amldraft

DRAFT RED HERRING PROSPECTUS Dated [•] Please read Section 60B of the Companies Act, 1956 (The Draft Red Herring Prospectus will be updated upon filing with the RoC) 100% Book Building Issue

AML STEEL LIMITED (Incorporated on 16 April, 1993 as Ashok Magnetics Limited at Chennai under the Companies Act, 1956 with Registration No. 18-24842. The name of the Company was changed to AML Steel Limited on 1 August, 2005. The Registered Office of the Company was changed from Raheja Complex, 834, Mount Road, Madras – 600 002 to the present location on 11 December, 1995.) Registered Office: B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu – 601 201 Tel: + 91 411 922 2792 Corporate Office: Raheja Complex, New no. 68 (834), Anna Salai, Chennai, Tamil Nadu – 600 002 Tel: + 91 44 2858 3182, Fax: +91 44 2841 9443, E-mail: [email protected], website: www.amlsteel.com Contact Person: Mr.Rajesh Agrawal, Company Secretary & Compliance Officer PUBLIC ISSUE OF [●] EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PRICE OF RS. [●] PER EQUITY SHARE AGGREGATING RS.12,000 LAKHS (THE “ISSUE”). THE ISSUE COMPRISES OF PROMOTERS CONTRIBUTION OF [●] EQUITY SHARES OF RS. 10/- EACH AGGREGATING RS. 2,000 LAKHS AND THE NET OFFER TO THE PUBLIC OF [●] EQUITY SHARES OF RS. 10/- EACH THROUGH 100% BOOK BUILDING PROCESS AGGREGATING RS. 10,000 LAKHS (THE “NET ISSUE”). THE NET ISSUE WOULD CONSTITUTE [●]% OF THE FULLY DILUTED POST ISSUE PAID-UP EQUITY CAPITAL OF THE COMPANY. PRICE BAND: Rs. [••] TO Rs. [••] PER EQUITY SHARE OF FACE VALUE RS. 10/THE FLOOR PRICE IS [••] TIMES OF THE FACE VALUE AND THE CAP PRICE IS [••] TIMES OF THE FACE VALUE. THE PRICE BAND AND THE MINIMUM LOT SIZE FOR THE ISSUE WILL BE DECIDED BY US IN CONSULTATION WITH THE BRLMS AND ADVERTISED ATLEAST ONE DAY PRIOR TO THE BID/ISSUE OPENING DATE. In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after such revision, subject to the Bidding/ Issue Period not exceeding 10 working days. Any revision of Price Band and the revised Bid/Issue Period, if applicable will be widely disseminated by notification to The Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) where the Equity Shares of the Company are proposed to be listed, whose online IPO systems will be available for bidding, by issuing a press release, and also by indicating the change on the website of the Book Running Lead Manager and the terminals of the Syndicate. The Issue is being made through the 100% Book Building Process wherein upto 50% of the Net Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out of which upto 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, at least 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and atleast 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THIS ISSUE The Face Value of the Shares is Rs. 10/- each and the Floor Price is [●] times of the face value and the Cap Price is [●] times of the Face Value. The Price Band (as determined by our Company in consultation with the Book Running Lead Managers (“BRLMs”) on the basis of assessment of market demand for the Equity Shares by way of book-building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing. 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 Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled “Risk Factors” on page no. [●] of this Draft Red Herring Prospectus. COMPANY’S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the BSE, NSE, MSE, DSE and ASE. We have received inprinciple approval from BSE, NSE, MSE, DSE and ASE for the listing of the Equity Shares pursuant to letters dated [•], [•], [•], [•] and [•] respectively. The Designated Stock Exchange is BSE.

BOOK RUNNING LEAD MANAGERS

KARVY INVESTOR SERVICES LIMITED “Karvy House”, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad – 500 034. Tel: +91 40 2337 4714 / 2332 0752 Fax: +91 40 2337 4714 E-mail: [email protected]. Website: www.karvy.com Contact Person :Mr.T.R.Prashanth Kumar

CENTRUM CAPITAL LIMITED 5th Floor, Khetan Bhavan, 198, J. Tata Road, Churchgate Mumbai - 400 020. Tel: +91 22 2202 3838 Fax: +91 22 2204 6096. Email:[email protected] Website: www.centrum.co.in Contact Person : Mr.Mayank Dalal

REGISTRAR TO THE ISSUE

CAMEO CORPORATE SERVICES LIMITED Subramanian Building, No.1, Club House Road, Chennai – 600 002. Tel No: +91 44 28460390 Fax No: +91 44 28460129 e-mail: [email protected] Website: www.cameoindia.com Contact Person: Mr.R.D. Ramasamy

ISSUE PROGRAMME BID / ISSUE OPENS ON

[••]

BID / ISSUE CLOSES ON

[••]

AML STEEL LIMITED

TABLE OF CONTENTS SECTION I- GENERAL Definitions and abbreviations............................................................................................................................................................. ii SECTION II-RISK FACTORS Certain conventions; use of market data............................................................................................................................................ ix Forward looking statements…………………………………………………………………………………………………………..x Risk factors…………………………………………………………………………………………………………………………..xi SECTION III-INTRODUCTION Summary ............................................................................................................................................................................................ 1 The issue............................................................................................................................................................................................. 4 Selected financial information............................................................................................................................................................ 5 General information............................................................................................................................................................................ 9 Capital structure ............................................................................................................................................................................... 14 Objects of the issue........................................................................................................................................................................... 19 Basic terms of the issue .................................................................................................................................................................... 35 Basis for issue price.......................................................................................................................................................................... 37 Statement of tax benefits .................................................................................................................................................................. 39 SECTION IV – ABOUT US Industry overview............................................................................................................................................................................. 42 Business overview ............................................................................................................................................................................ 61 Regulations and policies................................................................................................................................................................... 79 History and certain corporate matters............................................................................................................................................... 82 Our management .............................................................................................................................................................................. 91 Our promoters................................................................................................................................................................................. 100 Currency of presentation ................................................................................................................................................................ 102 Related party transactions............................................................................................................................................................... 102 Dividend policy .............................................................................................................................................................................. 102 SECTION V - FINANCIAL INFORMATION Auditors report ............................................................................................................................................................................... 104 Management’s discussion and analysis of financial condition and results of operations ............................................................... 147 SECTION VI - LEGAL AND REGULATORY INFORMATION Outstanding litigation and material developments ......................................................................................................................... 157 Licences and approvals................................................................................................................................................................... 160 Other regulatory and statutory disclosures ..................................................................................................................................... 166 SECTION VII - ISSUE RELATED INFORMATION Terms of the issue........................................................................................................................................................................... 175 Issue procedure............................................................................................................................................................................... 179 SECTION VIII- DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION Rights of members.......................................................................................................................................................................... 204 Main provisions of the articles of association ................................................................................................................................ 204 SECTION IX-OTHER INFORMATION Material contracts and documents for inspection ........................................................................................................................... 226 Declaration .................................................................................................................................................................................... 228

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SECTION I - GENERAL DEFINITIONS AND ABBREVIATIONS Term

Description

The “Company” or “our Unless the context otherwise requires, refers to AML Steel Limited, a Company” or “AMLSL” or Company constituted under the Companies Act, 1956, having its Registered “we” or “our” or “us” Office at B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu 601 201, India “Our Subsidiary Company” Unless the context otherwise requires, refers to Ankit Ispat Private Limited, or “Our Subsidiaries” Ashok Steel Industries Private Limited and AML Steel & Power Limited. Conventional/General Terms Term Description Articles / Articles of Articles of Association of the Company, as amended from time to time Association / AoA Companies Act / Act The Companies Act, 1956 and subsequent amendments thereto Depositories Act The Depositories Act, 1996, and subsequent amendments thereto Depository NSDL and CDSL, both being depositories, which are registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996 as amended from time to time. Depository Participant A depository participant as defined under the Depositories Act. Directors Directors of the Company from time to time unless otherwise specified. FEMA Foreign Exchange Management Act, 1999 read with rules and regulations thereunder and amendments thereto. FII Foreign Institutional Investor (as defined under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000) registered with SEBI under applicable laws in India General Meeting General Meeting includes all kinds of General Meetings, whether annual, extraordinary or statutory Government/ GoI The Government of India I.T. Act The Income Tax Act, 1961, and subsequent amendments thereto Indian GAAP Generally Accepted Accounting Principles in India Memorandum / MoA Memorandum of Association of the Company, as amended from time to time MF/MFs Mutual Funds. MoF Ministry of Finance, Government of India. MoU Memorandum of Understanding. NAV Net Asset Value. Non Resident / NR Non-Resident is a Person resident outside India, as defined under FEMA. NRI/Non-Resident Indian Non-Resident Indian, is a Person resident outside India, who is a citizen of India or a Person of Indian Origin, and shall have the same meaning as ascribed to such term in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. OCB/ Overseas Corporate OCB means and includes an entity defined in clause (xi) of Regulation 2 of Body the Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCB’s) Regulations 2003 and which was in existence on the date of the commencement of these Regulations and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Regulations. OCBs are not allowed to invest in this Issue. Person/Persons Any individual, sole proprietorship, unincorporated association, unincorporated organization, body corporate, corporation, company, partnership, limited liability company, joint venture, or trust or any other entity or organization validly constituted and/or incorporated in the jurisdiction in which it exists and operates, as the context requires. PIO/ Person of Indian Origin Shall have the same meaning as is ascribed to such term in the Foreign Exchange Management (Investment in Firm or Proprietary Concern in India) Regulations, 2000. RBI The Reserve Bank of India.

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Term Description Reserve Bank of India Act/ The Reserve Bank of India Act, 1934, and subsequent amendments thereto. RBI Act Insider Trading Regulations SEBI (Prohibition of Insider Trading) Regulations, 1992, and subsequent amendments thereto, including instructions and clarifications issued by SEBI from time to time. SCRA Securities Contracts (Regulation) Act, 1956, and subsequent amendments thereto. SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SEBI The Securities and Exchange Board of India constituted under the SEBI Act, 1992. SEBI Act Securities and Exchange Board of India Act, 1992, and subsequent amendments thereto. SEBI Guidelines SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by SEBI on January 27, 2000, and subsequent amendments thereto, including instructions and clarifications issued by SEBI from time to time. SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, and subsequent amendments thereto. SICA Sick Industrial Companies Act, 1985 and subsequent amendments thereto. Issue Related Terms Term Allotment Allottee Banker(s) to the Issue Bid

Bid Price / Bid Amount Bid Closing Closing Date

Date

Bid Opening Opening Date

/Issue

Date/Issue

Bid cum Application Form

Bidder Bidding Period / Issue Period

Book Building Process BRLMs / Book Running Lead Managers CAN / Confirmation of Allocation Note Cap Price Cut-off Price

Designated Date

Description Unless, the context otherwise requires, the allotment of Equity Shares of the Company pursuant to this Issue to the successful Bidder The successful Bidder to whom the Equity Shares are being allotted The Banker(s) with whom the Escrow Account(s) for the Issue shall be opened An indication to make an offer made during the Bidding Period by a prospective investor to subscribe to our Equity Shares at a price within the Price Band, including all revisions and modifications thereto The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid in the Issue The date after which the Syndicate will not accept any Bids for the Issue, which shall be notified in an English national newspaper, a Hindi national newspaper and a Tamil newspaper with wide circulation. The date on which the Syndicate shall start accepting Bids for the Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper and a Tamil newspaper with wide circulation. The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of our Company and which will be considered as the application for issue of the Equity Shares pursuant to the terms of this Draft Red Herring Prospectus Any prospective investor who makes a Bid pursuant to the terms of this Draft Red Herring Prospectus and the Bid cum Application Form The period between the Bid Opening Date/Issue Opening Date and the Bid Closing Date/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids Book building route as provided under Chapter XI of the SEBI Guidelines, in terms of which the Issue is being made Book Running Lead Managers to the Issue, in this case being Karvy Investor Services Limited and Centrum Capital Limited Means the note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares after discovery of the Issue Price in accordance with the Book Building Process The higher end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted Any price within the Price Band finalised by us in consultation with the BRLMs. A Bid submitted at Cut-off Price is a valid Bid at all price levels within the Price Band The date on which funds are transferred from the Escrow Account(s) of the

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Term

Description Escrow Collection Bankers to the Issue Account after the Prospectus is filed with the RoC, following which the Board shall allot Equity Shares to successful Bidders Designated Stock Exchange BSE DRHP or Draft Red Herring This Draft Red Herring Prospectus issued in accordance with Section 60B of Prospectus the Companies Act, which does not have complete particulars on the price at which the Equity Shares are offered and size of the Issue. It carries the same obligations as are applicable in case of a Prospectus and will be filed with RoC at least three days before the Bid/Issue Opening Date. It will become a Prospectus after filing with RoC after the pricing. Equity Shares Equity shares of the Company of Rs. 10/- each unless otherwise specified in the context thereof Escrow Account Account opened with an Escrow Collection Bank and in whose favour the Bidder will issue cheques or drafts in respect of the Bid Amount and from which refunds (if any) shall be made of the amount collected by the Bidders Escrow Agreement Agreement entered into amongst the Company, the Registrar, the Escrow Collection Bank (s), the Syndicate Members and the BRLMs for collection of the Bid Amounts and for remitting refunds, if any, of the amounts collected, to the Bidders Escrow Collection Bank (s) The banks, which are clearing members and registered with SEBI as Bankers to the Issue, at which the Escrow Account will be opened First Bidder The Bidder whose name appears first in the Bid cum Application Form or Revision Form Floor Price The lower end of the Price Band, below which the Issue Price will not be finalised and below which no Bids will be accepted IPO Initial Public Offering Issue Public issue of [●] Equity Shares of Rs. 10 each for cash at a price of Rs. [•] per Equity Share aggregating Rs. 12,000 lakhs by the Company pursuant to this Draft Red Herring Prospectus. Issue Account Account opened with the Banker(s) to the Issue to receive monies from the Escrow Accounts for the Issue on the Designated Date Issue Price The final price at which Equity Shares will be issued and allotted in terms of this Draft Red Herring Prospectus, as determined by The Company in consultation with the BRLMs, on the Pricing Date Issuer AML Steel Limited Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid, which may range between 10% to 100% of the Bid Amount Mutual Fund A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996 Mutual Funds Portion Upto 5% of the QIB Portion or [●] Equity Shares available for allocation to Mutual Funds only, out of the QIB Portion. Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than Rs. 1,00,000/Non-Institutional Portion The portion of the Issue being a minimum of [•] Equity Shares of Rs. 10/each available for allocation to Non-Institutional Bidders Pay-in-Date The last date specified in the CAN sent to the Bidders Pay-in-Period This term means: (i) With respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid Opening Date and extending until the Bid Closing Date, and (ii) With respect to Bidders whose Margin Amount is less than 100% of the Bid Amount, the period commencing on the Bid Opening Date and extending until the closure of the Pay-in Date. Price Band The price band with a minimum price (Floor Price) of Rs. [●] and the maximum price (Cap Price) of Rs. [●], including any revisions thereof Pricing Date The date on which the Company in consultation with the BRLMs finalises the Issue Price Promoters Ashok Agarwal and Ashok Memory (India) Private Limited

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Term Prospectus

Description The Prospectus, filed with the RoC containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of the Issue and certain other information. QIB Portion The portion of the Net Issue being [●] Equity Shares of Rs. 10 each at the Issue Price, available for allocation to QIBs on proportional allotment basis of which upto 5% i.e. [●] Equity Shares are reserved for Mutual Funds and the balance will be available for all QIBs including Mutual Funds. Qualified Institutional Public financial institutions as defined in Section 4A of the Companies Act, Buyers / QIBs Scheduled Commercial Banks, Mutual Funds registered with SEBI, Foreign Institutional Investors registered with SEBI, Multilateral And Bilateral Development Financial Institutions, Venture Capital Funds registered with SEBI, Foreign Venture Capital Investors registered with SEBI, State Industrial Development Corporations, Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA), Provident Funds with a minimum corpus of Rs. 2,500 lakhs and Pension Funds with a minimum corpus of Rs. 2,500 lakhs. QIB Margin Amount An amount representing at least 10% of the Bid Amount Refund Account Account opened with the Escrow Collection Bank, from which refunds of the whole or part of the Bid Amount, if any, shall be made Registrar /Registrars to the Registrar to the Issue, in this case being Cameo Corporate Services Limited Issue Retail Individual Bidders Individual Bidders (including HUFs and NRIs) who have Bid for Equity Shares for an amount less than or equal to Rs. 1,00,000 in any of the bidding options in the Issue Retail Portion The portion of the Net Issue to the public and being a minimum of [•] Equity Shares of Rs. 10/- each aggregating Rs. [•] available for allocation to Retail Individual Bidder(s) Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the Bid Price in any of their Bid cum Application Forms or any previous Revision Form(s). RHP or Red Herring Means the document issued in accordance with the SEBI Guidelines, which Prospectus does not have complete particulars on the price at which the Equity Shares are offered and the size of the Issue. The Red Herring Prospectus which will be filed with the RoC at least three days before the Bid Opening Date and will become a Prospectus after filing with the RoC and pursuant to pricing and allocation. Stock Exchanges BSE, NSE, MSE, DSE and ASE Syndicate The BRLMs and the Syndicate Members collectively Syndicate Agreement The agreement to be entered into among the Company and the members of the Syndicate, in relation to the collection of Bids in this Issue Syndicate Members Intermediaries registered with SEBI and eligible to act as underwriters. Syndicate Members are appointed by the BRLM TRS or Transaction The slip or document issued by the Syndicate Members to the Bidder as Registration Slip proof of registration of the Bid. Underwriters The BRLMs and the Syndicate Members Underwriting Agreement The Agreement among the BRLM, the Syndicate Members and the Company to be entered into on or after the Pricing Date Company Related Terms Term AGM AMLSPL AIPL ASIPL

Description Annual General Meeting. AML Steel & Power Limited. Ankit Ispat Private Limited. Ashok Steel Industries Private Limited, Sri Lanka.

Auditors

The statutory auditors of the Company, namely M/s.K.P Jain & Co., Chartered Accountants.

Board of Directors/Board

The Board of Directors of our Company.

Committee

Committee of the Board of Directors of the Company authorised to take

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decisions on matters relating to or incidental to this Issue. Constitutional Documents

The constitutional documents of the Company being the certificate of incorporation, memorandum of association and articles of association of the Company.

Director(s)

Director(s) of the Company, unless otherwise specified

Equity Shares

Equity Shares of the Company of Rs. 10/- each unless otherwise specified in the context thereof.

Equity Shareholders

Persons holding Equity Shares of the Company unless otherwise specified in the context thereof.

Face Value

Value of paid up equity capital per Equity Share, in this case being Rs. 10/each.

Head Office/ Office

Registered The Registered Office of the Company being B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu – 601 201, India.

Technical and Industry Terms Term Description ADM Building Administration Building AFBC Atmospheric Fluidised Bed Combustion AIFIs All India Financial Institutions CaO Calcium Oxide CCM Continuous Casting Machine CO Carbon Monoxide CR Cold Rolled DRI Direct Reduced Iron / Sponge Iron DRI Plant Direct Reduced Iron Plant at the Project Site EAF Electric Arc Furnace EOT Cranes Electric Overhead Travelling Cranes ESP Electrostatic Precipitator F/C Furnace Fe Iron HBI Hot Briquetted Iron HR Hot Rolled IF Induction Furnace INSDAG Institute for Steel Development and Growth IISI International Iron and Steel Institute JPC Joint Plant Committee Kwh Kilowatt-Hour KVA Kilo Volt Ampere MgO Magnesium Oxide MM SQ. Millimetre square Mmt Million Metric Tonnes MMTPA Million Metric Tonnes per Annum MS Mild Steel MSI Mild Steel Ingots MW Mega Watt PAT Profit After Tax The proposed setting up of an Integrated Steel Plant in Saraikela, Jharkhand Project for manufacture of sponge iron and steel billets. Prov. Provisional PVC Poly Vinyl Chloride Qty Quantity RINL Rashtriya Ispat Nigam Limited R&D Research and Development SAIL Steel Authority of India Limited SSA Steel Subsidy Agreement SSI Small Scale Industries TISCO Tata Iron and Steel Co. Ltd

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TMT TPA TPD Tpy YTD Abbreviations Term AS ASE AY A/c BPLR BSE CAGR CBI CC (H) CDSL C.I.S DEPB DGFT DSE EBITDA EGM EPS ERU ESI ESPL ESOP FII(s) FIPB FDI GDP GIR Number HNI HUF ITC (HS) Code MSE NAFTA NOC NRE Account NSDL NSE OECD PAN P/E Ratio PLR QIB RoC RONW ROW Rs. / Rupee(s) / INR SL Rs. SBI SBI Caps TDS

Thermo Mechanically Treated Tonnes Per Annum Tonnes Per Day Tons Per Year Year-To-Date

Description Accounting Standards as issued by the Institute of Chartered Accountants of India Ahmedabad Stock Exchange Limited Assessment Year Account Bank Prime Lending Rate The Bombay Stock Exchange Limited Compounded Annual Growth Rate Central Bank of India Cash Credit (Hypothecation) Central Depository Services (India) Limited Commonwealth of Independent States Duty Entitlement Pass Book Scheme Directorate General of Foreign Trade Delhi Stock Exchange Association Limited Earning Before Interest Tax Depreciation and Amortisation Extraordinary General Meeting Earnings Per Share i.e., profit after tax divided by outstanding number of Equity Shares at the year end Economic Research Unit Employees' State Insurance Elango Steels Private Limited Employee Stock Option Plan Foreign Institutional Investors registered with SEBI under applicable laws. Foreign Investment Promotion Board Foreign Direct Investment Gross Domestic Product General Index Registry Number High Net Worth Individual Hindu Undivided Family Indian Trade Clarification based on Harmonised System Madras Stock Exchange Limited North America Free Trade Agreement No Objection Certificate Non-Resident External Account National Securities Depository Limited The National Stock Exchange of India Limited Organization for Economic Co-operation and Development Permanent Account Number Price/Earnings Ratio Prime Lending Rate Qualified Institutional Buyer Registrar of Companies, Tamil Nadu situated at Chennai Return on Net Worth Rest of the World Indian Rupee(s) Sri Lankan Rupees, Currency of Sri Lanka. State Bank of India SBI Capital Markets Limited Tax Deducted at Source

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TN USD or $ or US $ VAT WTO

Tamil Nadu United States Dollar Value Added Tax World Trade Organization

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SECTION II-RISK FACTORS CERTAIN CONVENTIONS; USE OF MARKET DATA Unless stated otherwise the financial data in this DRHP is derived from our unconsolidated financial statements prepared in accordance with Indian GAAP and included in this DRHP. The statistical and operational data in this DRHP is presented on an unconsolidated basis as well as consolidated basis. Our fiscal year commences on 1 April and ends on 31 March of each year, so all references to a particular financial year are to the twelve-month period ended 31 March of that year. In this DRHP, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding. The degree to which the Indian GAAP financial statements included in this DRHP will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by Persons not familiar with Indian accounting practices on the financial disclosures presented in this DRHP should accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. For additional definitions, please see the section titled “Definitions and Abbreviations” on page no. [●] of this DRHP. In the section titled “Main Provisions of the Articles of Association” on page no. [●] of this DRHP, defined terms have the meaning given to such terms in the Articles of Association of the Company. Unless stated otherwise, industry data and the market data used throughout this DRHP have been obtained from internal company reports and industry publications and other industry sources. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe that industry data used in this DRHP is reliable, it has not been independently verified.

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FORWARD LOOKING STATEMENTS We have included statements in this DRHP that contain words or phrases such as “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: • General economic and business conditions in India and other countries; • Our ability to successfully implement our strategy, growth and expansion plans and technological initiatives; • Our ability to respond to technological changes; • Changes in laws and regulations relating to the industry in which we operate; • Our ability to retain management team and skilled personnel; • Our ability to successfully launch new products; • Any adverse outcome in legal proceedings in which our Company is involved; • Potential mergers, acquisitions or restructurings; • The occurrence of natural disasters or calamities affecting the areas in which we have operations or outstanding credit; and • Changes in political and social conditions in India. For further discussion of factors that could cause our actual results to differ, see the section titled “Risk Factors” beginning on page no. [●] of this DRHP. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. The Company, the members of the Syndicate and their respective affiliates do not have any obligation to, and do not intend to, update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company and the BRLMs will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges in respect of the Equity Shares allotted in this Issue.

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RISK FACTORS An investment in Equity Shares involves a high degree of risk. You should carefully consider all the information in this DRHP, including the risks and uncertainties described below, before making an investment in the Equity Shares. If any of the following risks actually occur, our business, results of operations and financial condition could suffer, the trading price of the Equity Shares could decline, and you may lose all or part of your investment. Prior to making an investment decision, prospective investors should carefully consider all of the information contained in this DRHP, including financial statements included in this DRHP beginning on page no. [
]. Unless stated otherwise, the financial data in this section is as per our financial statements prepared in accordance with Indian GAAP. Unless otherwise stated in the relevant risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of any of the risks mentioned herein. Materiality The Risk factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality. 1. 2. 3.

Some events may not be material individually but may be found material collectively. Some events may have material impact qualitatively instead of quantitatively. Some events may not be material at present but may be having material impacts in future.

INTERNAL RISK FACTORS 1. Project Related Risks a.

With regard to the setting up of an Integrated Steel Plant (the Project) by AMLSPL (our wholly owned subsidiary), AMLSPL has not yet applied for or is yet to receive certain statutory clearances and approvals. AMLSPL has applied for clearance for Operation of Iron and Manganese ore mines from the Ministry of Environment and Forest on 6 January, 2006, which is pending clearance. It has also applied for clearance from the Ministry of Coal for coal linkages for the Project on 20 September, 2005 which is pending for approval. It has also applied for the renewal of the licence from the Government of Jharkhand under the Factories Act 1948, which was valid till 31 December, 2005. AMLSPL is yet to apply for the following licences/ registrations from the Government of Jharkhand/ Central Government for the Project: i)

ii) iii) iv) vi)

Consent to operate under the Water (Prevention & Control of Pollution) Act, 1974 and Air (Prevention & Control of Pollution) Act, 1981. AMLSPL has, however, received No Objection Certificate from Jharkhand State Pollution Control Board (Ref. No. N-403) dated 27 June, 2005 for the sponge iron unit and No Objection Certificate (Ref. No. N556) dated 17 December, 2005 for the iron ore mines in connection with the Project. Tax Deduction Account Number (‘TAN’). Service Tax registration. Registration under the Employees Provident Fund Act, 1948. Registration with the Employee’s State Insurance Corporation.

AMLSPL shall be applying for the above-mentioned approvals/licences as the work at the Project site progresses. Any delay in receiving the above mentioned critical permissions for the Project may delay implementation of the Project and hence, the profitability. Please refer to the section “Licences and Approvals” on page no. [•] of this DRHP for more details.

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b.

AMLSPL has not yet acquired the entire land required for the Project or taken possession of the iron ore mine. For the Project, AMLSPL would require an area of 70 acres out of which an area of about 60.71 acres has already been acquired. Although AMLSPL is in the process of negotiating with the land owners, any delay in acquiring the balance area may delay implementation of the Project and hence, the operations and profitability may be affected. The Ministry of Mines, GoI, has agreed to the grant to AMLSPL, of a mining lease for a period of twenty years, over an area of 383.54 acres, for iron and manganese ore in Mauza Bokna District, West Singhbum, Jharkhand. However, no formal lease agreement has been executed for this purpose, the possession of the land has not been handed over and mining operations are yet to commence.

c.

Failure to comply with the conditions attached to acquisition of land for the Project may result in the acquisition being terminated and the land being returned to the original owners. i)

Leasehold land at Saraikela – Kharsawan- Jharkhand The Government of Jharkhand has agreed to allot AMLSPL land admeasuring 1.30 acres on lease, for industrial use, on the following conditions: (1) AMLSPL shall use the land for the purpose for which the land has been allotted to AMLSPL. (2) From the year 2005-06 AMLSPL shall pay rent of Rs. 13,572/- p.a. which shall be payable every year. (3) AMLSPL is required to deposit a sum of Rs. 2,75,040/- towards security with Revenue officer, Saraikela. (4) The lease is granted for a term of 90 years but annual rent is subject to renewal by the Government of Jharkhand after a period of 20 years. (5) AMLSPL shall sign an agreement with the Government.

However, the Government of Jharkhand is yet to execute a formal lease agreement in favour of AMLSPL and hand over the possession of land to AMLSPL.Failure to comply with any of the conditions of allotment mentioned above could result in the State Government revoking the allotment. Thus , in case AMLSPL does not use the aforesaid land for the purpose for which it has been allotted, (specified by Government of Jharkhand at the time of allotment), the land would automatically revert to the State Government. ii)

Land purchased at Saraikela – Kharsawan- Jharkhand. AMLSPL has been permitted to purchase land for the Project, from tribals, by the Government of Jharkhand interalia on the following conditions. (i) the price of the land shall be paid by payee bank draft (ii) AMLSPL to maintain ecological balance in the interests of tribals; (iii) use of the land shall be only for industrial purposes; (iv) provide employment to one family member of the owner, in AMLSPL according to his/her qualification; (v) ensure that all proper amenities and facilities are provided to tribals relating to health, education and water facilities. It is necessary on the part of AMLSPL to fulfill all the social obligations.

Failure to comply with any of the conditions on which the transfer of the aforesaid land has been permitted to AMLSPL could result in the permission being revoked. d.

AMLSPL is yet to make definitive arrangements for procurement of some of the equipment/machinery required for the Project, which may cause a delay in implementation of the Project and a revision in the costs of the Project as estimated. The proposed Project comprises of a DRI Plant, a steel melt shop and a captive power plant. AMLSPL has placed orders for equipment constituting around 30.17% of the estimated cost of

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plant and machineries required for the DRI Plant. Orders have not yet been placed or any kind of service or purchase agreements have not been entered into for the remaining equipment required for the DRI Plant, the steel melt shop and the captive power plant, which together constitute 87.03% of the total cost of the plant and machinery of the Integrated Steel Plant. AMLSPL has already initiated negotiations and sought quotations from various vendors. However, any delay in placing the orders or procurement of the machinery may delay the implementation of the Project. e.

AMLSPL has not yet received commitments for the remaining portion of the debt component of the proposed means of finance required for the Project. AMLSPL has received final sanction for almost 92% of the debt portion of the means of finance for the Project, from Federal Bank, Central Bank of India and UCO Bank. Any delay in obtaining the release of the funds, may delay the Project implementation. Further in case AMLSPL fails to receive commitments for the remaining portion of the debt component or if internal accruals are insufficient to fund the same, then the Project may be delayed thereby affecting the operations, profitability and cash flows.

f.

Risk factors as envisaged in the Financial Appraisal Report of SBI Caps. Weakness The products – sponge iron and billets- proposed to be manufactured by AMLSPL is an industrial commodity, susceptible to price volatility. There is expected to be a shortfall of around 2 MMTPA billets as per demand-supply gap estimates by CRIS INFAC during 2006-07. However, the Promoters have been in the steel business for a considerable time and are confident of facing adverse price movements. In case of any adverse movements in prices of sponge iron, AMLSPL can increase the captive consumption of sponge iron, for the production of value added steel products, thereby minimizing price risk. Threat Many greenfield and brownfield ventures have been commissioned over the last 1-2 years in India, especially in mineral rich states like Jharkhand and Orissa. There is expected to be a shortfall of around 2 MMTPA billets as per demand-supply gap estimates by CRIS INFAC during 2006-07. The Promoters with their experience in the steel industry are confident of handling competition.

2.

Delay in identifying the proposed fresh acquisitions may affect our profitability. A sum of Rs. 2,000.00 lakhs out of the proceeds of the Issue is intended for fresh acquisitions of existing steel plants. We have identified a couple of existing plants manufacturing billets with downstream rolling mills producing structural steel and reinforcement bars to the tune of 50,000 to 60,000 MTs. We are in the process of discussions and are yet to sign a Letter of intent or enter into a MoU. Any delay in conclusively identifying and acquiring these steel plants could affect our future operations, sales and profitability. Further in case the acquisition price exceeds the amount allocated for this purpose in this present issue, the Company intends to bridge the gap via internal accruals or by raising additional debt. Failure to have sufficient internal accruals or to raise additional debt could lead to a delay in the acquisition and affect our future operations, sales and profitability.

3.

We and our subsidiaries have not yet applied for certain permissions and made certain payments due to which our title and that of our subsidiaries to our units/ the lands on which our/their units are situate, may not be marketable and we/our subsidiaries could be subject to related penalties/fines. We and our subsidiaries have received certain approvals required to establish and operate our manufacturing units. For further details please refer to “Licences and Approvals” appearing on page no. [•] of this DRHP. However, we are yet to apply for the following approvals: a) Conversion orders for the use of the land belonging to the Company at Pondicherry, for industrial purpose.

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b) Registration under the Shops and Establishments Act for our corporate office premises. c) Professional tax registration. d) Registration as a principal employer under the Contract Labour (Regulation and Abolition) Act, 1970. Our subsidiary, AIPL has not obtained permission from the Pondicherry Planning Authority under the Pondicherry Building Bye-Laws and Zoning Regulations, 1972 to erect industrial buildings for both its units and has also not yet applied for professional tax registration and service tax registrations. In view of the failure to obtain the aforesaid permissions, we/our subsidiaries could be subject to related penalties/fines, including those relating to any building/safety violation, as regards the units of AIPL. 4.

We rely on contract labour for the performance of many of our operations We rely on contractors who engage on-site labourers for performance of many of our unskilled operations. We are yet to be registered as a principal employer under the Contract Labour (Regulation and Abolition) Act, 1970. We shall apply for this registration however, failure to do so may subject us to penalties and non-receipt of this registration could adversely affect our ability to employ contract labour and our operations. Further, on an application made by the contract labourers, the appropriate court/ tribunal may direct that the contract labourers are required to be regularized or absorbed, and/ or that our Company pay certain contributions in this regard.

5.

Imposition of penalty on the Company by DSE DSE has imposed a penalty of Rs.20,000/- on the Company for non-submission of proof of publication of notices of Board Meetings of the Company for the years 2003 and 2005. DSE has also imposed a penalty of Rs.5,000/- on the Company for non-compliance of Clause 24(f) of the listing agreement with DSE. The Company has paid the aforesaid sums to DSE on 17 January, 2006. Any future non-compliance may lead to fines, suspension of trading and/or delisting etc.,

6.

There are legal proceedings initiated against us, that we believe, may have a material adverse effect on our business. a.

The Customs, Excise and Service Tax Appellate Tribunal has confirmed the imposition of differential duty of Rs. 13,66,687/- redemption fine of Rs. 6,00,000/- and penalty of Rs.2,00,000/- on the Company, arising from the import of three consignments of heavy melting scrap in the form of old rusted pipes from Middle East. During the clearance of the goods, the Commissioner of Customs considered the melting scrap as usable pipes and therefore, held that the same cannot be treated as melting scrap and subsequently levied the aforesaid differential duty, fine and penalty on the Company. While the differential duty has already been adjusted against the deposit made by the Company during investigation, the Company had provided a Bank Guarantee for the amount of the penalty and fine. The Company has filed Writ Petition No. 20275 of 2005 in the High Court of Madras against the Commissioner of Customs and others. The Company has got an interim order from the High Court, in its favour, staying the operation of order passed by the Tribunal, after furnishing a bank guarantee for a sum of Rs. 15 lakhs. The case is still subjudice.

b.

The TN Taxation Special Tribunal rejected the claim of the Company claiming benefits under the Interest Free Sales Tax Deferral for its unit situate at Gummidipoondi. The total liability arising out of the aforesaid matter towards tax is Rs.97,00,000/- approximately. The Company has filed Writ Petitions in the Madras High Court being 5257 and 5258 of 2004 against the orders of the TN Taxation Special Tribunal and others including seeking stay on the demands made against it and recovery proceedings initiated against the Company. The High Court has granted an interim order in the Company’s favour staying the demands made and recovery proceedings against the Company, on the Company paying a sum of Rs. 50 lakhs to the Commercial Tax Officer, Pooneri (the 1st Respondent in the Petitions), which has been paid by the Company. The High Court has also

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restrained the Company from alienating, encumbering or dealing with the properties of the Company until further orders of the Court. The case is still subjudice. No assurance can be given as to whether these matters will be settled in favour of or against our Company. Nor can any assurance be given that no further liability will arise out of these claims. If a decision is determined against us in the aforesaid litigations we would have to pay the aforesaid amounts (i.e. the amounts demanded from us less those already paid). Further in view of the order of the Hon’ble High Court in b) above restraining the Company from alienating, encumbering or dealing with the properties of the Company until further orders of the Court, the Company would not be able to raise finances against security of the Company’s properties. For more information regarding litigations involving us, refer “Outstanding Litigations and Material Developments” on page no.[●] of this DRHP. 7

Significant dependence on top five customers. Our top five customers have contributed to 70% and 63% of our revenue from the manufacturing activity for the year ended 31 March, 2005 and for the nine month period ended 31 December, 2005 respectively. Although, we have been able to maintain cordial relationships with our customers who have contributed significantly to our revenue streams in the last three years, we cannot give an assurance that these customers will continue to meet their requirements from us and any such disassociation may have an impact on our profitability.

8.

Change in mining policies. We shall be meeting our raw material requirement of iron ore and coal, from mines in states like Jharkhand, Orissa, where they are available in abundance. Any change in the regulatory policies of those states where these mines are located may adversely impact costs, and/ or delay, or hamper the supply of iron ore and coal.

9.

Failure to comply with environmental laws, rules and regulations may adversely affect our business or operations. Being a part of an industry, subject to stringent regulations of the Central Pollution Control Board, it is our imperative to ensure compliance with the environmental laws, regulations, rules and norms. A failure on our part to adequately comply with applicable environmental laws, rules and regulations, could hamper or adversely impact the operations of our Company, and consequently, could adversely affect the Company and its cash flows and profitability.

10.

Risk related to failure to acquire new acquisitions and to integrate the new acquisitions, if any, with our existing operations. We have been taking the inorganic route for the growth of our steel manufacturing business by pursuing strategic acquisitions. We have been able to successfully implement our earlier plans that led us to acquire ASIPL (formerly Maruthi Steels Private Limited) and also integrate the acquired facilities from Elango Industries Limited and EGPK Steels Limited into AIPL. However, acquisitions involve a number of other risks, including, but not limited to: • • • •

11.

Adverse short-term effects on our reported operating results; Unanticipated liabilities or contingencies relating to the acquired facility; Unidentified operational risks. Inability to successfully integrate the acquired facility with our own facilities.

We have not taken any insurance for business losses, and claims in respect of workmen’s compensation, which we might incur/ face. Although we have insured all our assets and properties adequately, we have not taken any insurance for protecting us from future business losses and claims in respect of workmen’s compensation. In the event of such losses occurring, claims being made, the operations of our Company may be affected significantly.

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12.

No liquidity in the Company’s shares The shares of the Company are listed on the MSE, ASE and DSE. However, for the last three years till date there has been no trading in the equity shares of the Company on any of these stock exchanges.

13.

Promise vs. Performance The following table gives our performance vis - a - vis the projections given during the IPO in 1996. Our actuals have fallen short of the promises we made during the IPO.

Particulars Sales Cost of Production Gross Profit Administrative and selling Expenses PBIDT Interest Depreciation Misc. Expenses written off PBT Provision for Tax PAT Proposed Dividend Proposed Dividend (%) Share capital Reserves and Surplus EPS Book value

(Rs. in lakhs) 1995 – 1996 1996 – 1997 1997-1998 Expected Actual Variance Expected Actual Variance Expected Actual Variance 833.00 720.82 -112.18 1229.90 1022.32 -207.58 1333.45 911.48 -421.97 640.89 502.76 -138.13 923.21 768.20 -155.01 1035.13 736.98 -298.15 192.11 218.06 25.95 306.69 254.12 -52.57 348.32 174.50 -173.82 42.84 48.45 149.28 169.61 24.77 18.35 4.72 6.50 1.53 118.27 14.52 103.75 26.87 12.00 300.00 116.39 4.33 13.42

0.00 144.76 0.26 144.50 21.79 12.00 300.00 155.30 8.00 14.76

5.61 20.33 -6.42 1.78

63.93 242.75 61.16 4.72

57.97 196.15 29.13 8.98

-5.96 -46.6 -32.03 4.26

70.94 55.14 -15.80 277.39 119.36 -158.03 65.85 19.83 -46.02 4.72 9.41 4.69

-1.53 26.49 -14.26 40.75 -5.08 0.00 0.00 38.91 3.67 1.34

1.53 175.34 39.99 135.35 45.00 15.00 300.00 206.74 4.51 16.48

0.00 158.04 0.00 158.04 45.00 15.00 300.00 273.61 5.27 19.10

-1.53 -17.30 -39.99 22.69 0.00 0.00 0.00 66.87 0.76 2.62

1.53 0.00 -1.53 205.29 90.12 -115.17 51.60 0.00 -51.60 153.69 90.12 -63.57 54.00 33.00 -21.00 18.00 10.00 -8.00 300.00 300.00 0.00 306.43 330.74 24.31 5.12 3.00 -2.12 19.86 21.03 1.17

Due to the obsolescence of Video and Audio cassettes technology, we could not meet the sales figures projected by us during the IPO for the years 1995-96 and 1996-97. However, better realisations enabled us to post profits higher than that projected for those two years. But in the year 1997-98, the margins came under pressure as the economy showed signs of an unexpected slow down due to which the overall sales and profitability declined. Meanwhile, we decided to diversify into the line of manufacture of steel ingots and finished steel and the first plant was commissioned in Pondicherry in the year 1998. 14.

The success of our business is highly dependent upon our ability to implement our growth strategies effectively. Our ability to sustain our growth depends, in a large part, on our ability: • • • •

To augment financial resources for additional capacities at competitive terms and conditions; To complete capacity expansion / new projects without time and cost overrun; To design and implement strong internal control system; To control costs.

We have been in this business for the last eight years during which we have been able to implement our business strategies effectively. However, we cannot give an assurance that, in the long run, we will be able to successfully implement our growth strategies within thew stipulated time frame and estimated budget, which could have a material impact on our business and results of operations.

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15.

The success of our business is dependent upon retention of our key managerial personnel and cordial relationship with our employees. Our success largely depends on the continued services and performance of our management and other key employees. The loss of any of our key personnel could impair our ability to continue to manage and expand our business efficiently. We also rely heavily on employees and the employees’ ability to provide requisite services. We do not have any labour or employee unions and we have not faced any union related problems. However, any disagreements with our employees in the future causing shortage of labour or stoppage of work, could affect our operations including our ability to meet the quality standards in manufacturing and timely completion of orders, thereby affecting our sales and profitability.

16.

Tax benefits that our subsidiaries and we enjoy may not be available to us in future We currently take advantage of various tax deductions and exemptions like deduction under the Income Tax Act, 1961 on the profits from steel production at our unit at Pondicherry, and benefits of Cenvat credit in connection with Central Excise Tariffs and Service tax. We have upgraded our scale of operations in terms of better capacity utilisation (54.44% for the period ended 31 December, 2005 vis- a vis 36.19% for the year ended 31 March, 2005) and our profits have also multipled almost four times for the year ended 31 March, 2005 and period ended 31 December, 2005. However, the unavailability of these tax benefits due to the changes in the government policies or applicable tax regimes could increase our tax obligation and consequently affect our cash flows.

17.

The market price of the equity shares may be adversely affected by any additional issuances of equity or sales of a large number of the equity shares by our Promoters or principal shareholders. There is a risk that we may be required to finance our growth or strengthen our balance sheet through additional equity offerings. Any further issuance of equity shares will dilute the position of existing shareholders and could adversely affect the market price of the equity shares.

18.

Defaults in the payment of loans could result in the sale of properties / assets belonging to the Company and its subsidiaries Certain assets and properties of the Company and its subsidiaries have been mortaged/ hypothecated in favour of Central Bank of India as security for the loans taken and any breach of the terms and conditions including defaults in the payment of, these loans could result in the sale of properties / assets belonging to the Company and its subsidiaries, kept as security for these loans. In the event of this happening it would affect the functioning of these units where the assets and properties are situated and thus affect our and /or their profitability.

19.

We and our subsidiaries have taken unsecured loans which are repayable on demand We and our subsidiaries have taken unsecured loans for a sum of Rs.646.09 lakhs (as on 31 December, 2005), which are as outstanding as on date. The aforesaid loans do not carry any interest and are repayable on demand. Any demand by the lenders for immediate payment may impact liquidity, business and operations of the Company.

20.

Transactions with related parties For the financial year ending 31 March, 2004, we sold goods worth Rs.228.59 lakhs to AIPL. For the financial year ending 31 March 2005, this figure amounted to Rs.822.25 lakhs and during this period we also purchased goods from ASIPL worth Rs.64.04 lakhs. For the period ending 31 December, 2005 we sold goods worth Rs.90.13 lakhs and Rs.293.99 lakhs, to AIPL and ASIPL respectively. It cannot be verified whether the aforesaid sales/purchases were at the market price or not. We cannot give an assurance that we will not enter into similar transactions in future.

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21.

Corporate Guarantee given by us to our subsidiary. The Company has issued a corporate guarantee for a sum of Rs 350.00 lakhs in respect of financing facilities availed by AIPL from Central Bank of India. If this corporate guarantee materializes, our profitability could be adversely affected.

EXTERNAL RISK FACTORS 1.

Cyclicality in the prices and demand for our products, prices and availability of raw materials may adversely affect our business. The Company’s fortunes are linked to those of the iron and steel industry, which is cyclical in nature. The demand for sponge iron and billeted steel is dependent upon the construction/ infrastructure facilities and any downturn in the same would adversely impact the margins and hence the financial performance of the Company. The demand, in turn, has a significant impact on the prices of the products also. Therefore, a fall in the prices would adversely impact the margins and hence the financial performance of the Company. The world steel industry is cyclical in nature and has been characterized by changes in prices of raw material inputs, excess demand in certain markets and excess capacity in other markets, all of which have resulted in fluctuations in international prices and consumption of steel. The domestic steel industry has been characterized by changes in prices of raw material inputs like iron ore, coal etc., and excess demand over supply, all of which have resulted in fluctuations in steel prices. In addition, domestic freight rates and customs duty in India, may also adversely affect the price of steel products. The prices of our raw materials are dependent upon global commodity prices including fuel prices, which are beyond our control. Fuel prices are volatile and have been rising in the past two years. Increase in the fuel costs could also affect our transport and handling costs. Any increase in the prices of our raw materials and in our transport and handling costs may adversely affect our business and results of our operations, if we are unable to proportionately increase the sale price of our products. For finished products, on all iron and steel items, the excise duty falling under Chapter 72 has been increased from 12% to 16% in the Union Budget 2005-06. Thus, the prices of finished products are also subject to fluctuations, which could adversely impact our profitability.

2.

Difficulty in keeping pace with technological advancement may have an adverse impact on our business Technology plays an important role in iron and steel manufacturing plants. The Company’s failure to adapt to or keep abreast of any change in, the latest technology might place its competitors at an advantage in terms of costs, efficiency and timely delivery of its products.

3.

Competition The entry barriers in the sponge iron industry are very low due to low capital requirement and low gestation period. We expect the competition to intensify and increase from a number of sources. We believe that the principal competitive factors in our markets are price, quality and raw material supply. Increasing competition may force the Company to reduce the prices of its products, which may reduce the revenues and margins and/or also decrease its market share, either of which could have an adverse impact on the business, financial and operations of the Company.

4.

Changes in Government policies may affect our operations adversely. Increase in taxes and other levies imposed by the Central or State Governments in India on the acquisition of capital goods/components, purchase of raw materials or finished goods may have an adverse effect on the profitability of the Company. Since 1991, the Government of India has pursued policies of economic liberalizations. We cannot assure you that these liberalization policies will continue in future. Protest against liberalization

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could slowdown the pace of economic development. The rate of economic liberalization could change, specific laws and policies could change, and foreign investment, currency exchange rates and other matters affecting investing in our securities could change as well. Withdrawal of any support by the supporting parties to the current Indian Government due to any reasons could result in political instability, which may have an adverse impact on capital markets and investor confidence. Taxes and other levies imposed by the Central or State Governments in India that affect the Steel industry include excise duties and interstate taxes on purchase of raw materials, components, capital goods and finished products. These taxes and levies affect the cost of production and prices of the Company’s products and hence the demand for its products. An increase in any of these taxes or levies or the imposition of new taxes or levies in the future may have an adverse impact on the Company’s business and financial condition. 5.

General economic conditions may adversely affect the sales and results of the Company. The Indian economy has shown sustained growth with the gross domestic product (“GDP”) growing at 6.9% in fiscal 2005 and 8.5% in fiscal 2004. However, any slowdown in the general economic conditions it may have an adverse bearing on the industry and hence, business and results of the Company.

6.

Force majeure events, could adversely affect the financial markets, result in a loss of client confidence and adversely affect our business, results of operations, financial conditions and cash flows. Being located in an area prone to naxal attacks, could expose us to loss of life and property. These events may result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations or the market price of the equity shares. The proposed Project is located in an area, which has witnessed and borne the brunt of naxal attacks. Though adequate insurance cover will be taken, still no assurance can be given against any damage to or loss of life or property situated there. Any such event could adversely affect our financial performance

7.

Natural disasters and technical failures The operations of our plants can be affected by natural disasters such as events that are beyond our control, including the recent tsunami or seismically generated sea wave capable of considerable destruction, which affected several parts of South East Asia, including India and Sri Lanka on 26 December, 2004. Occurence of any such event could adversely affect our business and operations. Technical failures could also have an adverse impact on our operations.

8.

The price of the equity shares of our Company may be volatile, and you may be unable to resell your equity shares at or above the Issue price or at all. An active trading market on the Indian stock exchanges may not develop or be sustained after the Issue. The Issue Price of the equity shares of our Company may bear no relationship to the market price of the equity shares after the Issue. The market price of the equity shares after this Issue may be subject to significant fluctuations in response to, among other factors, variations in our operating results, market conditions, and volatility in the Indian stock exchanges and securities markets elsewhere in the world.

9.

Changes in applicable interest rates and/ or banking policies Our Company has availed of finances vide short-term loans and long-term borrowings with banks. Any negative change in applicable contractual, regulatory or statutory policies in connection with these facilities, could adversely affect the Company and its cash flows and profitability.

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NOTES TO RISK FACTORS Public Issue of [●] Equity Shares of Rs. 10/- each for cash at an Issue Price of Rs. [●] per Equity Share aggregating Rs. 12,000 lakhs (the ‘Issue’) by our Company. •

The net worth of our Company before the Issue, as on 31 December, 2005, was Rs. 3,767.23 lakhs.

•

Except as stated below, there have been no equity shares sold or purchased by the Promoter, the Promoter Group and the directors of the Promoter (AMIPL), during the period of six months preceding the date on which this DRHP is filed with SEBI. S.No. 1. 2.

•

Name Mr. Alok Agarwal Mr.Ruli Ram Agarwal and Mrs.Geeta Devi Agarwal

No. of shares purchased/(sold) 2250 800

Date of transaction 29 December, 2005 1 December, 2005

Price per share (in Rs.) 10 10

The average cost of acquisition of one Equity Share for the Promoters is as follows: Name of the Promoter Mr. Ashok Agarwal Ashok Memory (India) Private Limited

Average Cost of Acquisition (Rupees) 1.00 1.60

•

The book value as on 31 December, 2005 was Rs. 50.23 per Equity Share.

•

The Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue shall be allotted to QIBs on a proportionate basis out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available for allotment on a proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue would be allocated to NonInstitutional Bidders and not less than 35% of the Issue would be allocated to Retail Individual Bidders on a proportionate basis, subject to valid bids being received from them at or above the Issue Price.

•

Investors may note that in case of over-subscription in the Issue, allotment to Retail Individual Investors and QIBs shall be on a proportionate basis. For more information, please refer to page no. [●] under the section titled ‘Basis of Allotment or Allocation’.

•

For related party transactions, refer to page no. [••] under the section titled ‘Related Party Transactions’.

•

The Investors are advised to refer to page no. [••] under the section titled ‘Basis for Issue Price’ before making an investment in the Issue.

Investors may contact the BRLMs or the Compliance Officer for any complaints, information or clarifications pertaining to the Issue. For contact details of the BRLMs and the compliance officer please refer to page no. [•] of this DRHP.

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SECTION III-INTRODUCTION SUMMARY Industry Overview World Steel Production

• •

The iron and steel industry in India is organized in three categories’ viz. main producers, other major producers and the secondary producers. Steel industry is on the upswing due to strong growth in demand propelled particularly by the high demand in China.

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AML STEEL LIMITED

India today is the eight largest crude steel producing country in the world. According to Ministry of Steel, finished carbon steel production during the year (April to December, 2004) at 28.3 million tonnes (provisionally estimated) was up by 3.8% over the corresponding period of the previous year. Apparent consumption of finished carbon steel during the year April to December 2004 rose 5.7% from the level of the corresponding period last year to reach 24.90 million tonnes (Prov). India is the largest producer of Sponge Iron in the world. Private sector is playing a significant role in the production of Pig Iron and Sponge Iron. and continues to play a dominant role in augmenting steel availability in the country. According to Ministry of Steel the contribution of private sector in finished steel production increased to about 68% in 2003-04 as compared to 45% in 2002-03.

• •

• • • •

The New Industrial policy commenced from 1991 has opened up the iron and steel sector for private investment by • •

Removing it from the list of industries reserved for public sector and Exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route.

