91)-IL, (MRTP) vide letter dated July 18 1991 to Indal. The approval was renewed from time to time initially by Indal and subsequently by Utkal Alumina. The last renewal sought for the establishment of the new undertaking in Kashipur for the manufacture of alumina (annual capacity of 1 million tonnes) which was obtained vide letter dated September 30, 1992 with a validity of a period of 3 years from its date of issue.Subject to certain conditions, the permission had been granted with all the facilities and privileges admissible under the 100% Export Oriented Scheme. The validity of this letter of intent had been extended till September 30, 2002, in favour of Utkal Alumina, by the Ministry of Commerce & Industry, Department of Industrial Policy and Promotion, vide letter dated September 26, 2000. In the year 2002, renewal application was again made by Utkal Alumina. The application for renewal is being processed.
275

HINDALCO INDUSTRIES LIMITED


2. There are certain approvals and consents in relation to Utkal Alumina to be obtained after the renewal of the letter of intent is granted: (a) Permission to survey land to Indal for the development of infrastructure facilities for export of aluminium and import of caustic soda granted by the Vishakapatnam Port Trust vide letter dated February 11, 1993. Application for allotment of land requires to be made. In-principle commitment for the allotment of 1000 hectares of land by the Joint Secretary to the Government, Revenue and Excise Department for the purpose of setting up a 100% EOU at Rayagada dated January 27, 1994. Rail transport clearance from Ministry of Railways for the outward transport of alumina and inward transport of coal, fuel oil and caustic soda. This clearance was valid till January 15, 1994. This clearance from the Ministry of Railways for the carriage of 3 million tpa to the alumina plant has been extended till December 17, 2002 vide letter dated December 7, 2001. Linkage accorded to the Utkal Aluminas captive power plant by the Ministry of coal for the supply of 0 .8 million tpa vide letter dated November 16, 1998. The ministry required an agreement for the supply of fuel to be concluded by May 17, 1999. The Ministry of Coal and Mines has given consent vide letter dated December 17, 2004 to extend time for signing the fuel supply agreement till March 31, 2005 In principal approval given by the Department of Energy, Government of Orissa on February 5, 1993 for supply of 5 MW power in 1994 for setting up the project and 15 MW operational power between 1997 and 1998 to Utkal Alumina.

(b)

(c)

(d)

(e)

Approvals for Offices


(A) 1. Bangalore Registration certificate dated July 12, 1966 issued under the Karnataka Shops and Establishments Act, 1961 in favour of Indian Aluminium Company Limited for an office located at Indal House, 140, Field Marshal House, KM Cariappa Road, Bangalore 560025, bearing registration No. 61/CE/0309. Branch Certificate issued to the Company for its office located at Industry House, Race Course Road, Bangalore 560001 bearing No. 72834304, on October 10, 2002, permitting the operation of branches at Peenya, KM Cariappa Road and Godown at survey no. 45/18. Mumbai

2.

(B)

1. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. KE II/011019 dated February 14, 2000 for an office located at Ahura Complex, 1st Floor, MIDC, Mahakali Caves Road, Andheri East, Mumbai 400093. The registration has been renewed till 2005. 2. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. A-II/005707 dated for an office located at 15th Floor, Air India Building, Nariman Point, Mumbai 400021. The registration has been renewed for the year, 2006 on January 7, 2004. Certificate of Registration issued under the Bombay Shops and Establishments Act, 1948 bearing No. G18-II-361 dated March 23, 2000 for an office located at Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400025. The registration has been renewed till 2005. Bhubaneshwar Registration Certificate Number II-478 issued under the Orissa Shops and Establishments Act, 1956 in favour of Indian Aluminium Company Limited dated January 24, 2005 for an office located at J-6 Jaydev Vihar, Bhubaneshwar - 751013. By letter dated May 2, 2005 to the District Labour Officer, the Company has requested a transfer in the registration certificate in favour of Hindalco Industries Limited. Registration certificate dated December 31, 1997 from the Assistant Labour Officer, Bhubaneshwar in favour of Aditya Aluminium Project bearing number II-733 permitting the use of contract labour on the premises.

3.

(C) 1.

2.

276

HINDALCO INDUSTRIES LIMITED


(D) 1. Chennai Statement issued under Section 3 of the Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, 1958 to the Company by Asst. Inspector of Labour on February 13, 1998 for the office located at 40 Calve Chateau, 808 PH Road, Kilpauk, Chennai 600010 updated on December 31, 2004. Statement issued under Section 3 of the Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, 1958 by Asst. Inspector of Labour bearing No.56/74 dated February 12, 1974 to Indian Aluminium Company Limited, Second Floor, Golden Enclave, 184 Poonamallee High Road, Kilpauk, Chennai 600010 updated on December 31, 2004. Delhi Notice issued under Section 33 of the Delhi Shops and Establishments Act, 1954 mentioning the time of operation of the office of the Company located at Vandana, 5th Floor, 11, Tolstoy Marg, New Delhi - 110001 by the Chief Inspector of Shops and Establishments, Delhi. Registration certificate issued under Delhi Shops and Establishments Act, 1954 bearing registration number 6/ 3200/II by the Chief Inspector, Shops and Establishments, Delhi on March 3, 1992 in favour of the office of the Company located at UCO Bank Building, 2nd Floor, Parliament Street, New Delhi -110001. Hyderabad Certificate of Registration No C22/1969/2000 dated March 14, 2000 issued under the Andhra Pradesh Shops and Establishments Act, 1988 to the Company for an office located at Emerald House, SP Road for carrying on sales and Marketing by the Department of Labour; this certificate is valid till December 31, 2005. Certificate of Registration No. AL032/HYD/196/1991 to the Company for an office located at 312 Minerva House, 94 Sarojini Devi Road, Secunderabad renewed till December 31, 2005 vide letter dated December 27, 2004 under the Andhra Pradesh Shops and Establishments Act, 1988 by the Department of Labour.

2.

(E) 1.

2.

(F) 1.

2.

(G) Kolkata 1. Certificate of registration bearing registration No. Cal/Park/P-II/439 issued under the West Bengal Shops and Establishments Act, 1963 to the office of I Middleton Street, Kolkata 700071, to operate as a commercial establishment. The registration was granted on May 31, 1994 and was last updated on January 25, 2005. Certificate of registration bearing registration No. CAL/Hare/P-II/37387/01 issued under the West Bengal Shops and Establishments Act, 1963 to the office of Hindalco Industries Limited at 9/1 R.N. Mukherjee Road, Kolkata 700001. The certificate of enlistment with the Kolkata Municipal Corporation has been renewed for 2005-2006.

2.

(H) Lucknow 1. Registration certificate issued for the office of the Company located at 23 Vidhan Sabha Marg, Lucknow. An application has been made to renew the registration for a period of 5 years starting from 2005-2066.

Permits and Approvals in relation to Mining


(I) A. 1. Maharashtra Durgamwadi Consent No. TB/NOC/Kri/B-3993 issued by the Maharashtra Pollution Control Board on October 28, 1991 granting a no objection certificate (NOC) to Indal for mining 72000 MT/Month of bauxite by open cast mining method at Radhanagari, District Kolhapur, subject to certain conditions. Consent No. BO/Kri/2529/C-2136 issued by the Maharashtra Pollution Control Board on November 19, 1993 granting clearance under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 (Water Act) to Indal to establish a factory in the Water Pollution Prevention Area of Krishna River basin for manufacture of 72000 MT/Month of bauxite in Village Durgamadwadi S.P No. 120(P), 123(P) and Padsoli 13(P), 14, 15(P), 16(P), 18(P), . 36(P), 38(P), 39(P), 40(P), 41(P), 42, 36(P), 43(P), 45(P), 188(P), Taluka Radhanagari, District Kolhapur. The consent also imposed certain air pollution control measures.

2.

277

HINDALCO INDUSTRIES LIMITED


3. Consent No. BO/Kri/2529/R/C-683 by the Maharashtra Pollution Control Board on April 29, 1995 granted to operate the factory in the Water Pollution Prevention Area of Krishna River Basin under Section 26 of the Water Act for the manufacture of 72000 MT/Month of bauxite and 10,000 MT/Month of aluminum laterite. This consent is valid upto December 31, 1995 and also imposed certain air pollution control measures. Environmental Clearance issued by the Government of Maharashtra on December 8, 1996, stating that the Department had no-objection to the Companys expansion to manufacture 72000 MT/Month of bauxite at village Durgamanwadi, Radhanagari, Dist. Kolhapur. Consent No. BO/KO/22/R/CC/24 issued by the Maharashtra Pollution Control Board on March 17, 2004 under the Air and Water Acts until December 31, 2006. The validity of the authorisation granted under Hazardous Wastes (Management and Handling) Rules, 1989 is valid for a period of three years. Kasarsada Certificate of Approval no. No.8-83/99-FC/3562-F issued by the Central Government on October 3, 2001 under Section 2 of the Forest (Conservation) Act, 1980 for diversion of 106.76 hectare forest land for renewal of Kasarsada mining lease and construction of feeder road in favour of Indalco in District Kolhapur, Maharashtra. Consent No. BO/RO/Kolhapur- 113/ R/CC-815 issued by the Maharashtra Pollution Control Board on January 3, 2004 in respect of mining 150000 MT/yr of bauxite and 300000 MT/yr of aluminum laterite under the Water and Air Pollution Acts and also the Hazardous Wastes (Management & Handling) Rules 1989. This consent is valid until December 31, 2006. Ngartaswadi No consents are required for this mine as it is non-operational. D. 1. 2. E. 1. Mogalgad Clearance No. J-11016/17/95-IA.II(M) issued by the Government of India on August 1, 1996 granting environmental clearance for diversion of 16 hectares of forest land. Since the mine is non-operational, no environmental consents are present. Idergunj Approval no. F No. 11-84/ 2003-FC given by the Ministry of Environment and Forests on June 29, 2004 granting . approval of the Central Government to entrust the work for carrying on Environmental Impact Assessment studies in the Inderganj area to the Indian Institute of Science, Bangalore. No other consents seen as mines are not operational.

4.

5.

B. 1.

2.

C.

2.

Consents and Approvals Pending A. 1. 2. 3. Dhangarwadi The Company has applied for forest clearance from the Ministry of Environment and Forests (MoEF) This application is pending before the concerned authority. In relation to obtaining an NOC from the Maharashtra Pollution Control Board (MPCB), a public hearing was conducted on August 18, 2005 and the report of the same has been forwarded to the MPCB. The Udyog, Energy and Labour Department, has written a letter to the Company on October 16, 2003 stating that the Company would be granted permission to work in the forest land upon receipt of NOC from the Forest Department for 74.91 hectares of forest land. Mogalgad The forest clearance in relation to diversion of forest land for which the Government had earlier granted approval, has since been withheld on the basis of recommendation of Dy.Conservator of Forests (Wildlife) (DCF), Principal Chief Conservator of Forests (Wildlife) and the Nodal Officer. The new Conservator and the DCF visited the aforesaid site on September 16, 2005 and have taken the opinion of the surrounding villagers. The report is expected to be forwarded by September 24, 2005

B. 1.

278

HINDALCO INDUSTRIES LIMITED


C. 1. D. 1. (II) A. 1. Durgmanwadi The Company has applied for environmental clearance on July 4, 2005 and for temporary working permission 15 July 2005 to the MoEF The said clearances are awaited. . Kasarsada The Company has applied for environmental clearance on July 11, 2005 and for temporary working permission 15 July 2005 to the MoEF The said clearances are awaited. . Jharkhand Bagru Emission Consent Order No. RA/0171/A/C-694 issued by the Jharkhand Pollution Control Board (JSPCB) to the Company under Section 21 of the Air Act on May 6, 2004 to the Company granting consent to operate its Industrial Plant at Bagru Hill Bauxite Mines, Lohardaga. The consent is valid from July 1, 2003 till June 30, 2004. Discharge Consent Order No. RA/0170/W/C-693 issued by the JSPCB on May 6, 2004 to the Company granting consent to operate under Section 25/ 26 of the Water Act for discharge of trade effluent at Bagru Hill Bauxite Mines, Indal for the period from July 1, 2003 till June 30, 2004. Renewal of consent order for Emission and Discharge for Bagru Hill Bauxite Mines submitted to the JSPCB on May 28, 2004. Bhusar Emission Consent Order No. RA/0170/W/C-694 issued by the JSPCB on May 6, 2004 to the Company granting consent under Section 21 of the Air Act to operate their Industrial Plant at Bagru Hill Bauxite Mines, Lohardaga. The consent is valid from July 1, 2003 till June 30, 2004. Discharge Consent Order No. RA/0170/W/C-693 issued by the JSPCB to the Company on May 6, 2004 granting consent to operate under Section 25/ 26 of the Water Act for discharge of trade effluent at Bagru Hill Bauxite Mines, Indal. The said consent is valid from July 1, 2003 till June 30, 2004. Renewal of consent order for Emission and Discharge for Bagru Hill Bauxite Mines submitted to the JSPCB on May 28, 2004. Hisri (Old) Emission Consent Order no. RA/0170/W/C-694] issued by the JSPCB to the Company on May 6, 2004 granting consent under Section 21 of the Air Act to operate an Industrial Plant at Bagru Hill Bauxite Mines, Lohardaga. The said consent is valid from May 6, 2004 July 1, 2003 till June 30, 2004. Discharge Consent Order No. RA/0170/W/C-693 issued by the JSPCB to the Company on May 6, 2004 granting consent to operate under Section 25/ 26 of the Water Act for discharge of trade effluent at Bagru Hill Bauxite Mines, Indal. The consent is valid from July 1, 2003 till June 30, 2004. Renewal of consent orders for Emission and Discharge for Bagru Hill Bauxite Mines submitted to the JSPCB on May 28, 2004. Hisri (New) Emission Consent Order No. RA/0170/W/C-694 issued by the JSPCB to the Company on May 6, 2004 granting consent under Section 21 of the Air Act to operate an Industrial Plant at Bagru Hill Bauxite Mines, Lohardaga The said consent is valid from July 1, 2003 till June 30, 2004. Discharge Consent Order No. RA/0170/W/C-693 issued by the JSPCB on May 6, 2004 granting consent to operate under Section 25/ 26 of the Water Act for discharge of trade effluent at Bagru Hill Bauxite Mines, Indal. The said consent is valid from July 1, 2003 till June 30, 2004. Renewal of consent orders for Emission and Discharge for Bagru Hill Bauxite Mines submitted to the JSPCB on May 28, 2004.

2.

3. B. 1.

2.

3. C. 1.

2.

3. D. 1.

2.

3.

279

HINDALCO INDUSTRIES LIMITED


E. 1. 2. F . 1. 2. Serengdag NOC no. No. N-403 issued by JSPCB to the Company on August 31, 2004 under Section 25 & 26 of the Water Act and under Section 21 of the Air Act. Letter no. 453 issued by the State Government on April 4, 2005 allowing Serangdag lease bifurcation and giving consent for mining in non-forest land. Pakhar The MoEF has issued Environmental Clearance to the Company. Emission Consent Order No. RA/0301/A/C-780 issued by the JSPCB under Section 21 of the Air Act on May 24, 2004 to the Company granting consent to operate the Pakhar Bauxite Mines, Lohardaga. The consent is valid from September 30, 2003 till September 30, 2004. Discharge Consent Order No. RA/0300/W/C-695 issued by the JSPCB on May 6, 2004 granting consent to operate under Section 25/ 26 of the Water Act for discharge of trade effluent at Pakhar Bauxite Mines, Indal for the period from September 30, 2003 till September 30, 2004. Shrengdag, Jalim and Sanai Renewal of Emission Consent Order no. Ref No. 160A/ 1100 issued by Jharkhand State Pollution Control Board (JSPCB) on November 30, 2004 to the Company under the Air Act with respect to the Shrengdag Bauxite Mines. The renewal is valid from January 1, 2005 till December 31, 2005. Application for consent of the Ministry of Environment and Forest has been initiated on May 28, 2005. The No objection certificate from the State pollution board is awaited. Gurdari Renewal Application for Emission Consent Order No. 160A/1101 issued by the JSPCB on November 30, 2004 to November 2005 for Gurdari Bauxite Mines under the Air Act. The renewal is valid from January 1, 2005 till December 31, 2005. Renewal of Discharge Consent Order No. 160A/ 1485 issued by JSPCB on February 22, 2005 to February 2006 for the Gurdari Bauxite Mines under the Water Act, 1974. The renewal is valid from April 1, 2005 till March 31, 2006. Application for consent of the Ministry of Environment and Forest has been made. The No objection certificate from the State pollution board is awaited, Chiro-Kukud No consents are required for this mine as it is non-operational. J. Orsapat No consents are required for this mine as it is non-operational. K. 1. Kujam-I NOC No. N-402 issued by the JSPCB on August 31, 2004 to the Company granting permission under Sections 25 and 26 of the Water Act and Section 21 of the Air Act for Kujam-I, Kujam-II and Amtipani Project for production of Bauxite- 500 MT/ day. The EIA submitted after the public hearing on June 21, 2004. The NOC is subject to certain conditions including that the unit shall obtain consent to operate from State Pollution Control Board under Section 25 and 26 of the Water Act and Section 21 of the Air Act prior to commissioning of the plant. The Unit is also required to obtain Environmental clearance from the Ministry of Environment and Forest before starting any activity at the site. This NOC is valid for a period of two years. The Company has already made an application to the MoEF in this regard. Mining lease grant order vide letter No. 3B.M.-II-3/97 1385/M, Ranchi issued by the State Government on October 30, 2004.