The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/ expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. IISI has forecasted 4-5% increase in steel demand for whole World and increase of around 7% in Asia Pacific alone for the year 2006. IISI Apparent Steel Demand Forecast 1200

1000

MMT

800

600

400

200

0 Central and Europe

CIS

NAFTA

South America

Africa

Middle East

Asia Pacific

WORLD

2004

192

45

151

33

20

28

502

971

2005

190

45

145

33

20

29

534

998

2006

198

48

149

36

21

31

570

1055

2

AML STEEL LIMITED

Business Overview We were incorporated as Ashok Magnetics Limited in the year 1993 for manufacturing and marketing of video cassettes. We ventured into production of PVC pipes in the year 1995 by establishing a PVC Pipe manufacturing unit at Gummidipoondi, Tamil Nadu. We had our IPO in 1996 and have been listed on the ASE, DSE and the MSE pursuant thereto We have diversified into steel making since the year 1998 when the first steel project was conceived to be put up in Pondicherry and since then steel has become our core business. Our Pondicherry plant was commissioned in the year 1998 and since then the business has been growing rapidly. We are constantly looking at various opportunities available for business expansion through the mode of acquisitions. With this view we acquired Maruthi Steel Private Limited, Sri Lanka in the year 2002 and two more steel plants in Karaikal in 2003. Later in the year 2005 our name was changed to AML Steel Limited keeping in view our line of business. In line with the quest for growth we have embarked upon an Integrated Steel Project in Jharkhand situated in Eastern part of India where there is a enormous deposit of iron ore as well as coal, both of which are essential raw materials for steel making. There is a great logistics advantage of putting up a steel plant in Eastern part of India as against locations in the rest of the country as evident from the fact that for every 1 tonne of steel produced there needs to be a movement of 3.5 tonnes of raw materials. We realized the importance of price stability in iron ore supplies and therefore we have sought to acquire an iron ore mine situated fairly closer to the Project site on a long-term lease. The Ministry of Mines, GoI has agreed for the grant of a mining lease to us over an area of 383.54 acres in West Singhbum district, Jharkhand for a period of 20 years subject to the terms and conditions laid down. We have also made an application to Ministry of Coal for the allotment of a coal mining lease with the support of Government of Jharkhand. We shall strive hard to maximize the value chain and accordingly we shall be putting up our own power plant at the Project site for captive use. We are also engaged in the trading of various steel products such as TMT bars, Tor steel, MS rods, steel structurals, steel angles and channels, HR plates, HR & CR sheets etc., which contributes significantly to our revenue. This is only a summary and does not contain all information that you should consider before investing in our Equity Shares. You should read the entire DRHP, including the information on “Risk Factors” and our financial statements and related notes appearing elsewhere in this DRHP, before deciding to invest in our Equity Shares.

3

AML STEEL LIMITED

THE ISSUE

Equity Shares offered: Fresh Issue by the Company Less: Promoters contribution to the issue Net issue to the Public of which:

[●] Equity Shares. [●] Equity Shares. [●] Equity Shares.

Upto [●] Equity Shares (allocation on proportionate basis), out of which upto 5% i.e., [●] shall be available for allocation on a proportionate basis to Mutual Funds only (Mutual Funds Portion), and balance Equity Shares shall be available for allocation to all QIBs, including Mutual Funds.

A) QIB Portion

B) Non-Institutional Portion

At least [●] Equity Shares (allocation on proportionate basis)

C) Retail Portion

At least [●] Equity Shares (allocation on proportionate basis)

Equity Shares outstanding prior to the Issue

[●] Equity Shares

Equity Shares outstanding after the Issue

[●] Equity Shares

Use of proceeds by the Company

See the section titled “Objects of the Issue” on page no. [•] of this DRHP.

Note: Under-subscription, if any, in any category would be allowed to be met with spillover inter-se from the other categories, at the sole discretion of the Company and the BRLMs.

4

AML STEEL LIMITED

SELECTED FINANCIAL INFORMATION The following table sets forth the selected historical financial information of AMLSL derived from (i) its restated and audited consolidated financial statements for the fiscal years ended 31 March 2003, 2004 and 2005 and for nine months period from 1 April, 2005 to 31 December, 2005 and (ii) its restated and audited unconsolidated financial statements for the fiscal years ended 31 March 2001, 2002, 2003, 2004 and 2005 and for nine months period from 1 April, 2005 to 31 December, 2005, all prepared in accordance with Indian GAAP, the Companies Act, and SEBI guidelines, and restated as described in the auditor’s report of M/s K P Jain & Co., included in the section titled “Financial Information” on page no. [•] of this DRHP and should be read in conjunction with those financial statements and notes thereon. CONSOLIDATED STATEMENT OF PROFITS AND LOSSES PERIOD ENDED ON INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income Increase / (Decrease) in Inventory Total Income

31.03.03

31.03.04

(Rs. in lakhs) 31.03.05 31.12.05

2,726.13 46.12 2.90 2,775.15

4,331.36 243.16 16.48 53.18 4,644.18

8,410.51 2,267.97 35.07 9.27 10,722.82

8,678.12 7,084.34 417.33 164.36 16,344.15

EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o

1,679.39 26.35 949.78 74.06 16.03 25.85 1.25

2,818.31 37.24 1,482.11 78.53 45.29 49.59 1.45

6,927.79 45.34 2,830.70 68.90 74.04 86.96 1.45

11,945.01 57.59 2,528.70 189.36 70.76 65.46 -

Total Expenditure

2,772.71

4,512.52

10,035.18

14,856.88

Net Profit before Tax & before Extraordinary items

2.44

131.66

687.64

1,487.27

Provision for Taxation Provision for Deferred Taxation

4.06 4.81

20.80 8.59

163.90 21.03

260.24 9.95

(6.43)

102.27

502.71

1,217.08

Net Profit after Tax & before Extraordinary items Extraordinary Items (net of tax) Net Profit after Extraordinary Items

-

-

(6.43)

Earlier year Adjustments

-

APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance Carried to Balance Sheet

5.42 36.00 7.20 (55.05)

102.27

-

5

502.71

-

9.50 36.00 4.50 52.27

1,217.08 -

25.00 45.00 6.31 426.40

1,217.08

AML STEEL LIMITED

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES AS AT A Assets Fixed Assets – Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve

31.03.03

31.03.04

31.03.05

(Rs. in lakhs) 31.12.05

933.82 167.86 765.96 -

1,487.97 213.50 1,274.47 -

1,627.38 293.32 1,334.06 -

2,619.60 364.61 2,254.99 -

765.96

1,274.47

1,334.06

2,254.99

B

Good Will

20.26

25.80

31.11

31.11

C

Investments

60.22

12.00

25.14

29.89

593.37 151.82 334.22 87.88 56.50

1,054.65 512.05 443.45 105.83 210.46

1,948.98 1,515.29 279.49 232.98 254.98

3,316.23 1,496.58 838.20 371.41 629.24

2,070.24

3,638.71

5,622.03

8,967.65

Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans

274.46 53.92

762.77 533.74

541.50 549.58

720.81 646.09

Current Liabilities & Provisions Sundry Liability Provisions (Including Deferred Tax)

580.23 78.39

1,087.48 101.03

2,619.45 303.52

2,963.75 521.74

300.00 818.84 818.84

303.00

303.00

886.46

1,338.68 1,338.68

750.00 1,368.61 2,105.75 2,105.75

35.61

35.77

33.70

109.10

Total Net Worth

1,083.23

1,153.69

1,607.98

4,115.26

Total of Liabilities and Provisions

2,070.23

3,638.71

5,622.03

8,967.65

D Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances Total Assets E

F

Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

6

886.46 -

AML STEEL LIMITED

UNCONSOLIDATED STATEMENT OF PROFITS AND LOSSES (Rs. in lakhs) PERIOD ENDED ON INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income Increase / (Decrease) in Inventory Total Income

31.03.01

31.03.02

31.03.03

31.03.04

31.03.05

31.12.05

3,455.72 484.51 30.25 (8.57) 3,961.91

4,539.91 622.38 35.38 3.88 5,201.55

2,616.09 46.12 2.90 2,665.11

2,791.29 228.60 15.27 3.14 3,038.30

3,469.84 2,250.65 34.48 0.83 5,755.80

3,585.99 7,072.56 415.46 25.15 11,099.16

2,553.53 17.91 967.26 51.72 36.26 29.58 1.25 3,657.51

3,715.92 17.19 1,186.55 51.37 26.57 29.70 1.25 5,028.55

1,618.49 21.38 862.00 67.62 15.63 25.85 1.25 2,612.22

1,916.36 16.30 920.64 51.93 30.34 27.85 1.25 2,964.67

4,021.89 11.83 1,178.01 42.75 36.83 31.22 1.25 5,323.78

8,730.01 14.30 1,133.85 91.28 42.75 24.29 10,036.48

304.40

173.00

52.89

73.63

432.02

1,062.68

26.82 -

13.52 26.33

4.06 4.81

19.19 1.72

134.50 2.07

180.93 -

Net Profit after Tax & before Extraordinary items

277.58

133.15

44.02

52.72

295.45

881.75

Extraordinary Items (net of tax)

-

-

-

-

-

Net Profit after Extraordinary Items

277.58

133.15

52.72

295.45

881.75

Earlier year Adjustments

-

-

-

-

APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance Carried to Balance Sheet

10.00 45.00 4.50 218.08

15.00 45.00 6.31 229.14

881.75

EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o Total Expenditure Net Profit before Tax & before Extraordinary items Provision for Taxation Provision for Deferred Taxation

Note 1. 2.

44.02 -

10.00 30.00 93.15

5.42 36.00 7.20 (4.60)

2.59

7.50 36.00 4.50 4.72

Public Issue Expenses to the extent of Rs. 1.25 lakhs has been adjusted with the profits. Provision for Deferred Taxation has been adjusted in the respective years.

7

AML STEEL LIMITED

UNCONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

AS AT A Assets Fixed Assets - Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve

31.03.03

31.03.04

(Rs. in lakhs) 31.03.05 31.12.05

751.53 135.99 615.54 -

716.29 159.48 556.81 -

712.85 183.57 529.28 -

762.05 208.23 553.82 -

765.28 232.52 532.76 -

644.16

615.54

556.81

529.28

553.82

532.76

10.00

85.00

324.66

437.28

450.42

463.17

237.91 213.76 453.24 85.05 121.68

1,016.44 468.29 513.91 172.32 52.82

558.59 151.82 280.35 87.88 52.91

718.89 334.41 353.41 104.18 51.06

1,007.73 1,761.06 207.65 152.10 118.42

1,919.58 1,480.28 229.75 285.54 1,860.84

1,765.80

2,924.32

2,013.02

2,528.51

4,251.20

6,771.92

Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans

225.63 3.04

312.74 24.18

274.46 22.64

458.32 21.65

318.71 42.64

356.15 139.15

Current Liabilities & Provisions Sundry Liability Provisions (Including Deferred Tax)

285.52 76.32

1,237.86 69.85

382.10 78.39

684.51 92.55

2,147.77 225.20

2,154.56 354.83

300.00 885.41 -

300.00 988.56 -

300.00 963.05 -

300.00 977.85 -

300.00 1,222.00 -

750.00 1,368.61 1,653.74 -

885.41

988.56

963.05

977.85

1,222.00

1,653.74

10.12

8.87

7.62

6.37

5.12

5.12

Total Net Worth

1,175.29

1,279.69

1,255.43

1,271.48

1,516.88

3,767.23

Total of Liabilities and Provisions

1,765.80

2,924.32

2,013.02

2,528.51

4,251.20

6,771.92

Investments

C

Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances Total Assets

E

31.03.02

752.81 108.65 644.16 -

B

D

31.03.01

Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

8

AML STEEL LIMITED

GENERAL INFORMATION Registered Office AML Steel Limited (Registration No. 18-24842) B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu – 601201 Tel: + 91 411 922 2792. Corporate Office AML Steel Limited Raheja Complex, New no 68(834), Anna Salai, Chennai, Tamil Nadu – 600 002. Tel: + 91 44 2858 3182, Fax: +91 44 2841 9443 E-mail:[email protected]., website:www.amlsteel.com Contact Person: Mr.Rajesh Agrawal, Company Secretary Our Company is registered with the RoC, Tamil Nadu situated at Block 6, IInd Floor, Shastri Bhavan, 26, Haddows Road, Chennai - 600 006. Board of Directors The Company is currently managed by the Board of Directors comprising of six Directors. Mr. Ruli Ram Agarwal is currently the Chairman of the Board and Mr. Ashok Agarwal is the Managing Director. Our Board comprises of: Sr. No Name Designation 1. Mr. Ruli Ram Agarwal Non – Executive Chairman 2. Mr.Ashok Agarwal Promoter cum Managing Director 3. Mr.Ajay Agarwal Non – Executive Director 4. Mr.Poonam Chand Jangir Non – Executive Director 5. Mr. Vinay Kishore Kasat Independent Director 6. Mr. S. Kolandai Raj Independent Director For further details of our Chairman, Managing Director and other Directors of the Board please see the section titled “Our Management” on page no. [●] of this DRHP. Company Secretary and Compliance Officer Mr Rajesh Agrawal, Raheja Complex, New no 68 (834), Anna Salai, Chennai, Tamil Nadu – 600 002. Tel: + 91 44 2858 3182 Fax: +91 44 2841 9443 e-mail:[email protected], website:www.amlsteel.com Investors can contact the Compliance Officer in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account and refund orders. Legal Advisors to the Issue J. Sagar Associates, Advocates & Solicitors 4121/B, 6th Cross, 19A Main HAL II Stage Extension Bangalore - 560 038 Karnataka, India Tel no.: +91 80 2520 0045 Fax no.: +91 80 2520 0044 E-mail: [email protected]

9

AML STEEL LIMITED

Book Running Lead Managers Karvy Investor Services Limited “Karvy House”, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad – 500 034. Tel: +91 40 2337 4714 / 2332 0752 Fax: +91 40 2337 4714 E-mail: [email protected]. Website: www.karvy.com Contact Person: Mr.T.R.Prashanth Kumar Centrum Capital Limited 5th Floor, Khetan Bhavan, 198, J. Tata Road, Churchgate Mumbai - 400 020. Tel: +91 22 2202 3838 Fax: +91 22 2204 6096. Email: amlsteel @centrum.co.in Website: www.centrum.co.in Contact Person: Mr. Mayank Dalal Syndicate Members [●] (Will be updated at the time of RoC Filing) Registrar to the Issue Cameo Corporate Services Limited Subramanian Building, No.1, Club House Road, Chennai – 600 002. Tel No: +91 44 2846 0390 Fax No: +91 44 2846 0129 E-mail: [email protected] Website: www.cameoindia.com Contact Person: Mr. R D. Ramasamy Auditors K. P Jain and Co., Chartered Accountants, 130, Thambu Chetty Street, Chennai – 600 001. Tel No: +91 44 2524 1033 Banker(s) to the Company Central Bank of India Mount Road Branch, Raheja Complex, First Floor, 69, Anna Salai, Chennai – 600 002. Tel No: +91 44 2841 0901 Telefax:- +91 44 2852 8752 Website:- www.centralbank.co.in E-mail:- [email protected] Banker (s) to the Issue and Escrow Collection Bank [●] (Will be updated at the time of RoC Filing)

10

AML STEEL LIMITED

Brokers to the Issue All members of the recognized Stock Exchanges would be eligible to act as Brokers to the Issue. Statement of Inter Se Allocation of Responsibilities for the Issue The following table sets forth the distribution of responsibility and coordination for various activities amongst the BRLMs: Activity Responsibility Co-ordination Capital structuring with the relative components and formalities such as type of instruments etc. Due diligence of the Company’s operations/management /business plans/legal etc. Drafting and Design of Red Herring Prospectus and the Prospectus and of statutory and nonstatutory advertisement including memorandum containing salient features of the Prospectus and any other publicity material.The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, ROC and SEBI including finalisation of the prospectus and filing with the Stock Exchanges/ ROC. Appointment of other intermediaries viz. Registrar to the Issue, printers, advertising agency and Bankers to the Issue. Retail and Non-Institutional marketing strategy, which will cover inter alia: Formulating marketing strategies, preparation of publicity budget; Finalise media and public relations strategy; Finalise centers for holding conferences for press and brokers; Finalise collection centres; Follow-up on distribution of publicity and issue material; Including form, prospectus and deciding on the quantum of the Issue material. Institutional marketing strategy, which will cover inter alia: Finalize the list and division of investors for one-on-one meetings; Managing the book, co-ordination with Stock Exchanges and pricing and institutional allocation in consultation with the Company and the BRLMs; Finalize roadshow presentations. The post bidding activities including management of Escrow Accounts, coordination of non-institutional allocation, intimation of allocation and dispatch of refunds to Bidders etc. The post Issue activities will involve essential follow up steps, including finalisation of basis of allotment including weeding out of multiple applications, finalisation of listing of Equity Shares, finalization of trading and dealing instruments and dispatch of certificates and demat delivery of Equity Shares, with the various agencies connected with the work such as the Registrar to the Issue and Bankers to the Issue and the banks handling refund business. The BRLMs shall be responsible for ensuring that these agencies fulfill their functions and enable them to discharge this responsibility through suitable agreements with the Company.

11

KARVY

KARVY

CENTRUM KARVY

KARVY

CENTRUM

KARVY

KARVY

CENTRUM KARVY

CENTRUM

CENTRUM

KARVY

KARVY

CENTRUM

KARVY CENTRUM

CENTRUM

AML STEEL LIMITED

Credit Rating As the Issue is of equity shares, a credit rating is not required. Grading We have not opted for grading of this Issue. Trustees As the Issue is of equity shares, the appointment of Trustees is not required. Appraising Entity and Monitoring Agency The proposed project to be undertaken by AMLSPL, a wholly owned subsidiary of the Company, has been financially appraised by SBI Capital Markets Limited which has submitted its report dated 30 July, 2005 to AMLSPL and the cost of the Project and and means of finance are based on this report. SBI Capital Markets Limited, 202, Maker Tower, ‘E’ Cuffe Parade, Mumbai – 400 005 Tel: +91 22 2218 9166, Fax: +91 22 2218 8332 We shall be appointing a monitoring agency for monitoring the utilization of the proceeds to be received through this Issue. Book Building Process Book building refers to the process of collection of Bids, on the basis of the DRHP within the Price Band. The Issue Price is fixed after the Bid Closing Date/Issue Closing Date. The principal parties involved in the Book Building Process are: • The Company; • Book Running Lead Managers; • Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible to act as Underwriters. Syndicate Members are appointed by the BRLMs; • Escrow Collection Bank(s); and • Registrar to the Issue. The SEBI Guidelines have permitted an issue of securities to the public through the 100% Book Building Process, wherein upto 50% of the Issue shall be allocated on a proportionate basis to QIBs out of which up to 5% shall be available for allocation on a proportionate basis to Mutual Funds and the balance to all QIBs including Mutual Funds. Further, not less than 15% of the Issue shall be available for allotment on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for allotment on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. We will comply with the SEBI Guidelines for this Issue. In this regard, we have appointed the BRLMs to manage the Issue and to procure subscriptions to the Issue. Pursuant to amendments to the SEBI Guidelines, QIB Bidders are not allowed to withdraw their Bid(s) after the Bid Closing Date/Issue Closing Date and for further details see the section titled “Terms of The Issue” on page no. [●] of this DRHP. Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for illustrative purposes and is not specific to the Issue) Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs.24 per share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the bidding centres during the bidding period. The illustrative book as shown below shows the demand for the shares of the company at various prices and is collated from bids from various investors.

12

AML STEEL LIMITED

Bid Quantity 500 1,000 1,500 2,000 2,500

Bid Price (Rs.) 24 23 22 21 20

Cumulative Quantity 500 1,500 3,000 5,000 7,500

Subscription 16.67% 50.00% 100.00% 166.67% 250.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired number of shares is the price at which the book cuts off, i.e., Rs. 22 in the above example. The issuer, in consultation with the book running lead managers, will finalise the issue price at or below such cut off price, i.e., at or below Rs. 22. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in the respective categories. Steps to be taken by the Bidders for bidding: • Check eligibility for bidding, see the section titled “Issue Procedure - Who Can Bid?” on page no. [●] of this DRHP; • Ensure that the Bidder has a demat account; and • Ensure that the Bid cum Application Form is duly completed as per instructions given in this DRHP and in the Bid cum Application Form. Underwriting Agreement After the determination of the Issue Price and allocation of our Equity Shares but prior to filing of the Prospectus with the RoC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through this Issue. The Underwriters have indicated their intention to underwrite the following number of Equity Shares: (This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the RoC) Name and Address of the Underwriters Indicative Number of Amount Underwritten Equity Shares to be (Rs. lakhs) Underwritten [•] [•] [•] [•] [•] [•] The above-mentioned amount is indicative underwriting and this would be finalized after pricing and actual allocation. The above Underwriting Agreement is dated [●]. In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the Securities and Exchange Board of India Act, 1992 or registered as brokers with one or more of the Stock Exchanges. The above Underwriting Agreement was accepted by the Board of Directors of our Company at their meeting held on [●] and our Company has issued letters of acceptance to the Underwriters. Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. In the event of any default, the respective Underwriter in addition to other obligations to be defined in the Underwriting Agreement will also be required to procure/subscribe to the extent of the defaulted amount. Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them, provided, however, it is proposed that pursuant to the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that their respective Syndicate Members do not fulfill their underwriting obligations.

13

AML STEEL LIMITED

CAPITAL STRUCTURE The share capital structure as at the date of filing of the DRHP with SEBI is set forth below: (Rs. in lakhs) Particulars Aggregate Value at Aggregate Value at nominal value Issue Price A) AUTHORISED 3,00,00,000 equity shares of Rs.10/- each 3,000.00 B)

C)

ISSUED, SUBSCRIBED AND PAID UP EQUITY SHARE CAPITAL 75,00,000 equity shares of Rs.10/- each fully paid up

750.00

PRESENT ISSUE IN TERMS OF THIS DRHP [●] Equity Shares of Rs.10/- each at a premium of Rs. [●]/- each.

[●]

12,000.00

OUT OF WHICH

D)

E)

PROMOTERS CONTRIBUTION. [●] Equity Shares of Rs.10/- each at a premium of Rs. [●]/- each.

[●]

2,000.00

NET OFFER TO THE PUBLIC THROUGH THIS DRHP [●] Equity Shares of Rs.10/- each at a premium of Rs. [●]/- each.

[●]

10,000.00

PAID UP EQUITY CAPITAL AFTER THE ISSUE [●] Equity Shares of Rs.10/- each.

[●]

[●]

SHARE PREMIUM ACCOUNT Before the Issue

Nil

Nil

After the Issue

[●]

The details of increase and change in the authorized share capital of our Company after the date of incorporation till filing of this DRHP with SEBI are as follows: Date of change

Nature of increase/change

16 April, 1993

With Memorandum

21 April, 1995

Increase in authorised capital Increase in authorised capital Increase in authorised capital

15 June, 1995 19 July, 2005

Number of Equity Shares Issued

Face Value (Rs.)

Number of Preference Shares

Face Value

5,00,000

10

Nil

Nil

Authorized Share Capital (Rs.) 50,00,000

25,00,000

10

Nil

Nil

3,00,00,000

2,50,000

10

Nil

Nil

3,25,00,000

2,67,50,000

10

Nil

Nil

30,00,00,000

14

AML STEEL LIMITED

Notes to Capital Structure 1. Share Capital History of AML Steel Limited Date of Allotment

Number of Face Equity Value Shares (Rs.)

Issue Price (Rs.)

Cumulative Consideration share capital (cash, bonus, (Rs.) consideration other than cash)

Reason for allotment (bonus, swap etc.,)

Cumulative share premium (Rs.)

16 April, 1993

700

10

10

14 August, 1993

*4,64,000

10

10

15 June, 1995

13,94,100

10

10

Subscription to Nil the Memorandum and Articles 46,47,000 Partly for cash Private Nil and partly for placement* consideration other than cash. 1,85,88,000 Bonus Bonus Nil

12 January, 1996

11,41,200

10

10

3,00,00,000 Cash

7,000 Cash

Issue of shares (Public issue)

Nil

23 August, 45,00,000 10 10 7,50,00,000 Bonus Bonus Nil 2005 * The Company had taken over the business of Trans Asia Exports, a proprietary concern of Mr. Ashok Agarwal and 1,50,000 equity shares of the Company were issued to him towards the consideration for the takeover of the said business. The balance 3,14, 000 equity shares were issued in the normal course. Note: - Save and except as mentioned below all the above shares are listed and trading permission has been obtained from MSE, DSE and ASE. For the 45,00,000 allotted as Bonus Shares on 23 August, 2005, we have obtained the listing and trading permission from MSE and ASE vide their letters dated 15 February, 2006 and 13 March, 2006 respectively. We have obtained in – principle approval from DSE, vide their letter dated 21 January, 2006. We are in the process of getting the listing and trading approval for the same from DSE. 2. Promoters Contributions and Lock-In Our shares are listed on the MSE, DSE and the ASE. We have declared equity dividend in the last five years. Please refer to the section on “Dividend Policy” on page no. [●] of this DRHP. Thus, in terms of clause 4.10.1(a) of the SEBI Guidelines, the requirement of promoters contribution and consequently, lock-in thereof, is not applicable to us. Promoters’ participation in the proposed issue: a. The Promoters will bring in Rs. 2,000 lakhs one day before the opening of the Issue. b. A Chartered Accountants’ certificate confirming the receipt of money would be submitted to SEBI. c. The Board of Directors of our Company would pass a Resolution, stating that our Company has received Rs.2,000 lacs from the Promoters and allotment of shares (total number of shares to be allotted to be decided on the finalisation of Issue Price through Book building route) to the Promoters, would be done along with the allotment to all the applicants in the Public Issue. d. A certified copy of the Resolution would be submitted to SEBI before the opening of the Issue. 3.(i) None of our Directors, the Promoters, we and the BRLMs have entered into any buyback and/or standby arrangements for the purchase of our Equity Shares from any person. (ii) An over subscription to the extent of 10% of the Net Issue can be retained for the purpose of rounding off to the nearer multiple of the minimum allotment bid, while finalising the basis of allotment.

15

AML STEEL LIMITED

4. (a) Our top 10 shareholders and the Equity Shares held by them on the date of filing the DRHP are as follows: S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Name

No. of Equity Shares

M/s.Ashok Memory (India) Pvt. Ltd Mr.Ashok Agarwal M/s.Corbin Trades Investments Ltd. Mrs.Anita Agarwal M/s.Betala Global Securities Ltd. Ashok Agarwal (HUF) Mr. Ankit Agarwal Mr..Janba Chougle Mr.Mulchand Golchha Ruli Ram Agarwal & Sons (HUF).

30,36,500 15,01,000 3,25,500 2,61,000 2,02,500 2,00,000 1,90,000 97,000 73,750 60,000

% 40.49 20.01 4.34 3.48 2.70 2.67 2.53 1.29 0.98 0.80

(b) Our top 10 shareholders and the Equity Shares held by them 10 days prior to the date of filing the DRHP are as follows: S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Name M/s.Ashok Memory (India) Pvt. Ltd Mr.Ashok Agarwal M/s.Corbin Trades Investments Ltd. Mrs.Anita Agarwal M/s.Betala Global Securities Ltd. Ashok Agarwal (HUF) Mr. Ankit Agarwal Mr.Janba Chougle Mr.Mulchand Golchha Ruli Ram Agarwal & Sons (HUF)

No. of Equity Shares 30,36,500 15,01,000 3,25,500 2,61,000 2,02,500 2,00,000 1,90,000 97,000 73,750 60,000

% 40.49 20.01 4.34 3.48 2.70 2.67 2.53 1.29 0.98 0.80

(c) Our shareholders and the Equity Shares held by them two years prior to the date of filing the DRHP are as follows: S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Name M/s.Ashok Memory (India) Pvt. Ltd Mr.Ashok Agarwal M/s.Corbin Trades Investments Ltd. Mrs.Anita Agarwal M/s.Betala Global Securities Ltd. Ashok Agarwal (HUF) Mr. Ankit Agarwal Mr.Janba Chougle Ruli Ram Agarwal & Sons (HUF). Mr.Mulchand Golecha

No. of Equity Shares 12,36,300 6,00,400 1,30,200 1,04,400 81,000 80,000 76,000 38,800 24,000 19,700

% 41.21 20.01 4.34 3.48 2.70 2.67 2.53 1.29 0.80 0.66

5. As on the date of the DRHP there are no outstanding warrants, options or rights to convert debentures, loans or other financial instruments into our Equity Shares.

16

AML STEEL LIMITED

6. Shareholding pattern The table below presents our shareholding pattern before the proposed Issue and as adjusted for the Issue; Particulars

Equity Shares owned prior to the Issue Number %

Shareholder Category Promoters Mr. Ashok Agarwal. M/s. Ashok Memory (India) Private Limited. Sub-total (A) Promoter Group Mr. Ruli Ram Agarwal Mr. Ruli Ram Agarwal/ Mrs. Geeta Devi Agarwal Ruli Ram Agarwal & Sons (HUF) Mr. Alok Agarwal Mrs. Sunita Bansal Mr. Ankit Agarwal. Mrs. Anita Agarwal Mr. Ajay Agarwal. Ashok Agarwal (HUF). Mrs. Shweta Agarwal M/s. Corbin Trades Investments Limited Sub- Total (B)

Equity Shares owned after the Issue Number %

15,01,000 30,36,500 45,37,500

20.01 40.49 60.50

[●] [●] [●]

[●] [●] [●]

11,250 800

0.15 0.01

[●] [●]

[●] [●]

60,000 2,250 1,000 1,90,000 2,61,000 14,000 2,00,000 5,250 3,25,500 10,71,050

0.80 0.03 0.01 2.53 3.48 0.19 2.67 0.07 4.34 14.28

[●] [●] [●] [●] [●] [●] [●] [●] [●] [●]

[●] [●] [●] [●] [●] [●] [●] [●] [●] [●]

Total of Promoter and Promoter Group holding [C=A+B] Directors of Ashok Memory (India) Private Limited are Mr. Ruli Ram Agarwal, Mr. Ashok Agarwal and Mrs Anita Agarwal are already covered in A and B above.

56,08,550

74.78

[●]

[●]

Others including Indian Public (D).

18,91,450

25.22

[●]

[●]

Total pre issue share capital (E=A+B+C+D) Public Issue (F) Total post-Issue share capital (G=E+F)

75,00,000

100

-

-

[●] [●]

7.

We have not made any public offerings in the last two years.

8.

Except as stated below, there have been no equity shares sold or purchased by the Promoter, the Promoter Group and the directors of the Promoter (AMIPL), during the period of six months preceding the date on which this DRHP is filed with SEBI. S.No. 1. 2.

9.

Name Mr. Alok Agarwal Mr.Ruli Ram Agarwal and Mrs.Geeta Devi Agarwal

No. of shares purchased/(sold) 2,250 800

Date of transaction 29 December, 2005 1 December, 2005

Price per share (Rs.) 10 10

We have not raised any bridge loan against the proceeds of this Issue. For details on use of proceeds, see the section titled “Objects of the Issue” on page no. [●] of this DRHP.

10. In the Net Issue, in case of over-subscription in all categories, upto 50% of the Net Issue shall be available for allocation on a proportionate basis to QIBs out of which up to 5% of the QIB portion shall be available for allocation on a proportionate basis to Mutual Funds and the balance of the QIB portion to QIBs including Mutual Funds, a minimum of 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and a minimum of

17

AML STEEL LIMITED

35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Under-subscription, if any, in any category would be met with spill over from other categories in the sole discretion of our Company in consultation with the BRLMs. 11. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor. 12. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, and rights issue or in any other manner during the period commencing from submission of the DRHP with SEBI until the equity shares offered hereby have been listed. 13. The Company presently does not have any intention or proposal to alter its capital structure for a period of six months commencing from the date of opening of this Issue, by way of split/ consolidation of the denomination of Equity Shares or further issue of Equity Shares or securities convertible into Equity Shares, whether on a preferential basis or otherwise. However, during such period or at a later date, we may undertake an issue of shares or securities linked to equity shares to finance an acquisition, merger or joint venture by us or as consideration for such acquisition, merger or joint venture, or for regulatory compliance or such other scheme of arrangement if an opportunity of such nature is determined by our Board to be in the interest of the Company. 14. There will be only one denomination of the Equity Shares of the Company unless otherwise permitted by law and the Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time. The Equity Shares offered through the Issue will be fully paid up. 15. Our Company has not issued any Equity Shares out of revaluation reserves. 16. Our Company has not issued any shares or agreed to issue any shares for consideration other than cash except the following: a.

b. c.

On 14 August, 1993 the Company allotted at par 1,50,000 Equity Shares of Rs.10/- each to Mr.Ashok Agarwal towards partial purchase consideration payable on the takeover of the business from Trans Asia Exports (a sole proprietary concern of Mr.Ashok Agarwal) under an agreement dated 14 August, 1993. On 15 June, 1995 the Company allotted 13,94,100 Equity Shares of Rs.10/- each as fully paid up bonus shares in the ratio of 3:1 by capitalizing the free reserves built out of genuine profits. On 23 August, 2005 the Company allotted 45,00,000 Equity Shares of Rs.10/- each as fully paid up bonus shares in the ratio of 1.5:1 by capitalizing the free reserves built out of genuine profits.

17. We have 1320 members as of 17 March, 2006. 18. As on the date of filing this DRHP with SEBI, there are no outstanding financial instruments or any other right, which would entitle the Promoters or shareholders of our Company or any other person any option to receive Equity Shares after the Issue. 19. The Company does not have any stock option plan.

18

AML STEEL LIMITED

OBJECTS OF THE ISSUE The Objects of the Issue are as stated below: I. To finance the following capital expenditure programmes: a. b.

Investment in AMLSPL, a wholly owned subsidiary, to set up an Integrated Steel Plant in Saraikela District, Jharkhand. Acquisition of existing steel plants.

II. To invest in the existing subsidiaries to fund their working capital requirement. III. To meet our working capital requirement. IV. To meet the expenses of the issue. V. To enable listing of the Equity Shares offered through this Issue on the Stock Exchanges. REQUIREMENT OF FUNDS AND MEANS OF FINANCE The total estimated fund requirement is as follows: S.NO. I

II III IV

(Rs. in lakhs)

PARTICULARS Capital Expenditure Programme A. Investment in AMLSPL, our wholly owned subsidiary, to set up an Integrated Steel Plant in the state of Jharkhand. B. Acquisition of existing steel plants. Total Investment in the existing subsidiaries to fund their working capital requirement Meet our working capital requirement.

COST 6,000.00 2,000.00

To meet the expenses of the issue. TOTAL

8,000.00 2,002.00 1,129.00 869.00 12,000.00

Means of Finance: Particulars Equity Capital Promoters contribution Public TOTAL

Amount (Rs. in lakhs) 2,000.00 10,000.00 12,000.00

The main objects, objects incidental or ancillary to the main objects, as set out in the Memorandum of Association enable us to undertake our existing activities and the activities for which the funds are being raised. A major portion of the requirement of funds shall be met out of the proceeds of the public issue. Excess, if any will be utilised for general corporate purposes. No part of the issue proceeds will be paid as consideration to Promoters, Directors and Key Managerial Personnel. Our capital expenditure plans are subject to various factors including but not limited to possible cost overrun; construction/development delays or defects; receipt of critical governmental approvals. In view of the dynamic nature of the steel industry, we may have to revise our business plan from time to time, depending on the market scenario and consequently the fund requirement may also change. This may include rescheduling of the proposed capital expenditure programme vis-à-vis our current plans at the discretion of the Management.

19

AML STEEL LIMITED

I. CAPITAL EXPENDITURE PROGRAMME A. Investment in AMLSPL, our wholly owned subsidiary, to set up an Integrated Steel Plant in Saraikela District, Jharkhand. AMLSPL, incorporated on 30 January, 2004, has signed a MoU with the Jharkhand State Government, dated 26 February, 2004, for setting up of an Integrated Steel Plant and for assistance in obtaining major raw materials such as iron ore, coal and other minerals and providing the required infrastructure. The Integrated Steel Plant will consist of: i.

A DRI plant (Sponge Iron Plant) having a production capacity of 1,10,000 TPA.

ii.

A Steel Melt Shop having a production capacity of 42,000 TPA of steel billets via induction furnace route.

iii.

A captive power plant of 9.6 MW capacity.

For further details about the incorporation, business and financial highlights of AMLSPL please refer to the section on “History and Corporate Matters” on page no [●] of this DRHP. Appraisal The financial viability of the capital expenditure programme for the Integrated Steel Plant for the manufacture of sponge iron and steel billets has been appraised by SBI Caps vide their Financial Appraisal Report dated 30 July, 2005. SBI Caps vide their letter dated 10 December, 2005 have given their consent for their name being included in the DRHP and for their Financial Appraisal Report being used in this document, wherever required. According to the Financial Appraisal Report, the overall financial, liquidity and profitability parameters of the capital expenditure programme project are considered reasonable and satisfactory and has been viewed as financially viable. Total Cost of the Project The total fund requirement to set up an Integrated Steel Plant is estimated to be Rs.11,403.00 lakhs. The different heads of the Project cost are detailed in the table given below: PARTICULARS Land and site development Building Iron Ore Mining Plant and machinery Miscellaneous fixed assets Provision for contingencies Total hard cost Pre-operative expenses Interest during construction Working capital margin Upfront fees Total soft cost TOTAL COST

COST (Rs. in lakhs) 150.00 2,534.00 1,000.00 6,200.00 310.00 306.00 10,500.00 150.00 381.00 353.00 19.00 903.00 11,403.00

(Source: SBI Caps Financial Appraisal Report)

20

AML STEEL LIMITED

Details of the Major Heads of Expenditure: The detailed break up of the cost under each of the major heads of expenditure such as land and site development, building, iron ore mining, plant and machinery and miscellaneous fixed assets have been estimated by the Management. Land and Site Development: It is estimated that to set up the Integrated Steel Plant, 70 acres of land will be required. AMLSPL has acquired approximately 60.71 acres of land for the project near village Saldih, in Saraikela district in Jharkhand state out of which 59.41 acres have been purchased and 1.30 acres has been agreed to be given on lease for a period of 90 years by the State Government of Jharkhand vide their letter dated 7 July, 2005. AMLSPL has already spent an amount of Rs.81.27 lakhs (approx.) on acquisition of land and site development. Building: The estimated built up area of the Control buiding, DG building and other buildings is estimated to be 730 square metre. AMLSPL has appointed M/s. Hari Environmental Systems for civil construction and mechanical fabrication and erection, who have estimated Rs.2,534.34 lakhs to be the cost of construction of building, the break up of which given below: Civil Construction: STRUCTURE 4X100 TPD Sponge iron plant Kiln Section Stock House and its circuit Product House and its circuit Coal Shed Iron Ore Ground Hopper Coal Ground Hopper Coal Crusher House Iron Ore Crusher House Control Building, DG Building and other buildings Sub Total 9.6 MW Power Plant Boilers ESP Chimney TG Building Cooling Tower AFBC DM Plant Pipe Rack Other Miscellaneous Sub Total Steel Plant (2X8 MT Furnace) Induction Furnace Steel Melt Shop Control Room Hydraulic Room CCM Scale Pit Cooling Bed Overhead Tank Steel RB-3

MATERIALS

(Rs. in lakhs) LABOUR

100.00 22.00 18.00 21.00 6.00 6.00 4.00 5.00 32.00

60.00 15.00 12.00 14.00 3.00 3.00 1.00 1.50 11.00

214.00

120.50

10.00 20.00 1.50 100.00 80.00 5.00 22.00 20.00 20.00 278.50

20.00 11.00 1.00 80.00 70.00 7.00 15.00 12.00 13.00 229.00

14.75 17.00 18.00 5.00 8.50 6.50 0.75 12.00 42.00

10.00 11.12 11.50 3.40 5.12 4.50 0.65 10.00 28.00

21

AML STEEL LIMITED

Sub Total Miscellaneous Boundary Wall Road ADM Building Paving Sub Total TOTAL

124.50

84.29

55.00 100.00 6.00 20.00 181.00 798.00

43.00 70.00 4.00 12.00 129.00 562.79

Mechanical Fabrication and Erection: STRUCTURE Sponge iron First kiln with accessories 600 MT Fabrication & Erection 320 MT Erection Second kiln with accessories 200 MT Fabrication & Erection 320 MT Erection Third kiln with accessories 250 MT Fabrication & Erection 320 MT Erection Fourth kiln with accessories 200 MT Fabrication & Erection 220 MT Erection Miscellaneous Sub Total Power Plant 200 MT Fabrication & Erection 220 MT Erection Miscellaneous Sub Total Steel Plant 800 MT Fabrication & Erection 350 MT Erection Miscellaneous Sub Total TOTAL TOTAL COST (Civil + Mechanical) TOTAL COST (Materials+Labour)

MATERIALS

(Rs. in lakhs) LABOUR

168.00

43.20 17.92

56.00

14.40 17.92

70.00

18.00 17.92

56.00 80.00 430.00

14.40 1.79 30.00 175.55

84.00 -55.00 139.00

21.60 11.20 25.00 57.80

224.00 -50.00 274.00 843.00

57.60 19.60 20.00 97.20 330.55

1,641.00

893.34

2,534.34

Plant and Machinery for the Integrated Steel Plant: To install the necessary equipments and accessories in the Integrated Steel Plant, for all the units viz., DRI Plant, Steel Melt Shop and the captive power plant, AMLSPL requires Rs.6,200.00 lakhs approx.). The estimated break up of the cost is given below: S.No. 1. 2. 3.

Particulars For DRI Plant For captive power plant For Steel melt Shop TOTAL

Cost (Rs. in lakhs) 2,666.02 541.95 2,994.31 6,202.28

22

AML STEEL LIMITED

For these estimates, AMLSPL has relied upon the purchase orders for the equipments which have been ordered, the quotations invited for the equipments for which orders are yet to be placed and its past experience. The detailed break up of the cost of the equipments and accessories are given below: (a) Equipment required for the DRI plant: AMLSPL has identified the major equipment required for the DRI Plant. They have been classified as: i. Plant and machinery for which firm purchase orders have been placed. ii. Plant and machinery for which suppliers have been identified but firm purchase orders have not been placed. iii. Plant and machinery for which supplier has not yet been identified and AMLSPL is in the process of inviting and receiving quotations. i. The details of the plant and machinery for which firm purchase orders have been placed are as under: Description

Quantity Amount Name of the (Rs. in supplier lakhs) Complete set of kiln and 2 sets 462.12 Hari Machines cooler

S.S.Components

2 sets

Drive systems

4 sets

Vibrating screens

4 Nos.

Electrostatic precipitator

1 No.

Wet Scrapper Chain

2 Sets

Slip Rings and D.P.valves

2 Sets

Hydraulic and Pneumatic Equipments Screw Compressor

4 Sets 2 Nos.

Vibratory Equipments and Feeders Single and Double Roller Crushers Cooling Tower

8 Nos.

100 Tonne Weigh Bridge Bag filters

1 No.

Conveyor belts TOTAL

Electronic

1 Set 1 No.

1 No. 5 items

Date of placement Date/Expected date of order and no. of supply

ASPL/PO/001 25.02.05 ASPL/PO/006 03.06.05 32.64 Dwarkesh ASPL/PO/002 Engineering 06.05.05 79.84 Elecon ASPL/PO/003 Engineering 07.05.05 20.20 Hari machines ASPL/PO/004 26.05.05 61.70 Associated ASPL/PO/007 Cements 6.06.05 11.49 Bevcon Wayers ASPL/PO/008 13.06.05 13.78 Bemci Industries ASPL/PO/009 14.06.05 22.26 Vamsee ASPL/PO/010 Engineering 15.06.05 8.53 Elgi Equpments ASPL/PO/011 15.06.05 16.69 Electro Zovad ASPL/PO/012 17.06.05 19.05 Moktali ASPL/PO/013 22.06.05 Engineering 5.18 Paharpur Cooling ASPL/PO/014 Towers 22.06.05 11.37 Sanmar ASPL/PO/015 Engineering 25.06.05 18.15 Reico Industries ASPL/PO/016 27.06.05 21.39 Sempetrans ASPL/PO/017 Nirlon Ltd., 4.07.05 804.39

23

dated Delivery date for 1 & set: 9 January, 2006 dated Delivery date for 2nd set: 15 April, 2006 dated 4 March, 2006 dated 5 March, 2006 dated 15 March, 2006 dated 25 February, 2006 dated 15 March, 2006 dated 30 March, 2006 dated 18 March, 2006 dated 16 February, 2006 dated 14 March, 2006 dated 14 March, 2006 dated 24 February, 2006 dated 28 January, 2006 dated 28 February, 2006 dated 16 February, 2006

AML STEEL LIMITED

ii. The details of the plant and machinery for which suppliers have been identified but firm purchase orders have not yet been placed are given below. The cost estimates of these equipments have been arrived on the basis of the above-mentioned purchase orders, placed for a part of the same type of plant and machinery. Description

Quantity

2 sets of kiln and cooler S.S.Components Drive systems Vibrating screens Slip Rings and D.P.valves Hydraulic and Pneumatic Equipments Screw Compressor Conveyor belts TOTAL

2 sets 4 sets 8 sets 8 Nos. 4 Sets 8 Sets 4 Nos. 10 items

Amount (Rs. in lakhs) 462.12 65.27 159.68 40.40 27.55 44.53 17.06 42.77 859.38

Basis of cost estimate Ref. ASPL/PO/001 25.02.05 Ref. ASPL/PO/002 06.05.05 Ref. ASPL/PO/003 07.05.05 Ref. ASPL/PO/004 26.05.05 Ref. ASPL/PO/009 14.06.05 Ref. ASPL/PO/010 15.06.05 Ref. ASPL/PO/011 15.06.05 Ref. ASPL/PO/017 04.07.05

iii. The following are the details of the plant and machinery for which supplier has not yet been identified and AMLSPL is in the process of inviting and receiving quotations. Description

Quantity

Pumps

4 sets

Amount (Rs. in lakhs) 23.42

PCC and MCC Panels

4 sets

81.78

Electrical Fittings

4 sets

18.44

Motors

4 sets

121.07

Refractories – Ref Cast

4 sets

156.15

Refractories – Bricks

4 sets

47.61

Refractories – Lining Work

4 sets

20.56

Idlers Rollers & Pulleys

4 sets

192.01

Non Metallic Expansion Joint Fabrics 15 KVA & 125 KVA Diesel Genset Variable Frequency Drive with complete set Fans

4 sets

5.08

4 sets

32.42

4 sets

227.91

4 sets

48.10

Fans and Blowers

4 sets

27.70

TOTAL

Details of quotations (Name, reference and date) Basic Engineers: Q-3151-05 dt.01.09.2005 Chaitanya Electricals: 336:05-06 dt.19.11.2005 Philips India: D62/PIL/SR/05-088 dt.19.10.2005 Electromech (India): EMI/177/05-06 dt.21.11.2005 Sharada Ceramics SCPL: HYD /AML/07.07 dt.07.07.2005 Sharada Ceramics SCPL: HYD/AML/07.07 07.07.2005 Sharada Ceramics SCPL:HYD/AML/07.07 07.07.2005 Swastik Systems: SS/ASPL/8706 dt.12.08.2005 Ke Burgman P.1105.0926.SRS.CHN 14.11.2005 Powrica Limited Q04/0171/KMK/1 dt.28.10.2005 Larsen & Turbo Ltd., CPCM/SID/AML/24102005 dt 31.10.2005 Nadi Airtechnics Pvt. Ltd 0700/R001 dt.16.11.2005 Aircon System OFF 115 dt.12.02.2004

1,002.25

(b) Equipment required for the steel melt shop for manufacturing steel billets: AMLSPL has identified the major equipments required for manufacturing steel billets and is in the process of receiving quotations for the same. No purchase orders have been placed yet.

24

AML STEEL LIMITED

Description

Quantity

Continuous Casting Machine - 2 strand, 12 tonne Capacity Continuous Casting Machine - 3 strand, 30 tonne Capacity Induction Steel Melting Line

1 Set 1 Set 1 Set

TOTAL

Amount Details of quotation (Rs. in lakhs) (Name, reference and date) 120.97 Concast (India) Ltd CC/SALES dt. 12.11.03 278.24 Concast (India) Ltd CC/SALES dt. 12.11.03 142.74 Megatherm Electronics Pvt. Ltd. MT/SQIT/967 541.95

(c) Equipment required for the captive power plant: The major equipment required for the captive power plant have been identified and AMLSPL is in the process of receiving quotations for them. No purchase orders have been placed for any of these equipments. The details are given below. Description

Quantity

Oil Filled transformer Oil burner and fuel handling system

4 Sets 4 Sets

Amount (Rs. in lakhs) 162.97 80.00

Cooling tower for power plant

4 Sets

203.24

Power unit

4 Sets

210.49

Grease Lubrication Coal Crushing & Screening

4 Sets 4 Sets

106.46 445.18

Magnetic Drum Separator HT panels – complete set EOT Cranes

4 Sets 4 Sets 4 Sets

168.15 288.83 391.47

10 Nos.

78.63

Crushing Plant

1 set

96.77

25 Tonne Capacity Crane

1 Set

29.00

Helical Gear Box

1 Set

139.82

Waste Heat Recovery Boiler

1 Set

509.80

DG Set – 1250 KVA

1 Set

66.60

6 nos.

16.90

40 Tonne Hydraulic truck loader

Electrical Installations MCC Panel TOTAL

–

PCC,

Details of quotation (Name, reference and date) Crompton Greaves YNV/T-RNC Westman thermal Engineering WTH/AML Paltach Cooling Towers Ltd., PCTE/3333 dt. 8.03.04 Inductotherm (India) Pvt. Ltd QBA 040064 dt. 2.07.04 Cenlub Industries CIL/2089 dt. 12.02.04 Puzzolana Machinery Fabricators PMFH/8277 dt. 04.03.04 P.R.Projects PRP/159 dt. 18.03.04 ABB Limited ABBL/AML Elite Steels Pvt. Ltd. ESPL/0358 dt. 10.07.04 Jaypee Engineering Co. Pvt. Ltd. JEHECL/642 dt. 18.11.04 Bhagwati Prasad Agarwala BPA 5741 dt. 29.4.2004 Avon Cranes Pvt. Ltd AC-1901865 dt. 26.04.2004 Shanthi Gears Ltd. SGM/623 dt.02.12.2005 Sitson India Pvt Ltd SI/HRSG/0702 dt.07.02.2004 Powerica Limited Q04-1005-RTM dt.27.12.2005 Chaitanya Elctricals 336: dt.19.11.2005

2,994.31

Miscellaneous Fixed Assets: Miscellaneous Fixed Assets includes the cost of all utilities, viz., miscellaneous office and electrical equipments, furniture fixtures, vehicles and mobile equipments, etc., The total cost estimated by AMLSPL for the project is Rs. 310.00 lakhs. No quotations have been invited for these equipments.The break up of the cost of the miscellaneous assets required is given below: Description Electrical installations

Amount (Rs. in lakhs) 100.00

25

AML STEEL LIMITED

Fire extinguishing equipments (Fire extinguishers, dry powder type, safety equipments for workmen, heat proof, aprons, goggles etc.,) Vehicles Furniture and fittings Communication systems Miscellaneous TOTAL

75.00

50.00 50.00 20.00 15.00 310.00

Iron Ore Mining: The Ministry of Mines, GoI has, vide its letter No.5/8/2005-M.IV dated 16 August, 2005, under Section 5(1) of the Mines and Minerals Development & Regulation Act, 1957, has agreed to the grant of mining lease for a period of twenty years over an area of 383.54 acres for iron and manganese ore in Mauza Bokna District, West Singhbum, Jharkhand in favour of AMLSPL. The site is around 100 kms from the Integrated Steel Plant. The total cost to be incurred is estimated Rs.1,000.00 lakhs and the break up is given below: S.No. 1. 2.

Particulars Amount (Rs.in lakhs) Cost of mining equipments 400.00 Cost of mine development 600.00 TOTAL 1,000.00 (Source: SBI Caps Financial Appraisal Report) The break up of the cost estimated to be incurred for mine development is given below: S.No. Particulars Amount (Rs.in lakhs) 1. Geology report and mine planning 40.00 2. Exploration expenses 150.00 3. Feasibility report 15.00 4. Environment management plan 35.00 5. Mine haul roads 80.00 6. Preparing broken open areas for mining involving forest 100.00 growth, clearing passage 7. Afforestation 115.00 8. Magazine room 25.00 9. Mining office 40.00 TOTAL 600.00 (Source: Management’s estimates) Details of the plant and machinery required for iron ore mining are as follows: The break up of the cost of equipment required for mining is given below: Description

Quantity

Rate (Rs. in lakhs) 70.00 50.00 20.00 35.00 30.00 20.00 25.00 12.00 13.00

Hydraulic Excavator- 2.8-4 cu.mt 1 No. Dozers - 320-410 HP 2 Nos. Dumpers- 20 Tonne 3 Nos. Drills with compressors - 150 mm 2 Nos. Motor grader 1 No. Explosive van 1 No. Pay loader - 4.5 cu.mt. 1 No. Water tanker 1 No. Diesel tanker 1 No. TOTAL No quotations have been invited for the above-mentioned equipments.