3.

G. 1.

2. H. 1.

2.

3. I.

2.

280

HINDALCO INDUSTRIES LIMITED


L. 1. Kujam-II NOC no.N-402 issued by the JSPCB on August 31, 2004 to the Company under Sections 25 and 26 of the Water Act and Section 21 of the Air Act for Kujam-I, Kujam-II and Amtipani Project for production of Bauxite- 500 MT/ day. The EIA was submitted after the public hearing held on June 21, 2004. The NOC is subject to certain conditions including that the unit shall obtain consent to operate from State Pollution Control Board under Sections 25 and 26 of the Water and Section 21 of the Air Act prior to commissioning of the plant and that the Unit is to obtain Environmental clearance from the MoEF before starting any activity at the site. The NOC is valid for a period of two years. The Company has already made an application to the MoEF in this regard. Mining lease grant order vide letter No. 3B.M.-II-2/97 1386/M, Ranchi issued by the State Government on October 30, 2004. Amtipani NOC No. N-402 issued by the JSPCB on August 31, 2004 under Sections 25 and 26 of the Water Act and Section 21 of the Air Act for Kujam-I, Kujam-II and Amtipani Project for production of Bauxite- 500 MT/ day. The EIA was submitted after the public hearing held on June 21, 2004. The NOC is subject to certain conditions including that the unit shall obtain consent to operate from State Pollution Control Board under Sections 25 and 26 of the Water and Section 21 of the Air Act prior to commissioning of the plant and that the Unit is to obtain Environmental clearance from the MoEF before starting any activity at the site. The NOC is valid for a period of two years. The Company has already made an application to the MoEF in this regard. Mining lease grant order vide letter No. 3B.M.-II-4/97 1384/M, Ranchi issued by the State Government on October 30, 2004.

2. M. 1.

2.

Pending Approvals A. 1. Bagru, Bhusar, Hisri New and Hisri Old The Company has made an application for renewal of Consent Orders for Emission and Discharge (combined for Bagru, Bhusar, Hisri New and Hisri Old) to the JSPCB on May 25, 2005. The JSPCB has carried out a site inspection on August 3, 2005 and found everything in order. The renewal is awaited. Bagru The Company has submitted a deforestation proposal for the forest land in Bagru on 2, 2005 and has applied for temporary working permission on June 27, 2005). It must be noted that the proposal and application have been submitted in relation to land on which permanent structures have been constructed before the Forest Conservation Act, 1980 came into force. The Company has submitted an EIA/EMP along with an application for NOC to the JSPCB on July 9, 2005 in order to comply with the MoEF notification dated October 28, 2004. The Company has applied for temporary working permission for environment related clearances to the MoEF on July 25, 2005 as per MoEF notification dated July 7, 2005. Bhusar The Company has submitted an EIA/EMP and an application for NOC on July 9, 2005 to the JSPCB in order to comply with the the MoEF notification dated October 28, 2004, The Company has applied for temporary working permission in relation to the environment to the MoEF on July 25, 2005 as per MoEF notification dated July 4, 2005. Hisri (Old) The Company has submitted an application for the renewal of Consent Orders for emission and discharge for Bagru Hill Bauxite Mines (combined for Bagru, Bhusar, Hisri New and Hisri Old) submitted to JSPCB on May 25, 2005. The JSPCB officials have carried out an inspection of the site on August 3, 2005 and found everything in order. The Company has made an application for second renewal on August 11, 2005 and has further made an application relating to the deforestation proposal over 10.29 Ha. of forest land on August 12, 2005.
281

B. 1.

2. 3. C. 1. 2. D. 1.

2.

HINDALCO INDUSTRIES LIMITED


3. The Company has submitted an EIA/EMP and an application for NOC on July 9, 2005 to the JSPCB in order to comply with the the MoEF notification dated October 28, 2004. The site inspection for 4.47 Hectares of forest land diversion has been carried out by Conservator of Forest, Ranchi and DFO, Ranchi West Division on October 22, 2005. Hisri (New) The Company has made an application for renewal of Consent Orders for Emission and Discharge for Bagru Hill Bauxite Mines (combined for Bagru, Bhusar, Hisri New and Hisri Old) to JSPCB on May 25, 2005. The JSPCB officials have carried out a site inspection on August 3, 2005 and have found everything in order. The Company has submitted an EIA/EMP and an application for NOC on July 9, 2005 to the JSPCB in order to comply with the MoEF notification dated October 28, 2004, Pakhar The Company has submitted an application for renewal of Consent Orders for Emission and Discharge for Pakhar Bauxite Mines to the JSPCB on August 27, 2004. The renewal is pending. The Company is also seeking the permission of the Ministry of Environment and Forest. Kujam-I, Kujam-II and Amtipani Approvals for Kujam-I, Kujam-II and Amtipani Project from the MoEF . Shrengdag Approvals for Shrengdag from the MoEF . Chiro-Kukud Environmental Impact Assessment report submitted to JSPCB for no objection certificate on August 27, 2005. Approval for Ministry of Environment and Forest clearance will be sought after NOC from the State is received. Orsapat Environmental Impact Assessment report submitted to JSPCB for no objection certificate. Approval for Ministry of Environment and Forest clearance will be sought after NOC from the State is received.

E. 1.

2. F . 1. 2. G. 1. H. 1. I. 1. J. 1.

(III) Chattisgarh A. 1. Tatijharia, Kudag and Samri Letter no. J-11015/304/94-1A II (M) issued by the MoEF on January 1, 1996 granting clearance for Samri, Kudag and Tatijharia leases.

Pending Approvals and Consents A. 1. Tatijharia, Kudag and Samri An application for clearance from the MoEF for enhanced capacity has been made. The said approval for enhancement is awaited.

(IV) Orissa Consents and Approvals Pending 1. 2. 3. MoEF clearance with respect to mines at Talabira for which an application for a temporary work permit has been filed with the Ministry of Environment and Forest on July 4, 2005. An application has been filed with the State Pollution Control, Orissa for public hearing and consent to establish a unit with higher capacity. A revised mine plan has been submitted to the Ministry of Coal, New Delhi.

282

HINDALCO INDUSTRIES LIMITED STATUTORY AND OTHER INFORMATION


Authority for the Issue
Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on September 20, 2005 and the resolutions passed by the Committee of Directors on November 12, 2005 it has been decided to make the following offer to the Equity Shareholders of the Company with a right to renounce.

Consent of Lenders
The agreements in respect of some of the debt taken by us contain certain covenants inter-alia for altering our share capital and for our expansions and diversifications plans, including the expansion proposed to be funded out of the proceeds of this Issue. We have obtained these consents from our lenders, where required.

Prohibition by SEBI
Neither we, nor our Directors or the Promoter Group Companies, or companies with which our Directors are associated with as directors or promoters, have been prohibited from accessing or operating in the capital markets under any order or direction passed by SEBI. Further, none of the directors or person(s) in control of the Promoters (as applicable) have been prohibited from accessing the capital market under any order or direction passed by SEBI.

Eligibility for the Issue


Hindalco is an existing company registered under the Indian Act whose Equity Shares are listed on BSE and NSE. It is eligible to offer this Issue in terms of Clause 2.4.1(iv) of the SEBI DIP Guidelines. The Company, its Promoter, its Directors or any of the Companys associates or group companies are currently not prohibited from accessing the capital market under any order or direction passed by SEBI. Further the Promoter, their relatives (as per Act), the Company, group companies, associate companies are not detained as willful defaulters by RBI / Government authorities.

Disclaimer Clause
AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THIS LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED/ 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 THIS LETTER OF OFFER. THE LEAD MANAGERS JM MORGAN STANLEY PRIVATE LIMITED AND DSP MERRILL LYNCH LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THIS LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE 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 IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER, THE LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGERS JM MORGAN STANLEY PRIVATE LIMITED AND DSP MERRILL LYNCH LIMITED HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER 22, 2005 WHICH READS AS FOLLOWS: 1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE; ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY;

2.

283

HINDALCO INDUSTRIES LIMITED


WE CONFIRM THAT: THE DRAFT LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; 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; THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO INVESTMENT IN THE PROPOSED ISSUE; 3. 4. 5. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID; AND IF UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS [NOT APPLICABLE] WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN, WILL NOT BE DISPOSED/ SOLD/ TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT LETTER OF OFFER WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER [ NOT APPLICABLE]

The filing of this Letter of Offer does not, however, absolve the Company from any liabilities under Section 63 or Section 68 of the Act or from the requirement of obtaining such statutory or other clearance as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up, at any point of time, with the Lead Managers any irregularities or lapses in this Letter of Offer.

Caution
The Company and the Lead Managers accept no responsibility for statements made otherwise than in this Letter of Offer or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk. The Lead Managers and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of Offer with SEBI.

Disclaimer with respect to jurisdiction


This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Mumbai, India only. This Letter of Offer has been prepared under the provisions of Indian Law and the applicable rules and regulations thereunder. The distribution of the Letter of Offer and the Issue of Equity Shares on a Rights basis to persons in certain jurisdictions outside India may be restricted by the legal requirements prevailing in those jurisdictions. Persons in whose possession this Letter of Offer may come are required to inform themselves about and observe such restrictions. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Mumbai, India only. The Equity Shares Issued on a Rights basis in terms of this Letter of Offer have not been, and will not be, registered under the US Securities Act of 1933, as amended, or under any U.S. State securities laws and may not be offered, sold, resold or otherwise transferred within the United States or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act), except in a transaction exempt from the registration requirements of the Securities Act. The delivery of this Letter of Offer to any address in the United States by anyone other than the Company or the Lead Managers is not authorized by the Company and the Lead Managers and the Rights Entitlement or the Equity Shares may not be offered, sold, exercised or delivered in the United States, unless specifically authorised by the Company. 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 this Letter of Offer has been filed with SEBI for observations and SEBI has given its observations.
284

HINDALCO INDUSTRIES LIMITED


Accordingly, the Equity Shares represented thereby 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 the legal requirements applicable in such jurisdiction. 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 our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date. The Draft Letter of Offer was filed with SEBI, Mittal Court, A Wing, Nariman Point, Mumbai 400 021, for its observations. After SEBI gave its observations, the final Letter of Offer was filed with the Designated Stock Exchange as per the provisions of the Act. NEITHER THE RIGHTS ENTITLEMENTS NOR THE EQUITY SHARES THAT MAY BE PURCHASED PURSUANT THERETO HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, RESOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF US PERSONS (AS DEFINED IN REGULATION , S UNDER THE SECURITIES ACT), EXCEPT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE OFFERING TO WHICH THIS LETTER OF OFFER RELATES IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, AN OFFERING OF ANY SHARES OR RIGHTS FOR SALE IN THE U.S.A. OR THE TERRITORIES OR POSSESSIONS THEREOF OR AS A SOLICITATION THEREIN OF AN OFFER TO BUY ANY OF , THE SAID SHARES OR RIGHTS. ACCORDINGLY, THIS LETTER OF OFFER SHOULD NOT BE FORWARDED TO OR TRANSMITTED IN OR INTO THE U.S.A. AT ANY TIME EXCEPT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY WILL NOT ACCEPT SUBSCRIPTIONS FROM ANY PERSON, OR HIS AGENT, WHO APPEARS TO BE, OR WHO THE COMPANY HAS REASON TO BELIEVE IS, A RESIDENT OF THE U.S.A. AND TO WHOM AN OFFER, IF MADE, WOULD RESULT IN REQUIRING REGISTRATION OF THIS LETTER OF OFFER WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THE COMPANY IS INFORMED THAT THERE IS NO OBJECTION TO A US SHAREHOLDER SELLING ITS RIGHTS IN INDIA. RIGHTS MAY NOT BE TRANSFERRED OR SOLD TO ANY US PERSON.

Designated Stock Exchange


The Designated Stock Exchange for the purpose of the Issue will be the Bombay Stock Exchange Limited.

Disclaimer Clause of the BSE


The Bombay Stock Exchange Limited (the Exchange) has given vide its letter dated October 6, 2005 permission to the Company to use the Exchanges name in this Letter of Offer as one of the Stock Exchanges on which this Companys securities are proposed to be listed. The Exchange has scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The Exchange does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; or (ii) warrant that this Companys securities will be listed or will continue to be listed on the Exchange; or (iii) take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Letter of Offer has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

Disclaimer Clause of the NSE


As required, a copy of this Letter of Offer has been submitted to National Stock Exchange of India Limited (hereinafter referred to as NSE). NSE has given vide its letter Ref. No. NSE/LIST/17524-E dated October 11, 2005 permission to the Issuer to use the Exchanges name in this Letter of Offer as one of the Stock Exchanges on which the Issuers securities are proposed to be listed. The Exchange has scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Letter of Offer has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; nor does it warrant that the Issuers securities will be listed or will continue to be listed on the Exchange; nor does it take any responsibility for the financial or other soundness of the Issuer, its Promoters, its management or any scheme or project of the Issuer. Every person who desires to apply for or otherwise acquire any securities of the Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
285

HINDALCO INDUSTRIES LIMITED


Filing
This Letter of Offer was filed with SEBI, Mittal Court, Nariman Point, Mumbai 400 021. The Letter of Offer has been filed with the Designated Stock Exchange as per the requirements of the law. All the legal requirements applicable till the date of filing the Letter of Offer with the Stock Exchanges have been complied with.

Dematerialised Dealing
The Company has agreements with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and its Equity Shares bear the ISIN No. INE038A01020.

Listing
The existing Equity Shares are listed on the BSE and NSE. The Company has made applications to the BSE and NSE for permission to deal in and for an official quotation in respect of the Equity Shares being offered in terms of this Letter of Offer. The Company has received in-principle approvals from BSE and NSE by letters dated October 6, 2005 and October 11, 2005 respectively. The Company will apply to the BSE and NSE for listing of the Equity Shares to be issued pursuant to this Issue. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above, within 42 days from the Issue Closing Date, the Company shall forthwith repay, without interest, all monies received from applicants in pursuance of this Letter of Offer. If such money is not paid 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 the money with interest as prescribed under the Section 73 of the Act.

Consents
Consents in writing of the Auditors, Lead Managers, Legal Advisors, Registrar to the Issue, Monitoring Agency and Banker to the Issue to act in their respective capacities have been obtained and filed with SEBI, along with a copy of the Letter of Offer and such consents have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. The Auditors of the Company have given their written consent for the inclusion of their Report in the form and content as appearing in this Letter of Offer and such consents and reports have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. Singhi & Co., auditors have given their written consent for inclusion of income tax benefits in the form and content as appearing in this Letter of Offer, accruing to the Company and its members. To the best of our knowledge there are no other consents required for making this Issue. However, should the need arise, necessary consents shall be obtained by us.

Expert Opinion, if any


Save and except as indicated elsewhere in this Letter of Offer, no other expert opinion has been obtained by the Company.

Fees Payable to the Lead Managers to the Issue


The fees payable to the Lead Managers to the Issue are set out in the Memorandum of Understanding entered into by the Company with JMMS and DSPML, copies of which are available for inspection at the Registered Office of the Company.

Fees Payable to the Registrars to the Issue


The fee payable to the Registrars to the Issue is as set out in the relevant documents, copies of which are kept open for inspection at the Registered Office of the Company.

Underwriting commission, brokerage and selling commission


No underwriting commission, brokerage and selling commission will be paid for this Issue.

286

HINDALCO INDUSTRIES LIMITED


Other Expenses of the Issue
The other expenses of the Issue payable by the Company including, printing and distribution expenses, publicity, listing fees, stamp duty and other expenses are estimated at Rs. 400.0 million (around 1.80% of the total Issue size) and will be met out of the proceeds of the Issue. The following table provides a break up of estimated issue expenses: Particulars Advertisement Budget (including non-statutory) Postage, Printing and Stationery Domestic and International Legal Advisors fee Lead Managers Information Agent and Distribution to GDR holders Road Show Expenses Monitoring Agency Fees Others & Contingencies Total In Rs. million 3.0 30.0 18.0 278.3 2.5 10.0 18.0 40.2 400.0

Promise versus Performance 1.


(a)

The Company
Initial public issue in 1960 Issue Open date Issue Close date February 8, 1960 February 18, 1960 Objects of the Issue (a) To raise capital for land, buildings, cost of engineering and construction of plant and facilities; Actual Performance achieved Integrated aluminium production facility at Renukoot was set up in 1962.

(b) To meet working capital needs; Working capital needs and pre(c) To meet pre-incorporation incorporation expenses partly met expenses of the company. from the issue proceeds. (b) Rights issue in 1967, of 2,037,943 equity shares of Rs. 10 each for cash at par. Issue Open date Issue Close date Objects of the Issue Actual Performance achieved The issue proceeds were used to fund the Companys expansion and for setting up a fabrication plant at Renukoot. December 26, 1967 To fund Companys expansion programme as well as for setting up a fabrication plant.

(c)

Rights issue in 1990 of 5,636,415 - 12.5% secured redeemable convertible debentures of Rs. 250 each. Issue Open date Issue Close date January 22, 1990 February 22, 1990 Objects of the Issue To finance in part: (a) the capital expenditure The expansion had been programme relating to completed well within the time. expansion of present installed There were no cost overruns. capacity for the manufacture of aluminium from 124,000 to 150,000 tonnes per annum; (b) the cost of modernization scheme; and (c) to augment the long term resources for working capital requirement.
287

Actual Performance achieved

HINDALCO INDUSTRIES LIMITED


2.
(a)

Group Companies
Grasim Grasim Industries Limited made a rights issue of 10,416,666 12.5% secured redeemable partly convertible debentures (II series) of face value Rs. 120 aggregating to a value of Rs. 125 crores to its equity shareholders in 1989.

Issue Open date Issue Close date September 27, 1989 October 26, 1989

Objects of the Issue To partly finance a gas based sponge iron project with a licensed capacity of six lakh TPA and if in line with Governments licensing policy, to expand capacity upto seven and a half lakh TPA. The project was to be located at Salav District, Raigad (Maharashtra) and estimated to cost Rs. 400 crores.

Actual Performance achieved The Company s sponge iron facility at Salav District, Raigad (Maharashtra) - Vikram Ispat Division, having an annual capacity of 750,000 tonnes was commissioned in March, 1993, within the scheduled time period. The current capacity is 900,000 TPA.

(b)

Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited)

Aditya Birla Nuvo Limited (formerly Indian Rayon And Industries Limited) made a rights issue in 1993 to its shareholders of 5,447,400 zero interest secured fully convertible debentures of Rs. 170 each and 1,620,000 zero interest secured fully convertible debentures of Rs. 200 each, both for cash at par, aggregating Rs. 125.01 crores and 7,227,400 number 16.5% fifteenth series secured redeemable non-convertible debentures of Rs. 300 each with detachable warrants for cash at par aggregating Rs. 216.82 crores.
Issue Open date Issue Close date September 14, 1993 October 11, 1993 Objects of the Issue a. To set up a 50,000 tons per annum sea water magnesia project at an estimated cost of Rs. 240.40 crore; To expand the capacity of the companys carbon black division from 20,000 tons p.a. to 40,000 tons p.a. at an estimated cost of Rs. 72.0 crores; Normal capital expenditure for modernization estimated at about Rs. 83 crore. Actual Performance achieved The sea water magnesia plant (known as Birla Periclase) with an installed capacity of 50,000 ton per annum, was commissioned and the commercial product started towards the end of February 1998. Due to adverse market conditions, the plant was written off in the year 2000. The expansion of the capacity of the company s carbon black division was completed well within the promised time period. There were no cost overruns. The current capacity is 170,000 TPA.

b.

c.

(c)

IGFL Indo Gulf Fertilisers Limited (formerly known as Indo Gulf Fertilisers and Chemicals Corporation Limited) (erstwhile Indo Gulf Corporation Limited) made a public issue of 80,850,000 equity shares of Rs. 10 each at par in 1986. Issue Open date Issue Close date November 19, 1986 Objects of the Issue Actual Performance achieved The Urea manufacturing facility of the company was completed in October 1988 with no cost

December 3, 1986 To set up a gas fertilizer complex for the manufacture of 7.26 lac tonnes per annum of urea
288

HINDALCO INDUSTRIES LIMITED


(nitrogenous fertliser) at Jagdishpur Industrial Area, District Sultanpur, a notified backward area in Uttar Pradesh. The project was based on natural gas from South Bassein area and was to include a single stream of 1350 tonnes per day ammonia plant (4.45 lac tpa) and two parallel streams of 1100 tpd each of urea plant (7.26 tpa). The complex was to be supported by a captive power plant. The project was expected to be completed by July, 1988 (d) BGFL Birla Global Finance Limited made a rights issue of 67,48,605, 18% optionally convertible secured debentures of Rs. 67.50 each for cash at par aggregating Rs. 45,55,30,837.50 on a rights basis to the existing shareholders of the company in 1996. Issue Open date Issue Close date August, 27, 1996 September 23, 1996 Objects of the Issue To strengthen the capital base of the company; to redeem such portion of the preference capital equivalent to issue of equity capital on conversion of Part A & Part B of the OCDs; and to augment such long term resources needed for business expansion and meet the expenses of the issue. Actual Performance achieved The capital base was strengthened and the preference capital was redeemed as promised. The resources were used for the business expansion. overruns. The facility consists of a 1350 tpd ammonia plant, 2200 tpd Urea Plant in 2 equal streams of equal tonnage. The facility is supported by a 19 MW natural gas turbine driven power generation plant with cogeneration of medium pressure steam used for process.

Previous Issues by the Company and other companies under same management
The Company has not undertaken any previous public or rights issue during the last five years. In 2003, our subsidiary, Bihar Caustic and Chemicals Limited made a rights issue of 15,600,000 equity shares of Rs. 10 each for cash at par aggregating Rs. 156,000,000 to its equity shareholders in the ratio of two equity shares for every equity share held on January 29, 2003. The issue opened on February 18, 2003 and closed on April 18, 2003. The object of the issue was to part finance a coal based captive power plant. The cost of the captive power plant has been met from proceeds of the issue and money raised through project finance. Further, no other listed company under the same management within the meaning of Section 370 (1) (B) of the Act, has made any capital issue during the last three years.

Defaults in the payment/refunds of debentures, fixed deposits, interest on fixed deposits, debenture interest and institutional dues
There are no defaults, non-payment/overdues of statutory dues, institutional/Company dues and dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, etc, other than unclaimed liabilities of the Company, its subsidiaries, its other ventures, promoters, Group companies and companies promoted by the promoter.

Status of complaints received from SEBI


As of the date of this Letter of Offer, no complaints were pending with SEBI.

Details of adverse events affecting the company since the last financial year
No circumstances have arisen since the date of the last financial statement that materially adversely affects / likely to affect the trading or profitability of the Company or the value of its assets or its ability to pay its liabilities within the next twelve months.
289

HINDALCO INDUSTRIES LIMITED


Material developments
Save as stated elsewhere in the Letter of Offer, there are no material developments, after the date of the last financial statements.

Issue Schedule
Issue Opening Date Last date for receiving requests for split forms Issue Closing Date : Monday, December 19, 2005 : Tuesday, January 3, 2006 : Wednesday, January 18, 2006

Allotment Letters / Refund Orders


The Company will issue and dispatch letters of allotment/ share certificates/ demat credit or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of 30 days from the date of closure of the Issue. If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. Letters of allotment/ share certificates/ demat credit/ refund orders above the value of Rs. 1,500 will be dispatched by registered post/ speed post to the sole/ first applicants registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants by way of under certificate of posting. Such cheques or pay orders will be payable at par at all the centres where the applications were originally accepted and will be marked A/c payee and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for dispatch of the letters of allotment/ share certificates/ demat credit/ refund orders. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companies Law Board under Section 113 of the Act or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for the share certificates.

Date of listing on the Stock Exchange


The Equity Shares of our Company of face value of Rs. 10 each were listed on the BSE and the listing agreement was signed with BSE on January 28, 1960. Thereafter, the Equity Shares were listed on the NSE.

Issue at premium or discount


This Issue is at a premium of Rs. 95 per Equity Share of our Company.

Capital Structure Issues for consideration other than cash


Except issuance of bonus shares or pursuant to merger, amalgamations, scheme of arrangements as stated in the Capital Structure on page 15 of this Letter of Offer, the Company has not issued Equity Shares for consideration other than cash or out of revaluation reserves within the two years preceding the date of this Letter of Offer.

Outstanding debentures or bonds and redeemable preference shares


Please see the section Description of Certain Indebtedness on page 206 for details on the outstanding debentures issued by the Company.

Option to Subscribe
Other than the present rights Issue, the Company has not given any person any option to subscribe to the shares of the Company.

Stock market data for Equity Shares of the Company


Please refer to page 175 of the Letter of Offer for further information pertaining to stock market data for the Equity Shares of the Company.

Investor Grievances and Redressal System


The Company has adequate arrangements for redressal of Investor complaints. Well-arranged correspondence system
290

HINDALCO INDUSTRIES LIMITED


developed for letters of routine nature. The share transfer and dematerialization for the Company is being handled by the Investor Services Department of the Company. Letters are filed category wise after having attended to. Redressal norm for response time for all correspondence including shareholders complaints is 30 days. However, the Company endeavours to redress all the complaints within 15 days of the receipt of complaint. An Investors Grievances Committee was constituted on January 23, 2001. The Committee consists of directors Mr. E.B. Desai and Mr. C.M. Maniar. Mr. E.B. Desai is the Chairman of the Committee. The role of the Committee is to look into the grievances of investors like non-receipt of share certificates, non-receipt of dividend receipts etc. Mr. Anil Malik, Company Secretary, is the compliance officer of the Company. Meeting of Investors Grievances Committee is scheduled once every 12 months. There was one complaint pending redressal as on November 18, 2005. During the period from April 1, 2005 to November 18, 2005, 16 complaints were received. 16 complaints were resolved to the satisfaction of the shareholders.

Status of Complaints
No. of shareholders complaints as of March 31, 2005: 1 Total number of complaints received during last financial year (2004-05): 31 Total number of complaints received during last financial year (2005-06): 16 (as of November 18, 2005) Status of the complaints: All complaints received during this financial year have been resolved Time normally taken by it for disposal of various types of Investor grievances:15 days

Investor Grievances arising out of this Issue


The Companys investor grievances arising out of the Issue will be handled by Karvy Computershare Private Limited, Registrars to the Issue. The Registrars will have a separate team of personnel handling only our post Issue correspondence. Investor grievances are settled expeditiously and satisfactorily by us. The agreement between us and the Registrars will provide for retention of records with the Registrars for a period of at least one year from the last date of dispatch of Letter of Allotment/ share certificate / warrant/ refund order to enable the Registrars to redress grievances of Investors. All grievances relating to the Issue may be addressed to the Registrars to the Issue giving full details such as folio no., name and address of the first applicant, number and type of shares applied for, Application Form serial number, amount paid on application and the name of the bank and the branch where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the renouncee should be furnished. The average time taken by the Registrar for attending to routine grievances will be seven days from the date of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the endeavour of the Registrars to attend to them as expeditiously as possible. We undertake to resolve the Investor grievances in a time bound manner. Investors may contact the Compliance Officer in case of any pre-Issue/ post -Issue related problems such as nonreceipt of letters of allotment/share certificates/demat credit/refund orders etc.

Changes in Auditors during the last three years


There have been no changes in our Statutory Auditors over the last three years.

Capitalisation of Reserves or Profits


Except as provided below, the Company has not capitalized any of its reserves or profits for the last five years: Sl. No. Financial Year Capitalisation of Reserves or profits (In Rs. million) 4.15 545.62 Reason/Explanation for Capitalisation

1. 2.

2001-2002 2002-2003

Utilised for premium on buy back of 5,807 Shares. Utilised for premium on buy back of 752,723 Shares.

291

HINDALCO INDUSTRIES LIMITED


Revaluation of Fixed Assets
There has been no revaluation of the Companys fixed assets for the last five years. However, during fiscal 2003 the Company had reinstated its fixed assets at original cost instead of revalued amount due to which the gross value of fixed assets was reduced by Rs. 25,809.28 million. Revaluation amount included in the value of net fixed assets amounting to Rs. 11,358.08 million had been reversed with the corresponding effect in Revaluation Reserves.

Government Approvals
Our Company was incorporated on December 15, 1958 under the Act. We have obtained all necessary approvals to undertake our activities and we do not propose to enter into any new activities through this Issue, for which further approvals may be required to be obtained, except as may be required to be obtained in the normal course of our business and for intended use of Objects of the Issue. For further details, please refer to the section on Government Approvals on page 258 of this Letter of Offer.

Important
G

This Issue is pursuant to the resolution passed by the Board of Directors at its meetings held on September 20, 2005 and the resolution passed by the Committee of Directors on November 12, 2005. This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company at the close of business hours on the Record Date i.e. November 28, 2005. The Company will arrange to dispatch the Letter of Offer and Composite Application Form (CAF) by registered/ speed post to such Equity Shareholders in India. Your attention is drawn to the section entitled Risk Factors appearing on Page vii of this Letter of Offer. Please ensure that you have received the Composite Application Form (CAF) with this Letter of Offer. Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. An application is liable to be rejected for any non-compliance of the provisions contained in the Letter of Offer or the CAF . All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAF . All information shall be made available to the Investors by the Lead Managers and the Issuer, and no selective or additional information would be available by them for any section of the Investors in any manner whatsoever including at road shows, presentations, in research or sales reports, etc. The Lead Managers and the Company shall update this Letter of Offer and keep the public informed of any material changes till the listing and trading commences.

G G G

Terms of Appointment of our Directors


Our directors are liable to retire by rotation in accordance with the Act. The term of appointment of the Managing Director is five years.

Purchase of Property
The Company in the ordinary course of expansion may start marketing and sales at new centres for which it may lease or buy properties at such places. The present Issue is not being made with the specific objective to buy such properties. None of the Directors are interested in any property acquired by the Company during the last three years.

292

HINDALCO INDUSTRIES LIMITED TERMS OF THE ISSUE


The Equity Shares, now being issued, are subject to the terms and conditions contained in this Letter of Offer, the enclosed Composite Application Form (CAF), the Memorandum and Articles of Association of the Company, the provisions of the Act, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or security certificate and rules as may be applicable and introduced from time to time.

Authority for the Issue


This Issue is being made pursuant to the resolution passed by the Board of Directors of the Company under Section 81(1) of Act at its meeting held on September 20, 2005 and the meeting of the Committee of our Directors held on November 12, 2005.

Basis for the Issue


The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company in respect of shares held in the physical form at the close of business hours on the Record Date, i.e., November 28, 2005 fixed in consultation with BSE.

Principal Terms and Conditions of the Issue


Face value Each Equity Share shall have the face value of Re. 1. Issue Price Each Equity Share is being offered at a price of Rs. 96 (including a premium of Rs. 95). Terms of payment On application, Rs. 24, which constitutes 25% of the full amount of the Issue Price of Rs. 96 shall be payable (Application Money). A further 25% of the full amount of the Issue Price shall become payable, at the option of the Company, anytime between 9 and 12 months after the Allotment Date. Rs 48, which constitutes the remaining 50% of the full amount of the Issue Price shall become payable at the option of the Company, anytime between 18 and 24 months after the Allotment Date. The payment on application and on calls would be applied as under Towards Share Capital On Application On first call On second and final call Re. 0.25 per Equity Share Re. 0.25 per Equity Share Re. 0.50 per Equity Share Towards Share Premium Account Rs. 23.75 per Equity Share Rs. 23.75 per Equity Share Rs. 47.50 per Equity Share

If there is a failure to pay any call or installment of a call on or before the day appointed for the payment of the same, in accordance with the provisions of the articles of association of the Company, the Board may, at any time during which any part of the call or installment remains unpaid, serve a notice on such member of the Company requiring him to pay the same together with any interest that may have accrued. The present Articles of Association of the Company provide for a rate of interest at 9%. The notice shall fix a date and a place or places on and at which such call or installment and such interest as aforesaid are to be paid. The notice shall also state that in the event of nonpayment at or before the time and at the place or places appointed, the shares in respect of which such call was made or installment is payable and to which the notice relates will be liable to be forfeited. If the requisites of such notice are not complied with, any shares in respect of which such notice has been given may, at any time thereafter before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. Neither the receipt by the Company of a portion of any money which shall from time to time be due from any Member to the Company in respect of his shares, either by way of principle or interest, nor any indulgence granted by the Company in respect of the payment of any such money, shall preclude the Company from thereafter proceeding to enforce a forfeiture of such shares. Any share so forfeited shall be deemed to be the
293

HINDALCO INDUSTRIES LIMITED


property of the Company, and the Board may sell, re-issue or otherwise dispose of the same in such manner as they think fit.

Rights Entitlement Ratio


The Equity Shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of one Equity Share for every four Equity Shares held as on the Record Date. Rights entitlement on shares held in the pool account of the clearing members on the Record Date shall be considered, and such claimants are requested to 1. 2. Approach the concerned depository through the clearing member of the Stock Exchange with requisite details; and Depository in turn should furnish details of the transaction to the Registrar.

Only upon receipt of the aforesaid details, rights entitlement of the claimants shall be determined.

Fractional entitlements
If the shareholding of any of the Equity Shareholders is not in multiples of four, then the fractional entitlement of such holders shall be ignored. Equity Shareholders whose fractional entitlements are being ignored would be given preferential allotment of ONE additional Equity Share each if they apply for additional shares.

Joint-holders
Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint-tenants with benefits of survivorship subject to provisions contained in the Articles of Association of the Company

Ranking of the Equity Shares


The Equity Shares shall be subject to the memorandum and articles of association of the Company. The dividend payable on Equity Shares allotted in this Issue, until fully paid up shall rank for dividend in proportion to the amount paid up. The Equity Shares allotted in this Issue, once fully paid up shall be pari passu with the existing Equity Shares in all respects including dividend. The voting rights in a call, whether present in person or by representative or by proxy shall be in proportion to the paid up value of the Equity Shares held, and no voting rights shall be exercisable in respect of moneys paid in advance until the moneys have become payable. For more details see Main Provisions of Our Articles of Association on page 321 of this Letter of Offer. The Global Depository Receipts with respect to the Equity Shares of the Company issued by JP Morgan Chase Bank (formerly Morgan Guaranty Trust Company of New York) as depositary (GDRs) were listed on the Bourse de Luxembourg- a market of the Luxembourg Stock Exchange appearing on the list of regulated markets issued by the European Commission. With effect from November 25, 2005 the listing of the GDRs has been transferred to the EuroMTF market of the Luxembourg Stock Exchange, which is not a market appearing on the list of regulated markets issued by the European Commission, but is regulated by the rules and regulations of the Luxembourg Stock Exchange. GDR holders are expected to be able to participate indirectly in the Issue through the issue of GDRs in respect of Equity Shares issued on a partly paid up basis, provided that they provide certification as to their status such as to satisfy the Company and the Depositary that they may legally do so without taking of any further action by the Company or the Depositary, to making payment in respect of the amounts payable on the relevant shares and the completion of such other formalities as the Company or the Depositary may determine. GDR holders who are unable to do so or fail to do so are expected to receive a proportionate share of any net value the Depositary may receive from selling the proportion of Rights Entitlements corresponding to the GDRs in respect of which no such certification is given. A separate notice with respect to the Issue will be distributed by the Depository in respect of the GDRs detailing how persons entitled to such GDRs may participate in the Issue. The Depositary may be contacted at 60 Wall Street, New York, NY 10260, USA.