26

Amount (Rs. in lakhs) 70.00 100.00 60.00 70.00 30.00 20.00 25.00 12.00 13.00 400.00

AML STEEL LIMITED

Provision for Contingencies: The total estimated project cost is based on estimates, quotation received and some purchase orders placed for capital equipment. Considering that some pricing assumptions may change, the provision for contingency has been estimated at Rs.306.00 lakhs, which is 3% of the total hard cost of Rs.10,194.00 lakhs. (Source: SBI Caps Financial Appraisal Report) Pre Operative Expenses: Preliminary and pre operative expenditure includes expenses for both technical services as well as expenses such as legal fee, printing and stationery, salary, electricity, travelling etc., incurred during the construction phase of the project. The cost component is estimated at Rs.150.00 lakhs. (Source: SBI Caps Financial Appraisal Report) Interest During Construction: Interest during construction has been calculated on the debt drawn down schedule estimated by AMLSPL, which is based on the capex implementation plan of the project. The commercial date of operation for the project is estimated to be 1 November, 2006. Also it is assumed that approximately 50% of the equity will be brought in upfront and the balance equity will be brought, alongwith debt, on a pro rata basis. The interest rate on term loan has been considered at 9%. The amount is estimated to be Rs.381.00 lakhs. (Source: SBI Caps Financial Appraisal Report) Working Capital Margin: The break up of the estimated working capital requirement, as included in the total cost of project of the Integrated Steel Plant, is given below: PARTICULARS Raw Materials – 0.75 months Work in Progress – 0.03 months Finished goods – 1 month Debtors – 1 month TOTAL Less: Creditors – 1 month Working capital gap Margin money (25%)

COST (RS. IN LAKHS) 324.00 17.00 850.00 979.00 2,170.00 756.00 1,414.00 353.00

(Source: SBI Caps Financial Appraisal Report) Raw Materials: The major raw materials estimated to be required for producing sponge iron are 1,76,000 TPA of iron ore, 1,32,000 TPA of coal and 3,300 TPA of dolomite and the primary major raw materials required for the production of Steel Billets metal shop are 39,070 TPA of Sponge Iron and 8,750 TPA of Pig Iron. For further details on the raw material used by us in our existing business and that required for the proposed project, please refer to the section on “Business Overview” on page no.[●] of this DHRP. Utilities and Manpower: The power requirement for the Project will be utilised from the captive power plant proposed to be set up in the integrated steel plant and the water supply would be sourced from bore well and intake well

27

AML STEEL LIMITED

situated inside the plant premises and from Saraikela River. For manpower, AMLSPL proposes to employ 222 people at different levels of operations. For details on the requirement of utilities and manpower please refer to the section on “Business Overview” on page no [●] of this DRHP. Government Approvals/Licensing Arrangements for the Project We need to obtain several licences/approvals/permissions under various statutes from several authorities prior to setting up of the Integrated Steel Plant. For details of licences/ approvals/ permissions obtained/ applied for the project kindly refer to the section titled ‘Licences and Approvals’ on page no [●] of this DHRP. Schedule of Implementation for the Integrated Steel Plant: Activity Land and site development Civil works DRI Plant Steel melt shop Procurement and installation of plant and machinery DRI Plant Steel Melt Shop Trial production DRI Plant Steel Melt Shop Commencement of commercial production DRI Plant Steel Melt Shop

Expected date of commencement August 2005

Expected date of completion October 2006

November 2005 March 2006

July 2006 August 2006

September 2005 October 2005

September 2006 October 2006

November 2006 November 2006

November 2006 November 2006

November 2006 November 2006

November 2006 November 2006

Means of Finance: The proposed means of finance given by the Management is as follows: Description Equity Debt Total

Amount (Rs. in lakhs) 6,000.00 5,403.00 11,403.00

The SBI Caps Financial Appraisal Report had envisaged in its means of finance, an equity component of Rs.3,801.00 lakhs and a debt component of Rs.7,602.00 lakhs. The Management proposes to increase the equity component in the means of funding the total cost of the Project in order to circumvent the risk of burden of interest associated with debt and also to have a larger equity base that will afford flexibility to AMLSPL to raise funds in future. Funding Plan: Foer the equity portion, we plan to invest in AMLSPL to the tune of Rs.6,000.00 lakhs. No dividends are assured for the investment made by us and it will depend upon the operational and financial performance of AMLSPL. For the debt component, AMLSPL has been sanctioned term loans by the Banks, totalling to Rs.5,000.00 lakhs.

28

AML STEEL LIMITED

The details are given below: S.No.

Name of the Bank

Amount (Rs. in lakhs)

Major Conditions of sanction

1. The Federal Bank Limited vide their letter dated 8 September, 2005.

1,000.00

Period - 88 Months Rate - BPLR- 2.5 (9%) PF – 0.25% Repayment - Repayable by 20 Quarterly instalments. First instalment due on 31 March 2008. Security - Primary: Paripassu charge on the project assets (excluding soft cost such as WC margin, interest etc) value – Rs.10,194/- (hard cost) Margin – 25%. Collateral: Second charge on pari-passu basis on current assets Personal Guarantees of the following Promoter Directors to be executed: Mr.Ashok Agarwal, Mr.Ajay Agarwal and Mrs.Anita Agarwal. Predisbursement conditions: The limit will be released only after the Promoters invest a minimum of Rs.2,223 lakhs up front and only after the debt component is fully tied up and a consortium is formed with SBI/CBI assuming leadership.

2.

UCO Bank vide their letter Ref.NPT/ADV/170/2006 dated 24 January, 2006

2,000.00

Rate – Concessional rate of interest at BPLR- 2% which will be 9% p.a. at present. Interest to be serviced during the moratorium period. Moratorium period: 12 months from commercial operation date (COD). Repayment - 20 Quarterly instalments commencing after moratorium period of 12 months from COD. Security - Primary: i.

First pari passu charge on all fixed assets of AMLSPL including equitable mortgage of immovable properties shared along with other member banks.

ii.

Second charge on pari passu basis with other term lenders on all the current assets of the company i.e., stocks, receivables etc.,

Personal Guarantees of Mr.Ashok Agarwal, Mr.Ajay Agarwal and Mrs.Anita Agarwal. Predisbursement conditions: The facilities are to be extended strictly under consortium arrangements with other banks. No disbursement should be made unless means of finance are fully tied up and formalities for consortium arrangement are completed for the total

29

AML STEEL LIMITED

requirement of Rs.7,602.00 lakhs and government clearances obtained. Promoters should bring in atleast 50% of the capital upfront. Corporate guarantee of all group companies to be obtained. 3.

Central Bank of India vide their letter no.MTR/ADV/2005-06/314 dated 25 January, 2006

Rs.2,000.00

Interest : BPLR (presently at 10%) Margin: 30% Security: Pari passu first charge on projected block assets of Integrated Steel Plant whose estimated cost is Rs.110.00 crores. Sub limit within Term Loan Letter of Credit (Inland/Foreign) DP/DA for capital goods with usance maximum upto 180 days. Limit: Rs.500.00 lakhs. Interest: as per C.O. circular. Margin: 25% Security: Document of title to current and future machineries. Collateral security: The proposed aggregate term loan of Rs.7,600.00 lakhs shall be collaterally secured by the pledge of 100% of the shares (value estimated at Rs.38.00 crores) to be held by the holding company AML Steel Ltd., in their subsidiary AML Steel & Power Limited. The proposed term loan of Rs.7,600.00 lakhs is to be covered by the guarantee of Mr.Ashok Agarwal, Mrs.Anita Agarwal, Mr.Ajay Agarwal, Mr.Poonam Chand Jangir and corporate guarantee of the holding company, M/s. AML Steel Limited. The company to achieve financial closure by receipt of regular sanction from lenders for the entire proposed term loan component of Rs.7,600.00 lakhs in full. The Company to submit copies of sanction letters received from other participating term lenders. Consortium is to be formed and joint documents to be got executed.

TOTAL

5,000.00

The above-mentioned term loans have been sanctioned by the Banks based on the debt requirement of Rs.7,600.00 lakhs given in the SBI Caps Financial Appraisal Report. With respect to the proposed project to be executed by AMLSPL, we confirm that firm arrangements of finance through verifiable means towards 75% of the stated means of finance, as estimated by the Management, excluding the amount of Rs.6,000.00 lakhs to be invested by us out of the proceeds of our proposed public issue, have been made.

30

AML STEEL LIMITED

Deployment of funds by AMLSPL for the proposed Project The Statutory Auditors, M/s. K P.Jain and Co., Chartered Accountants have issued a certificate dated 1 March, 2006 for the deployment of funds in the proposed Project of AMLSPL, the extracts from which are reproduced below:

“In our opinion and to the best of our information and explanations given to us, we certify that till 28 February, 2006 the company has already made an investment of Rs.14,78,76,130.00 (Rupees Fourteen Crores Seventy Eight Lakhs Seventy Six Thousand One Hundred and Thirty Only) as per the details given. Details of Investments made in Project till 28.02.2006 PARTICULARS AMOUNT (in Rs.) Land 81,26,897.00 Civil Construction 7,90,50,673.55 Advances against plant and machinery 4,81,88,017.30 Vehicles 7,09,008.00 Miscellaneous fixed assets 16,78,617.80 Preliminary and preoperative expenses 1,01,22,916.35 TOTAL 14,78,76,130.00 The above expenditure has been met out of the funds received from the promoters of the company against Equity Issue. Yours faithfully, For K.P.Jain & Co., Chartered Accountants Sd/Kishore Kumar P.Jain (Proprietor) Membership No:27236 B. Acquisition of Existing Steel Plants. We have been studying the possibility of strategic acquisitions within the steel sector. We have identified a couple of existing plants manufacturing billets with downstream rolling mills producing structural steel and reinforcement bars to the tune of 50,000 to 60,000 MTs. We are still in the process of discussions and have not signed a MoU/Letter of Intent in this regard and therefore, the form of investment is not yet decided. In case the acquisition price exceeds the amount allocated for in this present issue, the Company will bridge the gap via internal accruals or by raising additional debt. II. INVESTMENT IN SUBSIDIARIES TO HELP THEM MEETING THEIR WORKING CAPITAL REQUIREMENT. Our subsidiaries, AIPL and ASIPL have been recording growth in the form of increased sales. While AIPL has a working capital limit of Rs.350.00 lakhs with Central Bank of India, ASIPL and AMLSPL have not availed any such facility till date. The Project for setting up of the Integrated Steel Plant is proposed to be executed by AMLSPL. To enable them carry on their existing operations smoothly and meet their future requirements, we propose to invest in our subsidiaries by way of equity to the tune of Rs.2,002.00 lakhs, which will be deployed by these entities in the form of working capital. The working capital requirement of the subsidiaries has been arrived as follows: (Rs. in lakhs) AIPL

ASIPL

AMLSPL

Total

Inventory: Raw Materials Work in Progress Finished Goods

230.00

161.00

324.00

715.00

9.00

6.00

17.00

32.00

428.00

270.00

850.00

1548.00

31

AML STEEL LIMITED

Total Inventory Debtors Total Current Assets Less: Creditors for Raw materials Net Working Capital Less: 1. Banking facilities available with Central Bank of India 2. Working capital margin added to Project cost 3. Working capital sanctioned Working Capital need to be met out of Public issue

667.00

438.00

1191.00

2296.00

461.00 1128.00 276.00 852.00

294.00 732.00 193.00 539.00

979.00 2170.00 756.00 1414.00

1015.00 4030.00 1225.00 2805.00

150.00

0.00

0.00

150.00

0.00 0.00

0.00 0.00

353.00 300.00

353.00 300.00

702.00

539.00

761.00

2002.00

Notes: 1. 2. 3. 4. 5.

Raw material is assumed to be at a level of 25 days consumption of Raw Materials Work in Progress is assumed to be at just 1 day's consumption of Raw Material alone Finished goods is assumed to be at a level of 30 days of Cost of Sales Debtors is assumed to be at a level of 30 days of Gross Sales Creditors is assumed to be at al level of 30 days of Raw Material Consumption

AMLSPL has been sanctioned a working capital of Rs.300.00 lakhs by Central Bank of India, vide their letter no. MTR/ADV/2005-06/314 dated 25 January, 2006. The terms and conditions which are included in the afore said letter include the following: For working capital in the form of CC (H): Interest: BPLR (presently at 11%) Margin: 25% Security: Pari passu first charge on current assets inventory and Trade receivables with age upto 90 days. III. OUR WORKING CAPITAL REQUIREMENT. Our working capital limits with the banks has not been proportionate to the increase in sales recorded, which has caused some strain on our resources and profitability. To ensure smooth functioning of our operations and also for meeting our future requirements, we intend to use Rs.1,129.00 lakhs out of the public issue proceeds to meet our enhanced working capital requirement. The calculations for the working capital requirement is given below: Particulars

Amount (Rs. in lakhs)

Inventory: Raw Materials

695.00

Work in Progress Finished Goods

28.00 1010.00

Total Inventory

1733.00

Debtors Total Current Assets Less: Creditors for Raw materials Net Working Capital Less: 1. Banking facilities available with Central Bank of India 2. Working capital margin added to Project cost Working Capital need to be met out of Public issue

1080.00 2813.00 834.00 1979.00 850.00 0.00 1129.00

32

AML STEEL LIMITED

Notes: 1. Raw material is assumed to be at a level of 25 days consumption of Raw Materials 2. Work in Progress is assumed to be at just 1 day's consumption of Raw Material alone 3. Finished goods is assumed to be at a level of 30 days of Cost of Sales 4. Debtors is assumed to be at a level of 30 days of Gross Sales 5. Creditors is assumed to be at al level of 30 days of Raw Material Consumption Our existing working capital limits: Currently we have working limit of Rs.250.00 lakhs with the Central Bank of India. Nature of limit Amount Security Margin (Rs. in lakhs) Fund based along with sub limits Cash credit (H) 250.00 Hypothecation of stocks and 25% bookdebts age upto 90 days 50%

Interest

PLR+2%

IV. The expenses for this Issue includes underwriting and management fees, selling commission, distribution expenses, legal fees, fees to advisors, stationery costs, advertising expenses and listing fees payable to the Stock Exchanges, among others. The estimated issue expenses are as follows: S.No. 1. 2. 3. 4. 5. 6.

Preliminary and preoperative expenses Issue Management Registrars fee Printing of stationery Advertising and marketing expenses Underwriting, brokerage and selling commission Other expenses TOTAL

Amount (Rs. in lakhs) [●] [●] [●] [●] [●] [●] [●]

Year Wise Break Up of Utilisation of Issue Proceeds The Company plans to utilise the entire Issue Proceeds as follows: (Rs. in lakhs) S.No. Particulars Quarter wise deployment of funds 31 March, 2006 (I)

Capital Expenditure programme A. Investment in AMLSPL, to set up an Integrated Steel Plant. B. Acquisition of existing steel plants Total capital expenditure (A+B) 2. Investment in subsidiaries to fund their working capital requirement 3. Working capital requirement 4. Issue expenses Total * Q – Quarter

1Q

2Q

3Q

4Q

31 March, 2007 (II=1Q+2Q+3Q+4Q)

Total (I+II)

1.

2,000.00 1,000.00 1,000.00 1,000.00 1,000.00

--

1,000.00 1,000.00

--

--

2,000.00 2,000.00 2,000.00 1,000.00 1,000.00

4,000.00

6,000.00

2,000.00

2,000.00

6,000.00

8,000.00

--

2,002.00

--

--

--

2,002.00

2,002.00

--

1,129.00

--

--

--

1,129.00

1,129.00

27.00 842.00 ---2,027.00 5,973.00 2,000.00 1,000.00 1,000.00 (Estimated by the Management)

33

869.00 869.00 9,973.00 12,000.00

AML STEEL LIMITED

Deployment of funds pending utilisation Pending any use as described above, the proceeds of this Issue will be kept in fixed deposits with Scheduled Banks. These investments would be authorised by Board of Directors of the Company or a duly authorised committee thereof.

Deployment of funds till date The Statutory Auditors, M/s. K P.Jain and Co., Chartered Accountants have issued a certificate dated 1 March, 2006 for the deployment of funds in the proposed Project, the extracts from which are reproduced below: “In our opinion and to the best of our information and explanations given to us, we certify that till 28 February, 2006 the company has already spent Rs.19,63,36,667.00 (Rupees Nineteen Crores Sixty Three Lakhs Thirty Six Thousand Six Hundred and Sixty Seven Only) as per the details mentioned below: Details of the deployment of the funds PARTICULARS Investment in AMLSPL, our wholly owned subsidiary as share application money. Issue Expenses TOTAL

AMOUNT (in Rs.) 19,41,00,000.00 22,36,667.00 19,63,36,667.00

The above expenditure has been met out of the funds received from the promoters of the Company towards their contribution in the public issue and internal accruals. Yours faithfully, For K.P.Jain & Co., Chartered Accountants Sd/Kishore Kumar P.Jain (Proprietor) Membership No:27236 Monitoring of utilisation of funds The Board and the Monitoring Agency appointed by the Company will monitor the utilisation of the proceeds of the Issue.

34

AML STEEL LIMITED

BASIC TERMS OF THE ISSUE Public Issue of [●] Equity Shares of the face value of Rs. 10/- each, at a price of Rs. [•] for cash at a premium of Rs. [●] per Equity Share aggregating Rs. 12,000 lakhs is being made through a 100% Book Building Process. Non-Institutional Bidders Minimum of [●] Equity Shares or Net Issue less allocation to QIB Bidders and Retail Individual Bidders

Particulars

QIBs

Number of Equity Shares*

Upto [●] Equity Shares or Net Issue less allocation to Non-Institutional Bidders and Retail Individual Bidders

Percentage of Issue Size available for allocation

50% of Net Issue

Minimum 15% of Net Issue or Net Issue less allocation to QIB Bidders and Retail Individual Bidders.

Basis of Allocation if respective category is oversubscribed

Proportionate as follows: (a) Up to [●] Equity Shares shall be allocated on a proportionate basis to Mutual Funds in the Mutual Funds Portion; (b) Balance Equity Shares shall be allocated on a proportionate basis to all QIBs including Mutual Funds receiving allocation as per (a) above. Such number of Equity Shares that the Bid Amount exceeds Rs. 1,00,000/- and in multiples of [•] Equity Shares thereafter. Such number of Equity Shares not exceeding the Net Issue, subject to applicable limits.

Proportionate

Compulsorily in dematerialised form. [•] Equity Shares and in multiples on [•] Equity Shares One Equity Share Public financial institutions, as specified in Section 4A of the Companies Act, Scheduled Commercial Banks, Mutual Funds, Foreign Institutional Investors registered with SEBI, multilateral and bilateral Development

Compulsorily in dematerialised form. [•] Equity Shares and in multiples on [•] Equity Shares One Equity Share NRIs, Resident Indian individuals, HUF (in the name of Karta), companies, corporate bodies, scientific institutions societies and trusts.

Minimum Bid

Maximum Bid

Mode of Allotment Bid/ Allotment Lot

Trading Lot Who can Apply**

Such number of Equity Shares that the Bid Amount exceeds Rs. 1,00,000/- and in multiples of [•] Equity Shares thereafter. Such number of Equity Shares not exceeding the Net Issue subject to applicable limits.

35

Retail Individual Bidders Minimum of [●] Equity Shares or Net Issue less allocation to QIB Bidders and Non-Institutional Bidders Minimum 35% of Net Issue or Net Issue less allocation to QIB Bidders and Non Institutional Bidders. Proportionate

[•] Equity Shares and in multiples of [•] Equity Share thereafter.

Such number of Equity Shares whereby the Bid Amount does not exceed Rs. 1,00,000. Compulsorily in dematerialised form. [•] Equity Shares and in multiples on [•] Equity Shares One Equity Share Individuals (including HUFs, NRIs) applying for Equity Shares such that the Bid Amount does not exceed Rs. 1,00,000 in value.

AML STEEL LIMITED

Particulars

Terms of Payment

Margin Amount

QIBs Financial Institutions, and State Industrial Development Corporations, permitted insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs. 2500 lakhs and pension funds with minimum corpus of Rs. 2500 lakhs in accordance with applicable law. Margin Amount applicable to QIB Bidders shall be payable at the time of submission of Bid cum Application Form to the BRLMs

Atleast 10% of the Bid Amount on bidding.

Non-Institutional Bidders

Retail Bidders

Margin Amount applicable to NonInstitutional Bidders at the time of submission of Bid cum Application Form to the members of the Syndicate

Margin Amount applicable to Retail Individual Bidders at the time of submission of Bid cum Application Form to the members of the Syndicate 100% of the Bid Amount on bidding

100% of the Bid Amount on bidding

Individual

*Subject to valid Bids being received at or above the Issue Price. Under-subscription, if any, in any category would be allowed to be met with spill over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLMs and subject to the applicable provisions of the SEBI Guidelines. ** In case the Bid cum Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form.

36

AML STEEL LIMITED

BASIS FOR ISSUE PRICE The Price Band for the Issue Price will be decided by us in consultation with the BRLMs and advertised at least one day prior to the Bid Opening Date / Issue Opening Date in [●], a widely circulated English language newspaper, [●], a Hindi language newspaper and [●], a Tamil newspaper. The Issue Price will be determined by our Company in consultation with the BRLMs on the basis of assessment of market demand for the offered Equity Shares by the Book Building Process. The face value of the Equity Shares is Rs. 10/- and the Issue Price is [●] times the face value at the lower end of the Price Band and [●] times the face value at the higher end of the Price Band. Qualitative Factors: We are an existing profit making listed company having a consistent track record of paying dividend. Our first steel plant was put up in Pondicherry where there is a distinct power cost advantage over the competitors as a result of which the project was yielding returns to investors even during such periods when steel prices were at rock bottom levels. The proposed Project for setting up an Integrated Steel Plant through our wholly owned subsidiary, AMLSPL, in the state of Jharkhand has close proximity to the sources of main raw materials viz., iron ore, coal and pig iron, which is expected to substantially bring down the overall transportation costs. While the ore mines are situated about 100 kms, the coal mines are around 150 kms away from the above project. AMLSPL has already been allotted a mining lease for a period of 20 years over 383.54 acres vide letter no.5/8/2005-MIV dated 16 August, 2005 from the Ministry of Mines. The geological report estimates that the iron ore reserves shall be to the tune of 25 million tonnes, assuring a continuous supply on a long term basis. The Project is a backward integration to the existing operations of the group. The proposed captive power plant is expected to substantially bring down the overall power cost. We are managed by a qualified management team having several years of relevant experience in this domain, steered by Mr.Ashok Agarwal, our Promoter who has been in the industry for the past eight years.

• •

•

•

• • •

Quantitative Factors: 1.

Adjusted Earning Per Equity Share Year Ended 31.03.2003 31.03.2004 31.03.2005 Weighted Average

• • 2.

Earnings Per Share (Rs.) 1.47 1.76 9.85 5.76

Weight 1 2 3

The earning per share have been computed on the basis of the adjusted profits / losses for the respective years as per the statement of profits and losses as restated. EPS calculations have been done in accordance with Accounting Standard 20-"Earnings per Share" issued by the Institute of Chartered Accountants of India. Price / Earning (P/E)* ratio in relation to the Issue Price of Rs [●] a. Based on the year ended 31 March, 2005 Adjusted EPS of Rs.[●] b. Based on weighted average EPS of Rs. [●] c. Industry P/E Highest 24.10 Lowest 0.60 Industry Composite 7.30 (Source: Capital Market (March 13- 26, 2006) Vol.XXI/01 Segment: Steel – Medium/Small)

37

AML STEEL LIMITED

3.

Return on Networth

Year Ended 31.03.2003 31.03.2004 31.03.2005 Weighted Average

RoNW % 3.51 4.15 19.48 11.71

Weight 1 2 3

The return on net worth has been computed on the basis of the adjusted profits / losses for the respective years as per the statement of profits and losses as restated. 4.

Minimum Return on Increased Net Worth required to maintain Pre-Issue EPS [●]

5.

Net Asset Value per Share (NAV) after Issue and Comparison with the Issue price. Adjusted NAV (Rs.) 50.56 [●]

As of 31 March, 2005 After the Issue 6.

Comparison with Industry Peers. Company Year ended

Kalayani Steels Garg Furnace Hisar Metal Industries Stelco Strips Welcast Steels ISSUER COMPANY AML Steel

EPS (Rs.)

31.03.2005 31.03.2005 31.03.2005 31.03.2005 31.03.2005

9.70 2.90 3.50 4.60 28.90

31.03.2005

9.85

P/E 15.10 8.90 10.70 4.20 10.40 [●]

RoNW% 18.10 6.00 17.00 20.00 20.10

Book Value (Rs.) 58.30 50.00 21.50 28.20 158.30

19.48

50.56

(Source: Capital Market ( March 13 – 26, 2006) Vol.XXI/01 Segment: Steel – Medium/ Small) The BRLM believes that the issue price of [●] is justified in view of the above qualitative and quantitative parameters. The investors may also want to peruse the risk factors and the financials of the Company including important profitability and return ratios, as set out in the Auditors Report in this DRHP to have a more informed view about the investment proposition.

38

AML STEEL LIMITED

STATEMENT OF TAX BENEFITS The Company has been advised by M/s. K P.Jain & Co., Chartered Accountants Statutory Auditors of the Company, vide their letter dated 24 February, 2006 that under the current provisions of the Income Tax Act, 1961 and the existing laws for the time being in force, the following benefits, inter-alia, will be available to the Company and the Members. The statement of tax benefits certificate from the Statutory Auditors of the Company is reproduced below: “We hereby report that the enclosed annexure states the possible tax benefits available to AML STEEL LIMITED (the“Company”) and its shareholders under the current direct tax laws. 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 the Company faces in the future, the Company may or may not choose to fulfill. The benefits discussed herein are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: * The Company or its shareholders will continue to obtain these benefits in future; or * The conditions prescribed for availing the benefit have been/ would be met with. The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company and the interpretation of current tax laws.” For K P Jain & Co., Chartered Accountants Sd/Kishore Kumar P. Jain (Propreitor) Membership Number 27236 Date: 24 February, 2006 Annexure to the Statement of Tax Benefits AML Steel Limited (Formerly Ashok Magnetics Limited) herein after called as “The Company” has been advised that under the current tax laws, the following tax benefits inter alia will be available to the Company and its Shareholders. 1.

Under the Income Tax Act, 1961

A. The Company The Company is having their steel production unit at Eripakkam Village, Nettapakkam Commune, Pondicherry 605106, which is a declared backward area, The Company is entitled to deduction under section 80IB of the Income Tax Act, 1961, upto 30 % of the Profit from its Steel Production unit for 5 years commencing from Financial Year 2003-2004. B. The Shareholders I. RESIDENT INDIANS 1.

Under Section 10(34) of the Income Tax Act, 1961 income earned by way of dividend on the shares of the company is exempt from income-tax on the hands of the shareholders.

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AML STEEL LIMITED

2.

Under Section 10(38) of the Income Tax Act, 1961 long term capital gains arising to the shareholder from transfer of a long term capital asset being an equity share in the company (i.e. equity shares held for the period of more than twelve months) and on which security transaction tax has been charged is exempt.

3.

As per the provisions of section 111A of the Income Tax Act, 1961 tax on short term capital gain is charged to tax @ 10% (plus applicable surcharge and education cess) provided the capital gain arises from the transfer of equity shares of the company which are held for a period of not more than 12 months and on which security transaction tax has been charged.

4.

As per the provisions of section 112 of the Income Tax Act, 1961 the long term capital gains arising from the transfer of shares of the company being long term capital asset, other than as mentioned in point 2 above, shall be chargeable to tax @20% (plus applicable surcharge and education cess) after indexation as provided in second provisio to Section 48, @10% (plus applicable surcharge and education cess) without indexation.

5.

Long term capital gains as stated in point 4 above on sale of shares of the company shall be exempt from income tax, if such gains are invested in bonds/shares specified in Section 54EC or section 54ED of the Income Tax Act, 1961 subject to the fulfillment of the conditions specified in the said sections. In the case of individual or HUF members, exemption is also available u/s 54F subject to the fulfillment of the conditions specified in the said section.

6.

In terms of section 88E of the Income Tax Act, 1961 the securities transaction tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head “Profit and gains of business or profession” arising from taxable securities transactions subject to the fulfillment of other conditions specified under the said section.

II. Non-Resident Indians 1.

Any income by way of dividends received on the shares of the company is entitled to be exempted u/s 10(34) of the Income Tax Act, 1961.

2.

In the case of Non Resident Indians taxability of long-term capital gains and short-term capital gains is similar to resident Indians. Refer paras.B.I.2 to B I.5 above.

3.

Further under section 115E of the Income Tax Act, 1961 income by way of long term capital gains arising from the transfer of shares (otherwise than as mentioned in paras B.I.2 and B.I.4 above) held in the company will be taxable @ 10% (plus applicable surcharge and education cess) subject to the fulfillment of other conditions specified under Chapter XII-A of the Income Tax Act, 1961. Further above said long term capital gains shall be exempt under section 115F of Income Tax Act, 1961 subject to the fulfillment of other conditions specified under the said section.

4.

Rebate of Securities Transaction Tax paid is available under section 88E of the Income Tax Act, 1961. Refer para B.I.6 above.

III. Foreign Institutional Investors (FII) 1.

Any income by way of dividends received on the shares of the company is entitled to be exempted u/s 10(34) of the Income Tax Act, 1961.

2.

Under Section 10(38) of the Income Tax Act, 1961 long term capital gains arising to the shareholder from transfer of a long term capital asset being an equity share in the company (i.e. equity shares held for the period of more than twelve months) and on which security transaction tax has been charged is exempt.

3.

Under Section 115AD(1)(iii) of the Income Tax Act, 1961 income by way of long term capital gain arising from the transfer of shares (otherwise than as mentioned in para B.III.2 above) held in the company will be taxable @ 10% (plus applicable surcharge and education cess). It is to be noted that the benefits of indexation are not available to FIIs.

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AML STEEL LIMITED

4.

Short-term capital gains on transfer of securities shall be chargeable @ 30%/10% (plus applicable surcharge and education cess) as per clause (ii) to Section 115AD of the Income Tax Act, 1961.

5.

Long term capital gains as para B.III.3 above on sale of shares of the company shall be exempt from income tax if such gains are invested in bonds/shares specified in section 54EC or section 54ED of the Income Tax Act, 1961 subject to the fulfillment of the conditions specified in the said sections.

IV. VENTURE CAPITAL COMPANIES/FUNDS In terms of section 10(23FB) of the Income Tax Act, 1961 all venture capital companies/funds registered with Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including income from sale of shares of the company. V. MUTUAL FUNDS As per the provisions of section 10(23D) of the Income Tax Act, 1961 any income of Mutual funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under or any other Mutual Funds set up by public sector banks or public financial institutions or authorized by the Reserve Bank of India would be exempt from income tax. 2. Under the Wealth Tax Act, 1957 All assesses are entitled to exemption from wealth tax in respect of the shares of the company as shares or securities are not included in the definition of asset u/s 2(ea) of the Wealth Tax Act, 1957. 3. Under Central Excise Tariff In respect of the Capital goods and allied machinery being purchased for ongoing projects, the benefit of Cenvat credit is available under Rule 4 of the Cenvat Credit Rules, 2004 subject to fulfillment of the conditions specified. 4. Under Finance Act 1994-Service Tax In respect of services availed for ongoing projects, the benefit of Cenvat-Service Tax is available under Rule 4 of the Cenvat Credit Rules, 2004 subject to fulfillment of the conditions specified. 5. Under Export Import Policy Import of Capital Goods under Export Promotion Capital Goods Scheme (EPCG scheme) at concessional rate of duty subject to fulfillment of obligations. Notes: All the above benefits are as per the current tax laws and will be available only to the sole/first named holder in case the Equity Shares are held by joint holders. 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.

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SECTION IV – ABOUT US INDUSTRY OVERVIEW Steel is one material that has played an important role in the development of mankind in the last century from world wars to public utilities. Steel is a versatile, constantly developing material that underpins any manufacturing activity. Steel has become vital to our everyday life. Currently there are more than 3,500 different grades of steel with many different properties environmental, physical, chemical, 75% of which have been developed in the last 15-20 years. Steel is also an eco-friendly material and has the distinction of being the most recycled material in today’s world. Today, consumption of steel is also regarded as an indicator of development of a nation. Per capita steel consumption is now universally accepted as an index of economic development of a nation. Given its role, steel has established itself as the backbone of any economy.

Apparent Consumption of Finished Steel per Capita in MMT

1200

978.8

1000

947.2

917.3 819

809

800

599.8

575.8

600

601.3

575

562.8

400

206.8

179.1

200

144.2

119.9

97.8 25.9

29.2

27.5

26.5

30.7

0 2000

China

2001

2002

India

2003

Japan

2004

South Korea (Source: IISI)

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AML STEEL LIMITED

Global Scenario The global perspective in the production of steel is depicted below.

world steel (million metric tons)

04-05

03-04

02-03

01-02

00-01

99-00

98-99

97-98

96-97

95-96

94-95

90-91

1200 1000 800 600 400 200 0

(Source: IISI) 

In the year 2004-05 World Steel output was at 1057 million metric tonnes, which was 8.3% more than 2003-04 output of 969 million metric tonnes, which was 6.8% more than 2002-03 output.



China remained the world’s largest Steel producer in 2004-05 also (272.5 million metric tonnes) followed by Japan (112.7 million metric tonnes) and USA (98.9 million metric tonnes). India occupied the 8th position (32.6 million metric tonnes with 2.5% increase over previous year).



Japan was the largest exporter followed by Russia and Ukraine with India occupying 16th place.

The International Iron and Steel Institute (IISI) in its Short Range Outlook (October 2005) for Steel Demand has forecasted the development of the Apparent Demand for Finished Steel Products until the end of 2006. According to IISI, Apparent Steel Demand is expected to grow to 1040-1053 million tonnes in 2006 from a total of 972 million tonnes in 2004. This is a growth of 4-5% over the two-year period.

(Source:IISI)

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AML STEEL LIMITED

Monthly crude steel production (in thousands of metric tonnes) Region European Union (25) Other Europe C.I.S North America South America Africa Middle East Asia/Oceania (Ex. China) (ROW) China World

2005 15.0 2.5 8.8 10.5 3.6 1.5 1.2 18.6

2004 16.4 2.3 9.5 11.3 3.9 1.4 1.2 18.1

61.8 30.4 92.1

64.2 24.8 89.0

September Mmt %Change -1.5 -8.8 +0.2 6.7 -0.7 -7.2 -0.7 -6.6 -0.3 -6.7 0 1.1 +0.1 7.4 +0.5 2.7 -2.4 +5.5 3.1

-3.7 22.3 3.5

2005 138.8 21.3 82.7 94.6 33.8 13.3 10.9 168.3 563.7 255.3 818.9

January-September 2004 Mmt %Change 144.8 -6.0 -4.2 21.3 -0.1 -0.4 83.6 -0.9 -1.1 99.7 -5.1 -5.1 34.3 -0.5 -1.5 12.2 +1.1 8.9 10.1 +0.9 8.6 168.8 +4.5 2.8 569.8 200.4 770.2

-6.2 -1.1 +54.9 27.4 48.7 6.3 (Source: IISI)

CRUDE STEEL PRODUCTION AS OF SEPTEMBER 2005

In Million Metric Tonnes

Source: IISI

IISI HAS DRAWN A COMPARISON OF SEPTEMBER 2005 VERSUS SEPTEMBER 2004. 

World output is estimated at 92.1mmt, an increase of 3.1mmt or a 3.5% overall increase from September 2004.



China continues to improve production by 5.5 mmt each month, on an average. China’s latest month production amounted to 30.4 mmt compared to 24.8 mmt last year or a 22.3% increase.



Rest of the World's output declined by 2.4 mmt compared to same month last year with Europe and the Americas cutting production by approximately 7 - 9%. Among the top 20 producing countries, only 6 registered YTD production growth (China by 22.3%, India by 13.9%, Iran by 8.6%, South Korea by 3.7%, Mexico by 0.8% and Turkey by 0.6%) while the rest registered productions cuts.

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AML STEEL LIMITED

Availability of Iron is considered to be the most important raw material for the growth of Steel Industry of any country. The graph below depicts the trends of Iron ore followed in Asian Region for the year 2003. Asia 2004 Iron ore (million metric tons)

250000

Leading Exporter

200000

150000

100000

50000

0

China

India

Japan

South Korea

Other Asia

145749

120600

0

497

2004

Exports

0

62650

1

0

5337

Imports

208089

1019

134884

44225

24075

Production

(Source: IISI) Other significant recent developments in the global steel scenario as given by Ministry of Steel in are as follows 

Under the auspices of the OECD the negotiations among the major steel producing countries for a Steel Subsidy Agreement (SSA) continued. A number of meetings of the Disciplines Study Group – a technical group constituted to examine issues relating to steel capacities and marketing distorting measures, were held in 2003 with the objective to agree on a complete negotiating text for the SSA by the middle of 2004



The global economy witnessed a gradual recovery from late 2003 onwards. While, the economies of USA, Japan and Europe continue on course towards economic recovery, the growth in China has become one of the major factors currently driving the world economy. With a projected GDP growth of more than double of the other world economies, China has by far become the fastest growing global economy.



USA has repealed the safeguard measures on import of steel w.e.f. 5 December, 2003 as a result of a ruling by a WTO Dispute Resolution Panel which held these measures to be illegal under the WTO regime.

Domestic Scenario Delicensed in 1991 and decontrolled in 1992, the steel industry is on an upward swing due to strong growth in demand propelled by high demand in China. The private sector is playing a dominant role in augmenting steel, pig iron and sponge iron availability in the country. Indian scenario - Highlights 

India is the 8th largest crude steel producer of steel in the world.



Finished Carbon steel production during the year April to December, 2004 was at 28.3 million tonnes and was up by 3.8% over the corresponding period of the previous year.



India is the largest producer of sponge iron in the world. The estimated production during April – December ’04 has been around 7.20 million tonnes.



In 2004-05, production of finished carbon steel was 40.055 million tonnes (Prov).



Pig Iron production in 2004-05 was 3.228 Million Tonnes (Prov).

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AML STEEL LIMITED

The share of Main Producers (i.e. SAIL, RINL, TISCO) and secondary producers in the total production of finished (Carbon) steel was 37.30% and 62.70% respectively during the period AprilNovember, 2005. (Source: www.steel.nic.in, a website of Ministry of Steel, GoI) Swot Anaylsis of Indian Steel Industry as Per Annual Review of Ministry of Steel Strengths

Weaknesses

1. Availability of iron ore and coal 2. Low labour wage rates 3. Abundance of labour 4. Mature production base

1. Unscientific mining 2. Coking coal import dependence 3. Low R&D investments 4. High cost of debt 5. Inadequate infrastructure Threats

Opportunities 1. Unexplored rural market 2. Growing domestic demand 3. Exports 4. Consolidation

1. China becoming net exporter 2. Protectionism in the West 3. Dumping by competitors

Development of Indian Steel Sector Since 1991 According to the Ministry of Steel since 1991 the economic reforms initiated by the Government have added new dimensions to industrial growth in general and steel industry in particular. 

Licensing requirement for capacity creation has been abolished, except for certain Locational restrictions.



Steel industry has been removed from the list of industries reserved for the public sector.



Foreign equity investment upto 100% is now available through automatic approval.



From January 1992 price and distribution controls have been removed, with a view to make the steel industry efficient and competitive.



Restrictions on external trade, both in import and export have been removed



Import duty rates have been drastically reduced.



Other policy measures such as reduction in import duty of capital goods, convertibility of rupee on trade account, permission to mobilize resources from overseas financial markets and rationalization of existing tax structure for a period of time have also benefited the Indian Steel Industry.

Production of Iron & Steel (a) Finished Carbon Steel Production The total production of finished carbon steel in the country has been 38.40 million tonnes in 2004-05 as compared to 14.33 million tonnes in 1991-92, indicating an increase of 167.97%. The high share of the secondary sector in finished steel production is largely due to substantial supplies of semis, the basic feed material from the main producers for conversion to needed shapes by rolling.

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AML STEEL LIMITED

PRODUCTION OF FINISHED CARBON STEEL (IN MILLION TONNES)

25

20

15

10

5

0 1992

1993

1994

1995

1996

1997

1998

1999

Main Producers

2000

2001

2002

2003

2004

2005

05-06 (Apr-May)

Secondary Producers (Source: Ministry of Steel)

(b) Pig Iron Production As compared to 1.59 million tonnes in 1991-92, the total production of Pig Iron was 5.22 million tonnes in 2003-04 registering an increase of 228.31 and decreased to a total production of 3.171 million tonnes during the year 2004-05. PRO DUCTIO N O F PIG IRO N (IN MILLIO N TO NNES)

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 1992

1993

1994

1995

1996

1997

1998

Main producers

1999

2000

2001

2002

2003

2004

2005

Secondary producers

(Source: Ministry of Steel)

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AML STEEL LIMITED

(c) DRI Production According to Ministry of steel the production of DRI has increased from 1.31 million tonnes in 199192 to 10 million tonnes in 2004-05, registering an increase of nearly 7.63 times over the considered period. India currently holds the top position in the production of DRI in the world. 12

DRI P RODUCTION ( IN MILLION TONNES)

10

8

6

4

2

0 1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

05- 06 ( Apr -

Production

Ma y)

(Source: Ministry of Steel) Imports of Iron & Steel Iron & Steel are freely importable as per the extant policy. According to Ministry of Steel, India has been importing around 1.5 Million Tonnes of steel annually. IMPORT OF IRON AND STEEL ( IN 000 TONNES)

2500

2000

1500

1000

500

0

1992

1993

1994

1995

1996

1997

1998

Pig Iron

1999

2000

2001

2002

2003

2004

2005

Steel Total (Carbon)

(Source: Ministry of Steel)

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AML STEEL LIMITED

Exports of Iron & Steel Although India started exporting steel way back in 1964, exports were not regulated and depended largely on domestic surpluses. However, in the years following economic liberalization, export of steel recorded a quantum jump. EXPO RT O F IRO N AND STEEL (IN 000 TO NNES) Pig Iron

Semis

Finished Carbon Steel

T otal Steel

05-06 (Apr- Ma y) 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 0

1000

2000

3000

4000

5000

6000

7000

(Source: Ministry of Steel)   

Iron & Steel are freely exportable. Advance Licensing Scheme allows duty free import of raw materials for exports. Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters on the basis of notified entitlement rates, are granted due credits which would entitle them to import duty free goods. The DEPB scheme was temporarily suspended from 27 March, 2004 to 12 July, 2004 for export of steel items. The Scheme has since been restarted. The DEPB rates have also been substantially reduced. Exports of finished carbon steel and pig iron during the last five years is as: Year

(Qty. in Million Tonnes) Finished (Carbon) Steel

Pig Iron

2000-2001

2.66

0.23

2001-2002

2.70

0.31

2002-2003

4.51

0.63

2003-2004

4.84

0.52

2004-2005

4.38

0.18

2005-2006

1.30

0.05

(April-July, 2005) (Source: Ministry of Steel) Apparent Consumption of Finished Carbon Steel Apparent consumption (production + imports - exports +/- variation in stocks) of finished steel, yearwise, sourced from Ministry of Steel has been shown below. Apparent consumption represents the actual demand of steel in a particular period/year. It has increased from 14.84 million tonnes in 1991-

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AML STEEL LIMITED

92 to 33.35 million tonnes in 2004-05. Increase in apparent consumption has not been uniform, fluctuating from a high of 21.80% to low of 1.20 % reflecting uneven growth in steel demand.

APPARENT CONSUMPTION OF THE FINISHED STEEL (CARBON) (in million tonnes) Year

Apparent Consumption of Finished Steel

1991-92

14.84

1992-93

15.00

1993-94

15.32

1994-95

18.66

1995-96

21.43

1996-97

22.12

1997-98

22.63

1998-99

23.15

1999-2000

25.01

2000-01

26.87

2001-02

27.350

2002-03

28.897

2003-04

30.328

2004-05

33.354

2005-06 (Apr-May)

4.957 (Source: Ministry of Steel)

Additional Capacity Creation in Private Sector Since 1991 According to Ministry of Steel, following the de-licensing of Indian Iron and Steel Industry and the steps taken for creation of additional capacity in the private sector, 19 projects involving a total investment of Rs. 30,835 crores equivalent to a capacity of 13 million tonnes per annum (approx.) have already been cleared by Financial Institutions and are in various stages of implementation. Duties and levies on Iron & Steel: GoI started SDF LEVY for funding modernization, expansion and development of steel sector for supporting: 1) Capital expenditure for modernization, rehabilitation, diversification, renewal & replacement of integrated steel plants. 2) Rebates to SSI Corporations 3) Research & Development 4) Expenditure on ERU of JPC However, SDF LEVY was abolished on 21 April, 1994. Cabinet decided that corpus could be recycled for loans to Main producers. Interest on loans to Main Producers be set aside for promotion of R&D on steel etc. An Empowered Committee has been set up to guide the R & D effort in this sector.

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AML STEEL LIMITED

Then the EGEAF (Engineering Goods Export Assistance Fund) was started for reimbursing the price differential cost of inputs used for engineering exporters which was also discontinued on 19 February, 1996. The duties and levies on iron and steel are classified under Chapter No. 72 of the ITC (HS) Code. Customs Duty 

During the last five years customs duty on the items falling under Chapter 72 has been reduced sharply.



The customs duty on non-alloy steel and alloy steel has been brought down to the level of 5% and 15% respectively in 2004-05.



In the Union Budget 2005-06 customs duty on alloy steel has been further brought down to 10%.



Currently the customs duty on prime non-alloy steel and prime alloy steel is 5% and 10% respectively.



The peak rate of customs duty on Chapter 72 items was brought down from 40% to 20% w.e.f. 1 January, 2005, as a result the customs duty on seconds and defectives also stands reduced from 40% to 20%. In the Union Budget 2003-04 customs duty on refractory and refractory making raw materials have also been reduced to 10%.

Some of the other changes made during the last one year in the structure of customs duty on items falling under Chapter 72 are as follows: i.

Customs duty on melting scrap reduced from 5% to Zero.

ii.

Customs duty on ships for breaking reduced from 15% to 5%.

iii.

Customs duty on steel making raw materials like non coking coal, met coke and charged nickel has been reduced to 5%.

Excise Duty The excise duty on all iron and steel items falling under Chapter 72 has been increased from 12% to 16% in the Union Budget 2005-06. Opportunities for growth of Iron and Steel in Private Sector According to CRIS INFAC the sponge iron industry continues to show good profits by posting net profits of Rs 1,449 million in the first 9 months of 2004-05 as against Rs 767 million in the corresponding period of 2003-04, a jump of almost 90%. The increase in PAT can be attributed mainly to the increase in operating profits. (Source: CRIS INFAC)

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AML STEEL LIMITED

Operating profits increased as a combined result of higher topline. However, operating margin remained more or less steady. The rise in input costs mitigated any benefit arising out of higher realizations. In the 9 months of 2004-05, average sponge iron prices rose by 47% over the average prices of the corresponding period in 2003-04. Currently, sponge iron prices are ruling at around Rs 12,000 per tonne. In first 9 months of 2004-05, average prices were almost 47% higher than the levels in the corresponding period of 2003-04, due to high input costs and strong demand. However in June 2004, prices slipped due to increase in supply and fall in scrap prices. Sponge iron prices are linked to international scrap prices, as scrap is a close substitute to sponge iron. Due to the explosion at Bhushan Steel & Strips Ltd in October 2004, the GoI issued a number of directives to reduce the risk of hazardous metal scrap entering the country. The DGFT changed the import policy of ferrous metals and the customs department has been authorised inspect 100% shipments of metal scrap. Consequently, scrap imports fell, leading to acute scarcity of scrap in the domestic market. At the same time, international scrap prices continued their uptrend. Thus, high demand and increasing scrap prices resulted in the trends of sponge iron prices. TRENDS IN SPONGE IRON AND SCRAP PRICES

(Source: CRIS INFAC) In India, where sponge iron is available in sufficient quantity and scrap needs to be imported, domestic sponge iron prices tend to move in line with the landed cost of scrap as is evident in the graph above. India has abundant reserves of high quality iron ore, limestone and coal, which are the main raw materials in the manufacture of steel. The cheap labour available in India provides Indian steel companies with a major cost advantage. It is these advantages that have helped make TISCO the second lowest cost producer of steel in the world. Indian steel has proved itself in terms of quality too. But these advantages are not reflected in the bottomline of steel companies. One of the major reasons for this is the huge interest cost that the companies have to bear. Another area of concern for the domestic steel industry is the high cost of power in the country. Keeping in view the above factors, researchers and planners do not expect indigenous availability of scrap to exceed 4.0 to 4.5 million tonnes per year over the next few years. Further, with increase in the production of Induction Furnace (IF) / Electric Arc Furnace (EAF) steel and gradual decrease in the quantity of traded scrap, it is difficult to envisage more than 1.5 to 2.5 million tonnes being imported to India on regular basis in the near future. Key future growth drivers 1.

Higher infrastructure spending: It is an indisputable fact that the infrastructure situation in India is poor. If the Indian economy has to maintain its growth rates, the infrastructure situation has definitely got to improve. Spending on infrastructure will definitely lead to a higher demand for steel.

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AML STEEL LIMITED

2.

Higher standard of living: The standard of living is expected to go up in the coming decade. This will in turn push up the demand for consumer durables and automobiles. Majority of the demand for flat products comes from these industries. So, any pickup in these sectors should lead to a higher demand for flat products.

34.6 35

32.5 30.7 29.2 28

30

25

Manufacturing

Others

25%

19% Consumer

CAGR – 6.6%

Million tons

durables 5%

20

13

15

Construction 10

19%

7.5 5.1

5 1.1

Infrastructure Automotive

25%

7%

2.4

India’s domestic steel demand

0 1950 1960 1970 1980 1990 2000 2001 2002 2003 2004

Sponge Iron ( Source: Ministry of Steel)

Sponge Iron is a substitute of steel scrap for steel making through the secondary route - DR/EF route. It is free from elements like Copper, Zinc, Tin, Chromium, Tungsten and Molybdenum etc that are usually present in scrap. It has low Sulphur content. It has the ability to use low grade fuels and fuels that are unacceptable for conventional iron making. Key Features • • •

•

India has emerged as the largest producer of sponge iron in the world. Fresh capacity addition in India through gas-based route will be restricted by gas availability. Sponge iron, a substitute for scrap, is the reduced form of iron ore with an iron content of 8392%. It can be prepared by using two alternative technologies viz. coal based and gas based. Coal based plants are of smaller size (typically 0.1mn tonnes), require low capital investment and use iron ore lumps as raw materials. Its output is in granular or lump form called sponge iron or direct reduced iron (DRI). Gas based plants are of large sizes (typically 1mn tonnes), require higher capital investment, use iron ore and pellets blend as raw materials and natural gas as reductant. If the output is briquetted, then it is called hot briquetted iron (HBI). Its output is of consistent and high quality.

CRIS INFAC expects the sponge iron industry’s profitability to remain healthy in the projected years, although at lower rates. The increasing raw material prices will lead to shrinking of margins. Iron ore and coal prices are expected to rise by around 50% and 5% respectively. As a result, the margins of the industry would go down by 7-8%.

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AML STEEL LIMITED

(Source: CRIS INFAC) According to CRIS INFAC, industry would remain healthy even after decline in industry margins. However caution should be exercised while lending to new capacities, as the availability of raw material may turn out to be a cause for concern for the new capacities. Procurement of raw material at higher costs would hamper the profitability of the players. The profitability of sponge iron manufacturers remains highly dependent on the availability and prices of key input - Iron ore and coal Sponge Iron demand – supply The industry has witnessed significant growth in capacities in 2004-05. According to CRIS INFAC the coal-based sponge iron capacity will grow by around 2.5 million tonnes in 2005-06 as the entry barriers in the sponge iron industry are very low due to low capital requirement and low gestation period. It is seen that the demand of Sponge iron is growing at around 20 percent. Sponge iron demand (for coal based units) has increased at a CAGR of 21 percent. The drivers of demand for Sponge iron is steel production through the induction furnace (IF)/electric arch furnace (EAF) route. Steel manufacturers use sponge iron with scrap as a charge mix in IF/EAF. In EAF/IF the ideal mix of sponge iron and scrap is in the ratio 60:40. But this ratio keeps changing as per the availability and prices of scrap. Factors driving the demand of sponge iron are •

Growth in steel production According to IISI, out of 32-33 million tonnes of finished steel production in India, around 38 percent is manufactured through the EAF/IF route.

•

Continued substitution demand for scrap

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AML STEEL LIMITED

(Source: CRIS INFAC) In addition to domestic industry fundamentals, buoyant scrap prices will also yield support to sponge iron prices as sponge iron being a substitute to scrap, a strong linkage can be observed in scrap and sponge iron prices. The New Industrial Policy Regime The New Industrial policy has opened up the iron and steel sector for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario. The Growth (i) Steel The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/Greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. At present, total (crude) steel making capacity is over 34 million tonnes and India, the 8th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the " World Steel Dynamics", Indian HR Products are classified in the Tier II category quality products – a major reason behind their acceptance in the world market. EU, Japan have qualified for the top slot, while countries like South Korea, USA share the same class as India. (Source: www.steel.nic.in, a website of Ministry of Steel, GoI) (ii) Pig Iron In pig iron also, the growth has been substantial. Prior to 1991, there was only one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned 21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have already been commissioned. The production of pig

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AML STEEL LIMITED

iron has also increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-04, the production of Pig Iron was 5.221 million tonnes. Key Features •

Hot metal from blast furnace is cooled and solidified to make pig iron. Its quality is determined by inter alia, percentage of impurities like phosphorus, sulphur etc.,

•

Pig iron is mainly used for manufacturing iron castings i.e. the foundry industry (pumps, pipe fittings, railway castings, gearbox, engine block, cylinder head, etc).

•

Pig iron can partially replace scrap or sponge iron in the production of steel through electric arc furnace (EAF) route. Many producers are using about 10% pig iron in the charge mix.

•

With the recession in the automobile industry, the castings units started performing poorly. Capacity addition also ran ahead of demand growth and integrated players like SAIL and RINL continued to produce and sell pig iron. Players like Malavika Steel and Usha Ispat also have been selling pig iron. Hence, the pig iron industry’s performance has been adversely affected.

•

With the collapse in world scrap prices, pig iron prices also declined, which further affected the profitability and viability of a large number of plants. Presently many units are making losses.