Procedure For Calls


The schedule set out below for listing and trading of the partly paid and fully paid shares is based on the current regulatory framework applicable thereto. Accordingly, any change in the regulatory regime would accordingly affect the schedule.
294

HINDALCO INDUSTRIES LIMITED


Calls The Company would convene meetings of the Board from time to time to pass the required resolution(s) for making the Calls and suitable intimation would be given by the Company to the Stock Exchanges. Further, advertisements for the same will be issued in one English national daily with wide circulation, one Hindi national daily with wide circulation and one Mumbai edition of a Marathi daily. Record date for Calls and suspension of trading The Company would fix a record date giving atleast 15 days prior notice to the Stock Exchanges for the purpose of determining the list of shareholders to whom the notice for call money (Call Money Notice) would be sent. Once the record date has been fixed, trading in the partly paid Equity Shares for which calls have been made would be suspended 5 days prior to each record date that has been fixed for the call concerned. Separate ISINs on application and call In addition to the present ISIN for the existing fully paid up Equity Shares, the Company would obtain separate ISIN Nos. for its 25% paid up Equity Shares and 50% paid up Equity Shares, respectively. The 25% paid up Equity Shares offered under the Issue will be traded under a separate ISIN No. for the period from the date of listing of these Equity Shares and up to five days prior to the record date for the first call. The ISIN No. representing 25% paid up Equity Shares will be terminated after the record date for the first call. Shares paid up to the extent of 50%, would be listed and traded under a separate ISIN No. for the period from the date fixed for commencement of trading for these shares and until five days prior to the record date for second and final call. The ISIN No. representing 50% paid up shares will be terminated after the record date for the second and the final call. On payment of the second and final call in respect of the 50% paid up Equity Shares, such shares on which final call has been duly paid would be converted into fully paid up Equity Shares and merged with the existing ISIN for fully paid Equity Shares of the Company. Listing of partly paid shares The 25% paid up shares and 50% paid up shares would be listed on the Stock Exchanges. Once, the Call Money Notice for respective calls has been sent, the listing of then existing partly paid up Equity Shares would be terminated. The Company will make necessary application to BSE and NSE for listing of partly paid up shares. The 25% paid up and 50% paid up shares will be issued in accordance with the Letter of Offer and would be listed for the period as per the following details.
G

The allotment of 25% paid up shares will be made within 30 days from the closure of Issue and the same will be listed within 10 days thereafter. The listing of 50% paid-up shares will be done within approximately 15 days from the last date fixed for payment of first call money. The fully paid up shares will be listed within approximately 15 days from the last date fixed for payment of second call money.

The process of corporate action for crediting 50% paid up and fully paid up shares to the Demat Account may take about two weeks time from the last date of payment of the account under the call money notice. During this period the partly paid up shares would not be tradeable. Payment Period for each call As per the article 29 of Articles of Association of the Company, the shareholders would be given not less than 21 days time for the payment of the call money for each call.

295

HINDALCO INDUSTRIES LIMITED


Indicative Activities Indicative Schedule of activities for making the partly paid up shares fully paid up: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Event Allotment is finalized with Stock Exchange Listing of Equity shares 25% paid up Board to make first call of another 25% Record date for making first call Suspension of ISIN No. representing 25% paid up shares Suspension of trading of 25% paid up shares Send the call notice to the shareholders holding shares on the record date Last date for payment of call money Corporate action for credit of 50% paid up shares (representing by new ISIN No.) to the demat account of shareholders who have paid the call money Listing of shares 50% paid up within Board to make second call for balance 50% Record date for making second call Suspension of ISIN No. representing 25% paid up shares Suspension of trading of 50% paid up shares Send the call notice to the shareholders holding shares on the record date Last date for payment of call money Corporate action for credit of fully paid up shares to the demat account of shareholders who have paid the call money Listing of shares fully paid up within Indicative time period (on or around) Day X Day X+2 working days Day X + (9 to 12) months time (Day Y) Y Y Y -5 trading days Y+2 days Y+23 days

Y + 35 days Y+ 40 days X + (12 to 24) months time (Day Z) Z Z Z- 5 trading days Z+2 days Z+ 23 days Z + 35 days Z+ 40 days

10. 11. 12. 13. 14. 15. 16. 17. 18.

Printing Of Bank Particulars On Refund Orders


As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the applicants bank account are mandatorily required to be given for printing on the refund orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. The Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud.

Notices
All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language daily newspaper in Mumbai with wide circulation and/or, will be sent by ordinary post/ to the registered holders of the Equity Share from time to time.

296

HINDALCO INDUSTRIES LIMITED


Market lot
The Equity Shares of the Company are tradable only in dematerialized form. The market lot for Equity Shares in dematerialised mode is one. In case of holding in physical form, the Company would issue to the allottees one certificate for the Equity Shares allotted to one folio (Consolidated Certificate). In respect of the Consolidated Certificate, the Company will, upon receipt of a request from the Equity Shareholder, split such Consolidated Certificate into smaller denomination within one weeks time from the request of the Equity Shareholder. No fee would be charged by the Company for splitting the Consolidated Certificate.

Nomination facility
In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose. A sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. A Person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Equity Share by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Share is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the registered office of the Company or such other person at such addresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion of the CAF . Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder(s) has already registered the nomination with the Company, no further nomination needs to be made for Equity Shares to be allotted in this Issue under the same folio. In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective DP .

Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than eight days after the Company becomes liable to repay the subscription amount, i.e. forty-two days after closure of the Issue, the Company will pay interest for the delayed period, at the rates prescribed in sub-sections (2) and (2A) of Section 73 of the Act. The Issue will become undersubscribed after considering the number of shares applied as per entitlement plus additional shares. The Promoters or promoter group will subscribe to such undersubscribed portion as per the relevant provisions of the law. The undersubscribed portion shall be applied for only after the close of the Issue. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to Takeover Code, such allotment of the undersubscribed portion will be governed by the provisions of the Takeover Code. Allotment to promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. The above is subject to the terms mentioned under the section entitled Basis of Allotment on page 305 of this Letter of Offer.

Offer to Non-Resident Equity Shareholders/Applicants


As per regulation 6 of notification No. FEMA 20/200-RB dated May 3, 2000, the RBI has given general permission to Indian companies to issue rights shares to non-resident shareholders including additional shares. Applications received from NRIs and non-residents for allotment of Equity Shares shall be inter alia, subject to the conditions imposed from
297

HINDALCO INDUSTRIES LIMITED


time to time by the RBI under the Foreign Exchange Management Act, 1999 (FEMA) in the matter of refund of application moneys, allotment of Equity Shares, issue of letter of allotment / notification No. FEMA 20/200-RB dated May 3, 2000. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of Equity Shares, payment of dividend etc. to the non-resident shareholders. The rights shares purchased by non-residents shall be subject to the same conditions including restrictions in regard to the repatriability as are applicable to the original shares against which rights shares are issued. By virtue of Circular No. 14 dated September 16, 2003 issued by the RBI, overseas corporate bodies (OCBs) have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, OCBs shall not be eligible to subscribe to the Equity Shares. The RBI has however clarified in its circular, A.P (DIR . Series) Circular No. 44, dated December 8, 2003 that OCBs which are incorporated and are not under the adverse notice of the RBI are permitted to undertake fresh investments as incorporated non-resident entities. Thus, OCBs desiring to participate in this Issue must obtain prior approval from the RBI. On providing such approval to the Company at its registered office, the OCB shall receive the Letter of Offer and the CAF . Letter of offer and CAF shall only be dispatched to non-resident Equity Shareholders with registered address in India.

No Offer in the United States


The rights and the shares of the Company have not been and will not be registered under the United States Securities Act of 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 or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act), 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 of America. The offering to which this Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any shares or rights for sale in the United States of America, or the territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or rights. Accordingly, this Letter of Offer should not be forwarded to or transmitted in or into the United States of America at any time. The Company will not accept subscriptions from any person, or his agent, who appears to be, or who the Company has reason to believe is, a resident of the United States of America and to whom an offer, if made, would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. The Company is informed that there is no objection to a United States shareholder selling its rights in India.

Procedure For Application


The CAF would be printed in blue ink for all shareholders. An additional separate advise for Non-resident shareholders will be provided. In case the original CAF is not received by the applicant or is misplaced by the applicant, the applicant may request the Registrars to the Issue, Karvy Computershare Private Limited, for issue of a duplicate CAF , by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address. Nonresident shareholders can obtain a copy of the CAF from the Registrars to the Issue, Karvy Computershare Private Limited from their office located Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034, India by furnishing the registered folio number, DP ID number, Client ID number and their full name and address. Equity Shares offered to you either in full or in part in favour of any other person or persons. Such renouncees can only be Indian Nationals/Limited Companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (unless registered under the Indian Trust Act), minors (through their legal guardians), societies (unless registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold equity shares in a company and cannot be a partnership firm, more than three persons including joint-holders, HUF foreign nationals (unless approved by RBI or other relevant authorities) or to any , person situated or having jurisdiction where the offering in terms of this Letter of Offer could be illegal or require compliance with securities laws.

298

HINDALCO INDUSTRIES LIMITED


Acceptance of the Issue
You may accept the Issue and apply for the Equity Shares offered, either in full or in part by filling Part A of the enclosed CAF and submit the same along with the Application Money payable to the Bankers to the Issue or any of the branches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board thereof in this regard. Applicants at centers not covered by the branches of collecting banks can send their CAF together with the cheque /demand draft, net of bank and postal charges, payable at Hyderabad in case of resident shareholder and payable at Mumbai or New Delhi in case of non-resident shareholders, to the Registrar to the Issue by registered post. Such applications sent to anyone other than the Registrar to the Issue are liable to be rejected.

Option available to the Equity Shareholders


The Composite Application Form clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to. If the Equity Shareholder applies for an investment in Equity Shares, then he can:
G G G G

Apply for his entitlement in part; Apply for his entitlement in part and renounce the other part; Apply for his entitlement in full; Apply for his entitlement in full and apply for additional Equity Shares.

Renouncees for Equity Shares can apply for the Equity Shares renounced to them and also apply for additional Equity Shares.

Additional Equity Shares


You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favor of any other person(s). Only depository representing various individual GDR holders, may apply for additional shares representing intention of those GDR holders who wish to apply for additional shares over their entitlements and also renounce the entitlement of those GDR holders who have indicated their intention to the depository to renounce their entitlement. Company would take due care that the GDR holders who have represented to the depository that they would renounce their entitlement would not be eligible to apply for any additional shares. If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for additional shares in Part A of the CAF Applications for additional Equity Shares shall be considered and allotment shall be in the manner prescribed . under the section entitled Basis of Allotment on page 305 of this Letter of Offer. The renouncees applying for all the Equity Shares renounced in their favor may also apply for additional Equity Shares. In case of change of status of holders i.e. from Resident to Non-Resident, a new demat account shall be opened for the purpose. Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

Renunciation
This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favour of any other person or persons subject to the approval of the Board. Such renouncees can only be Indian Nationals (including minor through their natural/legal guardian)/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (registered under the Indian Trust Act), societies (registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold equity shares in a company and cannot be a partnership firm, foreign nationals or nominees of any of them (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of this Letter of Offer could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board. Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to other Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the approval of the FIPB and/ or necessary permission of the RBI
299

HINDALCO INDUSTRIES LIMITED


under the Foreign Exchange Management Act, 1999 (FEMA) and other applicable laws and such permissions should be attached to the CAF Applications not accompanied by the aforesaid approval are liable to be rejected. . By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas Corporate Bodies (OCBs) have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe to the Equity Shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s). Your attention is drawn to the fact that the Company shall not allot and/or register any Equity Shares in favor of:
G G G G G

More than three persons including joint holders Partnership firm(s) or their nominee(s) Minors Hindu Undivided Family Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable Trust laws and is authorized under its Constitutions to hold Equity Shares of a Company)

The right of renunciation is subject to the express condition that the Board/ Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof. Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part B of the CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Equity Shares in Part C to receive allotment of such Equity Shares. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part A must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will also have no further right to renounce any shares in favour of any other person.

Procedure for renunciation To renounce the whole offer in favour of one renouncee
If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF In case of joint . holding, all joint holders must sign Part B of the CAF The person in whose favor renunciation has been made should . complete and sign Part C of the CAF In case of joint renouncees, all joint renouncees must sign this part of the CAF . .

To renounce in part/or renounce the whole to more than one person(s)


If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split into requisite number of forms. Please indicate your requirement of split forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for split forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraph above shall have to be followed. In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimen registered with the Company, the application is liable to be rejected.

Renouncee(s)
The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the Application Form and submit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money.

Change and/ or introduction of additional holders


If you wish to apply for Equity Shares jointly with any other person(s), not more than three, who is/are not already a joint holder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to
300

HINDALCO INDUSTRIES LIMITED


be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed.

Please note that:


G

Part A of the CAF must not be used by any person(s) other than those in whose favour this Issue has been made. If used, this will render the application invalid. Request by the applicant for the Split Application Form should reach the Company on or before January 3, 2006. Only the person to whom this Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. Split form(s) will be sent to the applicant(s) by post at the applicants risk.

G G

How to Apply Resident Equity Shareholders


Applications should be made on the enclosed CAF provided by the Company. The enclosed CAF should be completed in all respects, as explained in the instructions indicated in the CAF Applications will not be accepted by the Lead . Managers or by the Registrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions given elsewhere in the Letter of Offer. The CAF consists of four parts: Part A: Form for accepting the Equity Shares offered and for applying for additional Equity Shares Part B: Form for renunciation Part C: Form for application for renouncees Part D: Form for request for split application forms

Non-resident Equity Shareholders


Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, inter alia, be subject to the conditions as may be imposed from time to time by the RBI, in the matter of refund of application moneys, allotment of Equity Shares, issue of letters of allotment/ certificates/ payment of dividends etc. Letter of offer and CAF shall only be dispatched to non-resident Equity Shareholders with registered address in India. The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF: Option A. B. Option Available Accept whole or part of your entitlement renouncing the balance. Action Required without Fill in and sign Part A (All joint holders must sign) Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign). Fill and sign Part A of the CAFs.

Accept your entitlement in full and apply for additional Equity Shares.

C.

Accept only a part of your entitlement of the Equity Shares offered to you (without renouncing the balance). Renounce your entitlement in full to one person (Joint renouncees not exceeding three are considered as one renouncee).

D.

Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand over the entire CAF to the renouncee. The renouncees must fill in and sign Part C of the CAF (All joint renouncees must sign).

301

HINDALCO INDUSTRIES LIMITED


E. 1. Accept a part of your entitlement and renounce the balance to one or more renouncee(s). OR 2. Renounce your entitlement to all the Equity Shares offered to you to more than one renouncee. Fill in and sign Part D (all joint holders must sign) requesting for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. Splitting will be permitted only once. On receipt of the Split Form take action as indicated below. (i) For the Equity Shares you wish to accept, if any, fill in and sign Part A of one split CAF (only for option 1). (ii) For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand over the split CAFs to the renouncees. (iii)Each of the renouncees should fill in and sign Part C for the Equity Shares accepted by them. F . Introduce a joint holder or change the sequence of joint holders. This will be treated as a renunciation. Fill in and sign Part B and the renouncees must fill in and sign Part C.

Applications for Equity Share should be made only on the CAF which are provided by the Company. The CAF should , be completed in all respects as explained under the head INSTRUCTIONS indicated on the reverse of the CAF before submission to the Banker to the Issue at its collecting branches mentioned on the reverse of the CAF on or before the closure of the subscription list. Non Resident Shareholders/Renouncee should forward their applications to Banker to the Issue as mentioned in the CAF for Non-Resident Equity Shareholders. No part of the CAF should be detached under any circumstances. Applicants must provide information in the CAF as to their savings / current / NRE / NRO / FCNR bank account and the name of the bank with whom such account is held to enable the Registrar to print the said details in the refund orders after the name of the payees.

For applicants residing at places other than designated Bank Collecting branches.
Applicants residing at places other than the cities where the Bank collection centres have been opened should send their completed CAF by registered post/speed post to the Registrars to the Issue, Karvy Computershare Private Limited, alongwith demand drafts, net of bank and postal charges, payable in favour of Hindalco Industries Limited - Rights Issue in case of Resident shareholders and Non Resident shareholders applying on Non-repatriable basis and in favour of Hindalco Industries Limited - Rights Issue - NR in case of non-resident shareholders applying on a repatriable basis and crossed A/c Payee only so that the same are received on or before closure of the Issue (i.e. January 18, 2006). In such case the demand draft in case of Resident shareholders, should be payable at Hyderabad and in case of Non-resident shareholders, should be payable at Mumbai or New Delhi. The Company will not be liable for any postal delays and applications received through mail after the closure of the Issue, are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned below: All application forms duly completed together with cash/ cheque/demand draft for the application money must be submitted before the close of the subscription list to the Bankers to the Issue named herein or to any of its branches mentioned on the reverse of the CAF. The CAF alongwith application money must not be sent to the Company or the Lead Managers to the Issue or the Registrars to the Issue except as mentioned above. The applicants are requested to strictly adhere to these instructions. Failure to do so could result in the application being liable to be rejected with the Company, the Lead Managers and the Registrars not having any liabilities to such applicants.
302

HINDALCO INDUSTRIES LIMITED


Availability of duplicate CAF
In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number/ DP and Client ID No. and his/ her full name and address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should not utilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. Thus in case the orginal and duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored.