The Production figures for pig iron and finished carbon steel for the last 4 years is given below: (in million tonnes) Category

2001-02

2002-03

2003-04 2004-05 2005-06 (Prov.) (Prov.) (April-July, 05)

Pig Iron

4.08

5.28

3.764

3.171

1.230

Finished Carbon Steel

30.63

33.67

36.957

38.385

12.575 (Source: JPC)

The business of the Company can be understood better by having a bird’s eye view on the manufacturing processes and current trends followed by Industry at large. Selection of suitable production process and the capacity of the production units form the nucleus around which the basic concept of a plant is developed. The selection of the process takes into account factors like type of product, availability of local raw material, process status, specific energy consumption, level of energy required, environment, pollution etc. Sponge Iron Manufacturing Process Sponge iron is the product created when iron ore is reduced to metallic iron, usually with carbon (e.g., charcoal), at temperatures below the melting point of iron. This is also known as Direct Reduced Iron (DRI), it is a quality metallic product. Hot Briquetted Iron (HBI) is a denser and compacted form of DRI designed for ease of shipping, handling and storage. Sponge iron is a substitute of scrap upto 70%, used in electric arc furnaces (EAF), induction furnaces and basic oxygen furnaces. There are two alternative methodologies:  

Coal-based plants, which are of smaller size (typically, 0.1 MMTPA). These require low capital investment and uses iron ore lumps as raw materials. Its output is in granular or lump form. A gas-based plant is of large sizes (typically, 1 MMTPA). These require higher capital investment; uses iron ore and pellets blend as raw materials and natural gas as reductant. The sponge iron output is of consistent and of high quality.

Sponge iron production using coal involves reducing iron ore with coal or lignite. The reduction will be carried out in a rotary kiln at a predetermined temperature and controlled atmosphere. The input raw material viz. iron ore, coal and limestone in the required calibrated sizes are fed into the inclined rotary

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AML STEEL LIMITED

kiln. Due to the inclination of the rotary kiln and the rotary motion, the raw materials move from the feed end to the discharge end. In the process it gets pre-heated and reduced to sponge iron. The discharged sponge iron is taken to a rotary cooler and the cooled product at about 80°C is discharged from the cooler. The product consists of sponge iron and non-magnetic material char and drum-type magnetic separation is employed to separate sponge iron. Also sized separation will be carried out using vibrating screens. Because of the solid-state nature of the reduction process, sponge iron powders are irregular in shape, and characterized by a high degree of interconnected porosity. The high surface area associated with sponge irons renders them uniquely suited for chemical applications.

India is the largest producer of Sponge Iron. It is estimated that there are 90 sponge iron units working in the country having a capacity of 9.98 million tonnes per annum. o There are around 87 coal-based units with capacity of 3.88 million tonnes per annum. o There are 3 gas-based units covering a capacity of 6.10 million tonnes per annum. The production of Sponge Iron units is Category

2001-02

2002-03

Total Reported Total Estimated Grand Total

5443.00 5443.00

6908.40 6908.40

2003-04

2004-05 Apr-Dec. ‘04 7287.30 6030.00 798.10 1170.00 8085.40 7200.00 (Source: Ministry of Steel)

Benefits of Using DRI in EAFs a) Use of DRI in the charge – mix The use of DRI in the charge – mix in an EAF process brings about a remarkable reduction of impurities such as sulphur and phosphorus. The dilution of the charge-mix decreases the refining requirements, which result in the simplification of the metallurgical operation inside the furnace and in crease the furnace productivity. b) Continuous feeding of DRI Continuous feeding of DRI results in achieving power level higher than 100% scrap charge with similar electrical settings in the EAF. Due to the heterogeneous nature of scrap and continuously varying arc length between the electrode and scrap leads to wide fluctuations in the melting scrap. Such arc fluctuations reduce the effective power input. c) Hot charging of DRI Hot charging of DRI is an effective means of lowering the cost per metric tonne of liquid steel produced because of the reduction of power and electrode consumption. In addition to power consumption reduction and savings thereof, hot charging of DRI increases the EAF productivity for a melt shop designed to charge cold DRI. Other Benefits (i) Lower Electrode Consumption The use of DRI vis-à-vis scrap helps lower electrode consumption due to the following reasons: • Scrap collapse results in increased breakage, which is much less in case of DRI charge.

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AML STEEL LIMITED

•

The productivity of the furnace is high in case of DRI, use Due to high CO content in the furnace, electrode oxidation is decreased.

(ii) Lower Oxygen Consumption • The need for oxygen in scrap cutting is obviated • The oxygen input in DRI is associated with unreduced oxides • The unreduced iron oxide in DRI is sufficient to provide the slag requirements for iron oxide. (iii) Reduction in lime consumption by using lime or dolomite bonded pellets for DRI production, the requirements for lime addition as a fluxing material can be reduced to large extent. (iv) Lower refractory consumption maintaining a deep foamy slag during continuous feeding of DRI can minimize arc radiation and the foamy slag also increase thermal efficiency as compared to all scrap charges. Balancing the feeding rate with power input and raising the bath temperature towards the end of the melting stage with decreased feeding rate reduce the refractory consumption. Addition of MgO improves the slag basicity control and reduces the intensity of slag line attack. In the last 20 years coal-based sponge iron industry has made remarkable growth. At present there are about 101 coal-based sponge iron plants operating in the country. In 2003-04, coal-based plants had a share of about 50.8% in the total production of sponge iron in India. More than 55% of these plants are mini sponge iron units having an annual capacity up to 30-35 tonnes per year. Due to high price of natural gas and its inadequate supply, the gas-based projects are finding difficulties to generate sufficient margin. Setting up of new gas – based projects has now become a remote possibility. Some of the key innovations in the coal-based technology are mentioned below: (a) Capital requirement reduced Up to 1998, nearly 80% of the equipment was being imported. Presently for a 120,000 tpy module, 100% indigenous equipment is available and for a 150,000 tpy module only the kiln tyres and support roller are imported. After 1998 the capital expenses related cost has, thus, been reduced from Rs. 75. crores to Rs. 40 crores for a 120,000 tpy module while the same for a 150,000 tpy module has come down from Rs. 110 crores to Rs. 60 crores. (b) Raw materials The main raw materials required for a coal-based plant are iron ore, suitable coal, dolomite and power. (i) Iron Ore – Iron ore with a Fe-content of 62-66% (hematite) is used. Earlier, the ore size was used at 5.20 mm and was washed in a scrubber. But at present 5-18 mm size ore are used as a feed for large kiln without scrubbing and / or washing. This led to the reduction of DRI consumption from 1.6 to 1.5 Mt per tonne of hot metal. Production and dispatches of iron ore

Year/Period

2002-2003

Production Quantity Value (MT) (Rs. in Crores) 99.10

2964.86

Total (MT) 102.60

120.60 3698.74 120.40 20032004(P) 140.20 5379.56 136.20 20042005(E) (P): Provisional (E): Estimated (MT): Million Tonnes

58

Dispatches For Internal Consumption (MT) 56.60

For Exports (MT) 46.00

71.60

48.80

79.60

56.60

(Source: Ministry of Steel)

AML STEEL LIMITED

(ii) Coal- Due to non-availability of ‘B’ grade coal from Coal India, presently ‘C’ and ‘D’ grades coal are being used. The industry has successfully adopted measures to utilize these grades through better process control and the cost has been reduced by about 20-30% as compared to ‘B’ grade coal used earlier. (iii) Dolomite – Earlier dolomite of 1-4 mm size was being used. At present, the use of 4-8 mm size dolomite has reduced the consumption by about 50% by minimizing a significant loss of dolerite fines through waste gases. (iv) Power - Previously, the power consumption per tonne of sponge iron produced was about 110-130 units. But with the advent of dry gas cleaning system through electro-static precipitator, programmable logic operator drivers and computer control, the power consumption has been reduced to 80-90 units per tonne of sponge iron produced. All the above innovations have resulted in a better capacity utilization from 85-90% to over 100% in the well-established plants. Manufacturing Process of Steel Billets 

Raw Material Feeding System DRI from DRI Plant will be conveyed to the overhead storage bins located in the melt shop. Plant Return scrap from various generating points and purchased pig iron will be transported to the scrap bay of steel melting shop. An EOT crane will be provided in the furnace bay for handling DRI as well as pig iron.



Batching Pig iron will be charged into the crucibles and necessary carbon in the form of petroleum coke will be added into the crucibles to ensure the availability of necessary carbon in the bath.



Furnace Feeding System and Melting of the raw material Once the liquid bath has been formed and the minimum temperature of the bath has been achieved, sponge iron will be charged in small batches and the slag formed will be removed periodically. After charging of sponge iron, sample will be drawn to determine the composition of the bath. After achieving the desired melt analysis, the temperature will be raised to the tapping temperature taking into account additions of predetermined amount of ferro-alloys to achieve the required tapping composition of the melt. The slag from the furnace will be transferred into the slag pot from where it will be disposed off to the slag yard.



Hot Metal Handling System After the liquid steel is tapped, the ladle will be picked up by casting crane and placed on the ladle stand of the billet caster.



Continuous Casting A refractory/cold board lined tundish, mounted on tundish car will be moved from the reserve position to the casting position. Prior to the start of the casting operation, the dummy bars will be introduced into the mould. The gap between the dummy bar head and mould walls will be sealed with asbestos chords and small pieces of steel scraps will be placed over the dummy bar head for chilling of initial metal. Water supply to mould, secondary cooling zone and machine cooling will be switched on at this stage. When the liquid steel level in the tundish reaches a predetermined level, the tundish nozzles will be opened. When the metal level in the mould reaches about 100150 mm from its top the drive of the mould oscillating mechanism as well as withdrawal and straightening unit will be switched on. The withdrawal of dummy bar begins at the minimum speed and is gradually increased to normal casting speed within a few minutes. The mould will be lubricated with liquid lubricant. During casting operation, the metal level in the mould will be maintained within predetermined limits by adjusting flow of metal into the mould or by the withdrawal speed.

The liquid metal level in the tundish will also be kept within permissible range by adjusting the opening of ladle slide gate. The partially solidified billets after leaving the mould will pass through strand guide roller segment where intensive but controlled cooling of billets, will be effected by water

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AML STEEL LIMITED

spray nozzles. The solidified billets will be guided through withdrawal and straightening unit before entering the gas cutting zone. The dummy bar will be separated from the billet by gas cutting and will be stored till its introduction is required for start of the next heat. The cast billet will be cut to the predetermined length by oxyacetylene gas cutting torches. The sized billets will be delivered to the cooling bed through run out roller table and cross transfer mechanism. The billets will be marked on cooling bed for identification/tracking. The cast billets will be stored in the billet bay. The conditioning facilities have also been envisaged in this bay. During an emergency, the casting operation can continue and the overflow of metal from the tundish will be received into a slag box through the tundish spout and the overflow launder. In case the casting operation has to be stopped, the ladle shall be lifted from the ladle stand and the liquid metal inside shall be poured back into the induction furnace. For chemical analysis of liquid steel, the samples will be taken from the ladle and sent to the laboratory. The samples will also be cut from cast billets and sent to the laboratory for macro etching, sulphur prints and for determining other quality parameters. After the liquid steel in the ladle is emptied, the ladle-handling crane will remove it. The slag from the ladle will be poured into a slag pot kept at the ground level in the ladle handling bay and the empty ladle will be sent to ladle preparation area. At the end of casting, the tundish will be shifted to the reserve position for drainage of remaining slag and metal in it. The empty tundish will be lifted by the crane and transferred to the tundish preparation area where necessary facilities for tundish tilting, cooling, lining, drying etc., will be provided.

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AML STEEL LIMITED

BUSINESS OVERVIEW Overview We are one of the key players based in South India and derive our revenue from manufacturing and trading in the steel intermediaries segment. Mr. Ashok Agarwal and his associates promoted our Company on 16 April, 1993 in order to enter into the area of manufacturing and marketing of Video Cassettes. We started with the acquisition of M/s. Trans-Asia Exports, which manufactured Video Cassettes, in the year 1993. We ventured into production of PVC Pipes in the year 1995 by establishing a PVC Pipe manufacturing unit at Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu. We diversified into the Steel Industry with the establishment of a Mild Steel Ingots manufacturing factory at Pondicherry in the year 1998. The operational activities of manufacturing of the PVC Pipes were in full swing till the year 2000; we later decided to concentrate fully in Mild Steel (MS). We not only integrated backward trading in Mild Steel (MS) Scraps in the year 2000, but also acquired a company called Maruti Steels Private Limited in Colombo, Sri Lanka in October 2002 facilitated with MSI manufacturing plant with a re-rolling mill. Subsequently in the year 2004 we renamed it as Ashok Steel Industries Private Limited (ASIPL). We have acquired two Steel plants in Karaikal through our wholly owned subsidiary Ankit Ispat Private Limited (AIPL), incorporated on 13 August, 2003 with the main objective of manufacturing and trading in ferrous and non-ferrous metals. We are in continuous revival of both the technology and management processes to reduce costs, increase productivity and remain globally competitive. Our existing plants enjoy infrastructural advantages due to good inland and waterway connectivity and access to power and water in abundance. AML Steel Limited and its Subsidiaries Name AML Steel Limited Ankit Ispat Private Limited Ashok Steel Industries Private Limited AML Steel & Power Limited

Year of Commercial Products Operation May 1998 MSI August 2003 MSI October 2002 Proposed in November 2006

MSI, Wire Rods Sponge Iron and Steel Billets

Location

Current Capacity

Pondicherry Pondicherry

45,000 TPA 27,600 TPA

Sri Lanka

60,000 TPA

Jharkhand

Proposed capacity 1,10,000 TPA of Sponge Iron & 42000 TPA of Steel Billets

Our Key Business Strengths and Achievements Track record of operating steel plants We have an experience of over 8 years in production of steel products, operation and maintenance of three steel plants with a total installed capacity of 1,32,600 TPA. Long Term Mining Leases The Ministry of Mines, GoI has agreed to the grant of iron ore-mining lease for the Project for a period of 20 years. We have also made an application to Ministry of Coal with the support of Government of Jharkhand for allotment of Coal mining lease. Quality Assurance We employ best manufacturing techniques so that quality is maintained right from the raw material stage to processing to finished products. All finished products are tested through our Quality Assurance lab and only when products go through our stringent quality norms they are dispatched to our valued customers.

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AML STEEL LIMITED

Project Assessment We have initiated the Rapid Environment Impact Assessment for Iron Ore Project and Environment Management Plan for the Project. Government support Ministry of Steel is extending all possible support, as detailed below, for the development of Iron and Steel Sector in the country: a) The Ministry is providing linkage for raw materials, rail movement clearance etc. for new plants and expansion of existing ones, wherever applied for. There are two linkage committees, viz., - Linkage Committee for finalizing and reviewing the linkage of coal as well as iron ore supply to the Sponge Iron Plants set up/being set up in the country; and - Linkage Committee for finalizing and reviewing the linkage of coal as well as Iron Ore supply to the Pig Iron plants, new steel plants and coke oven setup/ being set up in the country. b) The Ministry has encouraged the setting up of "Institute for Steel Development and Growth (INSDAG)" in Calcutta in August 1996. The leading steel producers in the country are members of this Institute, which has been set up with the objective of promoting, developing and propagating the proper and effective use of steel and increasing intensity of steel usage particularly in the construction sector and in rural and semi urban areas. c) In order to resolve the problems faced by existing & new steel plants & to assist major steel plants being implemented, GoI has set up a Project Coordination Group under the Chairmanship of Steel Minister Competent and committed workforce We have a highly competent and committed workforce. For a detailed profile of our key managerial personnel, refer to the paragraph on Key Managerial Personnel in the section titled “Our Management” on page no. [●] of the DRHP. Our Strategy We diversified into steel making in the year 1997 when the first steel project was conceived to be put up in Pondicherry and since then steel has become the core business for the group. Pondicherry plant was commissioned in the year 1998 and since then the business has been growing rapidly. We capitalized on opportunities for expansion through acquisition of M/s Maruthi Steel Pvt. Ltd., Sri Lanka in the year 2002 and two steel plants in Karaikal, India in the year 2003. In line with the quest for growth we have embarked upon a Integrated Steel Project in Jharkhand situated in Eastern part of India where there are enormous deposits of iron ore and coal, both of which are essential raw materials for steel making. There is also a logistics advantage of setting up a steel plant in Eastern part of India as against locations in the rest of the country as evident from the fact that for every 1 tonne of steel produced there needs to be a movement of 3.5 tonnes of raw materials. Keeping in view the importance of price stability in iron ore supplies, we have sought to procure an iron ore mine situated fairly closer to the proposed Project site on a long-term lease. We have made an application to Ministry of Coal with the support of Ministry of Jharkhand for allotment of captive coalmine. To maximize the value chain we also plan to install a power plant for captive consumption. We are constantly looking at various opportunities available for business expansion through the mode of acquisitions. Having gained the experience of successful acquisition of steel plants we are open for opportunities of acquiring similar plants in India and abroad.

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AML STEEL LIMITED

By capacity expansion    

We have entered into a MoU with the Government of Jharkhand for setting up a steel plant on 26 February, 2004. According to Industry and Mine Department, there are adequate Coal and iron ore reserves for setting up steel projects. We are looking for opportunities for acquisition of steel plants in India and abroad. The Ministry of Mines, GoI has agreed for the grant of an Iron ore-mining lease for a period of 20 years. We have made an application to Ministry of Coal, with the support of Ministry of Jharkhand to grant us a coal-mining lease.

By further improvising the operating performance We intend to improve the availability and plant load factor and reduce the operating costs by regular maintenance and thereby increased efficiency. We further intend to implement advanced maintenance practices. We believe that our focus on higher plant availability and maintenance will increase our useful economic life and operating performance. By securing raw material supply The Ministry of Mines, GoI has agreed for the grant of an iron ore-mining lease for a period of 20 years and we have also made an application to the Ministry of Coal for granting us coal-mining lease. Our Business Operations We are presently operating three steel plants with a total installed capacity of 1,32,600 TPA. Our main focus is on mild steel ingots and wire rods. Mild steel ingots is intermediate product for steel re-rolling mills, which produce various long products such as angles, channels, bars, rails, etc. which has got applications in civil and engineering construction for housing as well as infrastructure sector.

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AML STEEL LIMITED

Our Presence The map given below shows the locations of our existing plants and offices as well as the proposed plant.

Note: The map herein above is solely for illustrative purposes and does not claim to have political or geographical accuracy. Our Operating Results: A Snapshot The details of capacity utilization for our existing steel plants are as follows: 2002-03 2003-04 2004-05 PONDICHERRY PLANT Licensed Capacity (Tonnes) Installed Capacity (Tonnes) Production (Tonnes) Capacity Utilisation (in %)

45000 45000 20824 46.28

45000 45000 17363 38.58

45000 45000 16284 36.19

KARAIKAL PLANT Licensed Capacity (Tonnes) Installed Capacity (Tonnes)

27600 27600

27600 27600

27600 27600

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AML STEEL LIMITED

Production (Tonnes) Capacity Utilisation (in %)

-

SRI LANKA PLANT Licensed Capacity (Tonnes) Installed Capacity (Tonnes) Production (Tonnes) Capacity Utilisation (in %)

60,000 60,000 3247 5.41

5650 20.48

14247 51.62

60,000 60,000 9438 15.73

60,000 60,000 12956 21.59

Manufacturing process at our existing plants Our existing plants situated at Pondicherry and Karaikal manufacture Mild Steel Ingots. The manufacturing process followed in these two plants can be depicted as follows:

The basic raw material required for manufacture of steel ingots is Steel Scrap. Initially the Steel Scrap is processed in the scrap yard for getting proper size. Then the processed scrap is melted in the Induction Furnace for getting Liquid Steel. For getting the final product, the Steel is poured into the Ingot Moulds and stripped after Cooling. The plant and machineries that are being used in these plants are listed below: S.no Machine type Quantity* 1 30 Tonne Electric Weigh Bridge 1 2 Scrap Storage and processing yard -3 Induction Furnace with Twin Crucible 2 4 Capacitor Bank 2 5 Pouring Bay Crane of 10 tonne 1 capacity 6 Finishing Bay of 10 Tonne capacity 1 7 Mould Preparation Yard of 20m2 area -8 Mould Cooling Yard of 20m2area -9 Finishing Yard -* Indicates the number installed in each of the two plants.

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AML STEEL LIMITED

Sri Lanka plant The manufacturing process followed in Sri Lanka plant can be depicted as follows:

In the plant, the finished product is Wire Rod meant for various construction activities. Initially Steel Scraps after processing is fed into the Induction Furnace for making Liquid Steel. This liquid is poured into Ingot Mould for obtaining Ingots. Thus produced Ingot is heated in the Reheating Furnace and rolled in the Rolling Stands for obtaining the Wire Rods as the final product. The plant and machineries that are being used for production in the Sri Lanka Plant are as follows:

3 4 5 6

For Steel Metal Shop Machine type Scrap and processing yard Induction Furnace with Twin Crucibles 2 tonne capacity Capacitor Bank Pouring Bay Crane 10 Tonne capacity Mould Preparation Yard 20m2 area Mould Cooling Yard 20m2area

S.no 1 2 3 4 5 6 7 8

For Steel Rolling Mills Machine type Reheating Furnace 12 Tonnes capacity 300mm Roughing group of mills Roughing Rolling Stands 200mm Finishing group of mills Stands Rotary Shear Machine Cooling Yard Finishing & Despatching Area

S.no 1 2

66

Quantity -1 -2 ---

Quantity 1 1 4 1 4 2 -4

AML STEEL LIMITED

Raw materials The main raw materials required for manufacturing MSI are Sponge Iron, Pig Iron, Scrap and Iron Ore; these requirements are met by purchases from open market. Some of our suppliers who have been regularly supplying us raw materials for the last few years are as follows: India Sponge Iron (I) Ltd Ashirwad Steel Kanishk Steel Ltd Venkateswara Sponge Iron Ltd HKT Mining, Sonal Vyapar Ltd Kamakshi Steels Goyal Ispat Ltd

Overseas Overseas Ventures Pte Ltd., Singapore SIMS Group Ltd., Australia Hugo Neu Company, USA EMR Ltd., UK, YLS Steel, Singapore Donold Trading Pvt Ltd., Singapore CMI Celrad Metal Industrial Ltd., Singapore Beriak & Parnters, Australia

Long-term Power Arrangements We have signed agreements with respective Electricity Boards where our plants are situated, as a result of which there is a continued supply of power in requisite load. Environmental Compliances We conduct our business strictly in accordance with the environmental policy and save as otherwise stated in the section titled “Licences and Approvals” on page no.[●] of the DRHP. All our steel plants are currently in compliance with the applicable environmental regulations. Strict observations of control measures in the plant are taken to avoid venomous effects on the environment. Human Resources Our philosophy of holistic human resource management has led to the combination of an efficient and enterprising set of individuals with unified goals and a missionary zeal. We encourage qualification enhancement and self-management and have focused in-house training facilities. We also provide need-based skills development for the employees at reputed institutes. As a group we have a total workforce of 1200 employees, out of which 60 are in Executive Cadre. Our plant employees are covered by ESI and hence are entitled for medical coverage as per the rules of ESI. There are no labour unions in any of our plants. Trading Business We are actively engaged in trading of steel products. The products, in which we trade, are: 1. 2. 3. 4. 5. 6. 7.

T.M.T Bars Tor Steel M.S Rods Steel Structurals Steel Angles and Channels H.R Plates H.R & C.R Sheets

Steel prices are subject to price movements and we have positioned ourselves in the market to make the best of the existing opportunity. We believe that we are enjoying a fairly good track record amongst our customers and suppliers added with fairly comfortable financial position coupled with active support of banks and other institutions. For each consignment we sign specific sale-purchase contracts with the suppliers. The said salepurchase contracts inter alia specify the quantity, delivery terms, quality, price, payment schedule, etc., Price is denominated in INR with credit period of upto 180 days.

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AML STEEL LIMITED

The table below names a few of our major suppliers and customers. Suppliers Tulsyan Nec Ltd Vaibhav Mercantile Ltd. Ponneri Steel Industries Shilp Priya Steels C.R Trading Company Tulsyan Udyog Balaji Drum Works

Customers O.P Steels Ltd Prakash Steel Enterprises Sidharth Mercantile (P) Ltd Bhagwan Das Metals Ltd Sri Thirumala Steel Enterprises Sri Agrasen Steel Industries Meenakshi Steel Corp

Proposed Integrated Steel Plant at Jharkhand As a part of our expansion plan, we propose to set up an Integrated Steel Plant in the state of Jharkhand, through our wholly owned subsidiary, AMLSPL. For this purpose, AMLSPL has signed an MoU dated 26 February, 2004 with the State Government of Jharkhand. The Project is being set up near village Saldih in Saraikela District near Jamshedpur in Jharkhand state. This gives the proximity to the sources of the main raw materials viz., Iron ore, Coal and Pig Iron. The Iron ore mines are situated about 100 kms away and the coalmines are situated around 150 kms away from the planned site. The Ministry of Mines, GoI has agreed for the grant of an Iron Ore Mining Lease right in favour of AMLSPL over an area of about 383.54 acres for a period of 20 years. An application has also been made to the Ministry of Coal, with the support of Government of Jharkhand, for allotment of captive coal mining blocks The Integrated Steel Plant will be facilitated with a power plant for captive consumption. The proposed plant will have following production capacities: Sl. No. 1 2 3

Product Sponge Iron Steel Melt Shop producing Steel Billets Captive power plant

Capacity 1,10,000 TPA 42,000 TPA 9.6 MW

Steel billets manufacturing process is highly power intensive and in order to ensure the viability of the Project, it is necessary to have cheap source of power. Also through the manufacturing process of sponge iron a lot of waste heat is generated, which can in turn be used for generation of power. AMLSPL proposes to generate 9.6 MW of power through this route. Average generation cost of power per unit (including depreciation and interest cost) will be around Rs.1.25. Locational advantages: 1. Nearness to Coal and Iron ore mines, which would reduce the operational cost. 2. Lignite and limestone are available in abundance in the Jharkand region 3. Nearness to the consumer, in case the end products are sold in market. 4. Availability of Excise benefit and Sales Tax benefit subject to fulfillment of the applicable conditions. The proposed manufacturing process to be followed in Integrated Steel Plant can be depicted as follows: 1. Sponge Iron Lumps: Iron Ore obtained from the mines is dressed to size by crushing and screening. This sized Iron is fed to Sponge Iron Kiln along with Coal. The final product of this kiln is Sponge Iron Lumps. 2. Steel Making: The Sponge Iron Lumps is charged into Induction Furnace and melted for getting Steel with various additions as required.

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AML STEEL LIMITED

3. Billet Making: The Steel melted in the Induction Furnace is poured in the continuous casters for getting the final product of concast Billets. 4. Power Generation: As a By-Product, gases generated in the Sponge Iron kilns are to be used for Electric Power Generation. The power generated will be used in the Sponge Iron kilns, Induction Furnace etc. The power generated will be utilized for captive consumption.

Captive Iron Ore Mine The Ministry of Mines, GoI has agreed for grant of a mining lease to us over an area of 383.54 acres for iron and manganese ore in Mauza district, West Singhbhum, Jharkhand for a period of 20 years Coal Mining As per the support extended by the Government of Jharkhand to recommend to the GoI for allotment of suitable Coal Blocks for captive coal mining, as per existing provisions of the Mines & Minerals (Development and Regulation) Act, in the MoU for the Integrated Steel Plant in Jharkhand, we have made an application to Ministry of Coal on 12 September, 2005 for allotment of Captive Coal Mining Block. Technical Know-How AMLSPL has appointed M/s Popuri Engineering & Consultancy Services as a technical consultant for the Sponge Iron project. The technical services required for the project includes know-how and basic engineering, design, engineering and drawing, procurement assistance and inspection project monitoring, etc. for the proposed project would be taken care by M/s Popuri Engineering & Consultancy Services. The details of Performance guarantee are mentioned in “Brief Details of Other Agreements”. Please refer page no. [●] of this DRHP.

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AML STEEL LIMITED

Advantages of sponge iron in steel making. Technical Advantage Ferrous scrap is the traditional raw material for Induction Furnaces (IF) as well as Electric Arc Furnaces (EAF) because of its availability in general and since it does not require any specific manufacturing process. With the limited availability of indigenous scrap, India needs to import large amount of shredded scrap. However, imported scrap is basically shredded automobiles and other household appliances, which contains high percentage of tramp elements. These tramp elements cannot be removed in the steel making process. For production of ordinary TOR steel, the presence of tramp element is not a major problem. As many mini steel plants are shifting towards production of alloy steel, wire rods & flat products, high percentage of tramp elements in scrap are not acceptable. Thus for quality reasons, almost all steel plants are using sponge iron for better quality products. Advantages of sponge iron vis-à-vis ferrous scrap •

Enhanced cost control The prices of scrap has been sensitive to fluctuations, substitution of sponge iron to scrap will help in better-cost control. Prices of scrap depend on market conditions whereas sponge iron price depends primarily on the cost of raw materials, which is less variable.

•

Cogeneration of Power The hot gas/ waste heat generated during the process of manufacture of sponge iron can be used for generation of power.

•

Shorter production time resulting in Increased productivity Reducing unwanted elements during melting is required for use of scrap, which consumes time, Electricity & leads to more production time. Thus using sponge iron in place of scrap leads to increased productivity. Scrap does not have exact known composition. Therefore it takes more time for reduction & affects refining time. Whereas using sponge iron leads to reduced refining time.

•

Simultaneous melting & refining with continuous charging Sponge iron can be charged during refining due to its purity but scrap cannot be charged during refining, as it requires removal of unwanted elements.

•

Reduces power consumption Scrap contains lot of elements having higher & different melting temperatures as compared to pure iron. This requires more power to melt the charge. On the contrary sponge iron is pure iron & requires stable power for melting.

•

Faster metallurgical reactions Sponge iron is a pure iron hence metallurgical reactions with alloying elements are quicker as compared to scrap.

•

Uniform consumption of Electrodes Electrode consumption while melting scrap is higher on two accounts.

•

o

Due to frequent temperature variations due to different elements having different melting temperatures in scrap.

o

Due to breakage of electrodes due to uneven shape of scrap.

o

Using sponge iron results in uniform consumption of Electrodes

Due to less hot spots in the furnace less refractory consumption Due to uneven shape & size abrasion of refectories in furnaces is much more while using scrap. This results in uneven thickness of furnace lining resulting in localized overheating of furnace, known as hot spots. Sponge iron is very smooth in handling and does not cause abrasion of furnace lining resulting in more refectory life.

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AML STEEL LIMITED

•

More Precision of Steel composition Using conventional scrap needs reduction of unwanted elements during melting & then addition of required ferroalloys for obtaining the required composition of steel. Full removal of all unwanted elements is practically difficult & leads to removal of few desired elements from both.

•

Quality Advantage Due to purity of sponge iron the quality of Steel produced using sponge iron is superior as compared to steel produced by conventional scrap.

•

High degree of Metallisation High degree of metallisation of iron ore is achieved in rotary kilns by using coal based direct reduction process.

Plant and Machinery The details of the major plant and machinery required for the Integrated Steel Plant are given under the section titled “Objects of the Issue”. Please refer page no.[●] of this DRHP. Inputs for Production Raw Materials a. Raw Materials for sponge iron Main raw materials required for producing sponge iron are iron ore, coal and dolomite. The consumption norms of Raw Materials are given in the table below: S. No. 1. 2. 3.

Raw Material

Requirement Basis / Daily requirement (1) Total Requirement (2) tonne of DRI Iron Ore 1.6 tonne 502 176,000 TPA Non-Coking Coal 1.2 tonne 377 132,000 TPA Dolomite 30 kg 9.42 3,300 TPA (Source: Company estimates)

Note: (1) The daily quantities have been arrived at by considering 350 days yearly arrival and delivery of raw materials (2) Quantity includes moisture, sizing and handling losses. i) Iron Ore The iron ore to be used for making sponge iron should have high iron Fe contents (65%), low gangue and phosphorous contents (below 0.04%) and good reducibility of the ore allowing the kiln operation at a relatively lower temperature thereby reducing the instances of ring formation and improving the availability of the kiln with better output rate. The ideal size of iron ore for making sponge iron is 5mm to 20mm. For producing one tonne of sponge iron approximately 1.6 tonne of iron ore is required. Ore transport and port costs accounts for 50% of the total costs of iron ore. Hence operationally, sponge iron manufacturing units are located in places near iron ore mines. The rich recoverable iron ore are available in abundance in the mines at Orissa and Jharkhand. i) Non Coking Coal Non Coking Coal (Coal) will be required for making sponge iron. The ash content in the coal should be low. Also the moisture content should be low. In addition to these, care should be taken in selecting the source of supply, the distance as well as continuous availability and transportation problem. Depending on the source of procurement and the mode of transportation (rail or truck or both), transportation cost will vary. For processing one tonne of sponge iron, approximately 1.2 tonne of non-coking coal is required and the suitable size is 5mm to 20 mm. Coal of desired quantity is indigenously available in abundance in the mines at Orissa and Jharkhand. iii) Dolomite The desirable dolomite for producing sponge iron should have high available base and low percentage loss. The suitable size required for sponge iron production is 1mm to 4 mm and the requirement is about 30 kg per tonne of sponge iron and is available in Jharkhand area in abundance.

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AML STEEL LIMITED

b. Raw Materials for Steel Metal Shop The primary raw material required for the production of Steel metal shop is Sponge Iron and Pig Iron. Raw Material Annual quantity Sponge Iron (80% of charge mix) 39,070 TPA Pig Iron (20% of charge mix) 8,750 TPA (Source: Company estimates) Availability of Raw Material The requirement of Sponge Iron will be met in-house for the production of Steel Billets. The Ministry of Mines, GoI has agreed for the grant of an iron ore-mining lease to us and we are also in the process of acquiring coal-mining lease. Other raw material requirements for the production are to be met by purchases from open market. Manpower Total manpower requirement for the proposed Project is estimated at 222 whose break-up is as given below. Particulars Nos. Managerial/Executives 11 Supervisor 37 Skilled 155 Semi-skilled 19 Total 222 (Source: Company estimates) The recruitment program for the proposed project will be done depending on the progress made in implementation of the Project. Recruitment of skilled/semiskilled manpower would be made locally and is not expected to pose any problem since there are similar plants operating in the state. Engineers and supervisors would also be recruited depending upon the requirement in the phases. The engineers, skilled and semi-skilled workers may also be provided training by us if required. Utilities Power The power consumption norm for sponge iron is 80 Kwh per tonne. The power consumption in steel melt shop is 850 Kwh per tonne of steel. The waste heat generated in the sponge iron plant will be utilised for the generation of power, as it would be more economical than the purchase of power from the State Electricity Board. The entire power requirements would be met by the captive power plant of 9.6 MW capacity envisaged in the project. Water The total water requirement for the Project is estimated as: Sr. Project No. 1 2 3

DR kiln 8MW Power plant Others including green belt development, administration Building & colony Total

Plant make up Drinking and Total water demand sanitation for plant (cu (cu m/hr) personnel (cu m/hr) m/hr) 25 3 28 56 3 59 5 5 92 (Source: Company estimates)

The water supply would be sourced from bore well and through intake well situated inside the plant premises and from Saraikela River.

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AML STEEL LIMITED

Environmental Compliances No objection certificate under section 25 and 26 of the Water (Prevention & Control of Pollution) Act, 1974 and under section 21 of the Air (Prevention & Control of Pollution) Act, 1981 from the Jharkhand State Pollution Control Board have been received for the proposed project. Details of Collaboration, performance guarantee or assistance in marketing We have not entered into any technical collaboration agreements or any contracts for performance guarantees and are not taking any assistance in marketing the products from any consultant or machine supplier. Proposed Capacity Utilization Sponge iron The proposed capacity utilization of sponge iron machinery is as follows: Year Installed Capacity Capacity Utilization Period Available (Months)

31 March, 2006 110000 70% 5

31 March, 2007 110000 80% 12

31 March, 2008 110000 90% 12

(In Metric Tonnes) 31 March, 2009 110000 90% 12

Steel billets The proposed capacity utilization of steel billets machinery is as follows: Year 31 March, 2006 Installed Capacity 42000 Capacity Utilization 70% Period Available 5 (Months) (Source: SBI Caps Financial Appraisal Report)

31 March, 2007 42000 80% 12

31 March, 2008 42000 90% 12

(In Metric Tonnes) 31 March, 2009 42000 90% 12

Assumption: Capacity utilization has been assumed on the basis of expected consumption/ demand of our existing plants, which are within the standard utilization pattern of the industry. Marketing and Selling Arrangement We are setting up the Project for sponge iron and steel billets as a measure of backward integration for our activities of manufacturing steel products. AMLSPL is expected to utilize 35% of manufactured sponge iron for captive consumption, remaining would be sold in open market. Sales and Marketing Strategy Indian economy is quite robust and growing at a rapid pace. Consequent to upsurge in economic growth, housing sector and infrastructure development like construction of roads, bridges & ports are bound to expand leaps and bounds. Since the general trend for domestic economy is quite upbeat in the medium term the domestic steel prices are bound to be stable, if not increase further. In any case entire steel industry operates on spot prices and therefore we are quite comfortable working with that kind of ruling spot prices. We have been in the industry for the last 8 years and have built a broad network of customer base as a result of which marketing and selling the production from the existing operations or from new project will be at ease.

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AML STEEL LIMITED

Marketing Strategy for products of the Project There are about 100 to 150 Steel Melting Units and about 200 Rolling mills in Jharkhand, Orissa, Chattisgarh and West Bengal each of which on an average consume anywhere between 20,000 MTs to 40,000 MTs of sponge iron and 10,000 MTs to 30,000 MTs of steel billets per annum respectively. This works out to less than 2% of the total regional demand, our production is negligible compared to the level of demand in that region. Further, currently most of the players in the industry sell their products based on prices prevailing on ‘Spot’ basis. We also propose to use it for captive consumption at our existing plants. Some of the companies who participate in the same market are as follows:

Source: CRIS INFAC

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AML STEEL LIMITED

Insurance Our subsidiaries and we have taken insurance covers for our buildings, plant and machineries, stocks against perils such as fire, burglary etc., The details are given below: Name of Entity AMLSL

Class of insurance

Amount

Description of property

Validity

Standard Fire And Special Perils Policy Office Shield Policy

Rs. 440.00 lakhs

Building, plant and machinery and stock. Fire & Allied Perils, Burglary, Plate Glass Extension, Electronic Equipment, Employee Dishonesty, Money in Transit and in safe.

26 November, 2006

Standard Fire And Special Perils Policy

Rs. 320.00 lakhs

Building, plant and machinery and stock

26 November, 2006

Fire insurance

SL Rs. 600.00 lakhs

21 November, 2006

Burglary & Housebreaking

SL Rs.100.00 lakhs

Stock – in – trade, tools & equoments, machinery & utensils, electrical equipments, transformer, building including permanent fixtures and fittings. Stock – in - trade

Rs. 280.60 lakhs

1 December, 2006

AIPL

ASIPL

21 November, 2006

Green Belts The ongoing plantation and development of green belt in the existing steel plants and mines area and plantation of trees in the industrial area undertaken by itself proves the commitment and contribution towards maintaining a clean environment, protecting wild life and forestry. Green belts are being developed around the mines of the AMLSPL. Besides above, intensive afforestation drive is proposed over reclaimed mining areas with soil treatment measures. Plantation will also be carried out along roads, around waste pumps, in township and steel plant, which will suppress dust and gaseous emissions from propagation to surroundings. Corporate Social Responsibility We strongly believe that we are here to serve the society and therefore all efforts shall be taken that we enrich the lives of the people by producing quality goods relevant to their every day lives and taking all precautions so that we shall be law abiding corporate citizens but also ensure that we do not infringe or harm the society in anyway while pursuing our business goals. Property Except as stated below, there are no properties proposed to be purchased or acquired, which are to be paid for wholly out of the proceeds of the Issue offered for subscription by the Prospectus or the purchase or acquisition of which has not been completed at the date of issue of the Prospectus, other than properties: (i) the contract for the purchase or acquisition whereof was entered into in the ordinary course of the Issuer Company’s business, the contract not being made in contemplation of the issue nor the issue in consequence of the contract; or (ii) as respects which the amount of the purchase money is not material

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AML STEEL LIMITED

Details of the freehold/leasehold property purchased/ taken on lease by AMLSPL in Saraikela District, Jharkhand. Freehold property S. No.

Date of Sale Deed

1.

13.06.2005

2.

Seller

Address of Seller

Occupation of Vendor / Seller

Consideration (In Rs.)

S.K. Basir

Village Baliposi, within P.S. Seraikela, District Seraikela – Kharsawan.

Cultivation.

31,200

Land Area (In Acres) 0.26

16.06.2005

Marium Bibi and others

Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan.

Cultivation.

2,35,200

1.96

14,120

3.

27.09.2005

Gulshan Begum

Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan.

Household Affairs

6,000

0.05

1,080

4.

27.09.2005

Yusuf

Cultivation.

159600

1.33

9,600

5.

16.06.2005

Guleshan Khatoon and others

Village Saldih, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan.

Not Mentioned.

4,83,600

4.03

29,150

6.

06.09.2005

Smt. Mugari Ho and others

Cultivation.

2,65,000

1.51

10,600

7.

31.08.2005

Chakra Ho and others

Cultivation.

1,67,400

0.93

6,700

8.

29.08.2005

Nikhil Sardar and others

Cultivation.

3,13,000

1.80

12,520

9.

29.08.2005

Sanatan Singh Paharia

Cultivation

3,83,360

2.15

15,350

10.

30.08.2005

Sunita Ho and others

Cultivation.

88,200

0.49

3,530

11.

30.08.2005

Ramesh Melgandi

Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan.

Cultivation.

1,52,000

0.87

6,080

12.

15.04.2005

Sheikh Nazir and others

Village Masleva, within P.S. Seraikela,

Cultivation.

36,000

0.30

2,160

76

Stamp Value (In Rs.) 1,900

AML STEEL LIMITED

13.

15.04.2005

Pada Lochan Mahato

14.

07.01.2005

Bipin Mahato and others

15.

07.01.2005

Majendra Mahato

16.

07.01.2005

Mahabir Mahato

17.

07.01.2005

Mochi Mahato

18.

12.01.2005

Sushen Kumar Mahato and Another

19.

07.03.2005

Majendra Mahato

20.

07.03.2005

Shishir Mahato and others

21.

14.01.2005

Nirmal Mahato

22.

19.04.2005

Smt. Dingala Mahato

23.

15.04.2005

Sheikh Habib and others

24.

15.04.2005

Budeswar Mahato and others

25.

13.04.2005

Zakir Hussain and others

26.

13.05.2005

Madhu Mahato others

and

District Seraikela – Kharsawan. Village Ram Jeevanpur, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Kolabria, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan.

77

Cultivation.

1,66,800

1.39

10,010

Cultivation.

3,31,200

2.76

16,560

Cultivation.

92,400

0.77

4,620

Cultivation.

69,600

0.58

3,500

Cultivation.

3,79,200

3.16

19,030

Cultivation

4,10,400

3.42

20,520

Cultivation.

94,800

0.79

4,750

Cultivation.

1,06,800

0.89

5,350

Cultivation.

5,89,200

4.91

29,460

Cultivation

1,20,000

1.00

6,800

Cultivation.

2,66,400

2.22

16,000

Cultivation.

4,34,400

3.62

24,450

Cultivation.

2,60,400

2.17

14,960

Cultivation.

6,10,800

5.09

34,450

AML STEEL LIMITED

27.

07.01.2005

Shahochari Tanti and others

28.

07.03.2005

Smt. Kandari Mahato and others

29.

07.01.2005

Anil Kumar Mahato and others

30.

21.12.2005

Sona Ram HO and others.

31.

07.07.2005

Total freehold land purchased Government Lease

Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, within P.S. Seraikela, District Seraikela – Kharsawan. Village Masleva, P.S. Seraikela, District: Seraikela – Kharsawan.

Not mentioned

1,26,000

1.05

6,180

Cultivation.

1,92,000

1.60

9,500

Cultivation.

6,38,400

5.32

31,600

Cultivation.

5,38,200

2.99

21,530

59.41

Village Masleva, P.S. Seraikela, District: Seraikela – Kharsawan

Total Area Total Sale Consideration

Not applicable

Annual rent of Rs. 13,572 and Rs. 2,75,040 towards security deposit 80,36,172

78

1.30

Nil

60.71

3,92,060

AML STEEL LIMITED

REGULATIONS AND POLICIES There are several legislations, which apply to companies engaged in the steel industry in India and Sri Lanka and to mining operations in India. Under the provisions of various Central Government and State Government statutes / legislations, our Company is required to obtain and regularly renew certain licences / registrations and / or to seek statutory permissions to conduct our business and operations in India and Sri Lanka. The various statutes under which material registrations/licences/consents/permissions are required to be obtained by us are set out below: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Mines and Minerals (Development and Regulation) Act, 1957 and the rules framed thereunder. The Mines Act, 1952 and the rules framed thereunder. The Cess and Other Taxes on Minerals (Validation) Act, 1992. Offshore Areas Mineral (Development and Regulation) Act, 2002. Public Liability Insurance Act. The Companies Act, 1956. The Income-Tax Act, 1961. The Central Excise Act, 1944. The Customs and Excise Act, 1962. The Central Sales Tax Act, 1956. The Air (Prevention and Control of Pollution) Act, 1981. The Water (Prevention and Control of Pollution) Act, 1974. Environment (Protection) Act, 1986. The Electricity Act, 2003. The Industries Development and Regulations Act, 1951. Contract Labour (Regulation) Act, 1970. National Steel Policy issued by the Government of India in 2004. The Employees Provident Fund Act, 1948. Employees State Insurance Act, 1948.

The list set out above is by way of an illustration and is not an exhaustive list of all statutes applicable to the Company’s operations. In addition to the above, our Company is required to comply with various labour laws and the rules framed thereunder. The following regulations are applicable to the operations of ASIPL in Sri Lanka. i) ii) iii) iv) v)

Employee Provident Act. Value Added Tax Act. Employee Trust Fund Act. Industries Promotion Act. National Environmental Act.

Employee Provident Fund Act, Sri Lanka This law has been passed in order to promote compulsory savings for the benefit of all the labour engaged in all the manufacturing industries. As per the law all the employers irrespective of the number of employees engaged by them are liable to deduct specified rate of provident fund from the employee’s gross earnings. In addition to that they are also required by law to compulsorily contribute their own contribution at a specified rate and both the contributions have to be deposited with Central Bank of Sri Lanka on a monthly basis. All the contributions deposited in favour of Government with Central Bank of Sri Lanka as above shall carry interest rate as prescribed by Government from time to time.

79

AML STEEL LIMITED

If the total number of employees is less than 50 then Form C Return shall be filed at monthly intervals with Government and if the total no of employees are more than 50 then Form C Return shall be filed with Government once in six months. Value Added Tax Act, Sri Lanka All companies carrying on the business of either trading or manufacturing of any goods covered under this Act after 1 August, 2002 shall be required to register under this Act. The following are the rates of VAT applicable as on date: Scrap

--- 15%

Steel Products --- 15% As per the above law all VAT paid on inputs for manufacture of final products are eligible to be offset while paying VAT payable on the final products resulting in payment of net taxes only to the extent of value addition by the manufacturer concerned. In order to claim rebate on input taxes the manufacturer has to produce original VAT tax paid invoice and if it is imported inputs then the manufacturer has to produce Custom Declaration Form as well as relevant import invoices. Necessary returns have to be filed quarterly giving details of input credits and final payment of taxes to the revenue authorities of Government of Sri Lanka. Employee Trust Fund Act, Sri Lanka This is an Act passed by the Government to create compulsory savings on account of employees which can be used at the age of retirement from employment. As per the above law all employers are liable to pay 3% of the gross earnings of the employer towards Employee Trust Fund, which is administered and monitored by a semi government body known as Employee Trust Fund Board. Every month a monthly return has to be filed confirming that necessary payment is made with Government with full facts and figures. Industry Promotion Act 1990, Sri Lanka The above Act has been enacted to regulate industrial development. The main purpose of this Act is to regulate capacities for production in various sectors. Before addition of new production facilities, the government assesses whether the sector is already having enough capacity to meet the expected demand both domestic and overseas. As per the above Act all the new manufacturing undertakings have to register with Ministry of Industrial Development and obtain a certificate before initiating further process to put up a capacity to produce the relevant goods. Any further additions to the existing capacities or any modifications to final product line shall be duly intimated to the above Ministry and necessary modification be obtained by the manufacturers in time. National Environment Act, 1980: As per the above Act all the manufacturing undertakings have to make an application to Central Environmental Agency based on which they shall be awarded a licence to manufacture indended goods subject to certain conditions imposed on them. The above agency shall, depending upon the nature of the manufacturing process involved, impose conditions and limits up to which the noise levels, burning of solid wastes, disposing of solid waste in water

80

AML STEEL LIMITED

bodies, efficiency of furnace, limit for emissions, limit for liquid effluent, etc., shall be maintained failing which it shall be a violation of the licence conditions attracting penalties or even closure of plants. No goods other than licenced under this Act can be manufactured in the licenced location. In addition to that any expansions or installation of new machinery shall also have to permitted by the above Government agency before commencement of new manufacturing process or through installation of expanded capacities. For details of the aforementioned / registrations see the section titled ‘Licences and Approvals’ in this DRHP beginning on page no.[●].

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AML STEEL LIMITED

HISTORY AND CERTAIN CORPORATE MATTERS Overview Our Company was incorporated on 16 April, 1993 under the Companies Act, 1956 as Ashok Magnetics Limited and obtained a certificate of commencement of business on 24 May, 1993. The registered office of our Company then situated at Raheja Complex, 834, Mount Road, Madras – 600 002 was shifted to the present address at B –73, Sipcot Industrial Complex, Gummidipoondi – 601 201 with effect from 11 December, 1995. The name of the company was changed to AML Steel Limited on 1 August, 2005. Promoted by Mr. Ashok Agarwal and his associates, we commenced our business operations in manufacturing and marketing of video cassettes by acquiring the business of Trans-Asia Exports, in the year 1993 and ventured into the production of PVC pipes in the year 1995. We came out with a public issue of 7,60,000 Equity shares of Rs.10/- each at par aggregating to Rs.76,00,000/- in the November 1995 and the Equity Shares of the Company are listed at MSE, DSE and ASE. We commenced operations in the Steel sector by setting up a Mild Steel (MS) Ingots manufacturing facility at Pondicherry in the year 1998. Manufacturing of the PVC Pipes were in operation till the year 2000, when it was considered to concentrate fully in MS Ingots. Our company disassociated with the business of dealing with video cassettes and magnetic tapes in the year 2002 to have a better focus on steel business. As part of our expansion plans, we acquired Maruti Steels Private Limited. Colombo, Sri Lanka, in October 2002 and subsequently renamed it as ‘Ashok Steel Industries Pvt. Ltd.’, (ASIPL). We also acquired two steel manufacturing facilities in Karaikal, Tamil Nadu through our wholly owned subsidiary, Ankit Ispat Private Limited (AIPL), which was incorporated in the year 2003. We proposed to execute the Project for setting up of an Integrated Steel Plant through our subsidiary, AMLSPL, incorporated in the year 2004. Key events: YEAR 1993

•

1995

•

1998

• • •

2002 2003

• • •

2004.

• • •

2005

• •

MAJOR MILESTONES Entered into the Business of manufacturing and marketing of video cassettes by acquiring the business of M/s. Trans Asia Exports. Ventured into the production of PVC pipes by establishing a factory at Gummidipoondi, Tamil Nadu. Came out with an Initial Public Offer of Equity Shares. Registered Office of the Company was shifted from Madras to Gummidipoondi. Ventured into Steel by commissioning the first steel plant in Pondicherry for the manufacturing of MS Ingots. Acquired 100% stake in Maruthi Steel Private Ltd., Sri Lanka. Incorporated Ankit Ispat Private Limited (AIPL), a wholly owned subsidiary. Ankit Ispat Private limited acquired assets of Elango Industries Limited and EGPK Steels Limited. AML Steel & Power Limited (AMLSPL) was incorporated. AMLSPL entered into a MoU with the State of Jharkhand for Integrated Steel Plant. The name of Maruthi Steel Private Limited was changed to Ashok Steel Industries Private Limited (ASIPL). Ministry of Mines, GoI agreed to the grant of a mining lease to AMLSPL a for iron and manganese ore mines for a 20-year lease period. The name of the Company was changed to AML Steel Limited (AMLSL).