Application on Plain Paper


An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with a demand draft net of bank and postal charges, drawn in favor of Hindalco Industries Limited - Rights Issue in case of resident shareholders and nonresident shareholders applying on non-repatriable basis and in favour of Hindalco Industries Limited - Rights Issue NR payable at Mumbai or New Delhi, in case of non-resident shareholders applying on repatriable basis and send the same by registered post directly to the Registrar to the Issue so as to reach them on or before the closure of the Issue. In such case the demand draft should be payable at Hyderabad in case of Resident shareholders and payable at Mumbai or New Delhi in case of Non-resident shareholders. The envelope should be superscribed Hindalco Industries Limited - Rights Issue in case of resident shareholders and non-resident shareholders applying on non-repatriable basis and in favour of Hindalco Industries Limited - Rights Issue - NR in case of non-resident shareholders applying on repatriable basis. The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars:
G G G G G G G G G G G G

Name of Issuer, being Hindalco Industries Limited. Name and address of the Equity Shareholder including joint holders. Registered Folio No./ DP ID No. and Client ID No. Number of shares held as on Record Date. Certificate numbers and distinctive Nos., if held in physical form. Number of Rights Equity Shares entitled. Number of Rights Equity Shares applied for. Number of additional Equity Shares applied for, if any. Total number of Equity Shares applied for. Total amount paid on application at the rate of Rs. 24 (application amount only) per Equity Share. Particulars of cheque/draft. Savings/Current Account Number and name and address of the bank where the Equity Shareholder will be depositing the refund order. PAN/GIR number, Income Tax Circle/Ward/District, photocopy of the PAN card/ PAN communication / Form 60 / Form 61 declaration where the application is for Equity Shares of a total value of Rs.50,000 or more for the applicant and for each applicant in case of joint names. Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company.

Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications. The Company shall refund such application amount to the applicant without any interest thereon.

303

HINDALCO INDUSTRIES LIMITED


Last date of Application
The last date for submission of the duly filled in CAF is January 18, 2005. The Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 60 (sixty) days from the Issue Opening Date. If the CAF together with the amount payable is not received by the Banker to the Issue/ Registrar to the Issue on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offer contained in this Letter of Offer shall be deemed to have been declined and the Board/ Committee of Directors shall be at liberty to dispose off the Equity Shares hereby offered, as provided under the section entitled Basis of Allotment. INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.

Mode of payment for Resident Equity Shareholders/ Applicants


G

All cheques / drafts accompanying the CAF should be drawn in favour of Hindalco Industries Limited- Rights Issue and marked A/c Payee only. Applicants residing at places other than places where the bank collection centres have been opened by the Company for collecting applications, are requested to send their applications together with Demand Draft of amount net of bank and postal charges, for the full application amount favouring Hindalco Industries Limited Rights Issue and marked A/c Payee only payable at Hyderabad directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. The Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

Mode of payment for Non-Resident Equity Shareholders/ Applicants


As regards the application by non-resident equity shareholders, the following further conditions shall apply: Payment by non-residents must be made by demand draft / cheque payable at Mumbai or New Delhi or funds remitted from abroad in any of the following ways:

Application with repatriation benefits


Payment by NRIs/ FIIs/ foreign investors must be made by demand draft/cheque payable at Mumbai or New Delhi or funds remitted from abroad in any of the following ways:
G

By Indian Rupee drafts purchased from abroad and payable at Mumbai or New Delhi or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in Mumbai or New Delhi; or By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable in Mumbai or New Delhi; or FIIs registered with SEBI must remit funds from special non-resident rupee deposit account. All cheques/drafts submitted by non-residents applying on repatriable basis should be drawn in favour of Hindalco Industries Limited - Rights Issue - NR payable at Mumbai or New Delhi and crossed A/c Payee only for the amount payable.

G G

A separate cheque or bank draft must accompany each application form. Applicants may note that where payment is made by drafts purchased from NRE/FCNR accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/FCNR account should be enclosed with the CAF In the absence of the above the application shall be considered incomplete and is liable to be rejected. . In the case of NR who remit their application money from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, . refunds and other disbursements, if any will be made in US Dollars at the rate of exchange prevailing at such time subject to the permission of RBI. The Company will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into US Dollars or for collection charges charged by the applicants Bankers.
304

HINDALCO INDUSTRIES LIMITED


Application without repatriation benefits
As far as non-residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account maintained in Mumbai or New Delhi or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Mumbai or New Delhi. In such cases, the allotment of Equity Shares will be on non-repatriation basis. All cheques/drafts submitted by non-residents applying on non-repatriation basis should be drawn in favour of Hindalco Industries Limited - Rights Issue payable at Mumbai or New Delhi and must be crossed A/c Payee only for the amount payable. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF . If the payment is made by a draft purchased from an NRO account, an Account Debit Certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account, should be enclosed with the CAF In . the absence of the above, the application shall be considered incomplete and is liable to be rejected. New demat account shall be opened for holders who have had a change in status from resident Indian to NRI. Note:
G

In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961. In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF . In case of an application received from non-residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

Payment by Stockinvest
In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in this Issue

Basis of Allotment
Subject to the provisions contained in this Letter of Offer, the Articles of Association of the Company and the approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority: (a) (b) Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part. If the shareholding of any of the Equity Shareholders is less than four or is not in multiples of four, then the fractional entitlement of such holders for Equity Shares shall be ignored. Equity Shareholders whose fractional entitlements are being ignored would be given preferential allotment of ONE additional Equity Share each if they apply for additional shares. (For further details please see the section Terms of the Issue Fractional Entitlements on page 294 of this Letter of Offer) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as part of the Issue and have also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after making full allotment in (a) above. The allotment of such Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and not preferential allotment. Allotment to the renouncees who having applied for the Equity Shares renounced in their favour have also applied for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in
305

(c)

(d)

HINDALCO INDUSTRIES LIMITED


(a) and (b) above. The allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion of the Board/ Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential allotment. (e) Allotment to any other person as the Board may in its absolute discretion deem fit provided there is surplus available after making full allotment under (a), (b), (c) and (d) above.

After taking into account allotment to be made under (a) and (b) above, if there is any unsubscribed portion, the same shall be deemed to be unsubscribed for the purpose of regulation 3(1)(b) of the Takeover Code which would be available for allocation under (c), (d) and (e) above. The Promoter and the promoter group will subscribe to unsubscribed portion if the Issue does not have subscription to the extent of 90% of the Issue size, after considering the above allotment, to ensure that the Issue is successful. This acquisition of additional Equity Shares, if allotted to the Promoter shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of regulation 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1)(b) of the Takeover Code. Further this acquisition will not result in change of control of management of the Company. After such allotments as above and to the Promoters and the promoter group, including the application for rights/ renunciation and additional equity shares, any additional Equity Shares shall be disposed off by the Board or committee of the Board authorised in this behalf by the Board of the Company, in such manner as they think most beneficial to the Company and the decision of the Board or committee of the Board of the Company in this regard shall be final and binding. In the event of oversubscription, allotment will be made within the overall size of the issue. Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement and the other applicable laws prevailing at that time.

Underwriting
The present Issue is not underwritten.

Allotment / Refund
The Company will issue and dispatch letters of allotment/ share certificates/ demat credit and/ or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of six weeks from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. In case of those shareholders who have opted to receive their Right Entitlement Shares in dematerialised form by using electronic credit under the depository system, an advice regarding the credit of the Equity Shares shall be given separately. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companys Law Board under Section 113 of the Act or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment, which would be exchanged later for the share certificates. For more information, please refer to the section entitled Letters of Allotment / Share Certificates / Demat Credit on page no. 307 of this Letter of Offer. Letters of allotment/ share certificates/ demat credit/ refund orders above the value of Rs. 1,500 will be dispatched by registered post/ speed post to the sole/ first applicants registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants by way of certificate of posting. Such cheques or pay orders will be payable at par at all the centres where the applications were originally accepted and will be marked A/c payee and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for the dispatch of such letters of allotment/ share certificates/ demat credit and refund orders. The Company shall ensure that at par facility is provided for encashment of refund orders/ pay orders at the places where applications are accepted. As regards allotment/ refund to non-residents, the following further conditions shall apply: In case of non-residents, who remit their application monies from funds held in NRE/ FCNR accounts, refunds and/ or payment of interest/ dividend and other disbursement, if any, shall be credited to such accounts, details of which should be furnished in the CAF Subject to the approval of the RBI, in case of non-residents, who remit their application . monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any
306

HINDALCO INDUSTRIES LIMITED


other disbursement, shall be credited to such accounts (details of which should be furnished in the CAF) and will be made net of bank charges/ commission in US Dollars, at the rate of exchange prevailing at such time. The Company will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupee amount into US Dollars. The share certificate(s) will be sent by registered post at the Indian address of the non-resident applicant.

Letters of Allotment / Share Certificates / Demat Credit


Letter(s) of allotment/ share certificates/ demat credit or letters of regret will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within 6 (six) weeks, from the date of closure of the subscription list. In case the Company issues letters of allotment, the relative share certificates will be dispatched within three months from the date of allotment. Allottees are requested to preserve such letters of allotment (if any) to be exchanged later for share certificates. Export of letters of allotment (if any)/ share certificates/ demat credit to non-resident allottees will be subject to the approval of RBI.

Option to receive Equity Shares in Dematerialized Form


Applicants to the Equity Shares of the Company issued through this Issue shall be allotted the securities in dematerialised (electronic) form at the option of the applicant. The Company signed a tripartite agreement dated May 10, 1999 with CDSL and MCS Ltd. and a bipartite agreement dated December 26, 2003 with NSDL, which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates. In this Issue, the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a depository participant. The CAF shall contain space for indicating number of shares applied for in demat and physical form or both. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF Applications, which do not accurately contain this . information, will be given the securities in physical form. No separate applications for securities in physical and/or dematerialized form should be made. If such applications are made, the application for physical securities will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares. The Equity Shares of the Company will be listed on the BSE and NSE. Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under:
G

Open a beneficiary account with any depository participant (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the Investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need not adhere to this step. For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on the Record Date, the beneficial account number shall be printed on the CAF For those who open accounts later or those who . change their accounts and wish to receive their Equity Shares pursuant to this Issue by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF It . may be noted that the allotment of Equity Shares arising out of this Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of the Company.

Responsibility for correctness of information (including applicants age and other details) filled in the CAF vis--vis such information with the applicants depository participant, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicants depository participant. If incomplete / incorrect beneficiary account details are given in the CAF the applicant will get Equity Shares in physical form. The Equity Shares pursuant to this Issue allotted to investors opting for dematerialized form, would be directly credited to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicants depository participant will provide to him the
307

HINDALCO INDUSTRIES LIMITED


confirmation of the credit of such Equity Shares to the applicants depository account. Renouncees will also have to provide the necessary details about their beneficiary account for allotment of securities in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

Utilisation of Proceeds
Subscription received against this Issue will be kept in a separate bank account(s) and the Company would not have access to such funds unless it has received minimum subscription of 90%, of the Issue and the necessary approvals of the Designated Stock Exchange, to use the amount of subscription.

General instructions for applicants


(a) (b) Please read the instructions printed on the enclosed CAF carefully. Application should be made on the printed CAF provided by the Company except as mentioned under the head , Application on Plain Paper and should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of this Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled in English and the names of all the applicants, details of occupation, address, fathers / husbands name must be filled in block letters. The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / Collecting Bank or to the Registrar to the Issue and not to the Company or Lead Managers to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to make payment by Demand Draft payable at Hyderabad of amount net of bank and postal charges, and send their application forms to the Registrar to the Issue by REGISTERED POST. If any portion of the CAF is / are detached or separated, such application is liable to be rejected. PAN/ GIR Number: Applications for a total value of Rs. 50,000 or more, i.e. where the total number of securities applied for multiplied by the Issue price, is Rs. 50,000 or more the applicant or in the case of application in joint names, each of the applicants, should mention his/ her PAN number allotted under the Income-Tax Act, 1961 and also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN (PAN Communication) along with the application for the purpose of verification of the number. Applicants who do not have PAN are required to provide a declaration in Form 60 / Form 61 prescribed under the I.T.Act along with the application. Application Forms without this photocopy/ PAN Communication/ declaration will be considered incomplete and are liable to be rejected. Bank Account Details: It is mandatory for applicants to provide information as to their savings/current account number and the name of the Company with whom such account is held in the CAF to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees. Application not containing such details is liable to be rejected. Payment by cash: The payment against the application should not be effected in cash if the amount to be paid is Rs. 20,000 or more. In case payment is effected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions as mentioned above, should be made only to the Bankers to the Issue. Signatures should be either in English or Hindi or in any other language specified in the Eight Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company or depositories. In case of an application under power of attorney or by a body corporate or by a society, a certified true copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the relevant investment under this Issue and to sign the application and a copy of the Memorandum and Articles of Association and / or bye laws of such body corporate or society must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF. In case the above referred documents are already registered with the Company, the same need not be a furnished again. In case these papers are sent to any other entity besides the Registrar to the
308

(c)

(d)

(e)

(f)

(g)

(h)

HINDALCO INDUSTRIES LIMITED


Issue or are sent after the Issue Closing Date, then the application is liable to be rejected. In no case should these papers be attached to the application submitted to the Bankers to the Issue. (i) In case of joint holders, all joint-holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicants name and all communication will be addressed to the first applicant. Application(s) received from Non-Resident / NRIs, or persons of Indian origin residing abroad for allotment of Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a Non-Resident or NRI Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF . All communication in connection with application for the Equity Shares, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation for change of address of Equity Shareholders, after the date of allotment, should be sent to the in house, Investor Service Department, Hindalco Industries Limited, Ahura Centre, First Floor, B Wing, Mahakali Caves Road, Andheri (East), Mumbai 400 093 in the case of Equity Shares held in physical form and to the respective depository participant, in case of Equity Shares held in dematerialized form. Split forms cannot be re-split.

(j)

(k)

(l)

(m) Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain split forms. (n) (o) Applicants must write their CAF number at the back of the cheque / demand draft. Only one mode of payment per application should be used. The payment must be either in cash or by cheque / demand draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted. A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. (For payment against application in cash please refer point (f) above) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at the bottom of the CAF .

(p)

(q)

Grounds For Technical Rejections


Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following:
G G G G

Amount paid does not tally with the amount payable for; Bank account details (for refund) are not given; Age of first applicant not given; PAN photocopy/ PAN Communication/ Form 60 / Form 61 declaration not given if Application is for Rs. 50,000 or more; In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted; If the signature of the existing shareholder does not match with the one given on the Application Form and for renouncees if the signature does not match with the records available with their depositories; If the Applicant desires to have shares in electronic form, but the Application Form does not have the Applicants
309

HINDALCO INDUSTRIES LIMITED


depository account details;
G

Application Forms are not submitted by the Applicants within the time prescribed as per the Application Form and the Letter of Offer; Applications not duly signed by the sole/joint Applicants; Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue; Applications accompanied by Stockinvest; In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Applicants (including the order of names of joint holders), the Depositary Participants identity (DP ID) and the beneficiarys identity; Applications by US persons; Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided.

G G

G G

G G

Disposal of application and application money


No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF . The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part, and in either case without assigning any reason thereto. In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the applicant within six weeks from the close of the Issue in accordance with section 73 of the Act. For further instruction, please read the Composite Application Form (CAF) carefully.

Utilisation of Issue Proceeds


The Board of Directors declares that: (i) (ii) The funds received against this Issue will be transferred to a separate bank account other than the bank account referred to sub-section (3) of Section 73 of the Act. Details of all moneys utilised out of the Issue shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such moneys has been utilised.

(iii) Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against this Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by the Company.

Undertakings by the Company


1. 2. The complaints received in respect of the Issue shall be attended to by the Company expeditiously and satisfactorily. All steps for completion of the necessary formalities for listing and commencement of trading at all Stock Exchanges where the securities are to be listed will be taken within seven working days of finalization of basis of allotment. The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post shall be made available to the Registrar to the Issue.
310

3.

HINDALCO INDUSTRIES LIMITED


4. 5. The certificates of the securities/ refund orders to the non-resident Indians shall be dispatched within the specified time. No further issue of securities affecting equity capital of the Company shall be made till the securities issued/ offered through the Issue are listed or till the application moneys are refunded on account of non-listing, undersubscription etc. The Company accepts full responsibility for the accuracy of information given in this Letter of Offer and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts. All information shall be made available by the Lead Managers and the Issuer to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc.

6.

7.

Important
G

Please read this Letter of Offer carefully before taking any action. The instructions contained in the accompanying Composite Application Form (CAF) are an integral part of the conditions of this Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected. All enquiries in connection with this Letter of Offer or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID number, the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed Hindalco Industries Limited - Rights Issue on the envelope) to the Registrar to the Issue at the following address: Karvy Computershare Private Limited Unit: Hindalco Rights Issue Karvy House, 46 Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034, Tel: (91 40) 2343 1546 Fax: (91 40) 2343 1551

It is to be specifically noted that this Issue of Equity Shares is subject to the section entitled Risk Factors beginning on page vii of this Letter of Offer.

The Issue will not be kept open for more than 31 days unless extended, in which case it will be kept open for a maximum of 60 days.

311

HINDALCO INDUSTRIES LIMITED SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND US GAAP
The consolidated and unconsolidated financial statements included in this Prospectus have been prepared in accordance with applicable Indian GAAP and the applicable provisions of the Companies Act, 1956 and the SEBI Guidelines. Indian GAAP differs in certain respects from US GAAP . The following table summarizes the significant differences between Indian GAAP and US GAAP in so far as they are relevant to the consolidated and unconsolidated financial statements of the Company. The following summary may not include all the differences that exist between US GAAP and Indian GAAP US GAAP is generally more prescriptive . and comprehensive than Indian GAAP regarding recognition and measurement of transactions, account classification and disclosure requirements. No attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial statements and the notes thereto. Various US GAAP and Indian GAAP pronouncements, including guidance provided by the US Securities and Exchange Commission, have been issued for which the mandatory application date is later than March 31, 2005. These together with standards that are in the process of being developed in both jurisdictions could have a significant impact on future comparisons between Indian GAAP and US GAAP . S r . Particulars No. 1 Contents of financial statements Indian GAAP Companies are required to present balance sheets and profit and loss accounts for two years along with the relevant accounting policies and notes. US GAAP Companies are required to present balance sheets, statements of operations, statements of cash flows and statements of changes in Stockholders equity for two years along with the relevant accounting policies and notes to accounts. Public companies are required to present statements of operations, statements of cash flows and statements of changes in stockholders equity for three years. They need not present the balance sheet for the third year.

Additionally all listed Companies (including companies in the process of getting listed), companies with turnover exceeding Rs. 500 million and insurance companies are required to present cash flow statements. (Applicable for financial years beginning on April 1, 2005 for other than listed companies).

There is no standard or requirement for A statement of comprehensive income comprehensive income statement. (comprising primarily of unrealized gains and losses) is required and is generally presented as part of stockholder s equity. 2 Changes in accounting The effect of a change in accounting policy must be recorded in the income policies statement of the period in which the change is made except as specified in certain standards where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. Correction of errors The effect of correction of errors must be included in the current year income statement with appropriate disclosure as a prior period item.
312

The effect of a change in accounting policy is generally included (net of taxes) in the current year income statement, after extraordinary items. Pro-forma comparatives reflecting the impact of the change is generally disclosed. The correction of material errors usually results in the restatement of relevant prior periods.

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. Consolidation and Joint 4 Ventures Indian GAAP US GAAP

In accordance with AS 27, Financial Investment in Joint Ventures is generally reporting of Interests in joint ventures accounted for under the equity method the venturer recognizes in its separate of accounting and consolidated financial statements its share of jointly controlled assets, any liabilities it has incurred, its share of any liabilities incurred jointly with other venturers in relation to the joint venture, any income from sale or use of its share of output of the joint venture, together with its share of expenses incurred by joint venture and any expenses which it has incurred in respect of interest in joint venture. There is no specific guidance with respect to Variable Interest Entities For financial statements, disclosure is Companies are required to evaluate if required for the share of interest in the they have any interest in Variable Joint Venture. Interest Entities, as defined by the standard. Consolidation of such entities may be required if certain conditions are met.

Business Combinations

Restricts the use of pooling of interest method to circumstances, which meet the criteria listed for an amalgamation in the nature of a merger. In all other cases, the purchase method is used

Business combinations are accounted for by the purchase method only (except as discussed below). Several differences can arise in terms of date of combination, calculation of share value to use for purchase price, especially if the Indian GAAP method is amalgamation or pooling In the event of combinations of entities under common control, the accounting for the combination is done on a historical cost basis in a manner similar to a pooling of interests for all periods presented. Goodwill is not amortized but, tested for impairment annually.

Goodwill

Goodwill is capitalized amortized over its useful life, except for Enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of directors resolution in this regard, or All other commercial, industrial and business reporting enterprises, whose turnover for the

313

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. Indian GAAP accounting period exceeds Rs. 500 millions. (Applicable for financial years beginning on April 1, 2005 for other than listed companies). 7 Negative of Goodwill (i.e., the excess of the fair value of net assets acquired over the aggregate purchase consideration) Intangible assets Negative goodwill is computed based on the book value of assets (not the fair value) of assets taken over/acquired and is credited to the capital reserve account, which is a component of shareholders funds. Intangible assets are capitalized if specific criteria are met and are amortized over their useful life, generally not exceeding 10 years. The recoverable amount of an intangible asset that is not available for use or is being amortized over a period exceeding 10 years should be reviewed at least at each financial yearend even if there is no indication that the asset is impaired. Specific requirements govern the format and content of a reportable segment and the basis of identification of a reportable segment. The information for disclosure is to be prepared in conformity with the accounting standards used for the company as a whole. Negative goodwill is allocated to reduce proportionately the fair value assigned to non-current assets. Any remaining excess is considered to be an extraordinary gain. When allocating purchase price of a business combination, companies need identify and allocate such purchase price to intangible assets, based on specific criteria. Intangibles that have an indefinite useful life are required to be tested, at least annually, for impairment. Intangible assets that have finite useful life are required to be amortized over their estimated useful lives. Public companies are required to report information about operating segments in annual financial statements and selected information about operating segments in interim financial reports issued to shareholders. There are requirements for related disclosures about products and services, geographic areas, and major customers. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. Dividends are accounted for when approved by the board/shareholders. If the approval is after year end, the dividend is not considered to be a subsequent event that needs to be reflected in the financial statements. US GAAP

Segment Information

10

Dividends

Dividends are reflected in the financial statements of the year to which they relate even if proposed or approved after the year end.

314

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. 11. Property, Plant Equipment Indian GAAP and Fixed assets are recorded at the historical costs or revalued amounts. Foreign exchange gains or losses relating to the procurement of property, plant and equipment can be capitalized as part of the asset. Depreciation is recorded over the assets useful life. Schedule XIV of the Companies Act prescribes minimum rates of depreciation and typically companies use these as the basis for useful life. Interest cost on specified or identifiable borrowings is capitalized to qualifying assets during its construction period. US GAAP Revaluation of fixed assets is not permitted under US GAAP . All foreign exchange gains or losses relating to the payables for the procurement of property, plant and equipment are recorded in the income statement. Depreciation is recorded over the assets useful life. Therefore the useful life may be different from the useful life based on Schedule XIV. The interest cost, if material, eligible for capitalization shall be the interest cost recognized on borrowings and other obligations. The amount capitalized is an allocation of the interest cost incurred during the period required to complete the asset. The interest rate for capitalization purposes is to be based on the rates on the companys outstanding borrowings. 12 Investment in Marketable Securities Unrealized appreciation on available for sale securities or trading securities is not recognized. Unrealized depreciation on available for sale securities and trading securities is recognized in the income statement. Unrealized gains and losses on available for sale securities are recorded as other comprehensive income, which is a component of stockholders equity. Unrealized gains and losses on trading securities are recognized in the income statement. An impairment analysis is performed if impairment indicators exist. An impairment loss shall be recognized only if the carrying amount of a longlived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). An impairment loss shall be measured as the amount by which the carrying amount of a longlived asset (asset group) exceeds its fair value (which is determined based on discounted cash flows).

13

Impairment of assets, other than goodwill

Applicable for accounting periods beginning from April 1, 2004 onwards for: Enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of directors resolution in this regard, or All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds Rs. 500 millions. (Applicable for financial years beginning on April 1, 2005 for other than listed companies).
315

HINDALCO INDUSTRIES LIMITED


Sr. .Particulars No. Indian GAAP If impairment is indicated, the assets must be written down to higher of net selling price and the value in use based on discounted cash flows. 14 Pension / Gratuity / Post Retirement Benefits The liability for defined benefit plans like gratuity and pension is determined as per actuarial valuation. There is no defined method of expense determination, the discount rate determination criteria, and guidance for valuation of plan assets and the choice is left to the discretion of actuary. Actuarial gains or losses are recognized immediately in the statement of income. The liability for defined benefit schemes is determined using the projected unit credit actuarial method. The discount rate for obligations is based on market yields of high quality corporate bonds. The plan assets are measured using fair value or using discounted cash flows if market prices are unavailable. If at the beginning of the year, the actuarial gains or losses exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets, then such amount is not recognized immediately, but amortized over the average remaining service period of active employees expected to receive benefits under the plan. The criteria to classify leases as capital or operating include specific quantitative thresholds. US GAAP

15

Leases

Leases are classified as finance or operating in accordance with specific criteria. Judgement is required to determine if the criteria are met or not.

16

Derivatives and other financial instruments measurement of derivative instruments and hedging activities

The accounting for derivative instruments has not clearly emerged in the Indian context. Currently what is applicable is the Guidance Note on Accounting for Equity Index and Equity Stock Futures and Options are the pronouncements, which address the accounting for derivatives. However, the accounting treatment recommended in the guidance note is applicable to all contracts entered into for Equity Derivative Instruments irrespective of the motive. The impact of derivative instruments are correlated with the movement of the underlying assets and liabilities and accounted pursuant to the principles of hedge accounting. The related amount receivable from and payable to the swap counter parties is included in the other
316

There is specific accounting guidance required for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as: (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (fair value hedge), (b) a hedge of the exposure to variable cash flows of a forecasted transaction (cash flow hedge), or

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. Indian GAAP assets or liabilities in the balance sheet. When there is no correlation of movements between derivatives and the underlying asset or liability, or if the underlying asset or liability specifically related to the derivative instrument is matured, sold or terminated, the derivative instrument is closed out or marked to market as an element of non interest income on an outgoing basis. There is specific guidance with respect to the documentation that must be maintained for hedge accounting. US GAAP (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currencydenominated forecasted transaction (net investment hedge). The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. Fair value hedge: the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. Cash Flow hedge and Net investment hedge: the effective portion of the derivatives gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change. An entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. Those methods must be consistent with the entitys approach to managing risk. 17 Deferred taxes Deferred tax asset / liability is classified as long term. Deferred tax asset/liability is classified as current and long-term depending upon the timing difference and the nature of the underlying asset or liability.

317

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. Indian GAAP US GAAP

The tax rate applied on deferred tax The tax rate applied on deferred tax items is the substantially enacted tax items is the enacted tax rate. rate. 18 Revenue recognition Revenues are recognized when all significant risks and rewards of ownership are transferred. US GAAP has extensive literature on revenue recognition topics and application of these guidelines could result in revenue recognition that is different from Indian GAAP . Entities have a choice of accounting methods for determining the costs of benefits arising from employees stock compensation plans. They may either follow an intrinsic value method or a fair value method. Under the intrinsic value method, the compensation cost is the difference between the market price of the stock at the measurement date and the price to be contributed by the employee (Exercise price). The measurement date is typically the date of the grant, on which date, both the number of shares and the exercise price would be known. This method is widely used in practice. The fair value method is based on the fair value of the option at the grant date. This is estimated using an option-pricing model. If an entity chooses to follow the intrinsic value method, it must make pro-forma disclosures of net income and earnings per share as if the fair value method had been applied. There is a new standard effective 2005, which requires a fair value method to be used for all options (June 15, 2005 for Public companies and December 15, 2005 for Private companies). 20 Options employees to Non- No specific guidance Complex guidance with respect to measurement date and timing of recognition of expense. All options to non-employees are recognized at fair value. Requires costs of start-up activities and organization costs to be expensed as incurred.

19

Stock compensation

based There is no specific guidance on accounting for employee stock compensation under Indian GAAP SEBI . has issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999, which are effective for listed companies for all stock-option schemes established after 19 June 1999. In accordance with these guidelines, the excess of the market price/fair valuation of underlying equity shares as of the date of grant of the options over the exercise price of the options, including up-front payments, if any, is to be recognized and amortized on a straight-line basis over the vesting period.

21

Start up costs organization costs

and

No specific guidance. Companies expense start up costs.

318

HINDALCO INDUSTRIES LIMITED


Sr. Particulars Indian GAAP US GAAP No. 23 Mandatorily redeemable Instruments characterized as preferred Mandatorily redeemable preferred preferred shares shares are recorded as equity, even if shares are classified as a liability and any payments related to them, even if they are mandatorily redeemable. characterized as a dividend, are recorded as interest expense. 24 Issuance and redemption costs for borrowings Debt issuance costs are generally recognised as expense in the period incurred. Redemption premiums payable may be amortised in the Profit and Loss Account. Redemption premiums are permitted to be recognised in the Securities Premium Account in certain instances. These are required to be disclosed as contingent liabilities. Debt issuance costs and redemption premiums are amortised using the effective interest method over the life of the debt.

25

Guarantees

A guarantor is required to recognize at inception a liability for the fair value of the obligation undertaken in issuing the guarantee, except for certain types of guarantees that are accounted as derivatives or are reported as equity or guarantees between parents and subsidiaries. A liability for costs to terminate a contract before the end of its term should be recognised and measured at fair value when the entity terminates the contract in accordance with the contract terms. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity should be recognized and measured at its fair value when the entity ceases to use the right conveyed by the contract.

26

Onerous Contracts

An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Under Indian GAAP the Company does not recognize , any provision on account of onerous contracts.

27

Provisions

Discounting of liabilities is not permitted Where the effect of the time value of and all provisions are carried at their full money is material, the amount of a provision may be the present value of values. the expenditures expected to be required to settle the obligation. The discount rate should be pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The discount rate should not reflect risks for which future cash flow estimates have been adjusted and, any change in present value of Provision is recognized as Interest Cost.

319

HINDALCO INDUSTRIES LIMITED


Sr. Particulars No. Indian GAAP US GAAP However, if a range of estimates is present and no amount in the range is more likely than any other amount in the range, the minimum (rather than the mid-point) amount must be used to measure the liability. A provision must only be discounted when the timing of the cash flows is fixed. 28 Other comprehensive income All items of income are included in net income, unless specifically permitted to be adjusted to equity. Certain items of revenues, expenses, gains, and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income are classified as other comprehensive income. Items included in other comprehensive income shall be classified based on their nature. For example, under existing US accounting standards, other comprehensive income shall be classified separately into; foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities 29 Related party disclosures Disclosures by public sector companies of related party transactions with other public sector companies do not need to be provided. Related parties would include all entities under common control (including government departments), and there is no specific exemption for public sector or government owned entities.

320

HINDALCO INDUSTRIES LIMITED MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION


Capitalised terms used in this section have the meaning that has been given to such terms in the Articles of Association. Pursuant to Schedule II of the Companies Act, 1956 and SEBI Guidelines, the main provisions of the Articles of Association of the Company are set forth below.

Capital
Allotment of Shares Article 6 provides that subject to the provisions of these Articles shares in the Capital of the Company for the time being shall be under the control of the Board of Directors who may allot or dispose of the same or anyof them on such terms and conditions and at such times and either at a premium or at par or (subject to the provisions of Section 79 of the Act) at a discount as the Board may think fit. Provided that where at any time subsequent to the first allotment of shares it is proposed to increase the subscribed capital of the Company by the issue of new shares then subject to any directions to the contrary which may only validly be given by Special Resolution of the Company in General Meeting the Board shall issue such shares in the manner set out in Section 81(1) of the Act. Minimum Application Money Article 7 provides that if the Company shall offer any of its shares to the public for subscription, the amount payable on application on each share shall not be less than 5 per cent of the nominal amount of the share. Compliance for the purposes of Allotment Article 8 provides that as regards all allotments from time to time made, the Directors shall duly comply with the provisions of the Act. Uniform Conditions as to Calls Article 11 provides that where any calls for further share capital are made on shares such calls shall be made on a uniform basis on all shares falling under the same class. For the purposes of this 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. Installments on shares to be duly paid Article 12 provides that if by the conditions of allotment of any shares, the whole or part of the amount or issue price thereof be payable by installments, every such installment shall, when due, be paid to the Company by the person who for the time being shall be registered holder of the share. Restrictions on purchase by Company or loans by Company for purchase of its own shares Article 13 provides that except as provided in these Articles, none of the funds of the Company shall be employed in the purchase of, or lent on the security of shares of the Company and the Company shall not, except as permitted by Section 77 of the Act, give any financial assistance for the purpose of or in connection with any purchase of shares in the Company. Who may be members Article 15 provides that shares may at the discretion of the Directors be registered in the name of any limited company or other corporate body or in any other collective name.