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AML STEEL LIMITED

Main Objects of the Company The main objects contained in our Memorandum of Association are: •

•

•

•

•

• • •

•

To carry on the business of manufacturers, importers and exporters, wholesale and retail dealers of and in Electronic goods of every kind, nature and description including blank video cassettes, Audio cassettes, prerecorded video cassettes, prerecorded audio cassettes, Audio and/or Video compact discs and so on and of all or anything which is used in electronic goods. To carry on the business of manufacturers, importers and exporters, wholesale and retail dealers of and in computers, floppy disks, printers, fax machines and the consumables and accessories for the above of every kind, nature and description including. To carry on all or any of the business of dealers and manufacturers, importers and exporters of all kinds of photographic goods including photo films, photo papers, X-ray films, cinematographic equipments and the consumables and accessories for the above of all articles similar to the foregoing or any of them or connected therewith. To carry on in India or elsewhere in any country or state or part of the world the business of manufacturing, producing, altering, converting, processing, treating, improving, manipulating, extruding, milling, slitting, cutting, casting, forging, rolling and re-rolling of all shapes, sizes, varieties, specifications, dimensions, descriptions and strength of iron and steel products including sponge iron, pig iron, malleable iron, S.G.iron, iron ore, steel, and non ferrous articles such as copper, brass gun metals, bell metals, aluminum bronzes, anti-friction metals, zinc, lead, tin, plastic malleables, glass or any other ferrous articles, now in vogue or hereafter to be invented or discovered, hot rolled coil, billets, slabs, bars, rods, structures, profiles, pipes, sheets, castings, wires, rolling metals, girders, channels, angles, rolls, ingots, flats, slabs, torsteels, bright bars, shaftings, beams, rounds, squares, hexagons, octagons, foils, joints, de-formed bars, their products, by-products and other allied materials, goods, articles and things made of all grades of iron and steel including steel rolling products, mild steel, carbon steel, stainless steel, electrical steel, alloy steel, special steel, Ls, Ts, I beam, rails, plates, hoops, wires, pipes and to manufacture by using non-ferrous metals like copper, brass rolling mill or roll brass as rounds, flats, angles, channels, wires or whatever articles or things required to be made out of it or any combination thereof with any other ferrous or non-ferrous materials including running a foundry and running a mill for rolling or re-rolling of all sections of mild steels or any or combinations of above metals or wrought iron as rounds, flats, angles, channels, squares or any combinations of above and to act as agent, distributor, stockist, dealer, promoter, C&F agent, retailer, wholesaler, intermediary, representative, importer, exporter, buyer, seller, job worker, converter, consultant, supplier, vendor; To carry on in India or elsewhere in any country or state or part of the world the business of manufacturing, producing, altering, converting, processing, casting, treating, improving of all varieties, shapes, sizes, specifications, descriptions and strengths of ferro alloy inclusive of but not restricted to ferro chrome, ferro manganese, ferro silicon, silicon manganese, ferro molybdenum, ferro titanium, ferro aluminum or any combination thereof and any other ferrous and non-ferrous materials and to act as agent, distributor, stockist, importer, exporter, buyer, seller, job worker, converter, consultant, supplier, vendor; To carry on the business of mining of iron ore, coal and any other mineral and metal; To sub-contract any work or portion of work or the whole/part of any contract in pursuance of the objects of the company; To apply for, purchase, or otherwise acquire any patents, invention, licences, concessions and the like, conferring any exclusive or non-exclusive or limited rights to use any secret or other information as to any invention which may seen capable of being used for other purposes of the objects of the company or the acquisition of which may seem calculated directly or indirectly to benefit the company, and to use, exercise, develop or grant licences in respect of, otherwise turn to account, the property rights of the same or information so acquired in attainment of any or all or combination of the main or ancillary objects of the company; To enter into partnership or any other arrangement for sharing profits, union of interest, cooperation, joint venture, reciprocal concession, or otherwise, with any person or company carrying on or engaged in or about to carry on or engaged in any business or transaction capable of being conducted so as to directly or indirectly benefit the company, and to lend money to, guarantee, or otherwise deal with the same in connection with the attainment of any or many or all objects of the company in which engaged.

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AML STEEL LIMITED

The main objects clause, the objects incidental or ancillary to the main objects of our Memorandum of Association enable us to undertake our existing activities and the activities for which the funds are being raised through this Issue. Since incorporation of the Company, the following changes have been made to the authorised capital: Increase in authorised capital The authorized share Capital of the Company was increased from Rs. 50 lakhs divided into 5,00,000 Equity Shares of Rs.10/- each to Rs. 3 crores divided into 30,00,000 Equity Shares of Rs. 10/- each. The authorized share Capital of the Company was increased from Rs. 3 crores divided into 30,00,000 Equity Shares of Rs.10/- each to Rs. 3.25 crores divided into 32,50,000 Equity Shares of Rs. 10/- each. The authorized share Capital of the Company was increased from Rs. 3.25 crores divided into 32,50,000 Equity Shares of Rs.10/- each to Rs. 30 crores divided into 3,00,00,000 Equity Shares of Rs. 10/- each.

Date of Amendment 21 April, 1995

15 June, 1995

19 July, 2005

Apart from the above-mentioned alterations in the authorised capital of the Company, the following alterations have been made in the object clauses of its Memorandum of Association Amendment Alteration of the object Clause of the Memorandum of Association of the Company by incorporating the Sub clauses 10, 11and 12 after sub clause 9 in Item No. III C – other object Clause of the memorandum of Association. 10 To carry, on the business of manufacturers, dealers, importers, exporters, and traders in rigid PVC Pipes, GI pipes, MS pipes, steel pipe, seamless pipes, SAW pipes, copper pipes, brass pipe, cast iron pipe & Tubes and fittings of PVC, Steel, Brass, Copper, cast iron rubber, polythene, aluminum stainless steel and other materials, and machinery equipments, tools and tackles for the manufactures of such items. 11. To carry on the business of manufacturers, buying and selling, export, import and market in al kinds of plastic raw materials, plastics, plastic goods & plastic scrape including plastic liners, fabrics and sacks of high density polyethylene, polypropylene, low density polyethylene, synthetic resins and compounds, ancillary and auxiliary materials and derivatives, intermediates and compounds, ancillary and auxiliary materials and derivatives, intermediates and compositions. 12. To undertake and execute any contracts, supply erection designing, fabrication of any kinds of pump, pipes, pipe work, fittings, tubular structures, pipe work systems and supply of engineering know how in relation to any of the aforesaid objects and to carry on any ancillary or other work comprised in such contracts.

84

Date of Shareholders Resolution 02 September, 1994

AML STEEL LIMITED

Alteration of the object Clause of the Memorandum of Association of the Company by incorporating the Sub clauses 13 to 30 after sub clause 12 in Item No. III C – other object Clause of the memorandum of Association. 13. To carry on the business as manufacturers, producers, dealers, stockist, distributor, importer and exporter of Sponge Iron and Pig Iron and all other kind of ferrous as well as non-ferrous metals, their alloys including iron and steel, aluminium, brass, tin, nickel, raw steel, mild steel, special steel and stainless steel, ferroualloy, nickel alloy, silicon alloy and to set up steel, furnaces and continuous casting and hot and cold rolling mill plants for producing ferrous and non-ferrous metals, alloy steels, ingots, billets, and all kinds and all sizes of iron steel rerolled section i.e., Flats, Angles, Rounds, Squares, Rails, Joist, Channels, Slabs Strips, Sheets, Plates, deformed bars, plan in and cold twisted bars and shiftings. 14. To carry on all or any of the business of manufacturers, assemblers, fitters, engineers, erectors, founders, smelters, refiners, maker, drawer, sinkers, repairers, hire-purchase, dealers, import & export agents, representatives, contractors and dealers of and in forgoing casting of steel, stainless and special steel, alloys, coke and implements, dies jigs, steel pipe and tube fittings. 15. To carry on the business of hire purchase, finance or leasing of all consumer durables, industrial and commercials properties, vehicles, machinery, equipment, tool, instruments and other assets of any and all description. 16. To act as Merchant Bankers, Managers to Issue of Capital, Registrars and Transfer Agents/Consultants for Shares, Debentures, Bonds, Fixed Deposits, and other instruments and Securities and to carry on all activities related thereto. 17. To carry on the business of foreign exchange dealing, money changing operations in foreign currency and such other activities as may be permitted subject to Foreign Exchange Regulations Act, 1973 and any other applicable laws and subject to Reserve Bank of India directives, if any, issued from time to time. 18.To act as investment advisers to individuals or Company/Companies and to provide advice on portfolio management or otherwise to corporations, companies or individuals. 19. To carry on the business of travel agency and to act as tour agents and contractors to facilitate traveling, and to provide conveniences of all kinds to tourists and travelers. 20. To carry on the business of financing whether by way of making loans or advances of factoring or securitising or otherwise to individuals and/or industrial enterprises, and/or such other persons and such terms and conditions as the Board may deem fit and expedient. 21. To carry on the business of investment and financial consultants, share and finance brokers, giving guarantees, dealing in commercial paper, providing custodial services, portfolio management, fund syndication, credit rating of financial instruments and other similar activities in the nature of financial intermediation or otherwise. 22. To carry on the business of manufacturers and/or sellers and/or dealers, importers and exporters of various type of plastic materials, goods, pipe articles, equipments, appliances, Tanks, Domestic as well as industrial, made/manufactured from various molding powders and materials like polymers and copolymers, shellac, resins (Synthetic and natural), polypropylene, polyethylene, polyamides, polystyrene, polyvinyl, acrylic, acetate and alcohol cellulose acetate and their similar thermo setting and thermoplastic, polymers by process of moulding, thermoplastic, insulating extruding, calendaring, laminating or producing by any other methods like vacuum forming, coating, blowing spreading to make plastics articles, thermoplastic, thermoware, insulated ware, including inter alia goods, articles, equipments, appliances and thinks made in combination with all or any of the aforesaid and/or man-made substance and whether can be used and/or applied in the form in which the same is manufactured and/or electrically and/or by any other power. 23. To design, manufacture, sell, alter, import/export all types of equipments

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15 June, 1995

AML STEEL LIMITED

products and renewal energy devices connected with the generation and distribution of power and energy through conventional and or non conventional energy sources including the utilisation of solar and wind power besides other natural resources. 24. To carry on business as traders, dealers, wholesalers, retailers, makers, designers, combers, scourers, spinners, weavers, finishers, dyers and manufacturers of readymade garments, yarn and fabrics of wool, cotton, jute, silk, rayon, nylon, terylene and other natural, synthetic and/or fibrous substances and/or manufacturers or materials from the waste realized from the above mentioned products either on its own account or on commission and to carry on business as drapers and dealers of furnishing fabrics in all its branches as costumers, readymade dress and mantle makers, silk mercers, makers and suppliers of clothing lingerie and trimmings of every kind, furriers, drapers, haberdashers, milliners, hosiers, glovers, lace makers, feather dressers, felt makers, dealers, in and manufacturers of yarn, fabrics and also to manufacture, deal in or process natural starch and other sizing materials, substances of all kinds and compounds and other substances, either basic or intermediate required for the above mentioned product or products. 25. To carry on business as manufacturers or grinders, crushers, buyers, sellers, distributors, importers exporters and makers, refiners, processors of cement and minerals used for and in connection with cements. 26. To carry on business of spinning & weaving mills and of spinners, weavers, bleachers, dyers, printers and Finishers of Cotton, Silk, Wool, Rayon, natural and synthetic fibres and fibre substance of all kinds. 27. To buy, take on lease, or under a licence, concession, grant, or otherwise acquire, in mines, in mining rights any land or other places and metalliferous land and explore, work, export, develop turn to account the same to crush, win, get, quarry, smelt, calcine, refine, dress, amalgamate, manipulate and mineral substance of all kinds, and to carry on any other metallurgical operation which may seem conductive to any of the objects of the Company. 28. To carry on business of manufacturers, suppliers, buyers, sellers, importers, exporter, commission and consignment agent and dealers in Drip Irrigation System, Sprinkler System & Green Houses. 29. To carry on the business of manufacturers, suppliers, importers, exporters and dealers of Manual, Mechanical, Electrical and Electronic Toys and all other type of Toys. 30. To carry on the business of farmers, growers, manufacturers, dealers, brokers, traders, exporter, importer, stockiest, distributors, agents of any of any of all of produce of agriculture including Teak Plantation, Floriculture, Agroforestry, tissue culture, bio-technology, horticulture, including all products and things which are produced on grown, on earth, water, or in air either naturally or otherwise. Alteration of the name clause of the memorandum of Association of the Company by changing the name from Ashok Magnetics limited to AML Steel Limited. (Certificate of Change of name was issued by the RoC on 1 August, 2005) Alteration of the object Clause of the Memorandum of Association of the Company by incorporating the sub clauses 4 to 9 after the sub clause 3 in Item No.111 A – Main object clause of the Memorandum of Association. (Resolution passed through postal ballot process) 4. To carry on in India or elsewhere in any country or state or part of the world the business of manufacturing, producing, altering, converting, processing, treating, improving, manipulating, extruding, milling, slitting, cutting, casting, forging, rolling and re-rolling of all shapes, sizes, varieties, specifications, dimensions, descriptions and strength of iron and steel products including sponge iron, pig iron, malleable iron, S.G.iron, iron ore, steel, and non ferrous articles such as copper, brass gun metals, bell metals, aluminum bronzes, antifriction metals, zinc, lead, tin, plastic malleables, glass or any other ferrous

86

19 July, 2005

31 December, 2005

AML STEEL LIMITED

articles, now in vogue or hereafter to be invented or discovered, hot rolled coil, billets, slabs, bars, rods, structures, profiles, pipes, sheets, castings, wires, rolling metals, girders, channels, angles, rolls, ingots, flats, slabs, torsteels, bright bars, shaftings, beams, rounds, squares, hexagons, octagons, foils, joints, de-formed bars, their products, by-products and other allied materials, goods, articles and things made of all grades of iron and steel including steel rolling products, mild steel, carbon steel, stainless steel, electrical steel, alloy steel, special steel, Ls, Ts, I beam, rails, plates, hoops, wires, pipes and to manufacture by using non-ferrous metals like copper, brass rolling mill or roll brass as rounds, flats, angles, channels, wires or whatever articles or things required to be made out of it or any combination thereof with any other ferrous or non-ferrous materials including running a foundry and running a mill for rolling or re-rolling of all sections of mild steels or any or combinations of above metals or wrought iron as rounds, flats, angles, channels, squares or any combinations of above and to act as agent, distributor, stockist, dealer, promoter, C&F agent, retailer, wholesaler, intermediary, representative, importer, exporter, buyer, seller, job worker, converter, consultant, supplier, vendor; 5. To carry on in India or elsewhere in any country or state or part of the world the business of manufacturing, producing, altering, converting, processing, casting, treating, improving of all varieties, shapes, sizes, specifications, descriptions and strengths of ferro alloy inclusive of but not restricted to ferro chrome, ferro manganese, ferro silicon, silicon manganese, ferro molybdenum, ferro titanium, ferro aluminum or any combination thereof and any other ferrous and non-ferrous materials and to act as agent, distributor, stockist, importer, exporter, buyer, seller, job worker, converter, consultant, supplier, vendor; 6. To carry on the business of mining of iron ore, coal and any other mineral and metal; 7. To sub-contract any work or portion of work or the whole/part of any contract in pursuance of the objects of the company; 8. To apply for, purchase, or otherwise acquire any patents, invention, licences, concessions and the like, conferring any exclusive or non-exclusive or limited rights to use any secret or other information as to any invention which may seen capable of being used for other purposes of the objects of the company or the acquisition of which may seem calculated directly or indirectly to benefit the company, and to use, exercise, develop or grant licences in respect of, otherwise turn to account, the property rights of the same or information so acquired in attainment of any or all or combination of the main or ancillary objects of the company; 9. To enter into partnership or any other arrangement for sharing profits, union of interest, co-operation, joint venture, reciprocal concession, or otherwise, with any person or company carrying on or engaged in or about to carry on or engaged in any business or transaction capable of being conducted so as to directly or indirectly benefit the company, and to lend money to, guarantee, or otherwise deal with the same in connection with the attainment of any or many or all objects of the company in which engaged.

Subsidiary Companies Our existing corporate structure is as under: AML Steel Limited

Ankit Ispat Private Limited (100%)

AML Steel & Power Limited (100%)

87

Ashok Steel Industries Private Limited (100%)

AML STEEL LIMITED

1. Ankit Ispat Private Limited (AIPL) Incorporated as a private limited company on 13 August, 2003, AIPL is engaged in the business of manufacturing, buying, selling, importing, exporting or otherwise dealing in iron, steel and non ferrous articles. It has got two units for manufacturing mild steel ingots with a total installed capacity of 27,600 TPA. Board of Directors Mr. Ashok Agarwal, Mrs. Anita Agarwal, Mr. Poonam Chand Jangir, Mr.Ajay Agarwal, Mr. Ankit Agarwal and Mr.Vinay Kishore Kasat constitute the Board of AIPL. Financial Highlights Particulars

Total Income Profit/Loss After Tax EPS (Rs.) Paid up Share Capital Reserves and Surplus NAV (Rs.)

For the period ended 31.12.2005 2883.12 175.92 14.32 163.84 10.65 26.65

For the year ended 31.03.2005 3037.69 87.69 5.35 163.84 98.35 15.90

(Rs. in lakhs) For the year ended 31.03.2004 993.90 10.66 0.65 163.84 10.65 10.54

Shareholding Pattern AMLSL is holding 100% of the paid up capital of AIPL. The Shareholding Pattern of AIPL is as follows: S No

Name

1. 2. 3. 4. 5.

AML Steel Limited Mr. Ashok Agarwal (nominee of AMLSL)* Mrs. Anita Agarwal (nominee of AMLSL)* Mr. Poonam Chand Jangir (nominee of AMLSL)* Mr.Ajay Agarwal (nominee of AMLSL)* Total

No. of Equity Shares 16,38,385 1 1 1 1 16,38,389

% 100 ----100

*The beneficial interest in and under such shares belongs exclusively to the Company. 2. AML Steel & Power Limited (AMLSPL) AMLSPL was incorporated as a public limited company on 30 January, 2004 and obtained the certificate of commencement of business on 12 February, 2004. The main object of AMLSPL is to engage in the business of manufacturing and trading of iron and steel, generation, distribution and transmission of the electrical power and mining of iron ore, coal and other minerals and metals. Board of Directors Mr. Ashok Agarwal, Mrs. Anita Agarwal, Mr. Poonam Chand Jangir and Mr.Ajay Agarwal constitute the Board of AMLSPL. Financial Highlights Particulars

Total Income Profit/Loss After Tax EPS (Rs.)

For the period ended 31.12.2005 ----

(Rs. in lakhs) For the year ended 31.03.2005 ----

88

AML STEEL LIMITED

Paid up Share Capital Reserves and Surplus NAV (Rs.)

5.00 1.58 2907.50

5.00 -106.82

Share Application money pending allotment as on 31 March, 2005 was Rs. 66.62 lakhs and as on 31 December, 2005 was Rs. 1522.72 lakhs. Shareholding Pattern AMLSL is holding 100% of the paid up capital of AMLSPL. The Shareholding Pattern of AMLSPL is as follows: S No 1. 2. 3. 4. 5. 6. 7.

Name AML Steel Limited Mr. Ashok Agarwal (nominee of AMLSL)* Mrs. Anita Agarwal (nominee of AMLSL)* Mr. Poonam Chand Jangir (nominee of AMLSL)* Mr.Ajay Agarwal (nominee of AMLSL)* Mr. Kamal Kishore Bihani (nominee of AMLSL)* Mr. Manoj Kumar (nominee of AMLSL)* Total

No. of Equity Shares 49,940 10 10 10 10 10 10 50,000

% 99.88 0.02 0.02 0.02 0.02 0.02 0.02 100.00

*The beneficial interest in and under such shares belongs exclusively to the Company. 3. Ashok Steel Industries Private Limited, Sri Lanka (ASIPL) ASIPL, originally incorporated on 25 June, 2001 as Maruthi Steel Private Limited, in Colombo, Sri Lanka, was acquired by the AMLSL with effect from 10 October, 2002. ASIPL is a wholly owned subsidiary of AMLSL. The name of the Company was changed to ASIPL with effect from 19 January, 2004. ASIPL has a mild steel ingots plant and re-rolling mill with a total steel making capacity of 60,000 TPA. Board of Directors Mr. Ashok Agarwal, Mrs. Anita Agarwal and Mr. Sai Anantha Rama Krishna constitute the Board of ASIPL. Financial Highlights Particulars

For the For the year For the year period ended ended ended 31.12.2005 31.03.2005 31.03.2004 Total Income 2360.29 1929.33 611.98 Profit/Loss After Tax 157.83 119.57 38.89 EPS (Rs.) 4.01 2.28 0.74 Paid up Share Capital 233.33 233.33 238.64 Reserves and Surplus 176.16 18.33 (102.04) NAV (Rs.) 7.29 4.28 2.08 * Share Application Money as on 31 March, 2003 is Rs.126.16 lakhs.

(Rs. in lakhs) For the period ended 31.03.2003 110.04 (50.45) 1.99 118.03 (144.21) 2.84

Shareholding Pattern AMLSL holds 100% of the share capital of ASIPL. Shareholders Agreements There are no shareholders agreements entered into by the Company with any of its shareholders.

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AML STEEL LIMITED

Brief Details of Other Agreements 1.

MoU between the Government of Jharkhand and AMLSPL dated 26 February, 2004. AMLSPL has entered into a MoU with Government of Jharkhand on 26 February, 2004 for setting up of an Integrated Steel Plant for manufacturing/generating following facilities with proposed investment of Rs.1,944/- Crores in two phases: • • • • • •

Sponge Iron – 15,40,000 TPA (15,40,000 TPA for captive consumption) Hot Metal – 7,77,000 TPA (6,92,640 TPA for Captive consumption and 84,360 TPA Pig Iron for Sale) Billets – 130 MM SQ X 9M Long – 20,00,000 TPA (6,00,000 TPA for Captive consumption and 14,00,000 TPA for Sale) TMT Bar Mill – 3,00,000 TPA (For sale) Wire Rod Mill – 3,00,000 TPA (For Sale) Captive Power Plant – 312 MW.

The Government will assist AMLSPL in obtaining the land, coal (for captive use), iron ore and other minerals, water, power and the environmental clearances. Also the Government shall consider to extend applicable incentives as envisaged in Mega Investment Incentive Scheme notified vide Notification No.1885 dated 10 June, 2003 and Jharkand Industrial Policy, 2001. 2.

Agreements for Technical Know-How between AMLSPL and M/s. Popuri Engineering & Consultancy Services dated 24 February, 2005 and 8 June, 2005. AMLSPL has entered into agreements dated 21 February, 2005 (for first phase of 1 X 100 TPD Kiln) and 8 June 2005 (for first phase of second kiln X 100 TPD Kiln) for the technical know how for the purpose of installing plant and machineries necessary for the manufacture of Sponge Iron and allied products. Consumption Norms capacity utilization: The Specific consumption of raw material for one tonne of sponge Iron (90% + 2% metallization) product will be 1.55 Tonnes of Iron Ore (Fe more than 65%) 1.2 Tonnes of Coal (FC > 45%) and 30 Kg of lime stone (CaO + MgO > 50%) is required. Above consumption norms shall be achieved once after stabilizing the process. Performance Guarantee: After stabilizing the process at 100% of the capacity utilization shall be shown continuously for three days at 90% +/- 2% metallization.

Strategic Partners We have not entered into any strategic partners’ agreement. Financial Partners We have not entered into any financial partners’ agreements.

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AML STEEL LIMITED

OUR MANAGEMENT Board of Directors As per our Articles of Association we cannot have less than 3 Directors or more than 12 Directors. Presently we have six Directors managing the day-to-day affairs of our Company under the overall supervision and control of Mr. Ashok Agarwal, Managing Director. The following table sets forth current details regarding our Board of Directors: Name, Designation, Fathers name, Address, Occupation and Term Mr. Ruli Ram Agarwal Chairman – Non-Executive. S/o. Mr.K.R.Agarwal “Sunil Bhawan”, Delhi Road, Model Town, Hisar – 125 005 Industrialist Term: Liable to retire by rotation. Mr.Ashok Agarwal Managing Director S/o. Mr. Ruli Ram Agarwal 145, Devdarshan Apartments, 1, Burnaby Road, Kilpauk, Chennai - 600 010 Industrialist Term: For a period of five years from 22 August, 2005 (Up to 22 August, 2010)

Nationality

Age

Other Directorship

Indian

65

1. Jindal Industries Limited 2. Ashok Memory India Private Limited. 3. Corbin Trades Investments Limited. 4. Suban Industries Limited

Indian

45

Mr. Poonam Chand Jangir Non – Executive Director S/o. Sohanlal Jangir, AE 5, Ist Floor, 7th Street, 10th Main Road, Anna Nagar, Chennai – 600 040 Business Term: Liable to retire by rotation. Mr.Ajay Agarwal Non – Executive Director S/o. Mr. Gauri Shankar Agarwal S – 13, 3rd Floor, Flat No.7, Golden Turn View Apartment, Anna Nagar, Chennai – 600 040 Business Term: Liable to retire by rotation. Mr. S. Kolandai Raj Independent Director S/o. Mr. Stanilas 82/83, Friends Nagar, Cuddalore – 607 001. Service Term: Liable to retire by rotation. Mr. Vinay Kishore Kasat Independent Director S/o.Late J L Kasat 30, Nilaya Street, Shanmugapuram, Pondicherry – 605 009 Business Term: Liable to retire by rotation.

Indian

39

1. Ankit Ispat Private Limited 2. AML Steel & Power Limited 3. Ashok Steel Industries Private Limited, Sri Lanka. 4. Ashok Memory India Private Limited. 5. Corbin Trades Investments Limited. 6. Skywell Assets Limited. 1. Ankit Ispat Private Limited 2. AML Steel & Power Limited

Indian

31

Indian

64

Indian

69

91

1. Ankit Ispat Private Limited 2. AML Steel & Power Limited

Nil

1. Ankit Ispat Private Limited

AML STEEL LIMITED

Brief profile of the Directors Mr.Ashok Agarwal is the Promoter cum Managing Director of the Company. His profile is mentioned under the head ‘Our Promoters’. Please refer to page no. [•] of this DRHP for further details. Mr. Ruli Ram Agarwal aged 65 years is the Non-Executive Chairman and has more than 40 years of experience in business, industry and trade. He is a commerce graduate and is also a Director of Jindal Industries Ltd. Mr. Poonam Chand Jangir aged 39 years is a Non-Executive Director of the Company. He is a commerce graduate and has more than 15 years of industrial experience most of which has been with our group. Mr.Ajay Agarwal aged 31 years is a Non-Executive Director of the Company. He is a commerce graduate and has more than 10 years of rich experience in various businesses. Mr. S. Kolandai Raj aged 64 years is a Non –Executive Independent Director of the Company. He is a Mechanical Engineer from Madras University. He has an experience of more than 40 years in the steel industry. He has undergone training in management as well as production technology from reputed institutes in India as well as overseas. He started his career as a junior engineer in Bokaro Steel Plant and resigned as the Executive Director (Works). Mr. Vinay Kishore Kasat aged 69 years is a Non –Executive Independent Director of the Company. He is a graduate in commerce and having an experience in different industries. He is practicing as an industrial consultant from the year 1998. He is also involved in the social activities. Borrowing Powers of the Board The Shareholders of the Company pursuant to 293 (1) (d) of the Companies Act, 1956, at the EGM held on 19 July, 2005 authorised the Board of Directors to borrow a maximum of Rs.200 crores. The section titled “Main provisions of the Articles of Association” on page no. [●] in this DRHP sets out the borrowing powers of the Directors of the Company. Details of appointment of the Managing Director and the compensation payable Mr. Ashok Agarwal was appointed as Managing Director of the Company for a period of five years with effect from 22 August, 2005. The appointment was made pursuant to Sections 198, 269, 297, 299, 300, 309 of the Companies Act, 1956 read with the provisions of Parts I, II & III of Schedule XIII of the Companies Act, 1956. He is not drawing any remuneration from the Company. Compensation of Our Directors No compensation is being paid to any of the Directors by way of salary and perquisites or sitting fees. Property acquired by our Promoters and/or Directors within two years Our Company has not acquired any Property in last two years from the Promoters and/or Directors of our Company or from any company in which they are directly and/or indirectly related. Corporate Governance Our Company stands committed to good Corporate Governance practices based on the principles such as accountability, transparency in dealings with our stakeholders, emphasis on communication and transparent reporting. These vital initiatives extend beyond mandatory corporate governance requirements and are in accordance with our aim of establishing voluntary best practices for good corporate governance. The SEBI Guidelines issued in respect of Corporate Governance are already applicable to us. We are currently complying with the SEBI Guidelines on Corporate Governance.

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AML STEEL LIMITED

Composition of the Board The Board has six Directors, of which two are independent in accordance with the requirements of clause 49 of the listing agreement entered into with the Stock Exchanges. The Chairman of the Board is a NonExecutive Director. The Constitution is as follows: Sl No 1 2 3 4 5 6

Name of the Director Mr.Ruli Ram Agarwal Mr.Ashok Agarwal Mr.Ajay Agarwal Mr.Poonam Chand Jangir Mr.S. Kolandai Raj Mr.Vinay Kishore Kasat

Designation Chairman Managing Director Director Director Director Director

Catagory Non – Executive Executive Non – Executive Non – Executive Non – Executive and Independent Non – Executive and Independent

Committees of the Board have been constituted in order to look into the matters in respect of audit and shareholders / Investors Grievance Redressal Committee and Share Transfer Committee. We have not formed a remuneration committee. Our Board of Directors decides the remuneration of our Directors, subject to the approval of our Directors, if required. Audit Committee Constitution of Committee The Board of Directors of the Company reconstituted the Audit Committee on 30 December, 2005 with the following Directors as the Members. Sl No 1 2 3

Name of the Director Mr.S Kolandai Raj Mr.Vinay Kishore Kasat Mr.Poonam Chand Jangir

Designation Chairman Member Member

Catgory Non – Executive and Independent Non – Executive and Independent Non – Executive

The Company Secretary of AMLSL is the Secretary of the Committee. Powers of Audit Committee: The Audit Committee can: 1. 2. 3. 4.

investigate any activity within its frame work and scope of activity which can refer to finance, accounts, management strategies, internal systems and procedures, delegation of authority, etc; seek any information from any employee within its terms of reference and in connection with execution of its powers; can obtain legal or professional advices from third parties in connection with carrying out its objectives, but within the frame work of the terms of reference; and, not the least; secure the attendance of outsiders which relevant expertise, if it considers necessary for carrying out the objectives for which the Committee is formed.

Role of Audit Committee: The Audit Committee will: 1. 2. 3. 4. 5.

examine, inter-alia, the entire financial reporting process; examine the veracity of disclosure of financial information to ensure that the financial statement is correct, sufficient and credible; recommend to the Board, the appointment, the re-appointment and, if required, the replacement or the removal of Statutory Auditors and fixation of the Audit Fees; be incharge of approval of payment to Statutory Auditors for any other services rendered by them; review with the management, the annual financial statement before submission to the Board for approval, with particular reference to:

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AML STEEL LIMITED

a)

Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956; b) Changes, if any, in accounting policies and practices and reasons for same; c) Major accounting entries involving estimates based on the exercise of judgment by management; d) Significant adjustments made in the financial statements arising out of audit findings; e) Compliance with listing and other legal requirements relating to financial statements; f) Disclosure of any related party transactions g) Qualifications in the draft audit report. 6. 7. 8.

9. 10.

11. 12. 13. 14.

review with the management, the quarterly financial statements before submission to the Board for approval; review with the management, performance of statutory and internal auditors, adequacy of internal control systems; review the internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit; have discussions with internal auditors any significant findings and follow up thereon; review the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. discuss with the Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern; look into the reasons for substantial defaults in the payment of the depositors, debenture holders, shareholders and creditors; review the functioning of the Whistle Blower mechanism, in case the same is existing; carry out any other function as is mentioned in the terms of reference of the Audit Committee;

Review of information by Audit Committee: The Audit Committee will also review: i. ii. iii. iv. v. vi.

the Management Discussion and Analysis of financial conditions and results of operations; the statement of significant related party transactions, submitted by management; management letters / letters of internal control weaknesses issued by the statutory auditors; internal audit reports to internal control weaknesses; and the appointment, removal and terms of remuneration of the Chief internal auditor. the financial statements of the subsidiary companies, in particular, the investments made by the unlisted subsidiary company.

Investor Grievance Committee The Investor Grievance Committee has been reconstituted under the chairmanship of a Non –Executive Director on 30 December, 2005 with the following Directors as Members. Sl. No. 1 2

Name of Director Mr.Ajay Agarwal Mr.Vinay Kishore Kasat

Designation Chairman Member

Category Non-Executive Non-Executive and Independent

The Company Secretary of AMLSL is the Secretary of the Committee. The committee has been constituted to look into the redressal of shareholders and investors’ complaints like non-receipt of share certificates sent for transfer, non receipt of balance sheets, non receipt of declared dividends etc. The committee also approves issue of duplicate share certificates and oversees the matters connected with the transfer of securities. Share Transfer Committee The Share Transfer Committee has been reconstituted under the chairmanship of a Non –Executive Director on 30 December, 2005 with the following Directors as Members.

94

AML STEEL LIMITED

Sl. No. 1 2

Name of Director Mr. Ajay Agarwal Mr. Poonam Chand Jangir

Designation Chairman Member

Category Non-Executive Non-Executive

The Company Secretary of AMLSL is the Secretary of the Committee. The committee approves issue of duplicate share certificates and oversees the matters connected with the transfer of securities. Shareholding of the Directors in our Company Names

% of shareholding 0.15 20.01 0.09 0.19 Nil Nil

No. of Shares held

Mr. Ruli Ram Agarwal Mr.Ashok Agarwal Mr. Poonam Chand Jangir Mr.Ajay Agarwal Mr. S. Kolandai Raj Mr. Vinay Kishore Kasat

11,250 15,01,000 7,250 14,000 Nil Nil

Interest of Promoters and / or Directors All the Directors of our Company may be deemed to be interested to the extent of sitting fees and/or other remuneration if any, payable to them for attending meetings of the Board or a committee thereof as well as to the extent of reimbursement of expenses if any payable to them under our Articles of Association. The Managing Director will be interested to the extent of remuneration, if any, paid to him for services rendered by him as an officer or employee of the Company. All our Directors may also be deemed to be interested in the Equity Shares in our Company, if any, held by them, their relatives or by the companies and firms in which they are interested as directors / members / partners or that may be subscribed for and allotted to them, out of the present Issue in terms of the DRHP and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. For further information on transactions which our Company has entered into with companies in which our Promoters and / or Directors are interested please refer to ‘Related Party Transactions’ of section titled on ‘Financial Information’ on page no. [•] in this DRHP. All the Directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be entered into by us with any company in which they have direct /indirect interest or any partnership firm in which they are partners. Changes in the Board of Directors during the last three years The changes in our Board of Directors during the last three years are as follows: Name Mr. S Kolandai Raj Mrs.Anita Agarwal Mr. Vinay Kishore Kasat

Change (Ceased/Appointed) Appointed Ceased Appointed

95

With effect from

Reason for change

4 November, 2005 Strengthen the Board 30 December, 2005 Resigned 30 December, 2005 Strengthen the Board

AML STEEL LIMITED

Management Organization Structure

96

AML STEEL LIMITED

Key Managerial Personnel

The details of our Key Managerial Personnel other than our Managing Director Mr.Ashok Agarwal are as below: For details on our Managing Director please refer to section titled “Our Promoters” on page no. [●] of this DRHP. Designation & Functional area

S. No

Name

Age

1.

Mr. Viswanathan P.

43

2.

Mr. Ajay Agarwal

31

3.

Mr. Rajesh Agrawal

32

Company Secretary

4.

Mr.Bishen Singh

60

General Manager Factory

Chief Financial Officer General Manager (Accounts)

Qualification A.C.A. Chartered Accountant B.A. (Economics. Hons.,), A.C.S. B. E. (Metallurgy)

Industry Date of Experience joining (years) 20 6 June, 2005 7

6 June, 2005

8

10 February, 2006

36

1 June, 2003

Brief Details of the Key Managerial Personnel Mr. Viswanathan. P aged about 43 years, a Chartered Accountant, is the Chief Financial Officer of the Company. He has also qualified as a Company Secretary and a Cost Accountant. He joined the Company on 6 June, 2005 and has an in depth experience of over 20 years in various facets of finance functions holding senior positions in diverse industries with companies of repute, both domestic and overseas, including Hindustan Lever limited. Prior to the current assignment, he was Vice President, Internal Audit (Overseas Operations) for Ispat Steel Group. Mr. Ajay Agarwal, aged about 31 years, has qualified as a Chartered Accountant and has an overall experience of 7 years in accounts and finance related matters. He joined as General Manager (Accounts) on 6 June, 2005. Previously he was employed with Uniply Industries Limited as Manager Accounts and Finance.

97

AML STEEL LIMITED

Mr. Rajesh Agrawal, aged about 32 years, joined the Company on 10 February, 2006 as the Company Secretary. He is in charge of the Secretarial Department of the Company. He is having an experience of 8 years to his credit with companies of repute. Previously he was working with Iljin Automotive Private Ltd., an ancillary unit of Hyundai Motor India Limited as Assistant Finance Manager cum Company Secretary. Mr. Bishen Singh, aged about 60 years a seasoned man of steel with rich experience in the industry of around 36 years. He joined the Company on 1 June, 2006 as General Manager - Factory. He is the complete in charge of the smooth functioning of the factory as a whole. Previously he was working with Sumangalam Steel Private Ltd., as Manager Factory. All the persons whose name appear as Key Managerial Personnel are on the permanent rolls of the Company and are not employed by any of our Group Concerns. Further, none of the key personnel mentioned above are related to the Promoters/Directors of the Company. None of the above has been selected pursuant to any arrangement/understanding with major shareholders/customers/suppliers. Changes in Key Managerial Personnel during last three years of AMLSL Name S. No 1 Mr. Balasubramaniam 2. Mr.Venkatesh 3. Mr.Rajendra Kumar 4. Mr Soundarajan

Designation Manager - Accounts Company Secretary Company Secretary V.P. (Finance) & Company Secretary

Date of joining 18 April, 1997 15 May, 2001 17 June, 2005

Date of Resignation 25 May, 2005 22 August, 2005 1 December, 2005

Reason Resigned Resigned Resigned

1 September, 2005

14 February, 2006

Resigned

Key Managerial Personnel of AMLSPL The following Key Managerial Personnel are employed with and are on the payrolls of the AMLSPL. S. No

Name

Age

1

Mr. Narendra Deo Mishra

54

2 3

Mr. Om Prakash Jangir Mr. Manoj Kumar

31 36

Designation & Functional area

Qualification

B.Sc (Phy, Chem, Maths), B.E. (Mech.), MBA (Prod. General Manager Mkt. Mgmt), PGDMM (IIMM, Bangalore) Project Manager M.Com V.P. Commercial B. E. (Machanical)

Exp (years)

Date of joining

32

12 June, 2005

13 16

28 March, 2003 2 March, 2003

Brief Details of the Key Managerial Personnel Mr. Narendra Deo Mishra joined AMLSPL as General Manager. A Mechanical Engineer from Gorakhpur University, he holds a MBA degree in Production Marketing Management from Nagpur University and a Post Graduate Diploma in Materials Management (PGDMM) from the Indian Institute of Materials Management (IIMM), Bangalore. He has an experience of 32 years handling projects in Cement Plant, Integrated Plants and in Sponge Iron plant. Previously he was working with Nav Bharath Steel Co. Ltd., as Vice President (Projects). Mr. Om Prakash Jangir, a holder of Masters Degree in Commerce from the University of Ajmer joined the Company as Project Manager on 28 March, 2003. He has an overall 13 years of experience in managing projects with companies of repute. Previously he was working with Poly Pipes (P) Ltd as Manager (Sales). Shri Manoj Kumar, aged about 36 years is a BE (Mechanical) joined the Company on 2 March, 2003. He is the VP (Commercial) and is responsible for the commercial function of the Company. He is having rich experience in various positions with companies of repute. Previously he was working with Tele Flow Industrial Valves (P) Ltd as Manager Marketing.

Shareholding of Key Managerial Personnel in our Company

98

AML STEEL LIMITED

S. No. 1.

Name Mr.Manoj Kumar

No. of shares 26,750

% of shareholding 0.36

Bonus or Profit Sharing Plan for the Key Managerial Personnel There is no Bonus or Profit Sharing Plan for the Key Managerial Personnel Employees We believe that a motivated and empowered employee base is key to our competitive advantage. AMLSL has employed directly 120 Employees as detailed below: Description Managers, Junior Managers and above Office Staff Members Plant Workers Total

Number 10 20 90 120

Disclosures regarding the Employee Stock Option Scheme There is no Employee Stock Option Scheme as on date in the Company. Payment or benefit to officers of the Company There is no payment or benefit to given to the officers of the Company other than salary.

99

AML STEEL LIMITED

OUR PROMOTERS The Promoters of our Company are Mr. Ashok Agarwal and M/s. Ashok Memory India Private Limited. The details of our Promoters are as follows: Mr.Ashok Agarwal

Voter ID Number PAN Passport Number Driving License Number Bank Account Number

Not Available ACWPA3685M E8564771 R/TN/001/013767/2001 Central Bank of India – HSS - 15591

Mr. Ashok Agarwal aged, 45 years is the Managing Director & the brain behind the organizational growth. He is a Mechanical Engineer from Regional Engineering College, Kurukshetra with about 23 years of experience in setting up plants, commissioning it and successfully turning around sick units. His contacts and personal rapport with the indigenous and overseas business enterprises has enabled the group to establish a permanent place in the global steel market. As a result of his excellent business acumen the group was able to embark on various projects and has led not only to the successful acquisitions of steel units in India and abroad but also turning them around in record time. Over a period of time, he has gained in-depth knowledge and experience in steel making as well as international sourcing and marketing. The permanent account number, bank account number and passport number of Mr. Ashok Agarwal will be submitted to the Stock Exchanges at the time of filing of this DRHP. Ashok Memory India Private Limited Originally incorporated on 4 June, 1993 as a public limited company, Ashok Memory India Limited was converted into a private limited company on 22 November, 1995. AMIPL was promoted by Mr.Ashok Agarwal to engage in the business of manufacturing and trading of electronic goods, computer floppy disks, video and audio cassettes etc., The registered office is situated in Raheja Complex, No.834, Anna Salai, Chennai - 600 002. Date of Incorporation Registration Number PAN Bank Account Number Address of the ROC

04 June, 1993 18-25712 of 1993 AACCA7380E Central Bank of India - 102384 The Registrar of Companies, Chennai, Block 6, IInd Floor, Shastri Bhavan, 26, Haddows Road, Chennai - 600 006.

Board of Directors The Board of Directors of AMIPL comprises of Mr.Ashok Agarwal, Mr. Ruli Ram Agarwal and Mrs. Anita Agarwal. Shareholding Pattern The Shareholding Pattern of AMIPL is as follows: S No 1 2 3 4

Name Mr. Ashok Agarwal Mrs. Anita Agarwal Mr. Ajay Agarwal Mr. Shyam Sundar Agarwal

No. of Shares 239600 15600 100 100

100

% of Total 93.52 6.09 0.04 0.04

AML STEEL LIMITED

5 6 7 8

Mr. Poonam Chand Jangir Mr. K. Balasubramoni Mr. Sai Anantha Rama Krishna Mr. Ruli Ram Agarwal Total

100 100 100 500 256200

0.04 0.04 0.04 0.20 100.00

Financial Highlights For the Year ended Total Income Profit/Loss After Tax EPS (Rs.) Share Capital Reserves and Surplus NAV (Rs.)

31.03.2005 14.95 12.33 4.81 25.62 115.31 55.01

31.03.2004 16.02 13.73 5.36 25.62 102.97 50.18

(Rs. in lakhs) 31.03.2003 13.73 6.29 2.45 25.62 89.24 44.80

AMIPL is an unlisted company and it has not made any public or rights issue in the preceeding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. The permanent account number, bank account number, registration number and the address of the concerned RoC of AMIPL will be submitted to the Stock Exchanges at the time of filing of this DRHP. Common Pursuits Our Promoters do not have interest in any venture that is involved in any activities similar to those conducted by our Company or any of its subsidiaries. Interest of Promoters The Promoters may be deemed to be interested to the extent of shares held by them, their friends or relatives, and benefits arising from their holding directorship, in the company. The Promoters do not have any interest in any property acquired by the Company within two years of the date of this DRHP or proposed to be acquired by it. Payment or benefit to Promoters of the Company There are no payments or benefits payable to our Promoters.

101

AML STEEL LIMITED

CURRENCY OF PRESENTATION In this DRHP all references to “Rupees” and “Rs” and “Indian Rupees” are to the legal currency of the Republic of India, “SL Rs” to the legal currency of the Sri Lanka and “USD” to the legal currency of the United State of America. RELATED PARTY TRANSACTIONS For related party transactions, please refer to paragraph titled ‘Related Party Transactions’ under the section titled ‘Financial Information’ on page no. [●]. DIVIDEND POLICY The declaration and payment of dividends will be recommended by our Board of Directors and approved by our shareholders. Declaration of dividend will also depend on a number of factors, including but not limited to our Company’s earnings, capital requirements and overall financial condition. Our Company has no stated dividend policy. We have have declared equity dividend in the last five years. The details of the dividend paid by our Company during the last last five financial years is presented below; (Rs. in lakhs) Financial Year Particulars 2004 – 2005 2003 – 2004 2002 – 2003 2001 – 2002 2000 - 2001 Equity Share Capital 300.00 300.00 300.00 300.00 300.00 Face Value (Rs.) 10.00 10.00 10.00 10.00 10.00 No. of Shares 30.00 30.00 30.00 30.00 30.00 Rate of Dividend (%) 15.00 12.00 12.00 10.00 15.00 Amount of Dividend 45.00 36.00 36.00 30.00 45.00 Corporate Dividend Tax 6.31 4.50 4.50 2.70 4.50 The amounts paid as dividends in the past are not necessarily indicative of the Company’s dividend policy in the future.

102

AML STEEL LIMITED

SECTION V - FINANCIAL INFORMATION

Particulars

Page No

•

Auditors Report and unconsolidated restated financial Statements of AML Steel Limited (Formerly known as Ashok Magnetics Limited)

[●]

•

Auditors Report and restated financial Statements of Ankit Ispat Private Limited.

[●]

•

Auditors Report and restated financial Statements of Ashok Steel Industries Private Limited, Sri Lanka.

[●]

•

Auditors Report and restated financial Statements of AML Steel & Power Limited.

[●]

•

Auditors Report and consolidated restated financial statements of AML Steel Limited and its subsidiaries.

[●]

103

AML STEEL LIMITED

AUDITORS REPORT AND UNCONSOLIDATED RESTATED FINANCIAL STATEMENTS OF AML STEEL LIMITED (FORMERLY KNOWN AS ASHOK MAGNETICS LIMITED) AUDITORS REPORT Date: 24.02.2006 The Board of Directors AML Steel Limited, (Formerly Ashok Magnetics Limited) B-73, Sipcot Industrial Complex, Gummidipoondi - 601 201 Dear Sir We have examined annexed financial information of M/s. AML Steel Limited (formerly Ashok Magnetics Limited), for the years ended 31st March, 2001, 2002, 2003, 2004, 2005 and for the nine months period ended 31st December 2005, being the last date up to which the accounts have been made up and audited by us. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these accounts based on our audit. These accounts were approved by the Board of Directors of the Company for the purpose of disclosure in the Offer Document being issued by the Company in connection with the Public Issue of its Equity Shares. In accordance with the requirements of: 1. Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 (“the Act”). 2.

The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (“the SEBI Guidelines”) issued by Securities and Exchange Board of India Act, 1992 and related amendments and

3.

Our terms of reference with the Company dated 20.01.2006 requesting us to carry out work in connection with the Offer Document as aforesaid.

We have examined the following financial information relating to the Company proposed to be included in the Offer Document, as approved by you and annexed to this report: 1.

The Restated Profits/Losses of the Company for the above mentioned periods are as set out in Annexure I to this report. These profits/losses have been arrived at after charging all expenses including depreciation and after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

2.

The Restated Assets and Liabilities of the Company for the above mentioned periods are as set out in Annexure II to this report after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

3.

Statement of Restated Cash Flow enclosed as Annexure III to this report.

4.

Statement showing breakup of Other Income as per Annexure V.

5.

Statement showing breakup of Unsecured Loans as per Annexure VI.

6.

Statement showing age wise analysis of Sundry Debtors as per Annexure VII.

7.

Statement showing breakup of Loans and Advances as per Annexure VIII.

8.

Capitalisation Statement as per Annexure IX.

9.

Tax Shelter Statement as per Annexure X.

104

AML STEEL LIMITED

10. There was no Contingent Liability as on 31.03.2005 and 31.12.2005. 11. Statement of Investment in Subsidiaries as per Annexure XI. 12. Statement showing Market Value of the Quoted Investment as on 31.03.2005 and 31.12.2005 as per Annexure XII. 13. Accounting Ratios as appearing in Annexure XIII to this Report. 14. There is no change in accounting policies in the concerned years. 15. Statement of Secured Loans outstanding as at above mentioned years enclosed as per Annexure XIV and security of loan outstanding as at 31.12.2005. 16. Statement showing distribution of dividend on Equity Shares for the above mentioned period as per Annexure XV. 17. Details of transaction with the related parties (Related parties with in the meaning of AS 18 issued by ICAI) enclosed as per Annexure XVI. In our opinion the financial information of the Company as stated above read with significant accounting policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the SEBI guidelines. This report is intended solely for your information and for inclusion in the offer document in connection with the specific Public Offer of the Company and is not be used, referred to or distributed for any other purpose without our prior written consent. For K. P. JAIN & CO., Chartered Accountants Sd/KISHORE P. JAIN (Proprietor) Membership No: 27236 Place: Chennai ANNEXURE I STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT

PERIOD ENDED ON INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income Increase / (Decrease) in Inventory Total Income EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses

31.03.01 31.03.02

31.03.03

31.03.04

(Rs. in lakhs) 31.03.05 31.12.05

3,455.72 4,539.91 484.51 622.38 30.25 35.38 (8.57) 3.88 3,961.91 5,201.55

2,616.09 46.12 2.90 2,665.11

2,791.29 228.60 15.27 3.14 3,038.30

3,469.84 2,250.65 34.48 0.83 5,755.80

3,585.99 7,072.56 415.46 25.15 11,099.16

2,553.53 3,715.92 17.91 17.19 967.26 1,186.55

1,618.49 21.38 862.00

1,916.36 16.30 920.64

4,021.89 11.83 1,178.01

8,730.01 14.30 1,133.85

105

AML STEEL LIMITED Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o Total Expenditure

51.72 51.37 36.26 26.57 29.58 29.70 1.25 1.25 3,657.51 5,028.55

Net Profit before Tax & before Extraordinary items Provision for Taxation Provision for Deferred Taxation Net Profit after Tax & before Extraordinary items Extraordinary Items (net of tax) Net Profit after Extraordinary Items Earlier year Adjustments APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance Carried to Balance Sheet Note 1. 2.

67.62 15.63 25.85 1.25 2,612.22

51.93 30.34 27.85 1.25 2,964.67

42.75 36.83 31.22 1.25 5,323.78

91.28 42.75 24.29 10,036.48

304.40

173.00

52.89

73.63

432.02

1,062.68

26.82 -

13.52 26.33

4.06 4.81

19.19 1.72

134.50 2.07

180.93 -

277.58

133.15

44.02

52.72

295.45

881.75

-

-

-

52.72

295.45

881.75

-

-

15.00 45.00 6.31 229.14

881.75

-

-

277.58 -

10.00 45.00 4.50 218.08

-

133.15

44.02

-

-

2.59

10.00 30.00 93.15

5.42 36.00 7.20 (4.60)

7.50 36.00 4.50 4.72

Public Issue Expenses to the extent of Rs. 1.25 lakhs has been adjusted with the profits. Provision for Deferred Taxation has been adjusted in the respective years.