Shares
Shares to be numbered progressively and no share to be sub-divided Article 17 provides that the shares in the Capital shall be numbered progressively, according to their several denominations, and except in the manner herein mentioned no share shall be sub-divided. Restriction on Allotment Article 18 provides that the Board of Directors shall observe the restrictions as to allotment of shares to the Public contained in Section 69 of the Act, and shall cause to be made the returns as to allotment provided for in Section 75 of the Act.
321

HINDALCO INDUSTRIES LIMITED


Acceptance of Shares Article 19 provides that any Application signed by an applicant for shares in the Company, followed by an allotment of any share therein, shall be an acceptance of shares within the meaning of these Articles; and every person who thus or otherwise accepts any shares and whose name is on the Register shall, for the purposes of these Articles, be a member. Article 19A provides that notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialise its shares, debentures and other marketable securities and to offer the same for subscription in a dematerialised form and on the same being done, the Company shall be further entitled to maintain a Register of Members with the details of members holding shares both in the materialised and dematerialised form of any media as permitted by law including any form of electronic media, either in respect of the existing shares or any future issue. Provided that the provisions set forth in Articles 22 to 26 shall not apply to shares or other marketable securities which have been dematerialised. Article 19B provides that in the case of transfer of shares or other marketable securities where the Company has not issued any certificates and where such shares or securities are being held in an electronic and fungible form, the provisions of the Depositories Act, shall apply. Deposit and Calls to be a debt payable immediately Article 20 provides that the money (if any) which the Board of Directors shall, on the allotment of any shares being made by them, require or direct to be paid by way of deposit call or otherwise, in respect of any shares allotted by them, shall immediately on the inscription of the name of the allottee in the Register of Members as the name of the holder of such shares, become a debt due to and recoverable by the Company from the allottee thereof, and shall be payable by such allottee accordingly. Liability of Members Article 21 provides that every Member, or his heirs, executors or administrators, shall pay to the Company the proportion the capital represented by his share or shares which may, for the time being remain unpaid thereon, in such amounts, at such time or times, and in such manner, as the Board of Directors shall from time to time, in accordance with the Companys regulations require or fix for the payment thereof. Restrictions on purchase by Company or loans by Company for purchase of its own shares. Article 24 provides that except as provided in these Articles, none of the funds of the Company shall be employed in the purchase of, or lent on the security of shares of the Company and the Company shall not, except as permitted by Section 77 of the Act, give any financial assistance for the purpose of or in connection with any purchase of shares in the Company.

Calls
Calls Article 27 provides that the Directors may, from time to time, subject to Section 91 of the Act and the terms on which any shares may have been issued, make such calls as they think fit upon the members in respect of all moneys unpaid on the shares held by them respectively (whether on account of nominal value of shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the persons and at the times and places appointed by the Directors. A call may be made payable by installments. A call may be revoked or postponed at the discretion of the Directors. When call deemed to have been made. Article 28 provides that a call shall be deemed to have been made at the time when the resolution of the Directors authorising such call was passed. Article 29 provides that not less than 21 days notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid. Provided that the Directors may by notice in writing to the members revoke the call or extend the time for payment thereof.

322

HINDALCO INDUSTRIES LIMITED


Amount payable at fixed times or by installments payable as calls. Article 30 provides that if by the terms of issue of any share or otherwise the whole or part of the amount or issue price thereof is made payable at any fixed time or by installments at fixed times, every such amount or issue price or installment thereof shall be payable as if it were a call duly made by the Directors and of which due notice had been given and all the provisions herein contained in respect of calls shall apply to such amount or issue price or installment accordingly. When interest on call or installment payable. Article 31 provides that if the sum payable in respect of any call or installment be not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call shall have been made or the installment shall be due, shall pay interest for the same at the rate of 9 per cent per annum, or at such other rate as the Directors may determine from the day appointed for the payment thereof to the time of the actual payment but they shall have power to waive the payment. Evidence in action by Company against members Article 32 provides that on the trial or hearing of any action or suit brought by the Company against any member or his representative to recover any debt or money claimed to be due to the Company in respect of his shares, it shall be sufficient to prove that the name of the members is, or was, when the claim arose, on the register of members of the Company as a holder or one of the holders of shares in respect of which such claim is made. Payment of calls in advance. Article 33 provides that the Directors may if they think fit, receive from any member willing to advance the same, all or any part of the Capital due upon the shares held by him beyond the sums for which calls shall have been made and upon the money so paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the Company may pay interest at such rate as the member paying such sum in advance and the Directors agree upon but not more than six per cent per annum unless the Company in General Meeting shall otherwise direct. No voting rights in respect of the moneys so paid in advance shall be exercisable until the moneys shall have become payable. Money so paid in excess of the amount of calls shall not rank for dividend and until appropriated towards satisfaction of any call shall be treated as a loan to the Company and not as a part of its capital and shall be repayable to the members at any time without notice if the Directors so decide.

Forfeiture and Lien


Notice may be given for call not made Article 34 provides that if any member fails to pay any call or installment of a call on or before the day appointed for the payment of the same, the Directors may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice on such member requiring him to pay the same, together with any interest that may have accrued. Form of Notice Article 35 provides that the notice shall fix a date (not being earlier than the expiry of 14 days from the date of service of the notice) and a place or places on and at which such call or installment and such interest as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time and at the place or places appointed the shares in respect of which such call was made or installment is payable and to which the notice relates will be liable to be forfeited. If notice not complied with shares may be forfeited Article 36 provides that if the requisites of any such notice as aforesaid be not complied with, any shares in respect of which such notice has been given may, at any time thereafter before payment of all calls or installments, interest and expenses 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. Neither the receipt by the Company of a portion of any money which shall from time to time be due from any Member to the

323

HINDALCO INDUSTRIES LIMITED


Company in respect of his shares, either by way of principal or interest, nor any indulgence granted by the Company in respect of the payment of any such money, shall preclude the Company from thereafter proceeding to enforce a forfeiture of such shares as herein provided.

Notice after Forfeiture


Article 37 provides that when any share shall have been so forfeited, notice of the forfeiture shall be given to the member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereon shall forthwith be made in the Register, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make such entry aforesaid. Forfeited share to become property of the Company Article 38 provides that any share so forfeited shall be deemed to be the property of the Company, and the Directors may sell, re-issue or otherwise dispose of the same in such manner as they think fit. Power to annul forfeiture Article 39 provides that the Directors may, at any time before any share so forfeited shall have been sold, reissued or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit.

Arrears to be paid notwithstanding forfeiture


Article 40 provides that a person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall notwithstanding forfeiture remain liable to pay to the Company all calls, installments, interest and expenses owing upon or in respect of such shares at the date of forfeiture with interest thereon from the date of forfeiture until payment at such rate not exceeding nine per cent per annum as the Directors may determine. The liability of such person shall cease if and when the Company shall have received payment in full of all such moneys in respect of the shares. The Company may receive the consideration, if any, given for the share on any sale or disposal thereof and execute a transfer of the share in favour of the person to whom the share is sold or disposed of. The transferee shall thereupon be registered as the holder of the share. The transferee shall not be bound to see to application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified. Effect of forfeiture. Article 41 provides that the forfeiture of a share shall involve the extinction of all interest in and also of 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 Articles are expressly saved. Evidence of forfeiture. Article 42 provides that a declaration in writing that the declarant is a Director of the Company, and that certain shares in the Company have been duly forfeited on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the shares and such declaration and the receipt of the Company for the consideration, if any, given for the shares on the sale or disposition thereof shall constitute a good title to such share. Companys Lien on shares Article 43 provides that the Company shall have a first and paramount lien upon all the shares (other than fully paid up shares) registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such shares and no equitable interest in any share shall be created except upon the footing and condition that Clause 14 hereof is to have full effect and such lien shall extend to all dividends and bonuses from time to time declared in respect of such shares. Unless otherwise agreed the registration of a transfer of shares shall operate as a waiver of the Companys lien, if any, on such shares. The Directors may at any time declare any shares to be wholly or in part to be exempt from the provisions of this Clause.
324

HINDALCO INDUSTRIES LIMITED


Enforcing the lien by sale and applying the proceeds of sale. Article 44 provides that for the purpose of enforcing such lien the Board of Directors may sell the shares subject thereto in such manner as they think fit but no sale shall be made unless a sum in respect of which the lien exists is presently payable and until notice in writing of the intention to sell shall have been served on such member, his executors or administrators, or his committee, curator bonis or other legal representatives as the case may be and default shall have been made by him or them in the payment of the sum payable as aforesaid for fourteen days after the date of such receipt. To give effect to such sale the Directors may authorise some person to transfer the shares sold to the purchaser thereof. The net proceeds of the sale shall be received by the Company and applied in or towards payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall be paid to each member, his executors of or administrators or his committee, curator bonis, or other legal representative as the case may be. Validity of shares Article 45 provides that upon any sale for enforcing a lien in exercise of the powers by these presents given, the Directors may cause the purchasers name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see the regularity of the proceedings, nor to the application of the purchase money, and after his name has been entered in the Register in respect of such shares his title to such shares shall not be affected by any irregularity or invalidity in the proceedings in reference to such sale or disposition, nor impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

Transfer and Transmission of Shares


Article 46 provides that subject to the provisions of the Foreign Exchange Regulation Act, 1947 as in force the Company shall not register a transfer of shares in, or debentures of, the Company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been, delivered to the Company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures. Provided that where on an application in writing made to the Company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of Directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the Company may register the transfer on such terms as to indemnity as the Board may think fit. The transferor shall be deemed to remain holder of such share until the name of the transferee is entered in the Register in respect thereof. Application for Transfer Article 47 provides that an application for the Registration of the transfer of a share may be made either by the transferor or the transferee provided that, where such application is made by the transferor, no registration shall in the case of partly paid shares be effected unless the Company gives notice of the application to the transferee in the manner prescribed by the Act, and, subject to the provisions of Articles 14, 52 and 56 hereof, the Company shall unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the Register the name of the transferee in the same manner and subject to the same conditions as if the application for registration was made by the transferee. Notice of transfer to registered holder. Article 48 provides that before registering any transfer tendered for registration, the Directors may, if they so think fit, give notice by letter posted in the ordinary course to the registered holder that such transfer deed has been lodged and that, unless objection is taken, the transfer will be registered and if such registered holder fails to lodge an objection in writing at the Office of the Company within seven days from the posting of such notice to him, he shall be deemed to have admitted the validity of the said transfer. Where no notice is received by the registered holder, the Directors shall be deemed to have decided not to give notice and in any event the non-receipt by the registered holder of any notice shall not entitle him to make any claim of any kind against the Company in respect of such nonreceipt.

325

HINDALCO INDUSTRIES LIMITED


The Company not liable for disregard of a notice prohibiting registration of a transfer. Article 49 provides that the Company shall incur no liability or responsibility whatever in consequence of its registering or giving effect to any transfer of 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 persons having or claiming any equitable right, title or interest to or in the same shares, notwithstanding that the Company may have had notice of such equitable right, title or interest or notice prohibiting registration of such transfer and may have entered such notice, or referred thereto, in any book of the Company, and the Company shall not be bound or required to regard to 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 referred to in some book of the Company; but the Company shall nevertheless, be at liberty to regard and attend to any such notice, and give effect thereto if the Directors shall so think fit. In what case to register transfer is declined. Article 51 provides that the Directors may, subject to the right of appeal conferred by Section 111 of the Act, decline to register any transfer of shares to a transferee of whom they do not approve. No transfer to minor or person of unsound mind. Article 52 provides that no transfer shall be made to a minor or person of unsound mind. Rights of unregistered executors and trustees. Article 60 provides that subject to Section 206 of the Act and other provisions of these Articles if the Directors in their sole discretion are satisfied in regard thereto, a person becoming entitled to a registered share in consequence of the death or insolvency of a member may receive and give a discharge for any dividends or other moneys payable in respect of the share.

Alteration of Capital
Power to alter capital Article 65 provides that the Company in General Meeting may from time to time by Special Resolution alter the condition of its Memorandum to increase the share capital by such amount, to be divided into shares of such amount as may be specified in the resolution. Article 66 provides that the Company may by Special Resolution alter the conditions of its Memorandum to consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum, and/or Articles of Association subject, nevertheless, to the provisions of Clause (d) of sub-section (1) of Section 94. cancel any shares, which at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. On what condition new shares to be Issued Article 67 provides that subject to the provisions of any special rights or privileges for the time being attached to any issued shares, the new shares shall be issued upon such terms and conditions and with such right and privileges attached thereto, as the Company in General Meeting or the Board of Directors (as the case may be) resolving upon the creation thereof shall direct and in particular such shares may be issued with a preferential or qualified right to dividends and subject to the provisions of Section 85 of the Act in the distribution of the assets of the Company and subject to the provisions of Section 87 of the Act with a special or without any right of voting. New shares to be offered first to the existing members Article 68 provides that subject to the other provisions of these Articles and subject to any directions to the contrary that may be given by the meeting that resolves upon the increase of capital where the Directors decide to increase the capital of the Company by the issue of further shares, such shares shall be offered to the persons who at the date of the offer, are holders of the equity shares of the Company, in proportion as nearly as circumstances admit to the capital paid up on those shares at that date, and such offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined; and after the expiration of such time, or on receipt of an earlier intimation from the members to whom such notice is given that he declines to accept the shares offered, the Directors
326

HINDALCO INDUSTRIES LIMITED


may dispose of the same in such manner as they think most beneficial to the Company; and the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice aforesaid shall contain a statement of this right, so that the person or persons in whose favour any such shares may be renounced shall be such as the Directors may in their absolute discretion approve of, and in case the Directors may not so approve of any such person the renunciation of any such shares in favour of such persons shall not take effect. Article 69 provides that in addition to and without derogating from the powers for that purpose concerned on the Directors under these presents, the Company in General Meeting may determine that any shares (whether forming part of the original capital or of any increased capital of the Company) shall be offered in the first instance to existing members in such proportion to the amount of the capital held by them and on such terms and conditions and either at a premium or at par, or (subject to compliance with the provisions of the Act), at a discount, as such general meeting shall determine, or make any other provisions as to the issue and allotment of the new shares, and with full power to give to any person (whether a-member or holder of debentures of the Company or not) the option to call for or be allotted shares of any class of the Company either at a premium or at par, or (subject to existing members compliance with the provisions of the Act), at a discount, and such option being exercisable at such times and for such consideration as may be directed by such General Meeting. New Capital to be same as Old Capital Article 70 provides that except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to the payment of calls and installments, transfer and transmission, forfeiture, lien and otherwise. Power to alter Capital Article 71 provides that the Company may, by special resolution, reduce in any manner and with, and subject to any incident authorised and consent required by law its share capital, any capital redemption reserve fund, or any share premium account.

Modification of Rights
Article 72 provides that whenever the capital, by reason of the issue of preference shares or otherwise, is divided into different classes of shares all or any of the rights and privileges attached to any class may be modified, commuted, affected, abrogated or dealt with according to the procedure and with sanctions prescribed in Section 106 of the Act or any statutory modification or re-enactment thereof from time to time and for the time being in force; and in respect of any general meeting of members holding shares of that class to be held for the purpose all the provisions hereinafter contained as to general meetings shall mutatis mutandis, apply but so that the quorum thereof shall be two persons, being members holding shares of that class. This clause is not to derogate from any power the Company would have had if this clause were omitted.

Proceedings at General Meetings


Business of Ordinary General Meeting. Article 93 provides that the Ordinary business of an Annual General Meeting shall be to receive and consider the profit and loss account, the balance sheet and the reports of the Directors and of the Auditors, to appoint Directors in place of those retiring, to appoint auditors and fix the remuneration and to declare dividends and subject to the provisions of Sections 173 and 188 of the Act to transact any other business. All other business transacted at an Annual General Meeting and all business transacted at an Extraordinary General Meeting shall be deemed to be special business. Where any items of business to be transacted at the meeting are deemed to be special business in accordance with Section 173 of the Act, 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 and extent of the interest, if any, therein of every Director, Managing Director and Manager, if any, of the Company. And where any item of business consists of the according of approval to any document by the meeting, the time and place where the document can be inspected shall be specified in the aforesaid statement.

327

HINDALCO INDUSTRIES LIMITED


Quorum Article 94 provides that the quorum for a General Meeting, of the Company shall be five members personally present. Quorum necessary for business. Article 95 provides that no business shall be transacted at any General Meeting unless a quorum shall be present at the commencement of the business. Chairman Article 96 provides that the Chairman of the Directors shall be entitled to take the chair at every General Meeting, or if such Chairman shall have notified to the Company that he will not be present at the meeting or if at any meeting he shall not have given notice of absence and shall not be present, within fifteen minutes after the time appointed for holding such meeting, or, is unwilling to act as chairman, the members present shall choose another Director as Chairman and, if no Director be present, or if all the Directors present decline to take the chair, then the members present shall choose one of their number being a member entitled to vote to be chairman. How questions or resolutions to be decided at meetings Article 98 provides that the 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 second or a casting vote in addition to the vote or votes to which he may be entitled as a member. What is to be evidence of the passing of a question or resolution where poll not demanded Article 99 provides that the at any General Meeting a resolution shall first be put to the vote on a show of hands and unless a poll is (before or on the declaration of the result of a show of hands) demanded in the manner mentioned in Section 179 of the Act and unless a poll is so demanded, a declaration by the Chairman that a question or resolution has on a show of hands, been carried, or carried unanimously, or by a particular majority, or not carried by a particular majority, or lost, and an entry to that effect in the Books containing the minute book of the proceedings of the Company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against such question or resolution. Before or on the declaration of the result of voting on any resolution on a show of hands a poll may be ordered to be taken by the Chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the person or persons specified in Section 179 of the Act. Poll Article 100 provides that if a poll is demanded as aforesaid it shall, subject to the provisions of Article 101 be taken in such manner and at such time and place as the Chairman of the Meeting directs and either at once or otherwise not being later than 48 hours from the time of such demand and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. Power to adjourn General Meeting Article 102 provides that the Chairman of a General meeting may with the consent of the meeting and shall if so directed by the meeting adjourn the same from time to time and. from place to place but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned sine die or for 30 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 an adjournment or the business to be transacted at an adjourned meeting. Chairmans decision conclusive. Article 106 provides that the Chairman of any meeting shall be sole judge of the validity of every vote tendered at such meeting. The chairman of the meeting present at the taking of a poll shall be the sole judge of the validity of every vote tendered at such poll. Article 107 provides that at every Annual General Meeting of the Company there shall be laid on the table the Report of the Directors, the Profit and Loss Account, Balance Sheet and Report of the Auditors, such documents (if any) required by law to be annexed or attached thereto and the Register of Directors shareholding. The Auditors Report shall be read before the Company in Annual General Meeting and shall be open to inspection by any member of the Company.
328

HINDALCO INDUSTRIES LIMITED


Votes of Members
Votes of Members Article 112 provides that subject to any rights or restrictions for the time being attached to any class or classes of shares on a show of hands, every member present in person or if a body corporate through a representative appointed under the provisions of Section 187 of the Act and Article 113 hereof or by proxy shall have one vote and on a poll the voting right of such member whether present in person or by representative or by proxy shall be in proportion to his share of the paid up equity share capital of the Company. Subject as aforesaid and save as provided in clause (c) of this Article, every member of the Company holding any preference share capital shall, in respect of such capital, have a right to vote only on Resolutions or questions placed before the Company which directly affect the rights attached to his preference shares. Any Resolution for winding up the Company or for the repayment or reduction of its share capital shall be deemed directly to affect the rights attached to preference shares within the meaning of this clause. Subject as aforesaid every member of the Company of holding any preference share capital shall, in respect of such capital, be entitled to vote on every resolution or question placed before the Company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid. In the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting and in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid. For the purposes of this clause, dividend shall be deemed to be due on preferences shares in respect of any period (whether a dividend has been declared by the Company on such shares for such period or not) on the last day specified for the payment of such dividend for such period in these Articles or other instrument executed by the Company in that behalf or in case no day is so specified, on the day immediately following such period. Where the holder of any preference share has a right to vote on any Resolution or question in accordance with the aforesaid provisions of this Article, on a show of hands he shall, if present in person, have one vote and upon a poll he shall as the holder of such share, whether present in person or by proxy, have a voting right in the same proportion as the capital paid up in respect of the preference share bears to the total paid up equity share capital of the Company. In case the Company may accept from any member the whole or a part of the amount remaining unpaid on any shares (whether equity or preference shares) held by him, although no part of the amount has been called up the member shall not be entitled to any voting rights in respect of the monies so paid by him until the same would, but for such payment, become presently payable. Representation of Corporations at meetings of Companies and of Creditors. Article 113 provides that a body corporate (whether a Company within the meaning of the Act or not) may, if it is a member of the Company, by resolution of its board of directors or other governing body, authorise such person as it thinks fit, to act as its representative at any meeting of the Company or at any meeting of any class of members of the Company. If such body corporate be a creditor (including a holder of debentures) of the Company, it may by resolution of the Board of Directors or other governing body, authorise such person as it thinks fit, to act as its representative at any meeting of any creditor of the Company held in pursuance of the Act or any rules made thereunder, or in pursuance of the provisions contained in any Debenture or Trust Deed, as the case may be. A person authorised by a resolution as aforesaid, shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as that body could exercise if it were a member, creditor or holder of debentures of the Company. He shall be counted for the purpose of ascertaining whether a quorum of members is present. The production at the meeting of a copy of such resolution duly signed by one director of such body corporate Company or by the Managing Director/Manager or other duly authorised officer thereof and certified by him or them as being a true copy of the resolution may on production at the meeting be accepted by the Company as sufficient evidence of the validity of his appointment. Proxies Permitted Article 116 provides that votes may be given either personally or by proxy or in case of a company or other body corporate by a representative duly authorised as aforesaid. A proxy or representative shall be entitled to vote on a show of hands as well as on a poll.

329

HINDALCO INDUSTRIES LIMITED


Instrument approving proxy to be in writing Article 117 provides that the instrument appointing a proxy shall be in writing and shall be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it. A proxy need not be a member of the Company. A proxy appointed as aforesaid shall not have any right to speak at any meeting. Instrument appointing proxy to be deposited at the office Article 119 provides that the instrument appointing a proxy and the Power of Attorney or other authority (if any) under which it is signed or a notarially certified copy of the power or authority, shall be deposited at the Office not less than forty-eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be valid. A vote given in accordance with the terms of an instrument appointing a proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the instrument or transfer of the share in respect of which the vote is given: Provided no intimation in writing of the death, insanity or revocation of instrument of transfer of the share shall have been received at the Office or by the Chairman of the Meeting before the vote is given: Provided nevertheless that the Chairman of any meeting shall be entitled to require such evidence as he may in his discretion think fit of the due execution of an instrument of proxy and that the same has not been revoked. Restriction on Voting Article 120 provides that no member shall be entitled to be present or to vote on any question either personally or by proxy at any General Meeting or upon a poll or be reckoned in a quorum whilst any call or other sum shall be due and payable to the Company in respect of any of the shares of such member or in regard to any shares on which the Company has and has exercised any right of lien.

Directors
Number of Directors Article 125 provides that subject of the provisions of Sections 252, 255, 256 and 259 of the Act, until otherwise determined by the Company in General Meeting, the number of Directors, shall not be less than four or more than twelve, excluding debenture Directors. Qualification of Directors Article 127 provides that the qualification of a Director shall be the holding of Ordinary and/or Preference shares or both in the Capital of the Company of the aggregate nominal value of Rs.2,500 (Rupees two thousand five hundred only). The first Directors named in the Articles, an Ex-officio Director or an alternate director appointed pursuant to Articles 76, 125, 126, 142 & 143 shall not be required to hold any qualification shares. Directors not to hold office of profit Article 132 provides that except with the previous consent of the Company accorded by a special resolution, no director of a company, 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, and no director or manager of such a private company shall hold any office or place of profit except that of Managing Director, Manager, legal or Technical Adviser, Banker, or Trustee for the holders of Debentures of the Company under the Company, or under any subsidiary of the Company, unless the remuneration received from such subsidiary in respect of such office or place is paid over to the Company or its holding company. Directors and Manager may contract with Company Article 133 provides that subject to the provisions of Sections 297, 299, 300, 302 and 314 of the Act, the Directors including a Managing Director and the Manager shall not be disqualified by reason of his or their office as such from contracting with the Company either as vendor, purchaser, lender, agent, broker, lessor or lessee or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any Director or the Manager or with any company or partnership of or in which any Director or the Manager shall be a member or otherwise interested be avoided nor shall any Director, or the Manager so contracting or being such member or so interested be liable to account to the Company for any profit realised by such contract or arrangement by reason only
330

HINDALCO INDUSTRIES LIMITED


of such Director or the Manager holding that office or of the fiduciary relation thereby established, but the nature of the interest must be disclosed by him or them at the meeting of Directors at which the contract or arrangement is determined on, if the interest then exists or in any other case at the first meeting of Directors after the acquisition of the interest; Provided nevertheless that no Director shall vote as a Director in respect of any contract or arrangement in which he is so interested as aforesaid and if he does so, his vote shall not be counted but he shall be entitled to be present at the meeting during the transaction of the business in relation to which he is precluded from voting although he shall not be counted for the purpose of ascertaining whether there is a quorum of Directors present. This proviso shall not apply to any contract by or on behalf of the Company to give the Directors or any of them any security by way of indemnity against any loss which they or any of them may suffer by becoming or being sureties for the Company. Appointment of Additional Director Article 140 provides that the Directors shall have power at a meeting of the Board at any time and from time to time to appoint any person other than a person who has been removed from office of a Director of the Company under Article 139 to be a Director of the Company as an addition to the Board but so that the total number of Directors shall not at any time exceed the maximum number fixed. Any Director so appointed shall hold office only upto the date of the next following Annual General Meeting of Company. Casual Vacancy may be filled by Board Article 141 provides that the Directors at a meeting of the Board shall have power to fill a vacancy in the Board if the office of any Director appointed by the Company in General Meeting is vacated before his term of office will expire in the usual course. Debenture Director Article 140 provides that any Trust Deed for securing debentures or debenture-stock if 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 debenturestock from time to time to remove any Director so appointed. A Director appointed, under this Article is herein referred to as a Debenture Director and that the term Debenture Director means a Director for the time being in office under this Article. A Debenture Director shall not be bound to hold any qualification shares and not be liable to retire by rotation or 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. Alternate Director Article 143 provides that the Board of Directors may appoint an alternate Director to act for a Director (hereinafter called the Original Director) during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held. An alternate Director appointed under sub-clause (a) above shall vacate office if and when the Original Director returns to State. If the term of office of the Original Director is determined before he so returns to State, any provision for the automatic re-appointment of the Retiring Director in default of another appointment, shall apply to the Original and not to the alternate Director. This Article shall not apply to an exofficio Director or Debenture Director. Managing Director Article 162 provides that subject to the provisions of the Act, the Board of Directors may from time to time appoint any one or more of their body to be the Managing Director or Managing Directors (in which expression shall be included Joint Managing Director/s) of the Company for such term not exceeding five years at a time and upon such terms and conditions as they may deem fit and may from time to time (subject to the provisions of any contract between him or them and the Company) remove or dismiss him or them from office and appoint another or others in his or their place or places.

Dividends
Division out of Profits Article 183 provides that subject to the provisions of these Articles the net profits of the Company (after making
331

HINDALCO INDUSTRIES LIMITED


provisions, if any, for sinking fund, depreciation and reserve funds and carrying forward balances) which it shall from time to time be determined to be divided in respect of any year or other period shall be applied first in paying the preferential dividend on the capital paid-up on the Preference Shares to the close of such year or other period and the surplus shall be divisible amongst the holders of Ordinary Shares in proportion to the amounts paid up on the Ordinary Shares held by them respectively. Capital paid in advance of calls Article 184 provides that when capital is paid-up on advance of calls upon the footing that the same shall carry interest, such capital shall not, whilst carrying interest, confer a right to participate in profits. Declaration and payment of Dividends Article 185 provides that the Company in General Meeting may declare a dividend to be paid to the members according to their rights and interest in the profits and may, subject to Section 207 of the Act, fix the time for payment. Dividend out of profits only and not to carry interest Article 186 provides that no dividend shall be payable except out of the profits of the Company of the year or any other undistributed profits, and no dividend shall carry interest as, against the Company. What to be deemed net profits Article 187 provides that the declaration of the Directors as to the amount of the net profits of the Company in any year shall be conclusive. Interim dividend Article 188 provides that the Directors may from time to time pay to the members such interim dividends as in their judgment the position of the Company justifies. Company may retain dividends Article 189 provides that The Directors may retain the dividend payable upon shares in respect of which any person is under The Transmission Article entitled to become a member or which any person under that Article is entitled to transfer until such person shall become a member in respect thereof or shall duly transfer the same. Dividend and call together Article 190 provides that any General Meeting declaring a dividend may make a call on the members of such amount as the meeting fixes, but so that the call on each member shall not exceed the dividend payable to him and so that the call be made payable at the same time as the dividend and the dividend may, if so arranged, between the Company and the members, be set off against the call. Dividend in specie Article 191 provides that any General Meeting declaring a dividend may upon the recommendation of the Directors resolve that such dividend be paid wholly or in part of the distribution of specific assets, and in particular of paid-up shares, debentures or debenture-stock of the Company or paid-up shares, debentures or debenture-stock of any other company, or in anyone or more of such ways. Capitalisation of Reserves Article 192 provides that any General Meeting may upon the recommendation of the Directors resolve that any moneys, investment or other assets forming part of the undivided profits of the Company standing to the credit of any reserve fund or special account or in the hands of the Company and available for dividend and including any profits arising from the sale or revaluation of the assets of the Company or any part thereof or by reason of any other accretion to capital assets be capitalized and distributed amongst such of the members as would be entitled to receive the same if distributed by way of dividend and in the same proportions on the footing that they become entitled thereto as capital and that all or any part of such capitalised fund be applied on behalf of such members in paying up in full either at par or at such premium as the resolution may provide any unissued shares, debentures or debenture-stock of the Company which shall be distributed accordingly or in or towards payment of the uncalled liability on any issued shares, or debentures or debenture-stock, and that such distribution or payment shall be accepted by such members in full satisfaction of their interest in the said capitalised sum.
332

HINDALCO INDUSTRIES LIMITED


Fractional certificates Article 193 provides that For the purpose of giving effect to any resolution under the two last preceding Articles the Directors may settle any difficulty which may arise in regard to the distribution as they think expedient and in particular may issue fractional certificates, and may fix the value for distribution of any specific assets and may determine that cash payments shall be made to any members upon the footing of the value so fixed or fractions of less value than rupee one may be disregarded in order to adjust the rights of all parties and may vest any such cash or specific assets in trustees upon such trusts for the persons entitled to the dividends or capitalised fund as may seem expedient to the Directors. Where requisite a proper contract shall be filed in accordance with the provisions of the Act and the Directors may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalised fund, and such appointment shall be effective. To whom dividends payable Article 194 provides that a transfer of shares shall not pass the rights to any dividend declared thereon before the registration of the transfer, and, subject to the provisions of these Articles, no dividend shall be payable to any person whose name does not appear on the register of members except with the authority, special or general, of the Directors. Any one of joint-holder can give receipts Article 195 provides that anyone of several persons who are registered as joint-holders of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such shares. Payment by post Article 196 provides that unless otherwise directed, any dividend may be paid by cheque, warrant or postal money order sent through the post to the registered address of the member or person entitled thereto or in the case of jointholders to the registered address of that one whose name stands first on the Register in respect or the joint -holding or to such person and such address as the member or person entitled or such joint-holders as the case may be, may direct; and every cheque or warrant so sent shall be made payable to the order of the person to whom it is sent. What payment a good discharge Article 197 provides that the payment of every cheque or warrant sent under the provisions of the last preceding Article, shall if such cheque or warrant purports to be duly endorsed, be a good discharge to the Company in respect thereof: Provided nevertheless that the Company shall not be responsible for the loss of any cheque, dividend warrant or postal money order which shall be sent by post to any member or by his order to any other person in respect of any dividend. Unclaimed Dividend Article 198 provides that Dividend remaining unclaimed - shall be dealt with in accordance with the relevant provisions of the Act for the time being in force.

333

HINDALCO INDUSTRIES LIMITED MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION


The following contracts (not being contracts entered into in the ordinary course of business carried on by us or entered into more than two years before the date of this Letter of Offer) which are or may be deemed material have been entered or are to be entered into by us. These contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company situated at Century Bhavan, 3rd Floor, Dr. Annie Besant Road, Worli, Mumbai 400 025 from 11.00 a.m. to 2.00 p.m. from the date of this Letter of Offer until the date of closure of the Subscription List.

A.
1. 2.

Material Contracts
Memorandum of Understanding between the Company, JM Morgan Stanley Private Limited and DSP Merrill Lynch Limited dated September 22, 2005.

Memorandum of Understanding between the Company and Karvy Computershare Private Limited dated November 1, 2005.

B.
1. 2. 3. 4. 5. 6.

Documents
Memorandum and Articles of the Company. Certificate of Incorporation of the Company dated December 15, 1958. Fresh certificate of incorporation consequent on change of name from Hindustan Aluminium Corporation Limited to Hindalco Industries Limited dated October 9, 1989. Shareholders Resolution passed at the Annual General Meeting held on July 12, 2005 appointing Singhi and Co., as statutory auditors for the financial year 2005-2006. Copy of the Board Resolution dated September 20, 2005 approving this Issue. Consents of the Directors, Auditors, Lead Managers to the Issue, Legal Counsel to the Company, Legal Counsel to the Lead Managers, Bankers to the Issue and Registrars to the Issue, to include their names in the Letter of Offer to act in their respective capacities. Appointment of Company Secretary as Compliance Officer. Letter dated September 22, 2005 from the Auditors of the Company confirming Tax Benefits as mentioned in this Letter of Offer. The Report of the Auditors, Singhi & Co., as set out herein dated September 22, 2005 in relation to the restated financials of the Company for the last five financial years.

7. 8. 9.

10. Annual Report of the Company for the last five Financial Years. 11. Application made for In-principle listing approval dated September 23, 2005, and September 23, 2005 to the BSE and NSE respectively. 12. In-principle listing approval dated October 6, 2005 and October 11, 2005 from BSE and NSE. 13. Letter No. CFD/DIL/SM/51685/2005 dated October 13, 2005 issued by SEBI for the Issue. 14. Due Diligence Certificate dated September 23, 2005 from JM Morgan Stanley Private Limited and DSP Merrill Lynch Limited. 15. Tripartite Agreement dated May 10, 1999 between the Company, CDSL and MCS Ltd. to establish direct connectivity with Depository. 16. Bipartite Agreement dated December 26, 2003 between the Company and NSDL to establish direct connectivity with Depository.

334

HINDALCO INDUSTRIES LIMITED DECLARATION


No statement made in this Letter of Offer contravenes any of the provisions of the Act and the rules made thereunder. All the legal requirements connected with the said issue as also the guidelines, instructions etc. issued by SEBI, Government and any other competent authority in this behalf have been duly complied with. Yours faithfully On behalf of the Board of Directors of Hindalco Industries Limited

Dr. K.M. Birla Chairman

Mrs. Rajashree Birla Non-executive Director

Mr. D. Bhattacharya Managing Director

Mr. A.K Agarwala Non-executive Director

Mr. C.M. Maniar Independent Director

Mr. E.B. Desai Non-executive Director

Mr. S.S. Kothari Non-executive Director

Mr. M.M. Bhagat Independent Director

Mr. K.N. Bhandari Independent Director

Mr. R.K. Kasliwal Chief Financial Officer

Place: Mumbai Date: November 25, 2005

Enclosure: Composite Application Form

335

Você também pode gostar