ANNEXURE II STATEMENT OF RESTATED ASSETS AND LIABILITIES

AS AT A Assets Fixed Assets - Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve B

Investments

C

Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances

(Rs. in lakhs) 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05 752.81 108.65 644.16 -

751.53 135.99 615.54 -

716.29 159.48 556.81 -

712.85 183.57 529.28 -

762.05 208.23 553.82 -

765.28 232.52 532.76 -

644.16

615.54

556.81

529.28

553.82

532.76

10.00

85.00

324.66

437.28

450.42

463.17

237.91 1,016.44 213.76 468.29 453.24 513.91 85.05 172.32 121.68 52.82

558.59 151.82 280.35 87.88 52.91

718.89 1,007.73 1,919.58 334.41 1,761.06 1,480.28 353.41 207.65 229.75 104.18 152.10 285.54 51.06 118.42 1,860.84

106

AML STEEL LIMITED

1,765.80 2,924.32 2,013.02 2,528.51 4,251.20 6,771.92

Total Assets D

Liabilities and Provisions Loan Funds Secured Loans

225.63

312.74

274.46

458.32

318.71

3.04

24.18

22.64

21.65

42.64

Current Liabilities & Provisions Sundry Liability Provisions (Including Deferred Tax)

285.52 1,237.86 76.32 69.85

382.10 78.39

684.51 2,147.77 2,154.56 92.55 225.20 354.83

Net Worth Represented by Shareholders Funds Share Capital

300.00

300.00

300.00

Unsecured Loans

E

Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

300.00

-

-

-

-

300.00

356.15 139.15

750.00

-

885.41 -

988.56 -

963.05 -

1,368.61 977.85 1,222.00 1,653.74 -

885.41

988.56

963.05

977.85 1,222.00 1,653.74

10.12

8.87

7.62

6.37

5.12

5.12

Total Net Worth

1,175.29 1,279.69 1,255.43 1,271.48 1,516.88 3,767.23

Total of Liabilities and Provisions

1,765.80 2,924.32 2,013.02 2,528.51 4,251.20 6,771.92

ANNEXURE III STATEMENT OF RESTATED CASH FLOW (Rs. in lakhs) Cash Flow Statement for the year/period ending

31.03.01

31.03.02

31.03.03

31.03.04

31.03.05

31.12.05

A Cash Flow from Operating Activities Net Profit before Taxation and Extra Ordinary Items Adjustments for: Depreciation (Profit) / Loss on Sale of Assets Interest Expenses Interest / Dividend Received Miscellaneous Expenditure Written off (Profit) / Loss on Sale of Investments Operating Profit before Working Capital Changes Movements in Working Capital Adjustments for: (Increase)/Decrease in Debtors and other Receivables (Increase)/Decrease in Inventories

304.40

173.01

52.89

73.62

29.58 4.48 36.26 (30.25) 1.25 -

29.70 1.77 26.57 (35.39) 1.25 -

25.86 28.76 15.64 (46.12) 1.25 -

27.86 4.61 30.34 (15.27) 1.25 -

31.22 4.33 36.83 (21.25) 1.25 (13.23)

24.29 42.75 (11.81) (403.65)

345.72

196.92

78.28

122.40

471.18

714.26

(234.12) 13.24

(275.10) (778.53)

400.81 457.84

107

432.03 1,062.68

(197.03) (1,541.94) (1,595.08) (160.29) (288.84) (911.85)

AML STEEL LIMITED

B

C

Increase/(Decrease) in Liabilities Cash Generated from Operations Direct Taxes Paid Extra Ordinary Items

143.13 267.97 -

973.16 116.45 26.82 -

(855.76) 81.17 13.52 -

302.42 67.50 4.05 -

1,463.25 6.79 103.66 (1,785.88) 14.73 -

Net Cash from Operating Activities

267.97

89.63

67.65

63.45

88.93 (1,785.88)

Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Interest Paid Interest Received

(194.27) (36.26) 30.25

(7.04) 4.18 (75.00) (26.57) 35.39

(11.35) 15.45 (239.66) (15.64) 46.12

(6.74) 1.81 (112.62) (30.34) 15.27

(64.46) 4.37 (13.14) 13.23 (36.83) 21.25

(3.23) (38.14) 429.04 (42.75) 11.81

Net Cash from Investing Activities

(200.28)

(69.04)

(205.07)

(132.63)

(75.58)

356.73

Proceeds from Issue of Share Capital Proceeds from Share Application Proceeds from Long Term Borrowings Dividends Paid

(5.58) (54.00)

89.58 (49.50)

(66.14) (30.00)

182.85 (40.61)

1,368.61 (118.61) 133.95 (40.50) (51.31)

Net Cash from Financing Activities

(59.58)

40.08

(96.14)

142.24

(159.11) 1,451.25

8.11

60.67

(233.56)

73.06

(145.76)

22.10

445.13 453.24 8.11

453.24 513.91 60.67

513.91 280.35 (233.56)

280.35 353.41 73.06

353.41 207.65 (145.76)

207.65 229.75 22.10

Cash Flow from Investing Activities

Cash Flow from Financing Activities

Net Increase in Cash and Cash Equivalents (A+B+C) Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents

ANNEXURE IV NOTES TO THE ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES: 1. Significant Accounting Policies: i. System of Accounting: The financial statements are prepared under the historical cost convention and accrual concept. ii. Sales: Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and excluding sales tax is accounted for as sales. iii. Fixed Assets and Depreciation: All fixed assets are stated at cost inclusive of all installation expenses incurred relating to acquisition. Depreciation is provided on straight-line method at the rates specified in Schedule XIV of the Companies

108

AML STEEL LIMITED

Act, 1956. Depreciation is charged on pro rata basis on addition to assets taken into account the date of additions. iv. Foreign Currency Transactions: Transactions in foreign currencies to the extent not covered by forward contracts are accounted at prevailing rates. Current Assets and Current Liabilities in foreign currencies are translated at the rates of exchange ruling. Fluctuations in exchange rates are accounted for in the profit and loss account. v. Inventories Stock-in-trade is valued at cost or net realizable value whichever is lower. v. Marketing Expenditure Expenditure incurred on marketing and market related activities are charged off in the year in which it is incurred. vii. Investment Investments are stated at cost. 2. Secured Loans from Central Bank of India is primarily secured by first charge on the entire block of assets of the Company along with personal guarantee of Mr R R Agrawal, Mr Ashok Agrawal, Mr Ajay Agrawal and Mr Poonam Chand Jangir Directors of the Company and third party personal guarantee of Mrs Anita Agarwal . Interest Free Sales Tax (IFST) Loan is secured by residual charges on all fixed assets of PVC unit of the Company. 3. The previous year figures have been regrouped / recasted wherever necessary. 4. The balances in Sundry Debtors, Sundry Creditors, Loans & Advances and Unsecured loans are subject to confirmation. 5. All Loans & Advances are unsecured but considered good. 6. Director’s Remuneration Year Salary

2000-01 138,000.00

2001-02 120,000.00

2002-03 40,000.00

2003-04 Nil

(Amount in Rs.) 2004-05 31.12.2005 Nil Nil

7. Auditor’s Remuneration Particulars Statutory Audit Fees Tax Audit Fees Service Tax Total

2000-01 10,000.00 5,000.00 750.00 15,750.00

2001-02 10,000.00 10,000.00 1,000.00 21,000.00

2002-03 10,000.00 10,000.00 1,600.00 21,600.00

(Amount in Rs.) 2003-04 2004-05 10,000.00 10,000.00 10,000.00 10,000.00 1,600.00 2,040.00 21,600.00 22,040.00

8. No amount is outstanding for more than 30 days as at the date of balance sheet payable to Small Scale Industrial undertaking. 9. Segment Reporting as per Accounting Standard 17 is not applicable.

109

AML STEEL LIMITED

10. Capacity and Production Licensed Capacity Product MS Ingots Rigid PCV Pipes Installed Capacity MS Ingots Rigid PCV Pipes Production MS Ingots Rigid PCV Pipes

Unit Tonnne Tonnne

31.03.01 45,000 NA

31.03.02 45,000 NA

31.03.03 45,000 NA

31.03.04 45,000 NA

31.03.05 45,000 NA

Tonnne Tonnne

30,000 2,100

45,000 2,100

45,000 2,100

45,000 2,100

45,000 2,100

45,000 2,100

Tonnne Tonnne

28,978 -

38,881 -

20,824 -

17,363 -

16,284 -

18,375.08 -

31.12.05 45,000 NA

ANNEXURE V DETAILS OF OTHER INCOME PERIOD ENDED ON Other Income 20 % of PBT 10 % of Total Income Applicability Details of Other Income Interest on Bank Deposits * Interest on Others ** Dividend Income ** Profit on Sale of Shares ** Others

31.03.01 30.25 60.88 396.19 NA

NA NA NA NA NA

31.03.02 35.38 34.60 520.16 Yes

31.03.03 46.12 10.58 266.51 Yes

28.29 2.70 4.39

38.02

-

Total 35.38 * Recurring and normal business activities ** Non-Recurring and other than normal business activities

31.03.04 31.03.05 15.27 34.48 14.73 86.40 303.83 575.58 Yes NA

9.25 1.74 4.18

8.10 -

NA NA NA NA NA

0.10 46.12

15.27

(Rs. in lakhs) 31.12.05 415.46 212.54 1,109.92 Yes

9.22 403.65 2.59 -

415.46

ANNEXURE VI BREAK UP OF UNSECURED LOANS Particulars 31.03.01 31.03.02 31.03.03 31.03.04 Amount Due to Affiliates / Group Companies or those related to Promoters / Directors in any way 3.04 24.18 22.64 21.65 Others Total 3.04 24.18 22.64 21.65 Notes: The Amount due is repayable on demand and carries no interest.

110

(Rs. in lakhs) 31.03.05 31.12.05

42.64 42.64

139.15 139.15

AML STEEL LIMITED

ANNEXURE VII AGE WISE ANALYSIS OF SUNDRY DEBTORS Agewise Break-up

31.03.01

Less than six months More than six months Total Amount Due from Affiliates / Group Companies or those related to Promoters / Directors in any way

31.03.02 31.03.03 31.03.04

20.03 193.73 213.76

20.03 448.26 468.29

-

-

16.88 134.94 151.82

(Rs. in lakhs) 31.03.05 31.12.05

26.24 308.17 334.41

1,734.95 26.11 1,761.06

1,457.05 23.23 1,480.28

198.76

385.31

90.12

-

ANNEXURE VIII BREAK UP OF LOANS AND ADVANCES Particulars Amount Due to Affiliates / Group Companies or those related to Promoters / Directors in any way Others Total

31.03.01

31.03.02 31.03.03 31.03.04

-

-

-

-

121.68 121.68

52.82 52.82

52.91 52.91

51.06 51.06

(Rs. in lakhs) 31.03.05 31.12.05 66.62 51.80 118.42

1,522.72 338.12 1,860.84

ANNEXURE IX CAPITALIZATION STATEMENT Borrowing Statement Short Term Debt ** Long Term Debt Total Debt (A) Shareholders Funds Share Capital -Equity Less Calls in Arrears -Preference Share Application Reserves & Surplus Less: Misc Exp not w/o Total Shareholders Funds (B) Long Term Debt / Equity Ratio (A/B)

31.03.05 277.59 83.76 361.35

31.12.05 356.15 139.15 495.30

300.00 1,222.00 5.12 1,516.88 0.06

750.00 1,368.61 1,653.74 5.12 3,767.23 0.04

(Rs. in lakhs) Post Issue *

* Share Capital and Reserve and Surplus (Total Share Holders fund) would be calculated on conclusion of the Book Building Process. ** Short Term debt represents debts, which are due with in one year.

111

AML STEEL LIMITED

ANNEXURE X TAX SHELTER STATEMENT

Profit Before Tax as per Books (A)

31.03.01 31.03.02 305.65 174.26

31.03.03 54.14

(Rs. in lakhs) 31.03.04 31.03.05 74.87 433.28

39.55

35.70

36.75

35.88

36.59

120.88

62.21

19.90

26.86

158.54

U/s 80IB Other Adjustments

273.52 -

143.04 -

58.30

21.40 4.18

-

Total Permanent Differences (C )

273.52

143.04

58.30

25.58

96.05

32.13

31.27

13.09

4.80

8.99

Tax Rate (%) (B) Tax at actual rate on Book Profits Adjustments Permanent Differences

Timing Differences Diff Between Tax Depreciation & Book Depreciation Other Adjustments

-

-

-

-

-

96.05

-

32.13

31.27

13.09

4.80

8.99

Net Adjustments (C+D=E)

305.65

174.31

71.39

30.38

105.04

Tax Savings thereon (E*B)

120.88

62.23

26.24

10.90

38.43

Disallowances (F)

-

0.05

29.39

4.62

5.25

Profit as per Income Tax Return (A-C-D+F)

-

12.14

49.11

333.49

4.46

17.62 -

122.02 -

Total Timing Differences (D)

Tax as per Income Tax Return Tax as per Income Tax Return (MAT)

-

-

26.82

12.99

-

ANNEXURE XI DETAILS OF UNQUOTED INVESTMENTS IN SUBSIDIARIES 31.03.05 Name of the Company Ashok Steel Industries (P) Ltd (Face Value of Sl Rs. 10.00) Ankit Ispat (P) Ltd (Face Value of Rs. 10.00) AML Steel & Power Ltd (Face Value of Rs. 10.00) Total

No of Shares

Amount in Rs.

Rate

No of Shares

(Rs. in lakhs) 31.12.05 Amount in Rate Rs.

52,50,000 5.04

2,64,43,675.00

52,50,000 5.04

2,64,43,675.00

16,08,389 10.00

1,60,83,890.00

16,38,389 10.00

1,63,83,890.00

20,000 10.00 68,78,389

2,00,000.00 4,27,27,565.00

50,000 10.00 69,38,389

5,00,000.00 4,33,27,565.00

112

AML STEEL LIMITED

ANNEXURE XII AGGREGATE MARKET VALUE OF THE QUOTED INVESTMENTS ON 31.03.2005

Details of Investment 21st Century Limited Brahamanand Ltd Emrald Commercial Ltd Khubsurat Ltd Quest Financial Ltd

Total Cost Market Rate Total Market Diminution (Rs. in per Share in Value in Value lakhs) Rs. (Rs. in lakhs) (Rs. in lakhs) 6.04 1.51 271.00 67.75 8.32 3.12 128.60 48.23 21.73 2.39 307.85 33.86 -

Cost per No of Shares Shares in Rs. 25,000 37,500 11,000 25,000

21.88

5.47

315.45

78.86

2.64

0.66

15.10

3.78

3.12

232.48

3.12

25,000

Total

13.15

-

AGGREGATE MARKET VALUE OF THE QUOTED INVESTMENTS ON 31.12.2005

Details of Investment

No of Shares

Emrald Commercial Ltd Khubsurat Ltd Quest Financial Ltd Lotus Homes Ltd Radiant Financial Services Ltd Total

4,000 11,000 25,000 9,000 65,700

Market Total Market Diminution Cost per Total Rate per Value in Value Shares in Cost Rs. (Rs. in lakhs) Share in Rs. (Rs. in lakhs) (Rs. in lakhs) 21.75 0.87 465.00 18.60 21.91 2.41 490.50 53.96 2.64 0.66 57.00 14.25 29.56 2.66 179.70 16.17 20.24 13.30 149.50 98.22 19.90 201.20

ANNEXURE XIII ACCOUNTING RATIOS PERIOD ENDED ON Earning Per Share (EPS) (Rs.) Cash Earning Per Share (Rs.) Return on Net Worth (%) Net Asset Value Per Share (Rs.) * Annualised

A

B

C D

31.03.01 9.25 10.39 23.62 39.18

31.03.02 4.44 5.49 10.40 42.66

31.03.03 1.47 3.29 3.51 41.85

31.03.04 31.03.05 31.12.05 * 1.76 2.84 4.15 42.38

9.85 11.03 19.48 50.56

Workings No of Shares at the Beginning of the Year 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 No of Shares at the End of the Year 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 Weighted Average Number of Equity Shares 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 Cash Earnings (Rs.in lakhs) PAT 277.58 133.15 44.02 52.72 295.45 Depreciation 29.58 29.70 25.85 27.85 31.22 Loss on Sale of Assets 4.48 1.77 28.76 4.61 4.33 Total 311.64 164.62 98.63 85.18 331.00 Net Worth 1,175.29 1,279.69 1,255.43 1,271.48 1,516.88 Notes A. The ratios have been computed as below;

113

23.51 24.16 31.21 50.23

30,00,000 75,00,000 50,00,000 881.75 24.29 906.04 3,767.23

AML STEEL LIMITED

1. Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year 2.

Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year.

3.

Return on Net Worth (%) = Profit After Tax / Net Worth

4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares Outstanding during the Year B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as per the statement of Restated Profit and Losses Account. C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered Accountants of India. ANNEXURE XIV SECURED LOANS 31.03.01 From Central Bank of India Cash Credit Term Loan From Government of Tamil Nadu (Interest Free Sales Tax Loan IFST) Total

31.03.02

31.03.03

(Rs. in lakhs) 31.03.05 31.12.05

31.03.04

87.80 46.71

221.62 -

183.34 -

242.93 124.27

277.59 -

315.03 -

91.12 225.63

91.12 312.74

91.12 274.46

91.12 458.32

41.12 318.71

41.12 356.15

Details of Secured Loans outstanding as on 31.12.2005 Securities offered with Repayment Terms Secured by hypothecation of Stocks and Book Debts

Particulars Financial of Loan Institution Central Cash Credit Bank of India

Nature of Loan Short Term Loan

Secured by Residual Charge of the State Govt Demand Fixed Assets of the PVC unit of the Term Loan of Tamil Loan Company. Nadu

Sanctioned Amount Rate of Amount Outstanding Interest p.a. Rs. 250.00 Rs. 315.03 lakhs lakhs

2% over BPLR Presently 11%

Rs. 91.11 lakhs

Interest Free

Repayment Terms : For Cash Credit from Central Bank of India Bullet at the end of one year Rs. 19.55 lakhs in the Year 2006-07 For Interest Free Sales Tax Loan (IFST) Rs. 18.91 lakhs in the Year 2007-08 Rs. 2.65 lakhs in the Year 2008-09

114

Rs. 41.12 lakhs

AML STEEL LIMITED

ANNEXURE XV STATEMENT OF DIVIDEND

Paid Up Capital % of Dividend Declared Amount of Dividend Paid

31.03.01 31.03.02 300.00 300.00 15.00 10.00 45.00 30.00

31.03.03 300.00 12.00 36.00

(Rs. in lakhs) 31.03.04 31.03.05 300.00 300.00 12.00 15.00 36.00 45.00

ANNEXURE XVI RELATED PARTY INFORMATION Year ended 2000 – 2001 1. List of Related parties Mr Ashok Agarwal Mrs Anita Agarwal Mr R R Agarwal M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies

Managing Director Director Chairman

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above. Mr. Ashok Agarwal (Managing Director) – Rs.1,38,000 (Directors Remuneration) Year ended 2001 – 2002 1. List of Related parties Mr Ashok Agarwal Mrs Anita Agarwal Mr R R Agarwal M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies

Managing Director Director Chairman

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above. Mr. Ashok Agarwal (Managing Director) – Rs.1,20,000 (Directors Remuneration) Year ended 2002 – 2003 1. List of Related parties Mr Ashok Agarwal Mrs Anita Agarwal Mr R R Agarwal M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies

Managing Director Director Chairman

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above. Mr. Ashok Agarwal (Managing Director) – Rs.40,000 (Directors Remuneration)

115

AML STEEL LIMITED

Year ended 2003 – 2004 1. List of Related parties Mr Ashok Agrawal Director Mrs Anita Agrawal Director Mr R R Agrawal Chairman M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies M/s. Ankit Ispat Pvt Ltd M/s. Ashok Steel Industries Pvt Ltd

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal Subsidiary Company Subsidiary Company

2. Transactions with the Related Parties as mentioned above. Sales to Ankit Ispat (P) Ltd - Rs. 228.59 lakhs Year ended 2004 – 2005 1. List of Related parties Mr Ashok Agrawal Director Mrs Anita Agrawal Director Mr R R Agrawal Chairman M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies M/s. Ankit Ispat Pvt Ltd M/s. Ashok Steel Industries Pvt Ltd

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal Subsidiary Company Subsidiary Company

2. Transactions with the Related Parties as mentioned above. Sales to Ankit Ispat (P) Ltd - Rs. 822.25 lakhs Purchases from Ashok Steel Industries Pvt Limited

- Rs.64.04 lakhs

Period ended 31.12.2005 1. List of Related parties Mr Ashok Agrawal Managing Director Mrs Anita Agrawal Director Mr R R Agrawal Chairman M/s. Ashok Memory (India) Pvt. Ltd M/s. Efficient Agencies M/s. Ankit Ispat Pvt Ltd M/s. Ashok Steel Industries Pvt Ltd

Key Management Personnel Related to Mr.Ashok Agarwal Related to Mr.Ashok Agarwal Associates Concern Sole Proprietor Firm of Mr.Ashok Agarwal Subsidiary Company Subsidiary Company

2. Transactions with the Related Parties as mentioned above. Sales to Ankit Ispat (P) Ltd - Rs. 90.13 lakhs Sales to Ashok Steel Industries Pvt Ltd - Rs. 293.99 lakhs

116

AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF ANKIT ISPAT PRIVATE LIMITED. AUDITORS REPORT Date: 24.02.2006 The Board of Directors Ankit Ispat Private Limited Raheja Complex 834 Mount Road Chennai – 600 002 Dear Sir, We have examined the annexed financial information of M/s. Ankit Ispat Private Limited, for the period from 13th August 2003 to 31st March 2004, year ended 31st March 2005 and for the nine months period ended 31st December 2005, being the last date up to which the accounts have been made up and audited by us. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these accounts based on our audit. These accounts were approved by the Board of Directors of the Company for the purpose of disclosure in the Offer Document to be issued by AML Steel Limited the Holding Company in connection with the Public Issue of Equity Shares in the Holding Company (referred to as “the issue”). In accordance with the requirements of: 1.

Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 (“the Act”).

2.

The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (“the SEBI Guidelines”) issued by Securities and Exchange Board of India Act, 1992 and related amendments and

3.

Our terms of reference with the Company dated 20.01.2006 requesting us to carry out work in connection with the Offer Document as aforesaid.

We have examined the following financial information relating to the Company proposed to be included in the Offer Document, to be issued by AML Steel Limited the Holding Company, approved by you and annexed to this report: 1.

The Restated Profits/Losses of the Company for the above mentioned periods are as set out in Annexure I to this report. These profits/losses have been arrived at after charging all expenses including depreciation and after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

2.

The Restated Assets and Liabilities of the Company for the above mentioned periods are as set out in Annexure II to this report after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

3.

Statement of Restated Cash Flow enclosed as Annexure III to this report.

4.

Statement showing breakup of Other Income as per Annexure V

5.

There is no Unsecured Loan outstanding as on 31.03.2005 and 31.12.2005.

6.

Statement showing age wise analysis of Sundry Debtors for the above mentioned period as per Annexure VI.

7.

Statement showing breakup of Loans and Advances for the above mentioned period as per Annexure VII.

.

117

AML STEEL LIMITED 8.

Capitalisation Statement as per Annexure VIII.

9.

Tax Shelter Statement as per Annexure IX.

10.

There was no Contingent Liability as on 31.03.2005 and 31.12.2005.

11.

Accounting Ratios as appearing in Annexure X to this Report.

12.

There is no change in accounting policies in the concerned years.

13.

Statement of Secured Loans outstanding as at above mentioned years enclosed as per Annexure XI and security of loan outstanding as at 31.12.2005.

14.

The Company has not distributed dividend on Equity Shares for any of the Financial Year as mentioned above.

In our opinion the financial information of the Company as stated above read with significant accounting policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the SEBI guidelines. This report is intended solely for your information and for inclusion in the offer document in connection with the specific Public Offer of the AML Steel Ltd and is not be used, referred to or distributed for any other purpose without our prior written consent. For K. P. JAIN & CO., Chartered Accountants Sd/KISHORE P. JAIN (Proprietor) Membership No: 27236 Place: Chennai ANNEXURE I STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT (Rs. in lakhs) PERIOD ENDED ON 31.03.04 31.03.05 31.12.05 INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income Increase / (Decrease) in Inventory Total Income

983.21 0.07 10.62 993.90

3,037.15 0.53 0.01 3,037.69

2,871.28 0.29 11.55 2,883.12

EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o

653.43 1.93 297.70 2.52 13.04 5.94 0.20

1,730.10 8.59 1,101.98 8.38 34.58 17.81 0.20

1,598.59 12.22 951.89 17.49 23.46 14.29 -

118

AML STEEL LIMITED

Total Expenditure

974.76

2,901.64

2,617.94

19.14

136.05

265.18

1.61 6.87

29.40 18.96

79.31 9.95

10.66

87.69

175.92

Net Profit before Tax & before Extraordinary items Provision for Taxation Provision for Deferred Taxation Net Profit after Tax & before Extraordinary items Extraordinary Items (net of tax)

-

Net Profit after Extraordinary Items

10.66

Earlier year Adjustments

87.69

-

APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance Carried to Balance Sheet

175.92

-

2.00

-

10.00

-

-

8.66

77.69

175.92

ANNEXURE II

AS AT

STATEMENT OF RESTATED ASSETS AND LIABILITIES (Rs. in lakhs) 31.03.04 31.03.05 31.12.05

A Assets Fixed Assets - Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve

357.79 5.94 351.85 -

387.71 23.71 364.00 -

351.85

364.00

408.50 38.00 370.50 370.50

B

Investments

-

-

C

Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances

57.02 177.64 53.64 1.19 110.90

577.60 139.63 22.23 71.78 107.81

892.72 106.42 26.68 50.83 107.81

Total Assets

752.24

1,283.05

1,554.96

304.45 -

222.79 -

D Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans Current Liabilities & Provisions

119

-

364.66 -

AML STEEL LIMITED

E

Sundry Liability Provisions (Including Deferred Tax)

266.69 8.48

744.51 55.22

Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

163.84 10.65 10.65 1.87

163.84 98.35 98.35 1.66

Total Net Worth Total of Liabilities and Provisions

172.62 752.24

260.53 1,283.05

609.22 144.48

163.84 274.27 274.27 1.51 436.60 1,554.96

ANNEXURE III STATEMENT OF RESTATED CASHFLOW Cash Flow Statement for the year/period ending A

31.03.04

Cash Flow from Operating Activities Net Profit before Taxation and Extra Ordinary Items Adjustments for: Depreciation (Profit) / Loss on Sale of Assets Interest Expenses Interest / Dividend Received Miscellaneous Expenditure Written off (Profit) / Loss on Sale of Investments Operating Profit before Working Capital Changes Movements in Working Capital Adjustments for: (Increase)/Decrease in Sundry Debtors and other Receivables (Increase)/Decrease in Inventories Increase/(Decrease) in Liabilities Cash Generated from Operations Direct Taxes Paid Extra Ordinary Items Net Cash from Operating Activities

B

(Rs. in lakhs) 31.03.05 31.12.05

19.14

136.05

265.18

5.94

38.25

17.81 34.58 (0.53) 0.20 188.11

14.29 23.46 (0.29) 0.15 302.79

(289.74) (57.02) 266.69 (41.82) -

(29.49) (520.59) 477.82 115.85 1.61 -

54.16 (315.12) (135.29) (93.46) -

(41.82)

114.24

(93.46)

(357.79) (2.07) -

(29.95) -

(20.79) -

13.04 (0.07) 0.20 -

Cash Flow from Investing Activities Purchase of Fixed Assets Preliminary Expenses Purchase of Investments Sale of Investments

120

AML STEEL LIMITED

Interest Paid Interest Received

(13.04) 0.07

(34.58) 0.53

(23.46) 0.29

(372.83)

(64.00)

(43.96)

Proceeds from Issue of Share Capital Proceeds from Long Term Borrowings Dividends Paid

163.84 304.45 -

(81.65) -

141.87 -

Net Cash from Financing Activities

468.29

(81.65)

141.87

53.64

(31.41)

4.45

53.64 53.64

53.64 22.23 (31.41)

22.23 26.68 4.45

Net Cash from Investing Activities C

Cash Flow from Financing Activities

Net Increase in Cash and Cash Equivalents (A+B+C) Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents

-

ANNEXURE IV Notes to the Accounts and Significant Accounting Policies: 1. Significant Accounting Policies i. System of Accounting: The Financial Statements are prepared under the historical cost convention and accrual concept. ii. Sales: Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and excluding sales tax is accounted for as sales. iii. Fixed Assets and Depreciation: All Fixed Assets are stated at cost inclusive of all installation expenses incurred relating to acquisition. Depreciation is provided on straight-line method at the rates specified in Schedule XIV of the Companies Act 1956. Depreciation is charged on pro rata basis on additions to Assets taken into account the date of additions. iv. Foreign Currency Transactions: Transactions in foreign currencies to the extent not covered by forward contracts are accounted at prevailing rates. Current Assets and Liabilities in foreign currency are translated at the rates of exchange ruling. Fluctuations in exchange rates are accounted for in the profit and loss account. v. Inventories: Stock in trade is valued at cost or net realizable value which ever is lower. vi. Marketing Expenditure: 1. Expenditure incurred on marketing and market related activities is charged off in the year in which it is incurred.

121

AML STEEL LIMITED 2. Secured Loans from Central Bank of India is primarily secured by first charge on the entire block of assets of the Company along with personal guarantee of Mr Ashok Agrawal, Mrs Anita Agrawal, Mr Ajay Agrawal and Mr Poonam Chand Jangir Directors of the Company. Further secured by the Corporate Guarantee given by AML Steel Limited (formerly Ashok Magnetics Limited), the holding Company. 3. The balances in Sundry Debtors, Sundry Creditors, Loans and Advances are subject to confirmation. 4. All Loans, Deposits and Advances are unsecured but considered good. 5. Directors Remuneration: Salary

2004 – 2005 Rs. Nil

2003 – 2004 Rs. Nil

31.12.2005 Rs. Nil

6. Auditors Remuneration:

Statutory Audit Tax Audit Service Tax

2004 – 2005

2003 – 2004

Rs. 10,000.00 Rs. 10,000.00 Rs. 2,040.00 Rs. 22,040.00

Rs. 10,000.00 Rs. 10,000.00 Rs. 1,600.00 Rs. 21,600.00

7. No amount is outstanding for more than 30 days as at the date of Balance Sheet payable to Small Scale Undertaking. 8. Previous figures have been regrouped wherever necessary to confirm to current year’s classification. 9. Capacity and Production Production

Unit

MS Ingots

Tonnes

Licensed Capacity 31.12.05 04-05 03-04 27,600 27,600 27,600

Installed Capacity 31.12.05 04-05 03-04 27,600 27,600 27,600

Production 31.12.05 04-05 03-04 18029.17 14,247 5,650

ANNEXURE V DETAILS OF OTHER INCOME Period ended on Other Income 20 % of PBT 10 % of Total Income Applicability

31.03.04 0.07 3.83 99.39 NA

31.03.05 0.53 27.21 303.77 NA

(Rs. in lakhs) 31.12.05 11.55 53.04 288.31 NA

ANNEXURE VI AGEWISE ANALYSIS OF SUNDRY DEBTORS Period ended on Less than Six Months More than Six Months Total Amount Due from Affiliates / Group Companies or those related to Promoters / Directors in any way

31.03.04 177.64 177.64 NIL

122

31.03.05 138.44 1.19 139.63 NIL

(Rs. in lakhs) 31.12.05 106.42 106.42 NIL

AML STEEL LIMITED ANNEXURE VII LOANS AND ADVANCES Period ended on Loans and Advances given to Affiliates / Group Companies or those related to Promoters / Directors in any way Others than Affiliates etc. Total

31.03.04 4.09

31.03.05

(Rs. in lakhs) 31.12.05

-

-

106.81 110.90

107.81 107.81

107.81 107.81

ANNEXURE VIII CAPITALIZATION STATEMENT Period ended on Borrowing Statement Short Term Debt Long Term Debt Total Debt

31.03.04

Shareholders Funds Share Capital -Equity Less Calls in Arrears -Preference Share Premium Reserves & Surplus Less: Misc Exp not w/o Total Shareholders Funds

31.03.05

(Rs. in lakhs) 31.12.05

102.49 201.96 304.45

58.09 164.70 222.79

227.28 137.38 364.66

163.84

163.84

163.84

-

10.65 1.87 172.62

98.35 1.66 260.53

274.27 1.51 436.60

0.63

0.31

1.17 Long Term Debt / Equity Ratio Notes: Short term debts represents debts which are due within one year ANNEXURE IX TAX SHELTER STATEMENT

(Rs. in lakhs) 31.03.2004 31.03.2005 19.14 136.05

Period ended on Profit Before Tax as per Books (A)

35.88

36.59

6.87

49.78

Diff Between Tax Depreciation & Book Depreciation Other Adjustments

30.38 10.96

52.27 11.25

Total Adjustments (C)

41.34

63.52

Tax Rate (%) (B) Tax at actual rate on Book Profits Adjustments

123

AML STEEL LIMITED

14.83

Tax Savings thereon (C*B) Disallowances (F) Profit as per Income Tax Return

(A-C+F)

Tax as per Income Tax Return Tax as per Income Tax Return (MAT)

23.24

-

0.83

-

73.36

-

26.84 1.47

ANNEXURE X MANDATORY ACCOUNTING RATIOS PERIOD ENDED ON

31.03.04

Earning Per Share (EPS) (Rs) Cash Earning Per Share (Rs) Return on Net Worth (%) Net Asset Value Per Share (Rs) * Annualised Workings A No of Shares Cash Earnings (Rs in lakhs) B PAT (Including Deferred Tax) Depreciation Loss on Sale of Assets C Total D Net Worth

31.03.05

31.12.05 *

0.65 1.29 6.18 10.54

5.35 6.70 33.66 15.90

14.32 15.48 53.72 26.65

16,38,389

16,38,389

16,38,389

10.66 5.94 4.61 21.21 172.62

87.69 17.81 4.33 109.83 260.53

175.92 14.29 190.21 436.60

Notes A. The ratios have been computed as below; 1. Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year 2.

Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year.

3.

Return on Net Worth (%) = Profit After Tax / Net Worth

4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares Outstanding during the Year B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as per the statement of Restated Profit and Losses Account. C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered Accountants of India.

124

AML STEEL LIMITED

ANNEXURE XI SECURED LOANS Period ended From Central Bank of India Cash Credit Term Loan Demand Loan Total

31.03.04

31.03.05

102.49 201.96 -

58.08 164.71 -

304.45

222.79

(Rs. in lakhs) 31.12.05 136.93 137.38 90.35 364.66

Details of the Secured Loans outstanding as on 31.12.2005 Securities offered with Particulars Financial Nature of Repayment Terms of Loan Institution Loan

Sanctioned Amount (Rs. in lakhs)

Amount Outstanding (Rs. in lakhs)

Secured by Central hypothecation of Stocks Cash Credit Bank and Book Debts of India

Short Term Loan

100.00

136.93

Equitable Mortgage of Factory Land and Building and Plant and Machinery

Central Term Loan Bank of India

Demand Loan

200.00

137.38

Secured by lien on Fixed Deposit Receipt

Demand Loan

Central Bank of India

Demand Loan

90.35

90.35

Rate of Interest p.a. 2% over BPLR Presently 11% 2% over BPLR Presently 11% 5.50%

Repayment Terms For Cash Credit from Central Bank of India For Term Loan from Central Bank of India For Demand Loan from Central Bank of India

Bullet at the end of one year Equal monthly installment of Rs. 4.50 lakhs Already been paid during the month of January 2006

125

AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF ASHOK STEEL INDUSTRIES PRIVATE LIMITED, SRI LANKA. AUDITORS REPORT

The Board of Directors M/s. Ashok Steel Industries Private Limited 8th Floor, IBM Building No 48 Nawam Mawatha Colombo, Srilanka - 02 Dear Sirs We have examined the annexed financial information of M/s. Ashok Steel Industries Private Limited, for the period 10.10.2002 to 31.03.2003 and years ended 31st March, 2004, 2005 and for the nine months period ended 31st December 2005, being the last date up to which the accounts have been made up and audited by us. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these accounts based on our audit. These accounts were approved by the Board of Directors of the Company for the purpose of disclosure in the Offer Document being issued by AML Steel Limited the Holding Company in connection with the Public Issue of Equity Shares of the Holding Company The Accounts of the Company are maintained in Sri Lankan Rupees and those are converted into Indian Rupees at the rate of Rs. 2.15 for the year ended 31st March 2003, at the rate of Rs. 2.20 for the year ended 31st March 2004, and at the rate of Rs. 2.25 for the year ended 31st March 2005 and for the nine months period ended 31st December 2005. We have examined the following financial information relating to the Company proposed to be included in the Offer Document, to be issued by AML Steel Limited the Holding Company as approved by you and annexed to this report: 1.

The Restated Profits/Losses of the Company for the above-mentioned periods are as set out in Annexure I to this report. These profits/losses have been arrived at after charging all expenses including depreciation and after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

2.

The Restated Assets and Liabilities of the Company for the above mentioned periods are as set out in Annexure II to this report after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

3.

Statement of Restated Cash Flow enclosed as Annexure III to this report.

4.

There was no Contingent Liability as on 31.03.2005 and 31.12.2005.

5.

Accounting Ratios as appearing in Annexure V to this Report.

6.

There is no change in accounting policies in the concerned years.

7.

The Company has not distributed dividend on Equity Shares for any of the Financial Year as mentioned above.

8.

Statement showing breakup of Unsecured Loans as per Annexure VI.

9.

Statement showing breakup of Loans and Advances as per Annexure VII.

126

AML STEEL LIMITED

In our opinion the financial information of the Company as stated above read with significant accounting policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as considered appropriate. This report is intended solely for your information and for inclusion in the offer document in connection with the specific Public Offer of the AML Steel Limited and is not be used, referred to or distributed for any other purpose without our prior written consent.

JAWAAMIL ASSOCIATES Chartered Accountants Signed by :

A M Jawaamil Membership No.2034 of the Insititute of Chartered Accountants of Srilanka

Colombo Date: 24.02.2006

ANNEXURE I STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT (Rs in lakhs) PERIOD ENDED ON

10.10.02 – 31.03.03

31.03.04

31.03.05

31.12.05

INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income

-

556.86 14.56 1.14

1,903.52 17.32 0.06

Increase / (Decrease) in Inventory

-

39.42

8.43

110.04

611.98

1,929.33

127.66 2,360.29

60.90

248.52

1,175.80

1,616.41

4.97 87.78 6.44 0.40

24.92 550.71 17.77 2.63 37.93 1,809.76

31.07 442.96 80.59 4.55 26.88

160.49

19.01 263.77 24.08 1.91 15.80 573.09

2,202.46

Net Profit before Tax & before Extraordinary items

(50.45)

38.89

119.57

157.83

Provision for Taxation

-

Net Profit after Tax & before Extraordinary items

(50.45)

Extraordinary Items (net of tax)

-

110.04

Total Income EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o Total Expenditure

-

127

-

-

38.89 -

2,2220.85 11.78 -

-

119.57 -

157.83 -

AML STEEL LIMITED

38.89

119.57

157.83

Net Profit after Extraordinary Items

(50.45)

Earlier year Adjustments

-

-

-

-

APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Deferred Tax Adjustment Balance Carried to Balance Sheet

(50.45)

-

119.57

-

38.89

157.83

ANNEXURE II STATEMENT OF RESTATED ASSETS AND LIABILITIES (Rs. in lakhs) AS AT A Assets Fixed Assets - Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve B

Investments

C Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances

10.10.02 31.03.03 217.53 8.38 209.15

D Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans

Provisions E

Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus

31.12.05

477.62 61.38 416.24 -

393.34

416.24

-

-

3.59

278.74 36.40 0.46 48.50

363.65 17.22 49.61 9.10 28.75

301.40

757.44

884.57

1,100.44

512.09

506.94

-

31.28

198.13

136.28

129.79

188.50

23.10

22.43

209.15 -

34.78 53.87 -

-

Current Liabilities & Provisions Sundry Liability

31.03.05

417.33 23.99 393.34 -

-

Total Assets

31.03.04

-

118.03 126.16 (144.21)

128

-

238.64 (102.04)

575.94 94.09 481.85 481.85 -

233.33 18.33

503.93 49.08 35.04 30.54

506.94

233.33 176.16

AML STEEL LIMITED

Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

(144.21)

(102.04)

27.99

18.33

176.16

27.53

26.92

26.92

71.99

109.07

224.74

382.57

301.40

757.44

884.57

1,100.44

Total of Net Worth Total of Liabilities and Provisions

-

ANNEXURE III RESTATED CASH FLOW STATEMENT Cash Flow Statement for the year ending A

B

31.03.03

Cash Flow from Operating Activities Net Profit before Taxation and Extra Ordinary Items Adjustments for: Depreciation (Profit) / Loss on Sale of Assets Interest Expenses Interest / Dividend Received Miscellaneous Expenditure Written off (Profit) / Loss on Sale of Investments Operating Profit before Working Capital Changes Movements in Working Capital Adjustments for: (Increase)/Decrease in Sundry Debtors and other Receivables (Increase)/Decrease in Inventories Increase/(Decrease) in Liabilities Cash Generated from Operations Direct Taxes Paid Extra Ordinary Items Net Cash from Operating Activities

(Rs. in lakhs) 31.03.05 31.12.05

38.89

119.57

(50.05)

15.80 1.91 56.60

37.93 2.63 0.61 160.74

189.26

(3.59) (34.78) 198.13 109.71 109.71

(45.37) (243.96) (61.85) (294.58) (294.58)

(6.11) (84.91) 16.61 86.33 86.33

(10.51) (140.28) 58.04 96.51 96.51

(209.16) (27.99) (0.40) (237.55)

(201.79) (1.91) (203.70)

(60.03) (2.63) (62.66)

(92.49) (4.55) (97.04)

Proceeds from Issue of Share Capital Proceeds from Long Term Borrowings Dividends Paid

24.27 157.44 -

480.81 -

(5.31) (5.15)

-

Net Cash from Financing Activities

181.71

480.81

(10.46)

-

0.40

157.83 26.88 4.55

Cash Flow from Investing Activities Purchase of Fixed Assets Misc Expenses Purchase of Investments Sale of Investments Interest Paid Interest Received Net Cash from Investing Activities

C

(50.45)

31.03.04

Cash Flow from Financing Activities

129

AML STEEL LIMITED

Net Increase in Cash and Cash Equivalents (A+B+C)

53.87

(17.47)

13.21

(0.53)

Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents

53.87 53.87

53.87 36.40 (17.47)

36.40 49.61 13.21

49.61 49.08 (0.53)

ANNEXURE IV SIGNIFICANT ACCOUNTING POLICIES 1.

FUNDAMENTAL ACCOUNTING ASSUMPTIONS

Going Concern These Financial Statements are prepared on the assumption that the company is a going concern i.e. as continuing in operation for the foreseeable future. It is therefore assumed that the company has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. GENERAL POLICIES 2.1 The financial Statements are prepared under the historical cost convention in accordance with generally accepted accounting principals and the accounting standards laid down by the Institute of Chartered Accountants of Sri Lanka. No adjustment is made for inflationary factors affecting these accounts other than for revaluation of Land and Buildings. 2.2 Previous year’s figures and phrases have been re-arranged wherever necessary to conform to the current presentation. 2.3 Conversion of Foreign Currencies All foreign exchange transactions are converted at the rates of exchange prevailing at the time the transactions were effected. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. The resulting gains and losses are accounted for in the Income Statement, if any. 2.4 Post Balance Sheet Events All material events occurring after the Balance Sheet date are considered and where necessary, adjustments made in these financial statements. 2.5 Taxation The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provision of the Inland Revenue Act. 2.6 Borrowing Costs Borrowing costs are recognized as an expense in the period in which they are incurred. VALUATION OF ASSETS 3.1 INVENTORIES Inventories are valued at the lower of cost and estimated net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which Inventories can be sold in the normal course of business after allowing for cost of realization.

130

AML STEEL LIMITED

3.2 Debtors Debtors are stated at the amounts they are estimated to realize inclusive of provisions for bad & doubtful debts. 3.3 Property, Plant and Equipments 3.3 1. Cost Valuation Properties, Plant & Equipment are recorded at cost less accumulated depreciation, which is provided for on the bases specified below. The cost of Property, Plant and Equipment is the cost of purchase together with any incidental expenses thereon. Interest costs incurred during the construction periods are also capitalized. The revalued amount is the current market value of the assets determined by a qualified valuer on the date of valuation. 3.3.2 Depreciation Provision of depreciation calculated on the cost of all Property, Plant & Equipment other than Free hold land in order to write-off such amounts over the estimated useful lives by equal installments as follows, Office Equipments Plant & Machinery Motor Vehicle

15% 10% 25%

Land & Buildings are not depreciated, since the value is always appreciating. Full provision is made in the year of sale and none in the year of purchase. LIABILITIES & PROVISIONS 4.1

Retirement Benefits

No Provision is made in these accounts for retirement gratuities payable under the Payment of Gratuity Act No. 12 of 1983 to employees from the time of employment by the company. INCOME STATEMENTS 5.1

Turnover Turnover represents the amounts derived from the provision of goods & services which fall within the companies ordinary activities net of trade discounts and turnover related taxes.

5.2

Revenue and Expenses

5.2.1

Revenue is accounted for on an accrual basis and matched with related expenditure.

5.2.2

Gain & Losses of a revenue nature on the disposal of Property, Plant & Equipment have been accounted for in the Income Statement, if any.

5.2.3

All expenditure incurred in the running of the business and in maintaining the property, plant & equipment in a state of efficiency has been charged to revenue in arriving at the profit for the year.

6.

M/s.AML Steel Limited (Formerly Ashok Magnetics Limited) acquired 100% equity share capital of the Company with effect from 10.10.2002. There for the accounts for the year 2002/2003 have been prepared for the period 10.10.2002 to 31.03.2003.

131

AML STEEL LIMITED

7.

The Name of the Company have been changed from “Maruthi Steels (P) Ltd” to “Ashok Steel Industries (P) Ltd” from the date of 19th Januaury 2004.

ANNEXURE V MANDATORY ACCOUNTING RATIOS PERIOD ENDED ON Earning Per Share (EPS) (Rs) Cash Earning Per Share (Rs) Return on Net Worth (%) Net Asset Value Per Share (Rs) * Annualised Workings No of Shares at the Beginning of the Year No of Shares at the End of the Year A Weighted Average Number of Equity Shares Cash Earnings B PAT Depreciation Loss on Sale of Assets C Total D Net Worth

10.10.02 31.03.03 (1.99) (1.99) (70.09) 2.84

31.03.04

31.03.05

31.12.05*

0.74 2.16 35.66 2.08

2.28 3.00 53.20 4.28

4.01 4.69 55.01 7.29

25,37,503 25,37,503 25,37,503

25,37,503 52,50,000 52,50,000

52,50,000 52,50,000 52,50,000

52,50,000 52,50,000 52,50,000

(50.45) (50.45) 71.99

38.89 15.80

119.57 37.93 157.50 224.74

157.83 26.88

54.69 109.07

184.71 382.57

Notes A. The ratios have been computed as below 1. Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year 2. Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year. 3. Return on Net Worth (%) = Profit After Tax / Net Worth 4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares Outstanding during the Year B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as per the statement of Restated Profit and Loss Account. ANNEXURE VI BREAK UP OF UNSECURED LOANS (Rs in lakhs) Particulars Amount Due to Affiliates / Group Companies or those related to Promoters / Directors in any way. Others Total

10.10.02 31.03.03

31.03.04

-

31.28 31.28

512.09 512.09

Note: The amount due is repayable on demand and carries no interest

132

31.03.05 506.94 506.94

31.12.05 506.94 506.94

AML STEEL LIMITED

ANNEXURE VII BREAK UP OF LOANS AND ADVANCES (Rs. in lakhs) Particulars Amount Due to Affiliates / Group Companies or those related to Promoters / Directors in any way Others Total

10.10.02 31.03.03

31.03.2004

31.03.2005

31.12.05

-

-

-

-

3.59 3.59

48.50 48.50

28.75 28.75

30.54 30.54

133

AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF AML STEEL & POWER LIMITED. AUDITORS REPORT Date: 24.02.2006 The Board of Directors AML Steel & Power Limited Raheja Complex 834 Mount Road Chennai – 600 002 Dear Sir We have examined the annexed financial information of M/s. AML Steel & Power Limited, for the period from 30th January, 2004 to 31st March, 2005 and for the nine months period ended 31st December 2005, being the last date up to which the accounts have been made up and audited by us. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these accounts based on our audit. These accounts were approved by the Board of Directors of the Company for the purpose of disclosure in the Offer Document being issued by the AML Steel Ltd., the Holding Company in connection with the Public Issue of Equity Shares. In accordance with the requirements of: 1. Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 (“the Act”). 2. The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (“the SEBI Guidelines”) issued by Securities and Exchange Board of India Act, 1992 and related amendments and 3. Our terms of reference with the Company dated 20.01.2006 requesting us to carry out work in connection with the Offer Document as aforesaid. We have examined the following financial information relating to the Company proposed to be included in the Offer Document, to be issued by AML Steel Ltd as approved by you and annexed to this report: 1. The Restated Assets and Liabilities of the Company for the above mentioned periods are as set out in Annexure I to this report after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure III to this report. 2. Statement of Restated Cash Flow enclosed as Annexure II to this report. 3. Statement showing breakup of Loans and Advances as per Annexure IV. 4. Statement showing breakup Unsecured Loans as per Annexure V. Since the company has not started its business the Restated Profit and Loss Account of the company for the above mentioned period is not applicable. In our opinion the financial information of the Company as stated above read with significant accounting policies attached in Annexure III to this report, after making adjustments/statements and regroupings as considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the SEBI guidelines. This report is intended solely for your information and for inclusion in the offer document in connection with the specific Public Offer of the AML Steel Limited and is not be used, referred to or distributed for any other purpose without our prior written consent. For K. P. JAIN & CO., Chartered Accountants Sd/KISHORE P. JAIN (Proprietor) Membership No: 27236 Place: Chennai

134

AML STEEL LIMITED

ANNEXURE I STATEMENT OF RESTATED ASSETS AND LIABILITIES (Rs. in lakhs) AS AT 31.03.05 31.12.05 A Assets Fixed Assets - Gross Block 40.91 869.88 Less: Depreciation Net Block 40.91 869.88 Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve B

Investments

C

Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets Loans & Advances

40.91 -

-

-

12.20

-

Total Assets D Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans

532.69 -

25.75

152.27

78.86

1,555.44

25.00

Current Liabilities & Provisions Sundry Liability Provisions E

869.88

-

0.45 -

Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

101.59 -

18.21

5.00 1,522.72 1.58 1.58 75.55

Total Net Worth

53.41

1,453.75

Total Liabilities and Provisions

78.86

1,555.34

135

5.00 66.62 -

AML STEEL LIMITED

ANNEXURE II STATEMENT OF RESTATED CASH FLOW (Rs. in lakhs) 31.03.05 31.12.05

Cash Flow Statement for the period ending A Cash Flow from Operating Activities Net Profit before Taxation and Extra Ordinary Items Adjustments for: Depreciation (Profit) / Loss on Sale of Assets Interest Expenses Interest / Dividend Received Miscellaneous Expenditure Written off (Profit) / Loss on Sale of Investments Operating Profit before Working Capital Changes Movements in Working Capital Adjustments for: (Increase)/Decrease in Sundry Debtors and other Receivables (Increase)/Decrease in Inventories Increase/(Decrease) in Liabilities Cash Generated from Operations Direct Taxes Paid Extra Ordinary Items

-

-

-

-

(25.75) 0.45 (25.30) -

(127.02) 101.14 (24.30) -

Net Cash from Operating Activities

(25.30)

(24.30)

Purchase of Fixed Assets Preliminary Expenses Purchase of Investments Sale of Investments Interest Paid Interest Received

(40.91) (18.21) -

(828.97) (57.34) -

Net Cash from Investing Activities

(59.12)

(886.31)

5.00 66.62 25.00

1,456.10 (25.00) -

Net Cash from Financing Activities

96.62

1,431.10

Net Increase in Cash and Cash Equivalents (A+B+C)

12.20

520.49

12.20 12.20

12.20 532.69 520.49

1.58 1.58

B Cash Flow from Investing Activities

C Cash Flow from Financing Activities Proceeds from Issue of Share Capital Proceeds from Share Application Proceeds from Long Term Borrowings Dividends Paid

-

Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents

-

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AML STEEL LIMITED

ANNEXURE III Notes to the Accounts and Significant Accounting Policies: 1. Significant Accounting Policies i. System of Accounting: The Financial Statements are prepared under the historical cost convention and accrual concept. ii. Fixed Assets and Depreciation: All Fixed Assets are stated at cost inclusive of all installation expenses incurred relating to acquisition. Depreciation has not been provided in the books of accounts as the company has not commenced its business. 2. Auditors Remuneration: 31.03.2005 Rs. 5,000.00 Rs. 510.00 Rs. 5,510.00

Statutory Audit Service Tax

3. Directors Remuneration: 31.03.2005 NIL 4. Reserves and Surplus of Rs. 1.58 lacs for the nine months period ending 31.12.2005 represents interest earned on FDR with Bank. ANNEXURE IV Loans and Advances Period ended Loans and Advances given to Affiliates / Group Companies or those related to Promoters / Directors in any way Others than Affiliates etc. Total

(Rs in lakhs) 31.03.2005 31.12.05 -

25.75 25.75

152.77 152.77

ANNEXURE V Break up of Unsecured Loans (Rs in lakhs) 31.03.2005 31.12.2005

Period ended Amount Due to Affiliates / Group Companies or those related to Promoters / Directors in any way Others

25.00 25.00

Total Notes: The Amount due is repayable in demand and carries no interest.

137

25.00

AML STEEL LIMITED

AUDITORS REPORT AND CONSOLIDATED RESTATED FINANCIAL STATEMENTS OF AML STEEL LIMITED AND ITS SUBSIDIARIES. AUDITORS REPORT Date:24.02.2006 The Board of Directors AML Steel Limited, (Formerly Ashok Magnetics Limited) B-73, Sipcot Industrial Complex, Gummidipoondi - 601 201 Dear Sir We have examined annexed Consolidated Financial Information of M/s. AML Steel Limited and its Subsidiary Companies M/s. Ankit Ispat Private Limited, M/s. AML Steel & Power Ltd and M/s. Ashok Steel Industries Private Limited., collectively referred to as “the Group” for the years ended 31st March, 2003, 2004, 2005 and for the nine months period ended 31st December 2005, being the last date up to which the accounts have been made up and audited by us. The annexed Consolidated Financial Information includes the accounts of the following Companies: 1. For AML Steel Limited: for the years ended 31st March, 2003, 2004, 2005 and for the nine months period ended 31st December 2005. 2. For Ankit Ispat Private Limited: for the period from 13th August, 2003 to 31st March 2004, year ended 31st March, 2005 and for the nine months period ended 31st December 2005. 3. For Ashok Steel Industries Private Limited: for the period from 10th October 2002 to 31st March 2003, for the years ended 31st March, 2004, 2005 and for the nine months period ended 31st December 2005. 4. For AML Steel & Power Limited: for the nine months period ended 31st December 2005. The information is based on the accounts audited by us of M/s. AML Steel Limited and its Subsidiary Companies M/s. Ankit Ispat Private Limited and M/s. AML Steel & Power Ltd for the above mentioned periods. However, we have not audited the financial statements of one of the subsidiary company, M/s Ashok Steel Industries Private Limited, for the above-mentioned periods. These Financial Statements have been audited by JAWAAMIL ASSOCIATES Chartered Accountants No: 96 2/7 Consistory Building, Malwatta Road, Colombo 11 Srilanka, whose report have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of the subsidiaries, is based solely on the report of the other auditor. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these accounts based on our audit. These accounts were approved by the Board of Directors of the Company for the purpose of disclosure in the Offer Document being issued by the Company in connection with the Public Issue of Equity Shares in the Company (referred to as “the issue”). In accordance with the requirements of: 1.

Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 (“the Act”).

2.

The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (“the SEBI Guidelines”) issued by Securities and Exchange Board of India Act, 1992 and related amendments and

3.

Our terms of reference with the Company dated 20.01.2006 requesting us to carry out work in connection with the Offer Document as aforesaid.

We have examined the following financial information relating to the Group proposed to be included in the Offer Document, as approved by you and annexed to this report:

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AML STEEL LIMITED

1.

The Restated Consolidated Profits/Losses of the Company for the above-mentioned periods are as set out in Annexure I to this report. These profits/losses have been arrived at after charging all expenses including depreciation and after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

2.

The Restated Consolidated Assets and Liabilities of the Company for the above mentioned periods are as set out in Annexure II to this report after making such adjustments/restatements and regrouping as in our opinion are appropriate and subject to the accounting policies and notes thereon appearing in Annexure IV to this report.

3.

Statement of Restated Consolidated Cash Flow enclosed as Annexure III to this report.

4.

Accounting Ratios as appearing in Annexure V to this Report.

5.

There is no change in accounting policies in the concerned years.

We report that the summarized restated consolidated financial statements have been prepared by the Company’s Management in accordance with the requirements of the Accounting Standards (AS) 21 – Consolidated Financial Statements issued by the Institute of Chartered Accountants of India. In our opinion the financial information of the Company as stated above read with significant accounting policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the SEBI guidelines. This report is intended solely for your information and for inclusion in the offer document in connection with the specific Public Offer of the Company and is not be used, referred to or distributed for any other purpose without our prior written consent. For K. P. JAIN & CO., Chartered Accountants Sd/KISHORE P. JAIN (Proprietor) Membership No: 27236 Place: Chennai ANNEXURE I STATEMENT OF RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT (Rs. in lakhs) PERIOD ENDED ON 31.03.03 31.03.04 31.03.05 31.12.05 INCOME Sales: Of Products manufactured by the Company Of Products traded by the Company Other Income Increase / (Decrease) in Inventory Total Income

2,726.13 46.12 2.90 2,775.15

4,331.36 243.16 16.48 53.18 4,644.18

8,410.51 2,267.97 35.07 9.27 10,722.82

8,678.12 7,084.34 417.33 164.36 16,344.15

EXPENDITURE Raw Materials & Goods Consumed Staff Costs Other Manufacturing Expenses

1,679.39 26.35 949.78

2,818.31 37.24 1,482.11

6,927.79 45.34 2,830.70

11,945.01 57.59 2,528.70

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AML STEEL LIMITED

Selling & Distribution Expenses Interest Depreciation Miscellaneous Expenditure w/o

74.06 16.03 25.85 1.25

78.53 45.29 49.59 1.45

68.90 74.04 86.96 1.45

2,772.71

4,512.52

10,035.18

14,856.88

Net Profit before Tax & before Extraordinary items

2.44

131.66

687.64

1,487.27

Provision for Taxation Provision for Deferred Taxation

4.06 4.81

20.80 8.59

163.90 21.03

260.24 9.95

(6.43)

102.27

502.71

1,217.08

Total Expenditure

Net Profit after Tax & before Extraordinary items Extraordinary Items (net of tax) Net Profit after Extraordinary Items

-

-

(6.43)

Earlier year Adjustments

-

APPROPRIATIONS Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance Carried to Balance Sheet

5.42 36.00 7.20 (55.05)

102.27

-

-

502.71

-

9.50 36.00 4.50 52.27

189.36 70.76 65.46

1,217.08 -

25.00 45.00 6.31 426.40

1,217.08

ANNEXURE II STATEMENT OF RESTATED CONSOLIDATED ASSETS AND LIABILITIES (Rs. in lakhs) AS AT 31.03.03 31.03.04 31.03.05 31.12.05 A Assets Fixed Assets – Gross Block Less: Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve

933.82 167.86 765.96 -

1,487.97 213.50 1,274.47 -

1,627.38 293.32 1,334.06 -

2,619.60 364.61 2,254.99 -

765.96

1,274.47

1,334.06

2,254.99

B

Good Will

20.26

25.80

31.11

31.11

C

Investments

60.22

12.00

25.14

29.89

593.37 151.82 334.22 87.88

1,054.65 512.05 443.45 105.83

1,948.98 1,515.29 279.49 232.98

3,316.23 1,496.58 838.20 371.41

D Current Assets, Loans & Advances Inventories Receivables Cash & Bank Balances Other Current Assets

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AML STEEL LIMITED

Loans & Advances

56.50

210.46

254.98

629.24

2,070.24

3,638.71

5,622.03

8,967.65

274.46 53.92

762.77 533.74

541.50 549.58

720.81 646.09

580.23 78.39

1,087.48 101.03

2,619.45 303.52

2,963.75 521.74

300.00 818.84 818.84

303.00

303.00

886.46

1,338.68 1,338.68

750.00 1,368.61 2,105.75 2,105.75

35.61

35.77

33.70

109.10

Total Net Worth

1,083.23

1,153.69

1,607.98

4,115.26

Total of Liabilities and Provisions

2,070.23

3,638.71

5,622.03

8,967.65

Total Assets E Liabilities and Provisions Loan Funds Secured Loans Unsecured Loans Current Liabilities & Provisions Sundry Liability Provisions (Including Deferred Tax) F Net Worth Represented by Shareholders Funds Share Capital Share Application Money Reserves & Surplus Less: Revaluation Reserve Reserves (Net of Revaluation Reserve) Less: Miscellaneous Expenditure not written off

886.46 -

ANNEXURE III STATEMENT OF RESTATED CONSOLIDATED CASH FLOW Cash Flow Statement for the year/period ending

31.03.03

(Rs. in lakhs) 31.03.04 31.03.05 31.12.05

A Cash Flow from Operating Activities Net Profit before Taxation and Extra Ordinary Items Adjustments for: Depreciation (Profit) / Loss on Sale of Assets Interest Expenses Interest / Dividend Received Miscellaneous Expenditure Written off (Profit) / Loss on Sale of Investments Operating Profit before Working Capital Changes Movements in Working Capital Adjustments for: (Increase)/Decrease in Debtors and other Receivables (Increase)/Decrease in Inventories Increase/(Decrease) in Liabilities

141

2.44

131.65

25.86 28.76 16.04

49.60 4.61 45.29

(46.12) 1.25 28.23

(15.34) 1.45 217.25

687.65 1,485.69 86.96 4.33 74.04

65.46 70.76

(21.78) (10.52) 2.06 0.15 (13.23) (403.65) 820.03 1,207.89

397.22 (532.14) (1,577.54) (65.61) 423.06 (461.27) (894.34) (1,367.25) (657.63) 507.26 1,957.68 (59.44)

AML STEEL LIMITED

Cash Generated from Operations Direct Taxes Paid Extra Ordinary Items

190.88 (268.90) 13.52 4.05 -

305.84 16.34 -

(284.41) -

Net Cash from Operating Activities

177.36 (272.95)

289.50

(284.41)

Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Interest Paid Interest Received Preliminary Expenses

(220.51) (566.32) (12.54) 1.81 (239.66) (112.62) (16.04) (45.29) 46.12 15.34 (2.07)

(154.44) 4.37 (13.14) 13.23 (74.04) 21.78 -

(945.48) (57.34) (38.14) 429.04 (70.76) 12.10 -

Net Cash from Investing Activities

(442.62) (709.16)

(202.24)

(670.58)

B Cash Flow from Investing Activities

C Cash Flow from Financing Activities Proceeds from Issue of Share Capital

(41.87) 127.44 -

Proceeds from Long Term Borrowings Dividends Paid Net Cash from Financing Activities

163.84 968.11 (40.61)

(5.31) 1,301.99 (205.41) 250.82 (40.50) (51.31)

85.57 1,091.34

(251.22) 1,501.50

Net Increase in Cash and Cash Equivalents (A+B+C)

(179.69)

109.23

(163.96)

546.51

Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents

513.91 334.22 (179.69)

334.22 443.45 109.23

443.45 279.49 (163.96)

291.69 838.20 546.51

ANNEXURE IV NOTES TO THE ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES: 1. Basis for preparation of consolidated accounts: i. The financial statements of the subsidiaries used in the consolidation are drawn up to the same reporting date as that of the Parent Company. ii. The consolidated financial statements have been prepared under the historical cost convention and on the accrual basis of accounting. The accounts of the group have been prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accounts of India, and generally accepted accounting principles. iii. The consolidated financial statements related to AML Steel Limited and its Subsidiary Companies. The consolidated financial statements have been prepared on the following basis. •

The financial statements of the Company and its Subsidiary Companies have been combined on a line by line basis by adding together book values of like items of assets, liabilities, income and

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AML STEEL LIMITED

•

expenses, after fully eliminating intra-group balances and intra-group transactions resulting in unrealized profits and losses. The excess of cost of the Company of its investment in the Subsidiary over the Company’s portion of equity of the Subsidiary is recognized in the financial statements ad Goodwill.

iv. The subsidiary Companies considered in the consolidated financial statements are:

Ankit Ispat (P) Ltd Ashok Steel Industries (P) Ltd AML Steel & Power Ltd

Country of Incorporation % voting power held As at 31st December 2005 India 100 Sri Lanka 100 India 100

2. Revenue Recognition Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and excluding sales tax is accounted for sales. 3. Fixed Assets: Fixed Assets are recorded at historical cost of purchase and do not reflect current values. Cost includes interest and other financial charges attributable to the acquisition of fixed assets. Foreign exchange differences relating to the acquisition of fixed assets are adjusted to the cost of the asset. When an asset is disposed off, the cost and related depreciation are removed from the books of account and the resultant profit (including capital profit) or loss is reflected in the profit and loss account. 4. Investments Investments are stated at cost. 5. Inventories Inventories are stated at cost or net realizable value, which ever is lower. 6. Transaction of Foreign Currency All assets and liabilities are translated at the relevant rates of exchange prevailing at the year-end. 7. Previous figures have been regrouped wherever necessary to confirm to current year’s classification. ANNEXURE V MANDATORY ACCOUNTING RATIOS PERIOD ENDED ON Earning Per Share (EPS) (Rs) Cash Earning Per Share (Rs) Return on Net Worth (%) Net Asset Value Per Share (Rs) * Annualised Workings No of Shares at the Beginning of the Year No of Shares at the End of the Year A Weighted Average Number of Equity Shares Cash Earnings (Rs. in lakhs) B

31.03.03 (0.21) 0.65 (0.59) 36.11

31.03.04 3.39 5.19 8.86 38.23

30,00,000 30,00,000 30,00,000

30,00,000 30,30,000 30,17,500

30,30,000 30,30,000 30,30,000

(6.43)

102.27

502.71

PAT (Including Deferred Tax)

143

31.03.05 31.12.05 * 16.59 32.46 19.60 34.20 31.26 39.43 53.07 82.31

30,30,000 75,00,000 50,00,000

1,217.08

AML STEEL LIMITED

Depreciation Loss on Sale of Assets C Total D Net Worth

25.85 19.42 1,083.23

49.59 4.61 156.47 1,153.69

86.96 4.33 594.00 1,607.98

65.46 1,282.54 4,115.26

Notes: A. The ratios have been computed as below 1. 2. 3. 4.

Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average Number of Equity Shares Outstanding during the Year. Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders/ Weighted Average Number of Equity Shares Outstanding during the Year. Return on Net Worth (%) = Profit After Tax / Net Worth. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares Outstanding during the Year.

B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as per the statement of Restated Profit and Losses Account. C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered Accountants of India.

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AML STEEL LIMITED

FINANCIAL INFORMATION OF GROUP COMPANIES / VENTURES PROMOTED BY THE PROMOTERS. 1. Corbin Trades Investments Limited Incorporated on 3 August, 1990, it is an investment company formed for the purpose of investing in shares of companies. The main source of income of Corbin Trades Investments Limited is dividend and there are no significant expenses. The Registered office of the Company is situated in 834, Raheja Complex, Mount Road, Chennai – 600 002. Board of Directors The Board of Directors of Corbin Trades Investments Limited consists of Mr.Ashok Agarwal, Mr. Ruli Ram Agarwal, Mrs. Anita Agarwal. Financial Highlights (Rs. in lakhs) For the Year ended 31.03.2005 31.03.2004 31.03.2003 Total Income 1.79 2.19 1.74 Profit/Loss After Tax 1.13 1.55 0.57 EPS (Rs.) 1.08 1.49 0.55 Share Capital 10.40 10.40 10.40 Reserves and Surplus 10.86 9.73 8.18 NAV (Rs.) 20.92 19.36 17.86 * Share Application Money pending as on 31 March, 2005 was Rs.0.50 lakhs. Shareholding Pattern The Shareholding Pattern of Corbin Tades Investments Limited is as follows:

2.

S No

Name

1. 2. 3. 4.

Mr.Ashok Agarwal Mr.Ruli Ram Agarwal Mrs.Anita Agarwal Others Total

No. of Equity Shares 1,000 1,000 1,000 1,01,000 1,04,000

% of Total 0.96 0.96 0.96 98.08 100.00

Skywell Assets Limited

Incorporated on 18 March, 2005 in the Brtish Virgin Islands, Skywell Assets Limited is an investment company with the main object of arranging finance and investing in the debt/equity capital of other companies. The Registered Office of Skywell Assets Limited is situated at the offices of Offshore Incorporations Limited, P.O. Box 957, Off Shore Corporations Centre, Road Town, Tortola, British Virgin Islands. Board of Directors The Board of Directors of Skywell Assets Limited are ENSOL (SINGAPORE) PTE LTD and Mr.Ashok Agarwal Financial Highlights (In USD) For the Year ended 31.12.2005 Total Income Nil Profit/Loss After Tax (4,224.71) EPS (Rs.) -Share Capital* 10,000.00 Reserves and Surplus (4,224.71) NAV (Rs.) 0.58 * Face Value per share is USD 1.00

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AML STEEL LIMITED

Shareholding Pattern The Shareholding Pattern of Skywell Assets Limited is as follows: S No

Name

1.

M/s.Ensol (Singapore) Private Limited Mr.Ashok Agarwal Total

2.

3.

No. of Equity Shares 4,900 5,100 10,000

% of Total

49.00 51.00 100.00

Elango Steels Private Limited

Incorporated on 31 May, 1999 Elango Steel Private Limited is a company whose main object is to carry on the business of steel. The entire share capital of Elango Steel Private Limited was acquired by the present shareholders from the original promoters and the then shareholders, on 8 November, 2003. The Registered office is situated at 57/2, Nainikattalai Road, Polagam Village, T. R Pattinam, Karaikal – 609 609. Shareholding Pattern The Shareholding Pattern of Elango Steel Private Limited is as follows: S No 1 2 3 4

Name M/s.Ashok Memory India Private Limited Mr.Ajay Agarwal Mr.P.C.Jangir M/s.Corbin Trades Investments Limited Total

No. of Equity Shares % of Total 930 46.97 140 7.07 90 4.55 820 41.41 1980 100.00

Board of Directors The Board of Directors of Elango Steel Private Limited consists of Mr.K.Rajesh and Mr. B.Babu. Financial Highlights For the Year ended Total Income Profit/(Loss) After Tax EPS (Rs.)* Share Capital Reserves and Surplus NAV (Rs.)*

31.03.2005 1.98 23.99

(Rs. in lakhs) 31.03.2004 31.03.2003 2.81 0.21 (0.26) (1.24) 1.98 1.98 23.99 -

* Face Value per share is Rs.100/4. Efficient Agencies (Sole Proprietorship) Efficient Agencies was started by Mr.Ashok Agarwal in August 1987 as a proprietary firm for the purpose of trading in video and audio cassettes and television tubes. It also entered manufacture of video and audio cassette subsequently. When there was a technology shift towards compact discs (CD), Efficient Agencies exited the cassettes business. Now, it functions as a merchant exporter of various engineering and electrical products to Sri Lanka. Financial Highlights For the Year ended Total Income Net Profit Proprietors Capital

31.03.2005 227.74 1.58 49.59

146

31.03.2004 232.59 1.31 48.01

(Rs. in lakhs) 31.03.2003 125.34 0.19 44.69

AML STEEL LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion of our financial conditions and results of operations together with our audited financial statements for the year ended 31 March, 2003, 2004, 2005 and for the nine months period ended 31 December, 2005, including the notes thereto and the reports thereon, which is appearing under the head ‘Financial Information’ on page no.[●] in this DRHP. These financial statements are prepared in accordance with Indian GAAP, the Companies Act and the SEBI Guidelines and restated as described in the Auditor’s Report of M/s. K.P Jain & Co., Chartered Accountants in the section titled “Financial Information”. Business Overview Promoted by Mr. Ashok Agarwal and his associates, our Group consists of AML Steel Limited (formerly known as Ashok Magnetics Limited), and its three subsidiaries viz., Ankit Ispat Private Limited, AML Steel & Power Limited and Ashok Steel Industries Private Limited. We diversified into Steel in the year 1998 by commencing operations in Pondicherry Plant. We are manufacturing Mild Steel Ingots from Mild Steel Scrap using the Induction Furnace route; the group’s value added products include Mild Steel Ingots and Wire Rods. The business operations of the group has expanded in progression by setting up of manufacturing facilities in Pondicherry, Karaikal, the proposed Integrated Steel Plant at Jharkhand in India and Colombo in Sri Lanka. The proposed project at Jharkhand envisages manufacturing Sponge Iron and Steel Billets. The group has an experience of over eight years in the steel manufacturing and has earned its name in the market for quality production of steel products. Details of the Existing Plants Owned By the Group Name AMLSL AIPL ASIPL

Products MSI MSI MSI, Wire Rods

Location Pondicherry Karaikal Sri Lanka

Installed Capacity 45,000 TPA 27,600 TPA 60,000 TPA

Our proposed project through our wholly owned subsidiary, AMLSPL, to set up a facility with an installed capacity to manufacture 1,10,000 TPA of sponge iron and 42,000 TPA of steel billets, is a step towards backward integration for the entire group for its existing operations. For this purpose, the Ministry of Mines, GoI has agreed for the grant of a mining lease to us over 383.54 acres on a long-term lease for a period of 20 years in the State of Jharkhand. We also propose to set up a 9.6 MW captive power plant to meet our power requirements. The entire production of sponge iron will be available for captive consumption for manufacture of other steel products such as steel billets and also for sale in the open market. We are also actively engaged in trading of steel products such as T.M.T Bars, Tor Steel, M.S Rods, Steel Structurals, Steel Angles and Channels, H.R Plates, H. R & C.R Sheets etc., With an experience of around 8 years in the industry, we have been able to exploit the opportunities in the trading segment, which contributes significantly to our total income. Capital Issues, Networth Addition We have issued bonus shares in the ratio of 1.5:1 on 23 August, 2005 increasing the paid up share capital to 7,500.00 lakhs. The networth of the Company as on 31 December, 2005 was Rs.3,767.23 lakhs against Rs.1,516.88 lakhs as on 31 March, 2005. The increase in networth has been due to the infusion of funds by the Promoters in the form of share application money. The profit generated out of the operations, after being added to reserves, has also resulted in an increase in the networth. Capacity Addition, Capacity Utilization, Production Our plant at Pondicherry is manufacturing Mild Steel Ingots from Mild Steel Scrap. The licensed capacity, installed capacity, production and capacity utilisation of the plant for the last three years are given below:

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AML STEEL LIMITED

31.12.2005 45000 45000 18375 54.44%*

Licensed Capacity (TPA) Installed Capacity (TPA) Production (TPA) Capacity utilization * Annualised

31.03.2005 45000 45000 16284 36.19%

31.03.2004 45000 45000 17363 38.58%

31.03.2003 45000 45000 20824 46.28%

The licensed and installed capacity remained unchanged during the last three years and for the nine month period ended 31 December, 2005. The capacity utilization came down during the last two years because of frequent power interruption, which was largely attended to by the Government in the year 2005. Thus, continuous supply of power coupled with debottlenecking done by the Company has helped it to achieve 54.44% capacity utlisation during the nine months period ended 31 December, 2005. Dividend Paid Our Company is having the track record of paying dividend consistently. The details of the dividend paid by us during the last five years is as under: Particulars Rate of Dividend (%) Amount of Dividend (Rs. in lakhs)

Financial Year 2004 – 2005 2003 – 2004 2002 – 2003 2001 – 2002 2000 – 2001 15.00 12.00 12.00 10.00 15.00 45.00

36.00

36.00

30.00

45.00

Liquidity and Capital Resources Liquidity Both internal and external sources augment our liquidity to fund the working capital and capital requirements. We have funded our working capital requirements and capital expenditures from internally generated funds and debt financing. In respect of the debt funding of working capital, we make use of cash credit limits from banks and for capital expenditure debt financing, we generally enter into long-term borrowings in the form of Term Loans. As of 31 December, 2005 we had cash and cash equivalents of Rs.229.75 lakhs, which represented an increase of Rs. 22.10 lakhs over cash and cash equivalents as on 31 March, 2005. As of 31 March, 2005 we had cash and cash equivalents of Rs.207.65 lakhs which represented a decrease of Rs. 145.76 lakhs from the cash and cash equivalents as on 31 March, 2004. Cash Flow Following table summarises our restated cash flow statements in the last three financial years and the ninemonth period ended 31 December, 2005. Cash Flow (Rs. in lakhs) Net cash from operating activities Net cash from Investing activities Net cash from Financing activities Opening cash and cash equivalents Closing cash and cash equivalents Net increase in cash and cash equivalents

31.03.2003 67.65 (205.07) (96.14) 513.91 280.35 (233.56)

31.03.2004 63.45 (132.63) 142.24 280.35 353.41 73.06

31.03.2005 88.93 (75.58) (159.11) 353.41 207.65 (145.76)

30.12.2005 (1785.88) 356.73 1451.25 207.65 229.75 22.10

Net Cash from Operating Activities Our net cash outflow from operating activities was Rs. 1,785.88 lakhs during the nine-month period ending 31 December, 2005. We had net profits before extraordinary items and tax of Rs. 1,062.68 lakhs. Our net cash from operating activities excludes non-cash items of depreciation of Rs. 24.29 lakhs, interest expenses of Rs. 42.75 lakhs, interest/ dividend received Rs. 11.81 lakhs and profit on sale of investments Rs. 403.65 lakhs. Further, adjustments for increase in debtors and receivables to the extent of Rs.1,595.08 lakhs,

148

AML STEEL LIMITED increase in inventories to the extent of Rs. 911.85 lakhs and increase in liabilities to the extent of Rs.6.79 lakhs, have been made. Our net cash inflow from operating activities was Rs. 88.93 lakhs in financial year ended 31 March, 2005. We had net profits before extraordinary items and tax of Rs.432.03 lakhs. Our net cash from operating activities excludes non-cash items of depreciation of Rs. 31.22 lakhs, net interest expenses of Rs.36.83 lakhs, loss on sales of assets of Rs. 4.33 lakhs, interest/dividend received Rs.21.25 lakhs, miscellaneous expenses written off Rs. 1.25 lakhs and profit on sale of investments Rs. 13.23 lakhs. Further, adjustments for increase in debtors and receivables to the extent of Rs.1,541.94 lakhs, increase in inventories to the extent of Rs. 288.84 lakhs, increase in other liabilities to the extent of Rs. 1,463.25 lakhs, have been made. The Income Tax paid for the period was Rs.14.73 lakhs. Net Cash from Investing Activities The net cash inflow from our investment activities during the nine-month period ended 31 December, 2005 was Rs.356.73 lakhs. During the period there was an inflow of Rs. 429.04 lakhs due to sale of investments and Rs. 11.81 lakhs from the receipt of interest. There was an outflow of Rs.3.23 lakhs for the purchase of assets, Rs. 38.14 lakhs for the purchase of investments and Rs. 42.75 lakhs for the payment of the interest. The net cash outflow from our investment activities in financial year ended 31 March, 2005 was Rs. 75.58 lakhs. This was because there was an outflow of Rs. 64.46 lakhs towards purchase of fixed assets, Rs.13.14 lakhs towards purchase of investments and the Rs.36.83 lakhs for payment of interest. There was an inflow of Rs. 4.37 lakhs from the Sale of fixed assets and Rs.13.23 lakhs from the sale of investments. We have received Rs.21.25 lakhs as interest in this period. Net Cash from Financing Activities The net cash inflow from the financing activities during the nine-month period ended 31 December, 2005 was Rs.1,451.25 lakhs. This inflow included proceeds from long-term borrowings of Rs. 133.95 lakhs and share application money of Rs.1,368.61 lakhs. There was a Cash outflow of Rs.51.31 lakhs for the payment of the dividends. The net cash outflow from our financing activities in FY 2005 was Rs. 159.11 lakhs. These Cash outflows were dividends to the extent of Rs. 40.50 lakhs and the repayment of long-term borrowings of Rs. 118.61 lakhs. INDEBTEDNESS We have both Secured and Unsecured loans borrowings. Major portion of our external financing has been from the Banks in India and other agencies. The details our secured loan position as on 31 December, 2005 is given in the following table: Name of the lender

Outstanding Rate of interest Security (Rs. in lakhs) Central Bank of India 315.03 2% over BPLR Secured by hypothecation of the stocks - Cash Credit presently 11% and book debts Government of Tamil Nadu 41.12 Interest Free Secured by the residual charge on the (Interest Free Sales Tax Loan) Fixed Assets of the PVC Unit of the Company Our unsecured loan of Rs. 139.15 lakhs as on 31 December, 2005 was from affiliates / group companies or those related to Promoters or Directors in any way. The amount due is repayable on demand and carries no interest. Capital Expenditure We have been expanding our business operations through our wholly owned subsidiaries in the form of equity investments and by pursuing strategic acquisitions of other steel plants. We now propose to set up an Integrated Steel Plant in the State of Jharkhand, through AMLSPL, our wholly owned subsidiary. For further details on our expansion plans please see the “Objects of the Issue” on page no. [●] of this DRHP. Our Capital expenditure is subject to modification as a result of variety of factors, including but not limited to the availability of funds, changes in expansion plans and other such factors.

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Significant Developments Subsequent to the Last Financial Year There are no significant developments subsequent to last financial year except for the issue of bonus shares. Discussion on Results of Operations The following discussion on the financial operations and performance should be read in conjunction with the audited unconsolidated financial results of the Company for the years ended 31 March, 2003, 2004 and 2005 and for the nine month period ended 31 December, 2005. Key Factors Affecting the Results of Our Operations • • • • • • •

Early commencement of mining operations. Non-receipt of pending approvals for the proposed project. Fluctuations in the prices of raw materials, both in domestic and international markets. General economic and business conditions particularly in the steel sector. Company’s ability to successfully implement its strategy and its growth and expansion plans. Fluctuations in exchange rates and interest rates. Government policies and regulations regarding duties, levies and taxes.

A summary of past financial results based on the restated statement of accounts is as under: (Rs. in lakhs) Period ended on 31.03.2003 31.03.2004 31.03.2005 31.12.2005 Income Sales: Of Products manufactured by the Company 2616.09 2,791.29 3,469.84 3585.99 % increase in sales -6.70 24.31 *37.80 Of Products traded by the Company -228.60 2,250.65 7072.56 % increase in sales -100 884.54 *319.00 Total sales 2616.09 3019.89 5720.49 10658.55 % increase in total sales -15.44 89.43 *148.43 Other Income 46.12 15.27 34.48 415.46 Increase / (Decrease) in Inventory 2.90 3.14 0.83 25.15 Total Income 2,665.11 3,038.30 5,755.80 11099.16 Expenditure Raw Materials & Goods Consumed 1,618.49 1,916.36 4,021.89 8730.01 Staff Costs 21.38 16.30 11.83 14.30 Other Manufacturing Expenses 862.00 920.64 1,178.01 1133.85 Selling & Distribution Expenses 67.62 51.93 42.75 91.28 Interest 15.63 30.34 36.83 42.75 Depreciation 25.85 27.85 31.22 24.29 Miscellaneous Expenditure w/o 1.25 1.25 1.25 -Total Expenditure 2,612.22 2,964.67 5,323.78 10036.48 Net Profit before Tax & before Extraordinary items 52.89 73.63 432.02 1062.68 Provision for Taxation 4.06 19.19 134.50 180.93 Provision for Deferred Taxation 4.81 1.72 2.07 -PAT 44.02 52.72 295.45 881.75 PAT as a % of Sales 1.68 1.75 5.16 8.27 * Annualised.

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We commenced our trading operations in full swing during the year 2004-05. A detailed break up of our manufacturing and trading operations are given below: (Rs. in lakhs) PARTICULARS 31.03.2003 31.03.2004 31.03.2005 31.12.2005 M M T M T M T Sales 2616.09 2791.29 228.60 3469.84 2250.65 3585.99 7072.56 % of Total sales (M+T) 100 92.43 7.57 60.66 39.34 33.64 66.36 Raw Material Consumed 1,618.49 1690.03 226.33 1858.56 2163.33 1794.11 6935.90 Raw Material as a % of Sales 61.87 60.55 99.01 53.56 96.12 50.03 98.07 Other Manufacturing Expenses 862.00 920.64 0.00 1178.01 0.00 1133.85 0.00 Other Manufacturing Expenses as % of Sales 32.95 32.98 0.00 33.95 0.00 31.62 0.00 Selling & Distribution Expenses 67.62 51.93 0.00 41.85 0.90 88.53 2.75 Selling & Distribution Expenses as % of Sales 2.58 1.86 0.00 1.21 0.04 2.47 0.04 0.00 Staff Costs 21.38 16.30 10.98 0.85 12.05 2.25 0.00 Staff Costs as % of Sales 0.82 0.58 0.32 0.04 0.34 0.03 0.00 Interest 15.63 30.34 36.83 0.00 42.75 0.00 0.00 Interest as % of Sales 0.60 1.09 1.06 0.00 1.19 0.00 0.00 Depreciation 25.85 27.85 31.22 0.00 24.29 0.00 0.00 Depreciation as % of Sales 0.99 1.00 0.90 0.00 0.68 0.00 PAT 44.02 51.27 1.46 241.19 54.26 794.41 87.34 PAT as % of Sales 1.68 1.84 0.64 6.95 2.41 22.15 1.23 M -Manufacturing activity. T – Trading activity. Performance for the nine-month period ended 31 December, 2005. Sales Revenues Our operating income primarily consists of sale of manufactured goods and the goods traded by us. The Company has reported an impressive performance for the nine-month period ended 31 December, 2005 and has achieved a total sales revenue of Rs. 10658.55 lakhs as against Rs.5720.49 lakhs for the year ended 31 March, 2005. The income from manufacturing activity for the period ended 31 December, 2005 was Rs.3585.99 lakhs as against Rs.3469.84 lakhs for the financial year 2004-05 attributable to better and higher capacity utilisation (54.44% for the period ended 31 December, 2005 as against 30.19% for the year ended 31 March, 2005). The income from trading activity stood at Rs.7072.56 lakhs for the period ended 31 December, 2005 as against Rs.2250.65 for the year ended 31 March, 2005. With an experience of about 8 years in this industry, we have been able to tap the market and build and widen our customer base, which in turn has contributed in the form of increased sales in the trading activity. Raw Material Consumed The Raw material consumed, for the manufacturing activity, as a percentage of sales, for this period is 50.03% as against 53.56% for the year ended 31 March, 2005, due to a drop in the prices of the raw materials. The Raw material consumed, for the trading activity, as a percentage of sales for this period is 98.07% as against 96.12% for the year ended 31 March, 2005. We are working on the model of high volume low margin strategy resulting in an increase in the cost of consumption.

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Manufacturing Expenses Manufacturing expenses as a percentage of sales for this period reduced to 31.62% from 33.95% for the year ended 31 March, 2005 as a result of higher capacity utilisation (54.44%) in this period. Selling & Distribution Expenses For the manufacturing activity, the Selling & Distribution expenses is 2.47% of the sales recorded for the period ended 31 December, 2005 compared to 1.21% for the year ended 31 March, 2005, due to the increased efforts taken by us to expand the market for the goods manufactured by the Company. For the trading activity, the Selling & Distribution expenses, as a percentage to sales, has remained at 0.04% for both the nine-month period and the previous financial year. Staff Costs The staff costs for the period ended 31 December, 2005, as a percentage of the sales figure, for manufacturing activity has marginally increased to 0.34% from 0.32% in the financial year 2004-05. But for the trading activity there was a marginal decrease of 0.01% in the staff cost as a percentage of the sales for the period ended 31 December, 2005. Interest Cost and Depreciation Interest expense has increased from 1.06% for the financial year 2004-05 to 1.19% during the nine-month period ending 31 December, 2005 due to an increase in the cash credit availed by us to meet our working capital requirement. Depreciation as a percentage to sales has reduced from 0.90% in financial year 2005 to 0.68% during the period ended 31 December, 2005. Profit After Tax (PAT) PAT for the nine-month period ending 31 December, 2005 was Rs. 881.75 Lakhs (8.27% of the total sales) as compared to Rs.295.45 lakhs (5.16% of the total sales) for the financial year 2004 –05. For the manufacturing activity, profit after tax, as a percentage of sales, was 22.15% as against 6.95% for the year ended 31 March, 2005 as a result of increase in sales volume due to better capacity utilisation. For the trading activity, profit after tax, as a percentage of sales, was 1.23% as against 2.41% for the year ended 31 March, 2005. We work on the strategy of high volume low margins, therefore, though there has been an increase in the volume of sales, the margins were under pressure resulting in a low profit after tax. Comparison of Performance and Analysis for the Financial Year ended 31 March, 2005 vis-à-vis 31 March, 2004 Sales Revenues We reported total sales revenue of Rs.5720.49 lakhs for the year ended 31 March, 2005 as against Rs.3019.89 lakhs for the year ended 31 March, 2004. The income from manufacturing activity for the year ended 31 March, 2005 was Rs.3469.84 lakhs as against Rs.2791.29 lakhs for the year ended 31 March, 2004 attributable to higher price realisation. The income from trading activity stood at Rs.2250.65 lakhs for the year ended 31 March, 2005 as against Rs.228.60 for the year ended 31 March, 2004. We were able to capitalise on the market oppurtunities in the trading segment resulting in an increase in our trading volume.

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Raw Material Consumed The Raw material consumed, for the manufacturing activity, as a percentage of sales, for this period is 53.56% as against 60.55% for the year ended 31 March, 2004. Though the cost of consumption was higher in the year 2005 over the year 2004, higher price realisation negated the effect of increased cost. The Raw material consumed, for the trading activity, as a percentage of sales for this period is 96.12% as against 99.01% for the year ended 31 March, 2004 due to increased trading volume. Manufacturing Expenses Manufacturing expenses as a percentage of sales for this period is 33.95% as compared to 32.98% for the year ended 31 March, 2004, a marginal increase recorded due to the increase in power and fuel expenses. Selling & Distribution Expenses For the manufacturing activity, the Selling & Distribution expenses is 1.21% of the sales recorded for the for the year ended 31 March, 2005 compared to 1.86% for the year ended 31 March, 2004 due to cost cutting techniques adopted by us. Staff Costs The staff costs for the for the year ended 31 March, 2005, as a percentage of the sales figure, for the manufacturing activity has reduced from 0.58% to 0.32% for the year ended 31 March, 2004 due to effective utilisation of manpower. We incurred an amount of Rs.0.85 lakhs due to deployment of workforce in the trading activity. Interest Cost and Depreciation Interest expense has decreased marginally from 1.09% for the financial year 2003-04 to 1.06% during the year ended 31 March, 2005 as a result of a low leverage maintained by us. Depreciation as a percentage to sales has also reduced marginally from 1.00% in financial year 2003-04 to 0.90% for the year ended 31 March, 2005. Profit After Tax (PAT) PAT for the year ended 31 March, 2005 was Rs.295.45 lakhs (5.16% of the total sales) as compared to Rs.52.72 lakhs (1.75% of the total sales) for the financial year 2003 –04. For the manufacturing activity, profit after tax, as a percentage of sales, was 6.95% as against 1.84% for the year ended 31 March, 2005 as a result of higher price realisation. For the trading activity, profit after tax, as a percentage of sales, was 2.41% as against 0.64% for the year ended 31 March, 2005 due to an increase in the volume of sales recorded. Comparison of Performance and Analysis for the Financial Year ended 31 March 2004 vis-à-vis 31 March, 2003 Sales Revenues We reported a total sales revenue of Rs.3019.89 lakhs for the year ended 31 March, 2004 as against Rs.2616.09 lakhs for the year ended 31 March, 2003. The income from manufacturing activity for the year ended 31 March, 2004 was Rs.2791.29 lakhs, a marginal increase from Rs.2616.09 lakhs for the year ended 31 March, 2003 due to better price realisation. We commenced trading in steel products like TMT bars, Structural angles, Steel Structurals, Steel Angles and Channels etc, which yielded an income of Rs.228.60 lakhs.

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AML STEEL LIMITED

Raw Material Consumed The Raw material consumed, for the manufacturing activity, as a percentage of sales, for the year 31 March, 2004 is 60.55% as against 61.87% for the year ended 31 March, 2003. Though the cost of consumption went up marginally due to increase in prices, its ratio to sales has decreased due to better price realisation. The Raw material consumed, for the trading activity, for this year stood at Rs.226.33 lakhs. Manufacturing Expenses Manufacturing expenses as a percentage of sales has almost remained the same during both the years. Selling & Distribution Expenses For the manufacturing activity, the Selling & Distribution expenses is 1.86% of the sales recorded for the for the year ended 31 March, 2004 compared to 2.58% for the year ended 31 March, 2003. Staff Costs The staff costs for the for the year ended 31 March, 2004, as a percentage of the sales figure, for the manufacturing activity has reduced to 0.58% from 0.82% for the year ended 31 March, 2003 due to effective utilisation of manpower. Interest Cost and Depreciation Interest expense has increased from 0.60% for the financial year 2002-03 to 1.09% during the year ended 31 March, 2004 due to an increase in our secured loan component availed for the business. Depreciation has almost remained the same during both the years. Profit After Tax (PAT) PAT for the year ended 31 March, 2003 was Rs.44.02 lakhs (1.68% of the total sales) as compared to Rs.52.72 lakhs (1.74% of the total sales) for the financial year 2003 – 04. The increase in profit is attributable to higher price realisation and the commencement of trading activity, which contributed to the extent of Rs.1.46 lakhs. Information Required As Per Clause 6.10.5.5 of SEBI Guidelines Unusual or Infrequent Events or Transactions There are no unusual or infrequent events or transactions that have significantly affected the business of the Company. Significant Economic Changes that Materially Affected or Are Likely to Affect Income from Continuing Operations With an overall upsurge in the Indian economy, the demand of iron and steel is at an all time high. This increase has resulted into demand of iron and steel products and the Company is suitably placed to benefit out of this situation as the demand for the products is from the construction, infrastructure, auto – auto ancillary industry. The proposal to allow 100% Foreign Direct Investment in the construction sector will provide an impetus to the industry. Government’s thrust on infrastructural development will lead to an increased demand for the products manufactured by the Company. Opening of futures trading in steel in the Multi Commodity Exchange Market helps for a better price discovery, hedging opportunities and benefits through standardized contracts thus providing more stability to prices. The National Steel Policy (NSP) of the Government seeks to adopt a multi-pronged strategy to move towards the long-term goal. This envisages an increase in production of steel to over 100 million tonnes annually by 2019 – 20 from the 2004 – 05 level of 38 million tonnes annually giving a compounded growth rate of 7.3 % till 2019 – 20.

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AML STEEL LIMITED

Known Trends Or Uncertainties That Have Had or Are Expected to Have a Material Adverse Impact On Sales, Revenue or Income From Continuing Operations. There is an uncertainty existing over the availability and price of raw materials namely Mild Steel Scrap, Iron Ore, Coal etc. and prices of finished products viz. Mild Steel Ingots, Wire Rods, Sponge Iron and Steel Billets etc. The risk on account of the above price fluctuation is reduced to a great extent considering the fact that a rise in the price of the basic raw material will be passed on in the form of increased price of the finished product. Other than as described elsewhere in the DRHP, to our knowledge, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenue or income of the Company from continuing operations. Future Relationship Between Costs And Income Import duty on steel, the basic raw material for the Company, excise duty and introduction of VAT are the three important factors, which would materially affect cost as a percentage of revenue. The risk on account of the price fluctuation is reduced to a significant extent considering the fact that a rise in the price of basic raw material is passed on in the form of increased prices of the finished products. Reasons For Material Increase in Net Sales or Revenue Our venturing into the trading activity, contributed significantly to our total sales revenue in the year 2004-05 and for the period ended 31 December, 2005. Our experience in the steel industry coupled with a good customer and supplier base helped us to work the oppurtunities in trading to our advantage. New Products or Business Segments Presently our group is manufacturing Mild Steel Ingots and Wire rods. With a view to produce Sponge Iron and Steel Billets the Group is setting up an Integrated Steel Plant at Jharkhand. The Ministry of Mines, GoI has agreed for the grant of a mining license to us for 383.54 acres of land in the Jharkhand for the mining of Iron ore. Major portion of this iron ore will be captively used for the manufacturing of sponge iron. Excess if any will be sold in the market. Seasonality of Business The business of the Company is not seasonal. Dependence on Single or Few Suppliers/Customers For our manufacturing and trading activities, the % of contribution of our customers and suppliers vis – a vis the total sales and purchases, in the last three years and for the period ended 31 December, 2005 is given below: Manufacturing Activity Customer Contribution: FY ended 31 December, 2005 31March, 2005 31March, 2004 31March, 2003 Top 3 contribution 45% 47% 40% 53% Top 5 contribution 63% 70% 57% 69% Top 10 contribution 87% 96% 84% 85% All percentages are rounded off to the nearest percentage point. Our pricing strategy to offer a competitive price to our customers depends on the market demand and supply conditions coupled with the pricing scenario in the industry. We have been able to retain and maintain a good rapport with our top ten customers who have been associated with us for the last couple of years and have significantly contributed to our revenue stream.

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Supplier Contribution: FY ended 31 December, 2005 31March, 2005 31March, 2004 31March, 2003 Top 3 contribution 40% 21% 45% 39% Top 5 contribution 46% 31% 56% 49% Top 10 contribution 65% 53% 75% 66% All percentages are rounded off to the nearest percentage point. As our prices are based on ruling spot prices, we source our raw materials from suppliers who offer the best price. Hence, we are not under any threat from excessive dependence on any single supplier. Trading Activity We have been able to capitalize on the advantage of our presence in this industry for the last eight years and depending on the market opportunities we have been able to build a diversified customer and supplier base. Thus, we are not under any threat from excessive dependence on any single customer or supplier. Customer Contribution: FY ended 31 December, 2005 31March, 2005 Top 3 contribution 53% 85% Top 5 contribution 56% 93% All percentages are rounded off to the nearest percentage point. Supplier Contribution: FY ended 31 December, 2005 31March, 2005 Top 3 contribution 34% 88% Top 5 contribution 45% 96% All percentages are rounded off to the nearest percentage point. Competitive Conditions For details of competitive conditions please refer to section titled ‘Business Overview’ on page no. [●] of this DRHP.

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AML STEEL LIMITED

SECTION VI - LEGAL AND REGULATORY INFORMATION OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 1. Outstanding Litigations 1.

2.

Save as detailed herein: a.

neither the Company, nor any director or Promoter of our Company is party to any ongoing litigation/proceedings for economic offences or statutory regulations or alleging criminal/civil offence (including past cases, if found guilty) before any statutory or regulatory authority/ court/ tribunal, nor are any show cause notices pending against any of them;

b.

neither our Company, nor any director of our Company was party to any past proceedings where any penalty was imposed;

c.

there have been/are no defaults to financial institutions/ banks, non-payment of statutory dues and dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares by the Promoters of our Company and the companies/ firms promoted by the Promoters of our Company;

d.

our Company has not failed to pay any statutory dues;

e.

no disciplinary action has been taken against the Promoters of our Company by the Securities and Exchange Board of India or any Stock Exchange in India; and

f.

none of the names of the directors of our Company have appeared on the RBI's defaulters list.

g.

There are no outstanding litigations, defaults, etc., pertaining to matters likely to affect operations and finances of the Issuer company and its subsidiaries , including disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII to the Companies Act, 1956 (1 of 1956) etc..

h.

There are no cases of pending litigations, defaults, etc. in respect of companies/ firms/ ventures with which the Promoters were associated in the past but are no longer associated;

i.

There are no pending proceedings initiated for economic offences against the Promoters, companies and firms promoted by the Promoters;

j.

There are no past cases in which penalties were imposed by the concerned authorities.

k.

There are no pending litigations, defaults, non payment of statutory dues, proceedings initiated for economic offences/ civil offences (including the past cases, if found guilty), any disciplinary action taken by the Board/ stock exchanges against the Promoters and their other business ventures (irrespective of the fact whether they are companies under the same management with the issuer company as per section 370 (1B) of the Companies Act, 1956)

There are no small scale creditors to whom our Company owes a sum exceeding Rupees one lakh which is outstanding for more than thirty days.

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AML STEEL LIMITED

The details of the relevant proceedings have been classified as follows: The list provided below indicates the current position of the legal matters related to the company/group companies outstanding before the various courts/juridical authorities. No case has been filed by the Company and the Group companies except as under:

A 1.

Court /Department Reference AGAINST THE COMPANY Delhi Exchange Limited

Background

Current Status

DSE has imposed a penalty The Company has paid the of Rs.20,000 /- on the aforesaid sums to DSE on Company for non- 17th January 2006. submission of proof of publication of notices of Board Meetings of the Company for the years 2003 and 2005. DSE has also imposed a penalty of Rs.5,000/- on the Company for non-compliance of Clause 24(f) of the listing agreement with DSE.

Stock

2

Refer to B below

Refer below

B 1.

BY THE COMPANY

to

B Refer to B below

Refer to B below

AML STEEL LIMITED Petition High Court of Writ Madras against No. 20275 of the Customs, 2005 Excise and Service Tax Appellate Tribunal and others

The subject matter of the instant case is that the Company had imported three consignments of heavy melting scrap in the form of old rusted pipes from Middle East. During the clearance of the goods, the custom authorities considered the melting scrap are usable pipes and therefore, held that the same cannot be treated as melting scrap and subsequently levied differential duty on AML.

158

The total liability arising out of the instant case is 21,66,687/(Differential duty Rs. 13,66,687 + Redemption fine Rs. 6,00,000 + Penalty Rs. 2,00,000). While the differential duty has already been adjusted against the deposit made by the Company during investigation, the Company had provided a Bank Guarantee for the amount of the penalty and fine. The Company has filed Writ Petition No. 20275 of 2005 in the High Court of Madras against the Commissioner of Customs and others. The Company has got an interim order in its favour, staying the operation of order passed by the Tribunal, after furnishing a bank guarantee for a sum of Rs. 15 Lakhs from the High Court. The case is still subjudice.

AML STEEL LIMITED

2.

AML STEEL LIMITED High Court of Writ Petition Nos. Madras against the 5257 and 5258 of TN Taxation Special 2004 Tribunal and others

TN Taxation Special Tribunal rejecting the claim of the company claiming benefits under Interest Free Sales Tax Deferral for its unit situate at Gummidipoondi expansion unit.

The Company has initiated Writ Petitions in the Madras High Court being 5257 and 5258 of 2004 against the orders of the TN Taxation Special Tribunal and others including seeking stay on the demands made against it and recovery proceedings initiated against the Company. The High Court has granted an interim order in the Company’s favour staying the demands made and recovery proceedings against the Company, on the the Company paying a sum of Rs. 50 Lakhs to the Commercial Tax Officer, Pooneri (the 1st Respondent in the Petitions), which has been paid by the Company.The High Court has also restrained the Company from alienating, encumbering or dealing with the properties of the Company until further orders of the Court. The case is still subjudice

Search and Seizure Operation by Income Tax Authorities As per information received from the Company there are no search and seizure operations conducted by the Income Tax Authorities. Outstanding Litigation Involving Our Directors and Our Subsidiaries There are no contingent liabilities, which require provisioning in the accounts, outstanding litigation, disputes, non-payment of statutory dues, overdues to banks/financial institutions or proceedings initiated for any economic/civil/criminal/any other offences against any of our Directors and our subsidiaries. 2. Material Developments In the opinion of the Board of Directors, there has not arisen, since the date of the last financial statements disclosed in this DRHP, any circumstance that materially or adversely affect or are likely to affect the profitability of the Company and its subsidiaries taken as a whole or the value of their consolidated assets or their ability to pay their material liabilities within the next twelve months.

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AML STEEL LIMITED

LICENCES AND APPROVALS Subject to the renewals of approvals and licences as listed below, we can undertake this Issue as well as our current business activities and no further major approvals are required from any Government authority for us to continue our activities. Approvals Received: 1. AML Steel Limited (Formerly Ashok Magnetics Limited), Pondicherry. 1.

Central Sales Tax Registration Certificate No. 10611 dated 27.07.1995.

2.

Pondicherry Sales Tax Registration Certificate No. D1/103959/95-96.

3.

Permanent Registration Certificate as a Small Scale Unit, No. 590306083 dated 02.04.1998 by the Director of Industries, Government of Pondicherry.

4.

Factory License No. PNC-052 valid till 31.12.2005. We have applied for renewal of the same vide our application dated 16 December, 2005.

5.

Acknowledgement receipt from Electricity Department, Government of Pondicherry dated 22.11.2005 for receipt of security deposit of Rs. 2, 41,700.00 from Ashok Magnetics Limited.

6.

Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No. 43-356/98Lic./Net-CP, dated 11.02.1998 granted by the Office of the Commissioner, Nettapakkam Commune Panchayat, Nettapakkam, Pondicherry. The licence has been renewed till 31.03.2006.

7.

Air Consent (Renewal) Order by the Department of Science, Technology and Environment, Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/NCP/JE-II/2004/2115 dated 29.07.2004.We have applied for renewal of the same by our application dated 09.09.2005, which is pending approval.

8.

Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry dated 13.11.1995 for receipt of Industrial Entrepreneur Memorandum in favour of Ashok Magnetics Limited. We have applied for change in the name of the Company from Ashok Magnetics Limited to AML Steel Limited and increase in the capacity of production from 30000 TPA to 45000 TPA vide our application dated 11.02.2006.

9.

Certificate of Incorporation No. L30007TN1993PLC024842, from the Registrar of Companies and subsequent change of name to AML Steel Limited on 01.08.2005.

10. Permanent Account Number (‘PAN”) AAACA4304Q dated 16.04.1993/Tax Deduction Account Number (‘TAN”) No. CHEA01359B. 11. Certificate of Employer Registration Certificate under the Employees Provident Fund Act No. TN/PC/923 dated 14.09.1999. 12. Certificate of ESI Registration dated 13.02.2002 vide Code No. 55-21743-56. 13. Central

Excise

Registration

certificate

dated

30.12.2003

vide

Registration

No.

AAACA4304QXM002. 14. IE Code Certificate dated 20.10.1993 and IE Code No. 0493018344 has been allotted. We have made an application for issuance of a new certificate in the present name of the Company (pursuant to its change in name), on 30 01.2006. 15. Service Tax Registration Certificate No. GTA/334/2005/PONDY dated 25.05.2005. 16. Permission from Pondicherry Planning Authority dated 17.07.1996 under Pondicherry Building Bye-Laws and Zoning Regulations 1972 to erect industrial building.

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AML STEEL LIMITED 17. Certificate of stability dated 07.12. 2004 for factory building. 18. Letters dated 29.11.2002, 16.12.2002 and 23.10.2003 bearing reference numbers Ref. No. EC.CO.OID 2805/19.01.328/ 2002-2003, Ref. No. EC.CO.OID 3176/19.01.331/ 2002-2003 and Ref. No. EC.CO.OID 2744/19.01.328/ 2003-2004 by the Reserve Bank of India, Exchage Control Department, Central Office, Overseas Division in favour of AML Steel Limited noting the investment of AML Steel Limited of a sum of US $5,45,000 in its Wholly Owned Subsidiary ASIPL (previuosly known as Maruti Steels Private Limited) in Sri Lanka under the Automatic Route and allotting Identification No. MAWAZ20020303 to the said investment. 2. Ankit Ispat Private Limited, Karaikal, Pondicherry AIPL has two (2) units, both co-located, however the two (2) units were previously EGPK Steels Limited and Elango Industries Limited (erstwhile Elango Steels Limited) respectively and their assets were subsequently taken over by AIPL. 1.

Approval letter from Directorate of Industries & Commerce, Government of Pondicherry dated 21.10.2003 to Ankit Ispat Private Limited for purchase and take over of assets of EGPK Steel Limited.

2.

Approval letter from Directorate of Industries & Commerce, Government of Pondicherry dated 19.01.2004 to Ankit Ispat Private Limited for purchase and take over of assets of Elango Industries Limited.

3.

Central Sales Tax Registration Certificate No. 1999/KRC dated 11.11.2003 for Ankit Ispat (P) Limited (Unit II) and Certificate No. 2036/KRC dated 5.03.2004 for Ankit Ispat Private Limited (Unit I).

4.

Pondicherry Sales Tax Registration Certificate No. 403275 dated 11.11.2003 for Ankit Ispat Limited (Unit II) and Certificate No. 403320 dated 5.03.2004 for Ankit Ispat Private Limited (Unit I).

5.

Permanent Registration Certificate as a Small Scale Unit, No. 590101663 dated 27.07.1998 by the Director of Industries, Government of Pondicherry in favour of EGPK Steels Limited and subsequently endorsed by the Director of Industries & Commerce, for change in name to Ankit Ispat Private Limited (Unit –II).

6.

Certificate from Industries Department, Government of Pondicherry dated 6.01.2000 exempting EGPK Steels Limited from payment of sales tax for a period of ten years i.e. till 27.07.2008, exemption from payment of earnest money and security deposit in respect of tenders called for by Government Departments, Pondicherry and price preference of 15% for supply of stores to Government Departments.

7.

Permanent Registration Certificate as a Small Scale Unit, No. 590101566 dated 11.11.1994 by the Director of Industries, Government of Pondicherry in favour of Elango Steels Limited and subsequently endorsed by the Director of Industries & Commerce, for change in name to Elango Industries Limited and subsequently to Ankit Ispat Private Limited (Unit –I).

8.

Certificate from Industries Department, Government of Pondicherry dated 24.05.1995 exempting Elango Steels Limited from payment of sales tax for a period of ten years i.e. till 11.11.2004, exemption from payment of earnest money and security deposit in respect of tenders called for by Government Departments, Pondicherry and price preference of 15% for supply of stores to Government Departments.

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AML STEEL LIMITED 9.

Factory License No. FA 7331 in favour of Elango Industries Limited, transferred in favour of Ankit Ispat Private Limited (Unit – I)

10. Factory License No. FA 7481 in favour of EGPK Steels Limited transferred in favour of Ankit Ispat Private Limited (Unit – II). 11. Letter from Electricity Department, Government of Pondicherry dated 04.08.2004 acknowledging change of name from Elango Industries Limited to Ankit Ispat Private Limited (Unit-I). 12. Letter from Electricity Department, Government of Pondicherry dated 20.07.2004 acknowledging change of name from EGPK Steels Limited to Ankit Ispat Private Limited (Unit-II). 13. Acknowledgement receipt from Electricity Department, Government of Pondicherry dated 2.08.2004 for receipt of security deposit of Rs. 5,66,000/- from Ankit Ispat Private Limited (UnitI). 14. Acknowledgement receipt from Electricity Department, Government of Pondicherry dated 12.04.2004 for receipt of security deposit of Rs. 7, 35,000/- from Ankit Ispat Private Limited (Unit-II). 15. Letter from Office of Superintendent of Central Excise, Karaikal dated 30.10.2003 certifying installation of 3 tonne induction furnace by Ankit Ispat Private Limited (Unit-II) having central excise registration certificate No. AAECA3639EXM001. 16. Letter from Office of Superintendent of Central Excise, Karaikal dated 23.06.2004 certifying installation of 3 tonne induction furnace by Ankit Ispat Private Limited (Unit-I) having central excise registration certificate No. AAECA3639EXM002. 17. Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No. TRPCP/A4/16/94, dated 22.11.1994 granted by the Office of the Commissioner, T.R. Pattinam Commune Panchayat, T.R. Pattinam in favour of Ankit Ispat Private Limited (Unit – I). 18. Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No.TRPCp/A4/26/99, dated 1.12.1999 granted by the Office of the Commissioner, T.R. Pattinam Commune Panchayat, T.R. Pattinam in favour of Ankit Ispat Private Limited (Unit – II). 19. Air Consent (Renewal) Order by the Department of Science, Technology and Environment, Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/KKL/JEII/2005/2699 dated 20.09.2005 in favour of Ankit Ispat Private Limited (Unit –II). We have applied for renewal of the same. 20. Water Consent (Renewal) Order by the Department of Science, Technology and Environment, Pondicherry Pollution Control Committee, No. PPCC/CON/WTR/JEII/KKL/2005/2698 dated 20.09.2005 in favour of Ankit Ispat Private Limited (Unit –II). We have applied for renewal of the same. 21. Air Consent (Renewal) Order by the Department of Science, Technology and Environment, Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/KKL/JEII/2005/2697 dated 20.09.2005 in favour of Ankit Ispat Private Limited (Unit-I). We have applied for renewal of the same. 22. Water Consent (Renewal) Order by the Department of Science, Technology and Environment, Pondicherry

Pollution

Control

Committee,

No.

PPCC/CON/WTR/JEII/KKL/2005/2696

20.09.2005 in favour of Ankit Ispat Private Limited (Unit-I). We have applied for renewal of the same.

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AML STEEL LIMITED

23. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry dated 23.04.2004 for receipt of Industrial Entrepreneur Memorandum for manufacture of mild steel ingots in favour of Ankit Ispat Private Limited (Unit-I). 24. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry dated 16.12.2003 for receipt of Industrial Entrepreneur Memorandum for manufacture of mild steel ingots in favour of Ankit Ispat Private Limited (Unit-II). 25. Letter from Department of Science, Technology and Environment, Pondicherry Pollution Control Committee dated 02.12.2003 certifying amendment of name of EGPK Steels Limited to Ankit Ispat Private Limited (Unit-II). 26. Letter from Department of Science, Technology and Environment, Pondicherry Pollution Control Committee dated 11.03.2004 certifying amendment of name of Elango Industries Limited to Ankit Ispat Private Limited (Unit-I). 27. Permanent Account Number (‘PAN’) AAECA3639E and TAN No. CHEA08972F. 28. Registrations under the Employees Provident Fund Act vide Code No. TN/PC/1363. 29. Registration with the Employee’s State Insurance Corporation vide code no. 55-21525-67. 30. IE Code Certificate dated 23October, 2003 and IE Code allotted is 0403019087. 31. Certificate of stability dated 31 December, 2004 for factory buildings of Ankit Ispat Private Limited (Unit-I). 32. Certificate of stability dated 31 December, 2004 for factory buildings of Ankit Ispat Private Limited (Unit-II). 33. Central Excise Registration Certificate No. AAECA3639EXM002 dated 06.01.2004 for Ankit Ispat Private Limited (Unit-I). 34. Central Excise Registration Certificate No. AAECA3639EXM001 dated 28.10.2003 for Ankit Ispat Private Limited (Unit-II). 35. Certificate of Registration (No. AAECA3639EST 002) for Ankit Ispat Private Limited (Unit-I) under Section 69 of the Finance Act, 1994 granted by Office of the Assistant Commissioner of Central Excise dated 26.05.2005. 36. Certificate of Registration (No. AAECA3639EST 001) for Ankit Ispat Private Limited (Unit-I) under Section 69 of the Finance Act, 1994 granted by Office of the Assistant Commissioner of Central Excise dated 26.05.2005. 3. Ashok Steel Industries Private Limited, Colombo, Sri Lanka 1. Certificate of Incorporation No. 28684, dated 25.06.2001 from the Registrar of Companies, Sri Lanka for Maruthi Steel Private Limited. 2. Approval by the Board of Investment of Sri Lanka dated 19.09.2002, for sale and transfer of Maruthi Steel Private Limited to Ashok Magnetics Limited, Chennai, India. 3. Environmental Licence No. 00920 (RO), dated 25.04.2003 from Director General, Central Environmental Authority, Sri Lanka in favour of Maruthi Steel Private Limited. The license is valid till 24.04.2006. 4. Taxpayer Identification Number (‘TIN’) Certificate No. 114286842 dated 08.04.2004 from the Commissioner General of Inland Revenue in favour of Ashok Steel Industries Private Limited.

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AML STEEL LIMITED

5. Certificate of VAT registration No. 114286842-7000 dated 08.04.2004 from the Deputy Commissioner (VAT) in favour of Ashok Steel Industries Private Limited. 6. Certificate of Employer Registration Certificate under the Employees Provident Fund Act, 1958, No. 11499-IJ dated 05.10.2001 from the Assistant Commissioner of Labour in favour of Maruthi Steels Private Limited. 7. Certificate of Change of Name from Maruthi Steel Private Limited to Ashok Steel Industries Private Limited dated 19.01.2004 from the Registrar of Companies, Sri Lanka. 4. AML Steel & Power Limited, Saraikela - Kharsawan, Jharkhand 1.

Approval for plant and factory layout by Inspector of Factories, Jharkhand dated 24.10.2005.

2.

Sanction letter for 200 KVA for factory by Jharkhand State Electricity Board, Chaibasa Electrical Circle dated 22.09.2005.

3.

Acknowledgement receipt from Jharkhand State Electricity Board dated 08.10.2005 for receipt of Rs. 1,50,000/- as security deposit.

4.

No Objection Certificate from Jharkhand State Pollution Control Board (Ref. No. N-403) dated 27.06.2005 for the sponge iron unit of the Project and No Objection Certificate from Jharkhand State Pollution Control Board (Ref. No. N-566) dated 17.12.2005 for the iron ore mining operations in connection with the Project.

5.

Licence from the Government of Jharkhand under the Factories Act 1948, which was valid till 31.12.2005. The company has applied for renewal of this licence.

6.

Registration under the Bihar Finance Act, 1981 for Commercial Tax. Certificate No.2/2005-06 and the same is valid from 20.09.2005 to 19.02.2006.

7.

Central Excise Registration Certificate No. AAECA6090PXM001 dated 7.04.2005.

8.

Central Sales Tax Registration Certificate No. CB-1536 dated 16.09.2005.

9.

Certificate of Registration under the Bihar Finance Act, for Sales Tax. Registration No. CB 1179 dated 16.09.2005.

10. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry dated 22.08.2005 for receipt of Industrial Entrepreneur Memorandum for manufacture of direct reduced iron and other spongy ferrous products in primary forms other than in the Integrated Steel Plants in favour of AML Steel & Power Limited. 11. Approval from Government of India, Ministry of Mines dated 16.08.2005 for grant of mining lease vide reference no. 5/8/2005-MIV. 12. Permanent Account Number (‘PAN”) AAECA6090P dated 14.01.2004. 13. Registration No. 69887/SBM dated 26.12.2005 from the Department of Labour and Employment, Government of Jharkhand. Apart from the above AMLSPL has also made application for the following licences / approvals which are pending ; 1.

Application dated 06.01.2006 to the Ministry of Environment and Forest for the clearance for operation of mines in an area of 383.54 acres in Jharkhand .

2.

Application dated 20.09.2005 to the Ministry of Coal for the grant of captive Coal mining blocks.

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AML STEEL LIMITED

AMLSPL is yet to apply for the following licences/ registrations from the Government of Jharkhand / Central Government for the Project: (i) (ii) (iii) (iv) (v)

Consent to operate under the Water (Prevention & Control of Pollution) Act, 1974 and Air (Prevention & Control of Pollution) Act, 1981. Tax Deduction Account Number (‘TAN”). Service tax registration. Registration under the Employees Provident Fund Act, 1948. Registration with the Employee’s State Insurance Corporation.

AMLSPL shall be applying for the above-mentioned approvals/licences as the work at the Project site progresses.

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AML STEEL LIMITED

OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the Issue The current Issue has been authorised by shareholders vide a special resolution adopted pursuant to Section 81(1A) of the Companies Act, passed at the Annual General Meeting held on 19 July, 2005. Prohibition by SEBI Our Company, Directors, Promoters, other companies / entities promoted by our Promoters, and companies/entities with which our Directors are associated with as directors, have not been prohibited from accessing the capital markets under any order or direction passed by SEBI. None of the Directors of our Company or the persons in control of the Promoter Company have been prohibited from accessing the capital markets or restrained from buying/selling/dealing in securities under any order or direction passed by SEBI. Eligibility for the Issue As per Clause 2.3.1 of the SEBI Guidelines, a listed company may make a public issue of equity shares provided that: 1.

2.

the aggregate of the proposed issue and all previous issues in the same financial year in terms of size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) issue size does not exceed 5 times its pre- issue net worth as per the audited balance sheet of the last financial year; if there is a change in the name of the issuer company within the last one year (reckoned from the date of filing the offer document) the revenue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the preceding 1 full- year period.

Our Company is eligible to access the capital market through Public issue of Equity Shares as explained below: 1. The aggregate of the proposed issue in terms of the size shall not exceed five times the pre – issue networth. Particulars Pre issue Networth (as per the audited balance sheet as on 31 December, 2005) Five times the pre issue networth Proposed Issue Size

Amount (Rs. in lakhs) 3,767.23 18,836.15 12,000.00

There have been no previous issues in the Financial Year 2005 – 06. Since the size of the proposed issue does not exceed five times the pre –issue networth of the Company, the Company is eligible to make this issue. 2. The Company’s main objects as suggested by its new name AML Steel Limited (changed on 1 August, 2005), accounts for more than 50% of its total revenue in the preceding one full year. DISCLAIMER CLAUSE AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED TO MEAN 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 THIS ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGERS,

166

AML STEEL LIMITED

KARVY INVESTOR SERVICES LIMITED AND CENTRUM CAPITAL LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION AS FOR THE TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, BOOK RUNNING LEAD MANAGERS VIZ. KARVY INVESTOR SERVICES LIMITED AND CENTRUM CAPITAL LIMITED HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED 24 MARCH, 2006 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READS AS FOLLOWS:1.

2.

“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, AND DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, IT’S DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.

WE CONFIRM THAT: a) THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THIS ISSUE; b) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; c) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE. (d) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID AND (e) WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS. THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 AND SECTION 68 OF THE ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED OFFER. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGERS, ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED HERRING PROSPECTUS DISCLAIMER BY THE COMPANY: The Issuer accepts full responsibility for the accuracy for the information given in this DRHP and confirms that to the best of their knowledge and belief, there are no other facts, their omission of which makes any statement in this DRHP misleading and they further confirm that they have made all reasonable inquiries to

167

AML STEEL LIMITED ascertain such facts. The Issuer further declares that the Stock Exchanges to which an application for official quotation is proposed to be made do not take any responsibility for the financial soundness of this issue or for the price at which the equity shares are offered or for the correctness of the statement made or opinions expressed in this DRHP. The Promoters/directors declare and confirm that no information/material likely to have a bearing on the decision of investors in respect of the shares offered in terms of the DRHP has been suppressed, withheld and/or incorporated in the manner that would amount to mis-statement, misrepresentation and in the event of it’s transpiring at any point of time till allotment/refund, as the case may be, that any information/material has been suppressed /withheld and/or amounts to a mis-statement/ mis-representation, the Promoters/Directors undertake to refund the entire application monies to all the subscribers within 7 days thereafter without prejudice to the provisions of Section 63 of the Companies Act. Caution Our Company and the BRLM accept no responsibility for statements made other than in this DRHP or in the advertisements or any other material issued by or at instance of the above, mentioned entitles and anyone placing reliance on any other source of information, including our Company’s website www.amlsteel.com, would be doing so at his or her own risk. The BRLM accepts no responsibility, save to the limited extent as provided in the Underwriting Agreement to be entered into between the Underwriters and the Company and the MoU between the BRLM and the Company. The Company and the BRLM shall make all information available to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in research or sales reports or at bidding centres etc. The BRLM have issued a fresh due diligence certificate dated [●] that reiterates the statements made in the above referred certificate and states that all observations made by SEBI vide letter no. [●] dated [●], have been incorporated in the DRHP. We shall not be liable to the bidders for any failure in downloading the Bids due to faults in any software / hardware systems or otherwise. Disclaimer in Respect of Jurisdiction This Issue is being made in India to persons resident in India (including Indian nationals resident in India who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as amended from time to time, or any other Trust law and who are authorized under the constitution to hold and invest in shares) and to NRIs, FIIs and Foreign Venture Capital Funds Registered with SEBI. This DRHP does not, however, constitute an invitation to subscribe to shares issued hereby in any other jurisdiction to any person to whom it is unlawful to make an issue or invitation in such jurisdiction. Any person into whose possession this DRHP comes is required to inform himself or her self and to observe any such restrictions. Any dispute arising out of this issue will be subject to the jurisdiction of appropriate court(s) in Chennai only. No action has been or will be taken to permit a public issuing in any jurisdiction where action would be required for that purpose, except that this DRHP has been filed with SEBI for observation and SEBI has given its observations and this DRHP has been filed with RoC as per the provisions of the Companies Act. Accordingly, the Equity Shares, represented thereby may not be issued or sold, directly or indirectly, and this DRHP may not be distributed, in any jurisdiction, except in accordance with the legal requirement applicable in such jurisdiction. Neither the delivery of this DRHP nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

168

AML STEEL LIMITED Disclaimer Clause of BSE (Designated Stock Exchange) As required, a copy of this DRHP has been submitted to BSE. The BSE has given vide its letter dated [●] given permission to this Company to use the BSE’s name in the DRHP as one of the stock exchange on which this Company’s securities are proposed to be listed. The BSE has scrutinized this DRHP for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The BSE does not in any manner: • • •

Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP; Warrant that this Company’s securities will be listed or will continue to be listed on the BSE; or Take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the BSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the BSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. Disclaimer Clause of NSE As required, a copy of the DRHP has been submitted to NSE. NSE has given vide its letter dated [●] given its permission to the Company to use the NSE’s name in this DRHP as one of the stock exchanges on which this Company’s securities are proposed to be listed subject to the Company fulfilling the various criteria for listing including the one related to paid up capital and market capitalization (i.e. the paid up capital shall not be less than Rs. 1000 lakhs and market capitalization shall not be less that Rs.2,500 lakhs at the time of listing). The NSE has scrutinized the DRHP for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the DRHP 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 DRHP nor does it warrant that this Company’s securities will be listed or will continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company. Every person who desires to apply for or otherwise acquires any securities of the Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the NSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever. Disclaimer Clause of MSE As required, a copy of this DRHP has been submitted to MSE. The MSE has given vide its letter dated [●] given permission to this Company to use the MSE’s name in the DRHP as one of the stock exchange on which this Company’s securities are proposed to be listed. The MSE has scrutinized this DRHP for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The MSE does not in any manner: • • •

Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP; Warrant that this Company’s securities will be listed or will continue to be listed on the MSE; or Take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the MSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do

169

AML STEEL LIMITED so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the MSE 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 DSE As required, a copy of this DRHP has been submitted to DSE. The DSE has given vide its letter dated [●] given permission to this Company to use the DSE’s name in the DRHP as one of the stock exchange on which this Company’s securities are proposed to be listed. The DSE has scrutinized this DRHP for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The DSE does not in any manner: • • •

Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP; Warrant that this Company’s securities will be listed or will continue to be listed on the DSE; or Take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the DSE. 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 DSE 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 ASE As required, a copy of this DRHP has been submitted to ASE. The ASE has given vide its letter dated [●] given permission to this Company to use the ASE’s name in the DRHP as one of the stock exchange on which this Company’s securities are proposed to be listed. The ASE has scrutinized this DRHP for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The ASE does not in any manner: • • •

Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP; Warrant that this Company’s securities will be listed or will continue to be listed on the ASE; or Take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the ASE. 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 ASE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. Filing A copy of the DRHP, along with the documents required to be filed under Section 60B of the Companies Act, would be delivered to the RoC, Chennai at Tamil Nadu. A copy of the DRHP has been filed with the Corporate Finance Department of SEBI at Ground Floor, Mittal Court, A Wing, Nariman Point, Mumbai – 400 021. Listing Applications have been made to the BSE, NSE, MSE, DSE and ASE for permission to deal in and for an official quotation of our Equity Shares. BSE shall be the Designated Stock Exchange with which the basis of allocation will be finalized for non-institutional portion and retail portion.

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AML STEEL LIMITED

If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the Stock Exchanges mentioned above, our Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of this DRHP. If such money is not repaid within eight days after our Company become liable to repay it from the date of refusal or within 70 days from the Bid / Issue Closing Date, whichever is earlier, then the Company, and every Director of the Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act. Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at the Stock Exchanges mentioned above are taken within 7 working days of finalization and adoption of the Basis of Allotment for this issue. Impersonation Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Companies Act, which is reproduced below: “Any person who: (a) (b)

Makes in a fictitious name, an application to the 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 term which may extend to five years.”

shall be punishable with imprisonment for term which may extend to five years.” Withdrawal of this Issue The Company, in consultation with the BRLM, reserves the right not to proceed with this Issue anytime after the Bid / Issue Opening Date without assigning any reason thereof. Consents Consents in writing of: (a) the Directors, the Company Secretary, the Auditors, Legal Advisor, Tax Auditor, Bankers to the Company, Escrow Collection Banks and Bankers to the Issue; and (b) Book Running Lead Managers to the Issue, Syndicate Members and Registrars to the Issue, to act in their respective capacities, have been obtained and shall be filed along with a copy of the DRHP with the RoC at Chennai, Tamil Nadu as required under Section 60 and 60B of the Companies Act and such consents have not been withdrawn up to the time of delivery of the DRHP for registration. M/s.K.P Jain & Co., Chartered Accountants, the statutory auditors of the Company have given their written consent to the inclusion of their report in the form and context in which it appears in the DRHP and such consent and report has not been withdrawn up to the time of delivery of the DRHP for registration to the RoC, at Chennai, Tamil Nadu. M/s K.P Jain & Co., Chartered Accountants, the statutory auditors have given their written consent to the inclusion of the statement of tax benefits accruing to the Company and its members in the form and context in which it appears in the DRHP and have not withdrawn the same up to the time of delivery of the DRHP for registration to the RoC at Chennai, Tamil Nadu. Expert Opinion Save as stated elsewhere in the DRHP, the Company has not obtained any expert opinions.

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AML STEEL LIMITED Expenses of the Issue The expenses of the Issue payable by our Company inclusive of brokerage, fees payable to the Book Running Lead Managers to the Issue, Registrar to the Issue, Legal Advisors, stamp duty, printing, publication, advertising and distribution expenses, bank charges, listing fees and other miscellaneous expenses are estimated as follows: Details of Fees Payable Particulars Amount Issue Management [●] Registrars fees [●] Printing of Stationery [●] Advertising and marketing [●] expenses Underwriting, Brokerage and [●] Selling commission Other expenses [●] [●] Total Will be incorporated after finalisation of issue price.

% of total issue expenses [●] [●] [●] [●]

(Rs. in lakhs) % of total issue size [●] [●] [●] [●]

[●]

[●]

[●] [●]

[●] [●]

Fees payable to the Book Running Lead Managers The total fees payable by us to the Book Running Lead Managers (including underwriting commission and selling commission) will be as per Engagement Letters both dated 21 October, 2005 a copy of which is available for inspection at our registered office. Fees payable to the Registrar to the Issue The fees payable by us to the Registrar to the Issue for processing of Application, data entry, printing of CAN/ refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as per the MoU signed with our Company dated 1 March, 2006. The Registrar to the Issue will be reimbursed for all out-of-pocket expenses including cost of stationery, postage, stamp duty and communication expenses. Adequate funds will be provided by us to the Registrar to the Issue to enable them to send refund orders or Allotment advice by registered post/ speed post/ under certificate of posting. Underwriting Commission, Brokerage and Selling Commission The underwriting commission and selling commission for the Issue is as set out in the Syndicate Agreement amongst our Company, the BRLM and Syndicate Members. The underwriting commission shall be paid as set out in the Syndicate Agreement based on the Issue Price and amount underwritten in the manner mentioned in the DRHP. Previous rights and public issues The Company had come out with a public issue in November 1995. The Company has not had a rights issue since its incorporation. Previous issues of shares otherwise than for cash Save as stated in the section titled “Capital Structure” on page no. [●] of this DRHP, the Company has not issued any equity shares for consideration otherwise than for cash. Commission and Brokerage on Previous Issue There has been only one public issue by the Company in the past in the year 1995 and we have paid an amount of Rs.1.66 lakhs towards Commission and Brokerage.

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Companies under the Same Management There are no listed companies under the same management within the meaning of Section 370 (1B) of the Companies Act, 1956, which have made any capital issue during the last three years. Promise vis-a-vis Performance The Company has made an IPO in November, 1995 for 7,60,000 Equity Shares of Rs. 10/- each for cash at par aggregating Rs.76 lakhs. The main object of the Issue was to finance the expansion of the production of Rigid PVC pipes. The total cost of project was estimated to be Rs. 408.51 lakhs. In the offer document for the purpose of the said issue, following projections were made gainst which the actual performance is given below: (Rs. in lakhs) Particulars 1995 – 1996 1996 – 1997 1997-1998 Expected Actual Variance Expected Actual Variance Expected Actual Variance Sales 833.00 720.82 -112.18 1229.90 1022.32 -207.58 1333.45 911.48 -421.97 Cost of Production 640.89 502.76 -138.13 923.21 768.20 -155.01 1035.13 736.98 -298.15 Gross Profit 192.11 218.06 25.95 306.69 254.12 -52.57 348.32 174.50 -173.82 Administrative and selling Expenses 42.84 48.45 5.61 63.93 57.97 -5.96 70.94 55.14 -15.80 PBIDT 149.28 169.61 20.33 242.75 196.15 -46.6 277.39 119.36 -158.03 Interest 24.77 18.35 -6.42 61.16 29.13 -32.03 65.85 19.83 -46.02 Depreciation 4.72 6.50 1.78 4.72 8.98 4.26 4.72 9.41 4.69 Misc. Expenses written off 1.53 0.00 -1.53 1.53 0.00 -1.53 1.53 0.00 -1.53 PBT 118.27 144.76 26.49 175.34 158.04 -17.30 205.29 90.12 -115.17 Provision for Tax 14.52 0.26 -14.26 39.99 0.00 -39.99 51.60 0.00 -51.60 PAT 103.75 144.50 40.75 135.35 158.04 22.69 153.69 90.12 -63.57 Proposed Dividend 26.87 21.79 -5.08 45.00 45.00 0.00 54.00 33.00 -21.00 Proposed Dividend (%) 12.00 12.00 0.00 15.00 15.00 0.00 18.00 10.00 -8.00 Share capital 300.00 300.00 0.00 300.00 300.00 0.00 300.00 300.00 0.00 Reserves and Surplus 116.39 155.30 38.91 206.74 273.61 66.87 306.43 330.74 24.31 EPS 4.33 8.00 3.67 4.51 5.27 0.76 5.12 3.00 -2.12 Book value 13.42 14.76 1.34 16.48 19.10 2.62 19.86 21.03 1.17 Due to the obsolescence of Video and Audio cassettes technology, we could not meet the sales figures projected by us during the IPO for the years 1995-96 and 1996-97. However, better realisations enabled us to post profits higher than that projected for those two years. But in the year 1997-98, the margins came under pressure as the economy showed signs of an unexpected slow down due to which the overall sales and profitability declined. Meanwhile, we decided to diversify into the line of manufacture of steel ingots and finished steel and the first plant was commissioned in Pondicherry in the year 1998. Outstanding Debenture or Bond offers As of date, the Company does not have any outstanding debenture or bond offers. Outstanding Preference Shares As of date, the Company does not have any outstanding preference shares. Listed ventures of the Group Companies There are no listed ventures in the Company’s group companies Stock Market Data for the Equity Shares of the Company No trading in the shares has been recorded on MSE, DSE and ASE in the last three years.

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Mechanism Evolved for redressal of investor grievance The agreement between the Registrar to this Issue and us will provide for retention of records with the Registrar to this Issue for a period of at least one year from the last date of dispatch of the letters of allotment, demat credit and refund orders to enable the investors to approach the Registrar to this Issue for redressal of their grievances. All grievances relating to this Issue may be addressed to the Registrar to this Issue, giving full details such as name, address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or collection center where the application was submitted. We estimate that the average time required by us or the Registrar to this Issue for the redressal of routine investor grievances will be seven business days from the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible. Our Company has appointed Mr. Rajesh Agrawal as the Compliance Officer and he may be contacted at: AML Steel Limited, Raheja Complex, New no 68 (834), Anna Salai, Chennai, Tamil Nadu – 600 002. Tel: + 91 44 2858 3182 Fax: +91 44 2841 9443, e-mail:[email protected], website:www.amlsteel.com Changes in Auditors in the last three years and the reasons thereof There has been no change in the statutory auditors of the Company in the last three years. Capitalisation of reserves or profits Our Company has not capitalized its reserves or profits at any time except as stated in the Section titled “Capital Structure” on page no.[●] of this DRHP. Revaluation of assets Our Company has not revalued its assets since inception. Classes of Shares The Company’s authorised capital is Rs. 30,00,00,000/- which is divided into 3,00,00,000 Equity Shares of Rs. 10/- each. Payment or Benefit to Promoters or Officers of the Company Other than as disclosed in the DRHP there have been no payments or benefits to the Promoters or officers of the Company.

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SECTION VII - ISSUE RELATED INFORMATION TERMS OF THE ISSUE The Equity Shares being offered are subject to the provisions of the are subject to the provisions of the Act, the Constitutional Documents, the terms of this DRHP, Bid-cum-Application Form, the Revision Form, CAN and other terms and conditions as may be incorporated in the Allotment Advice, and other documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, the Government, Stock Exchanges, RBI, and/or other authorities, as in force on the date of the Issue and to the extent applicable. Ranking of Equity Shares The Equity Shares being offered shall be subject to the provisions of the Constitutional Documents and shall rank pari passu in all respects with the existing Equity Shares of the Company including rights in respect of dividend. The persons in receipt of allotment will be entitled to dividend or other benefits, if any, declared by our Company after the date of allotment. Mode of payment of dividend The declaration and payment of dividends will be recommended by our Board of Directors and our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition. Face Value and Issue Price The Equity Shares with a face value of Rs. 10/- each are being offered in terms of this DRHP at a total price of Rs. [•] per Equity Share. At any given point of time there shall be only one denomination for the Equity Shares. The face value of the shares is Rs. 10/- and the Floor Price is [•] times of the face value and the Cap Price is [•] times of the face value. Compliance with SEBI Guidelines The Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time. Rights of the Equity Shareholder Subject to applicable laws, the Equity Shareholders shall have the following rights: • Right to receive dividend, if declared. However the declaration of dividend of the Company is subject to certain restrictions. Please refer to the restrictions on the payment of dividend in the section titled “Dividend Policy” on page no.[•] of this DRHP; • Right to attend general meetings and exercise voting powers, unless prohibited by law. • Right to vote on a poll either in person or by proxy • Right to receive offer for rights shares and be allotted bonus shares, if announced • Right of free transferability • Right to receive surplus on liquidation • Such other rights, as may be available to a shareholder of a listed Company under the Companies Act and Memorandum and Articles of Association of the Company For a detailed description of the main provisions of our Articles of Association dealing, among other things, with voting rights, dividend, forfeiture and lien, transfer and transmission see the section titled “Main Provisions of the Articles of Association” on page no. [●] of this DRHP.

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Market Lot and Trading Lot In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialized form. As per the existing SEBI Guidelines, the trading in the Equity Shares shall only be in dematerialized form for all investors. Since trading of our Equity Shares is in dematerialized form, the tradable lot is one Equity Share. Allotment through this Issue will be done only in electronic form in multiples of one Equity Share subject to a minimum Allotment of [•] Equity Shares to the successful Bidders. Jurisdiction of Courts Any dispute arising out of this issue will be subject to the jurisdiction of appropriate court (s) in Chennai, India only. Nomination Facility to the Investor In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidder may nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, in the event of death of all the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share(s) in the event of his/her death during the minority. A nomination shall stand rescinded upon a sale/transfer/alienation of Equity Share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the Registered Office of the Company and the Registrars and transfer agents of the Company. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either; a) To register himself or herself as the holder of the Equity Shares; or b) To make such transfer of the Equity Shares, as the deceased holder could have made. Further, the Board may at any time give notice requiring any nominee to elect/choose either to register himself or herself or to transfer the Equity Shares, and if the notice is not complied within a period of ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice have been complied with. Since the allotment/transfer of Equity Shares in the Issue will be made only in dematerialized mode, there is no need to make a separate nomination with the Company. Nominations registered with the respective depository participant of the applicant would prevail. If the investors require changing the nomination, they are requested to inform their respective depository participant Impersonation Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Companies Act, which is reproduced below: “Any person who: (a) (b)

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.”

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AML STEEL LIMITED

Minimum Subscription If the Company does not receive the minimum subscription of 90% of the net issue to public including devolvement of Underwriters within 60 days from the date of closure of the issue, the company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the Company shall pay interest prescribed under Section 73 of the Companies Act, 1956. Application to the Issue Equity Shares being issued through this DRHP can be applied for in the dematerialized form only. Withdrawal of the Issue Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue anytime after the Bid/ Issue Opening Date without assigning any reason thereof. Arrangements for Disposal of Odd Lots The Company’s shares will be traded in dematerialized form only and therefore the marketable lot is one share. Therefore there is no possibility of odd lots. Letters of Allotment or Refund Orders The Company shall give credit to the beneficiary account with depository participants within 2 working days of finalization of the basis of allotment of Equity Shares by the Designated Stock Exchange. The Company shall dispatch refund orders above Rs.1,500, if any, by registered post or speed post at the sole or first bidder’s sole risk within 15 days of the Bid/Issue Closing Date. In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Guidelines, the Company further undertakes that: • Allotment of Equity Shares will be made only in dematerialized form within 15 days from the Bid/Issue Closing Date; • Dispatch of refund orders will be done within 15 days from the Bid/Issue Closing Date; • The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if allotment is not made, refund orders are not dispatched and/or demat credits are not made to investors within the 15 day prescribed time period as mentioned above. The Company will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Issue. Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by the Company, as an Escrow Collection Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders. Restriction on Transfer and Transmission of Shares Nothing contained in the Articles of Association of the Company shall prejudice any power of the Company to refuse to register the transfer of any share. No fee shall be charged for sub-division and consolidation of share certificates (physical form), debenture certificates and detachable warrants and for sub-division of letters of allotment and split, consideration, renewal and pucca transfer receipts into denomination corresponding to the market units of trading. Application by Non Residents/NRIs/FIIs/ Foreign Venture Capital Funds registered with SEBI There is no reservation for Non Residents, NRIs, FIIs and Foreign Venture Capital Funds and all Non Residents, NRI, FII and Foreign Venture Capital Fund applicants will be treated on the same basis as other categories for the purpose of allocation.

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The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account of benefit of, "U.S. Persons" (as defined in the Regulations of the Securities Act), except pursuant to any exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

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ISSUE PROCEDURE Book Building Procedure The Issue is being made through the 100% Book Building Process wherein upto 50% of the Net Issue to the public shall be allotted on a proportionate basis to QIB’s, of which 5% are reserved for Mutual Funds and the balance will be available for all QIBs including Mutual Funds. Further, not less than 15% of the net issue to the public shall be available for allotment on a proportionate basis to Non-Institutional Bidders and not less than 35% of the net issue to the public, shall be available for allotment on a proportionate basis to the Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Bidders are required to submit their Bids through the members of the Syndicate. The Syndicate Members have the right to reject a Bid received from QIBs at the time of receipt of the Bids. However, the Syndicate Members shall disclose the reasons for not accepting the Bid to the Bidder. In case of Non-Institutional Bidders and Retail Individual Bidders, our Company would have a right to reject the Bids only on technical grounds. Investors should note that Equity Shares would be allotted to all successful allottees only in the dematerialised form. Bidders will not have the option of allotment of Equity Shares in physical form. The Equity Shares, on allotment, shall be traded only in the dematerialised segment of the Stock Exchanges. Bid-cum-Application Form Bidders shall only use the specified Bid-cum-Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of this DRHP. The Bidder shall have the option to make a maximum of three Bids in the Bid-cum-Application Form and such options shall not be considered as multiple bids. Upon the allotment of Equity Shares, dispatch of CAN, and filing of the Prospectus with the RoC, the Bid-cum-Application Form shall be considered as the Application Form. Upon completing and submitting the Bid-cum-Application Form to a member of the Syndicate, the Bidder is deemed to have authorised the Company to make the necessary changes in this DRHP and the Bid-cum-Application Form as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder. The prescribed colour of the Bid-cum-Application Form for various categories is as follows: Category Indian Public or NRIs applying on a nonrepatriation basis Eligible Non residents, NRIs or FIIs applying on a repatriation basis

Colour of Bid Cum Application Form White Blue

Who can Bid? 1.

Indian nationals resident in India who are major, in single or joint names (not more than three);

2.

Hindu Undivided Families or HUFs in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: ABC Hindu Undivided Family applying through ABC, where ABC is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals;

3.

Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in the Equity Shares;

4.

Indian Mutual Funds registered with SEBI;

5.

Indian Financial Institutions, scheduled commercial banks, commercial banks, regional rural banks, co-operative banks (subject to RBI regulations, as applicable); as defined in Section 4A of Companies Act;

6.

Venture Capital Funds registered with SEBI;

7.

Foreign Venture Capital Investors registered with SEBI;

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AML STEEL LIMITED 8.

State Industrial Development Corporations;

9.

Trust/ society registered under the Societies Registration Act, 1860, as amended, or under any other law relating to Trusts/ Societies and who are authorised under their constitution to hold and invest in Equity Shares;

10. Eligible non-residents including NRIs and FIIs on a repatriation basis or a non- repatriation basis subject to applicable laws; 11. Scientific and/ or Industrial Research Organisations authorised to invest in Equity Shares. 12. Insurance companies registered with the Insurance Regulatory and Development Authority; 13. Provident funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their constitution to hold and invest in Equity Shares; 14. Pension funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their constitution to hold and invest in Equity Shares; 15. Multilateral and bilateral development financial institutions; and Pursuant to the existing regulations, OCBs are not eligible to participate in the Issue. Note: The BRLMs, Syndicate Members and any associate of the members of the BRLMs and Syndicate Members (except asset management companies on behalf of mutual funds, Indian financial institutions and public sector banks) cannot participate in that portion of the Issue where allocation is proportionate. Further, the BRLMs shall not be entitled to subscribe to this Issue in any manner except towards fulfilling their underwriting obligation. In terms of the Regulation 15A (1) of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, the Foreign Institutional Investor or sub-account (“FIIs) may issue, deal in or hold, off-shore derivative instruments such as Participatory Notes, Equity Linked Notes or any other similar instruments against underlying securities being allocated to such FIIs. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under the relevant regulations or statutory guidelines. Application by Mutual Funds As per the current regulations, the following restrictions are applicable for investments by mutual funds: No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No mutual fund under its scheme should own more than 10% of any company’s paid-up capital carrying voting rights. These limits would have to be adhered to by the Mutual Funds for investment in the Equity Shares. In case of a Mutual Fund, a separate bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple bids provided that the bids clearly indicate the scheme concerned for which the bid has been made. Application by NRIs Bid cum Application forms have been made available for NRIs at the corporate office of the Company. NRI applicants may please note that only such applications as are accompanied by payment in free foreign exchange shall be considered for allotment under the NRI category. The NRIs who intend to make payment

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AML STEEL LIMITED through Non-Resident Ordinary (NRO) Account shall use the form meant for Resident Indians (white in colour.). Application by FIIs As per current regulations, the following restrictions are applicable for investment by FIIs: No single FII can hold more than 10% of the post-issue paid-up capital of the Company. In respect of an FII investing in the Equity Shares of the Company on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of the total issued capital or 5% of the total issued capital of the Company in case such sub-account is a foreign corporate or an individual. As of now, the aggregate FII holding in the Company cannot exceed 24% of the total issued capital of the Company. With the approval of the Board of Directors and the shareholders by way of a special resolution, the aggregate FII holding can go up to 100%. However, as on this date no such resolution has been recommended to the shareholders of the Company for adoption. Bids by NRIs or FIIs on Repatriation Basis Bids and revision to bids must be made: •

On the bid cum application form or Revision Form, as applicable, (Blue in colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.

•

In a single or joint names (not more than three).

•

Bids by NRIs for a Bid amount of up to less than Rs 1,00,000 would be considered under the Retail Individual Bidders Portion for the purposes of allocation and Bids for a Bid amount of more than or equal to Rs. 1,00,000 would be considered under Non-Institutional Bidder Portion for the purposes of allocation; by FIIs or Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions for a minimum of such number of Equity shares and in multiples of [●] Equity Shares thereafter so that the Bid amount exceeds Rs. 1,00,000. For further details please refer to the sub-section titled “Maximum and Minimum Bid size”.

•

In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital Fund, Multilateral and Bilateral Financial Institutions but not in the names minors, firms or partnerships, foreign nationals or their nominees or OCBs.

•

Refunds, dividends and other distributions, if any, will be payable in India Rupees only and net of bank charges and / or commission, in case of Bidders who remit money payable upon submission of the Bid cum Application Form or Revision form through INR drafts purchased abroad, such payments in INR will be converted into USD or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by the space provided for this purpose in the Bid Cum Application Form. The Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.

As per the current regulations, the following restrictions are applicable for SEBI registered Venture Capital Funds and Foreign Venture Capital Investors: The SEBI (Venture Capital Funds) Regulations, 1996 and the SEBI (Foreign Venture Capital Investors) Regulations 2000, prescribe investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI. Accordingly, the holding by any individual venture capital fund or foreign venture capital investor registered with SEBI should not exceed 25 % of the Company’s paid-up capital. The aggregate holdings of venture capital funds and foreign venture capital investors registered with SEBI could, however, go up to 100 % of the Company’s paid-up equity capital. The above information is given for the benefit of the Bidders. The Company and the BRLMs are not liable for any amendments or modifications or changes in applicable laws or regulations, which may happen after the date of this DRHP. Bidders are advised to make their independent investigations

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AML STEEL LIMITED and ensure that the number of Equity Shares bid for do not exceed the applicable limits under laws or regulations. Maximum and Minimum Bid Size For Retail Individual Bidders The Bid must be for a minimum of [
] Equity Shares and in multiples of [
] Equity Shares thereafter, subject to maximum Bid amount of Rs. 1,00,000/-. In case of revision of Bids, the Retails bidders have to ensure that the Bid amount does not exceed Rs. 1,00,000/-. In case the maximum Bid amount is more than Rs. 1,00,000/- due to revision of the Bid or revision of the Price Band or on exercise of the option, then the same would be considered for allocation under the Non-Institutional Bidders category. The cut-off option is an option available only to the Retail Individual Bidders indicating their agreement to bid and purchase the Equity Shares at the final issue price as determined at the end of the Book Building process. For Non-Institutional Bidders and QIBs Bidders The Bid must be for a minimum of such number of Equity Shares, so as to ensure that the minimum Bid amount exceeds Rs.1,00,000/-. Above this minimum Bid Amount, the Bid should be in multiples of [
] Equity Shares. A Bid cannot be submitted for more than the size of the Issue. However, the maximum Bid by a QIB should not exceed the investment limits prescribed for them by the regulatory or statutory authorities governing them. Under SEBI existing guidelines a QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date. In case of revision in Bids, the Non-Institutional Bidders who are individuals have to ensure that the Bid Amount is greater than Rs. 1,00,000/-. In case the Bid Amount reduces to Rs 1,00,000/- or less due to a revision in Bids or revision of the Price Band, the same would be considered for allocation under Retail portion. Non-Institutional Bidders and QIB Bidders are not allowed to Bid at Cut-Off Price. A QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date. Right to Reject Bids In case of QIB bidders, our Company, in consultation with the BRLM’s/Syndicate Members may reject bids at the time of submission of the bid provided that the reasons for rejecting the same shall be provided for such bidder in writing. In case of Non Institutional Bidders and Retail Individual Bidders who bid, the Company has the right to reject bids on technical grounds. Consequent reference shall be made by cheque or pay order or draft and will be sent to the bidders address at the bidder’s risk. Information for the Bidders (a) Our Company will file the RHP with the RoC at least three days before the Bid/ Issue Opening Date. (b) The members of the Syndicate will circulate copies of the RHP along with the Bid-cum-Application Form to potential investors. (c) Any investor (who is eligible to invest in the Equity Shares of the Company) who would like to obtain the RHP and/ or the Bid-cum-Application Form can obtain the same from the corporate office of the Company or from any of the BRLMs or Syndicate Members. (d) The Bids should be submitted on the prescribed Bid-cum-Application Form only. Bid-cum-Application Forms should bear the stamp of the members of the Syndicate. Bid-cum-Application Forms, which do not bear the stamp of the members of the Syndicate, will be rejected. (e) Investors who are interested in subscribing to our Company’s Equity Shares should approach the BRLMs or Syndicate Members or their authorised agent(s) to register their Bid.

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AML STEEL LIMITED Method & Process of Bidding a)

The Company and the BRLMs shall declare the Bid/Issue Opening Date, Bid/Issue Closing Date at the time of filing the RHP with RoC and publish the same in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is situated. This advertisement shall be in the format and contain the disclosures specified in Part A of Schedule XX-A of the SEBI Guidelines. The BRLMs and Syndicate Members shall accept Bids from the Bidders during the Issue Period in accordance with the terms of the Syndicate Agreement.

b) Investors who are interested in subscribing for our Company’s Equity Shares should approach any of the BRLMs, or Syndicate Member or their authorised agent(s) to register their Bid. c)

The Bidding Period shall be open for atleast 3 working days and not more than 7 working days. In case the price band is revised, the revised price band will be published in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is situated and the Bidding period will be extended for a further period of three working days, subject to the total Bidding period not exceeding 10 working days. During the bidding period, the Bidders may approach the Syndicate to submit their Bid. Every Member of the Syndicate shall accept Bids from all clients/investors who place orders through them and shall have the right to vet the bids.

d) Each Bid-cum-Application Form will give the Bidder the choice to bid for up to three optional prices (for details refer to the paragraph entitled “Bids at Different Price Levels” on page no. [●] of this DRHP) and specify the demand (i.e. the number of Equity Shares bid for) in each option. The price and demand options submitted by the Bidder in the Bid-cum-Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares bid for by a Bidder at or above the Issue Price will be considered for allocation and the rest of the Bid(s), irrespective of the Bid Price, will become automatically invalid. e)

The Bidder cannot bid on another Bid-cum-Application Form after his or her Bids on one Bidcum-Application Form have been submitted to any member of the Syndicate. Submission of a second Bid-cum-Application Form to either the same or to another member of the Syndicate will be treated as multiple bids and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the paragraph “Build up of the Book and Revision of Bids” on page no.[●] of this DRHP.

f)

The BRLM’s, and Syndicate Members will enter each bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder. Bidders should make sure that they ask for a copy of the computerized TRS for every Bid Option from the Syndicate Member. Therefore, a Bidder can receive up to three TRSs for each Bid-cum-Application Form.

g) During the Bidding Period, Bidders may approach the members of the Syndicate to submit their Bid. Every member of the Syndicate shall accept Bids from all clients / investors who place orders through them and shall have the right to vet the Bids. h) Along with the Bid-cum-Application Form, all Bidders will make payment in the manner described under the paragraph “Terms of Payment and Payment into the Escrow Collection Account” on page no. [●] of this DRHP. Bids at Different Price Levels a)

The Price Band and the minimum bid size shall be advertised atleast one day prior to the Bid Opening Date / Issue Opening Date in [●], a widely circulated English language newspaper, [●] a Hindi language newspaper and [●], a Tamil newspaper as appearing on the cover page. The Bidders can bid at any price within the Price Band, in multiples of Re 1/-

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b) In accordance with SEBI Guidelines, the Company, in consultation with the BRLMs, can revise the Price Band during the Bidding period, in which case the Issue will be kept open for a period of three working days after the revision of the Price Band, subject to the total Bidding Period not exceeding ten working days. The Price Band can be revised during the Bidding Period in which case the maximum revisions on either side of the Price Band shall not exceed 20% fixed initially and as disclosed in this DRHP. In addition to this, the cap on the Price Band should not be more than 20% of the floor of the Price Band. c)

In case of revision in the Price Band, the Issue Period will be extended for three additional working days after revision of Price Band subject to a maximum of ten working days. Any revision in the Price Band and the revised Bidding / Issue Period, if applicable, will be widely disseminated by notification to BSE and NSE, by issuing a public notice in two national newspapers (one each in English and Hindi) and one regional language newspaper, and also by indicating the change on the websites of the BRLMs and at the terminals of the Syndicate Members and the Bidding Period shall be extended for a further period of three days, subject to the total bidding period not exceeding 10 days.

d) The Company in consultation with the BRLMs can finalise the Issue Price within the Price Band in accordance with this clause, without the prior approval of, or intimation, to the Bidders. e)

The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number of Equity Shares at a specific price. Retail Individual Bidders may bid at “Cut off”. However, bidding at “Cut-off” is prohibited for QIB or Non Institutional Bidders and such Bids from QIBs and Non Institutional Bidders shall be rejected.

f)

Retail Individual Bidders who bid at the Cut-Off agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders bidding at Cut-Off shall deposit the Bid Amount based on the Cap Price in the Escrow Account. In the event the Bid Amount is higher than the subscription amount payable by the Retail Individual Bidders (i.e. the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), Retail Individual Bidders who bid at cut-off price shall receive the refund of the excess amounts from the Escrow Account/ refund account(s).

g) In case of an upward revision in the Price Band announced as above, the Retail Bidders or who had bid at Cut-off Price could either (i) revise their Bid or (ii) make additional payment based on the higher end of the Revised Price Band (such that the total amount i.e., original Bid Price plus additional payment does not exceed Rs. 1,00,000/- for Retail Bidders or, if the Bidder wants to continue to bid at Cut-off Price), with the Syndicate Member to whom the original bid was submitted. In case the total amount (i.e., original Bid Price plus additional payment) exceeds Rs. 1,00,000 for retail Bidders the Bid will be considered for allocation under the Non-Institutional portion in terms of this DRHP. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the higher end of the Price Band prior to revision, the number of Equity Shares bid for shall be adjusted downwards for the purpose of allotment, such that the no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut-off Price. h) In case of downward revision in the Price Band announced as above, Retail Bidders who have bid at Cut-Off Price could either revise their Bid or the excess amount at the time of bidding would be refunded from the Escrow Account/ refund account(s) i)

In the event of any revision in the Price Band, whether upwards or downwards, the Minimum Application shall remain [●] Equity Shares irrespective of whether the Bid Amount payable on such Minimum Application is not in the range of Rs.5,000/- to Rs.7,000/-.

Option to subscribe Equity Shares being issued through this DRHP can be applied for in the dematerialized form only. Bidders will not have the option of getting Allotment in physical form. The Equity Shares, on Allotment, shall be traded only in the dematerialized segment of the Stock Exchanges.

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Escrow Mechanism Escrow Account for the Issue Our Company shall open Escrow Accounts with one or more Escrow Collection Banks in whose favour the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the bid. Cheques or demand drafts received for the full Bid amount from Bidders in a certain category would be deposited in the Escrow Account for the Issue. The Escrow Collection Banks will act in terms of this DRHP and an Escrow Agreement. The monies in the Escrow Account for the Issue shall be maintained by the Escrow Collection Bank(s) for and on behalf of the Bidders. The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the monies from the Escrow Account to the Public Issue Account with the Bankers to the Issue as per the terms of the Escrow Agreement with the Company. Payments of refunds to the Bidders shall also be made from the Escrow collection Banks are per the terms of the Escrow Agreement with the Company and this DRHP. The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between the Escrow Collection Bank(s), our Company, the Registrar to the Issue and BRLMs, and Syndicate Members to facilitate collection from the Bidders. Terms of Payment and Payment into the Escrow Collection Account In case of Non-institutional Bidders and Retails Individual Bidders, each Bidder shall, with the submission of the Bid cum Application Form draw a cheque or demand draft for the maximum amount of his Bid in favour of the Escrow Account of the Escrow Collection Bank (for details refer to the paragraph “Payment Instructions on page no.[●] of this DRHP) and submit the same to the members of the Syndicate with whom the Bid is being deposited. Bid cum Application Forms accompanied by cash and Stock invest shall not be accepted. The maximum bid price has to be paid at the time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder. The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Bank(s), which will hold the monies for the benefit of the Bidders till such time as the Designated Date. On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue Account or Refund Account with the Bankers to the Issue, as applicable. The balance amount after transfer to the Issue Account shall be held for the benefit of the Bidders who are entitled to refunds on the Designated Date, and not later than 15 days from the Bid Closing Date / Issue Closing Date, the Escrow Collection Bank(s) shall refund all monies to unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for Allotment to the Bidders. In case of QIBs, each QIB shall, with the submission of the bid cum application form draw a cheque or demand draft for 10% of the maximum amount of his bid in favour of the Escrow account of the Escrow collection bank. The balance amount shall be payable for the allocated Equity Shares not later than the date specified in the CAN, which shall be subject to a minimum period of two days from date of communication of the allocation list to the members of the Syndicate by the BRLMs. If the payment is not made favouring the Escrow Account within the time stipulated above, the application of the Bidder is liable to be rejected and the margin amount will be refunded. Where the Bidder has been allocated lesser number of Equity Shares than he or she had bid for, the excess amount paid on bidding, if any, after adjustment for allocation, will be refunded to such Bidder within 15 days from the Bid/Issue Closing Date, failing which and the Company shall pay interest at 15% per annum for any delay beyond the periods as mentioned above. Electronic Registration of Bids (a)

The members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE. There will be at least one on-line connectivity to each city where the Bids are accepted.

(b)

NSE and BSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the terminals of the members of the Syndicate and their authorised agents during

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AML STEEL LIMITED the Bidding Period. Members of the Syndicate can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently download the off-line data file into the on-line facilities for book building on a regular basis. On the Bid Closing Date, the Syndicate shall upload the Bids till such time as may be permitted by the Stock Exchanges. (c)

Aggregate demand and price for bids registered on the electronic facilities of NSE and BSE will be downloaded on a regular basis, consolidated and displayed on-line at all bidding centres. A graphical representation of consolidated demand and price would be made available at the bidding centres during the bidding period.

(d)

At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the online system: •

Name of the investor (Investors should ensure that the name given in the Bid cum Application form is exactly the same as the Name in which the Depository Account is held. In case, the Bid cum Application Form is submitted in joint names, investors should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form).

•

Investor Category –, Individual, Corporate, NRI, FII, or Mutual Fund, etc.

•

Numbers of Equity Shares bid for

•

Bid price

•

Bid-cum-Application Form number

•

Whether payment is made upon submission of Bid-cum-Application Form

•

Depository Participant Identification No. and Client Identification No. of the Demat Account of the Bidder

(e)

A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be allocated either by the members of the Syndicate or the Company.

(f)

Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

(g)

The members of the Syndicate have the right to review the Bid. The Syndicate Members have right to reject a bid received from a QIB at the time of receipt of Bids. However, Syndicate Members shall disclose the reason for not accepting the Bid to the Bidder.In case of NonInstitutional Bidders, Bids under the Retail Individual Bidders, Bids shall not be rejected except on the technical grounds listed on page no. [●] in this DRHP.

(h)

It is to be distinctly understood that the permission given by NSE and BSE to use their network and software of the online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by the Company, and BRLMs are cleared or approved by NSE and BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of the Company, its Promoters, its management or any scheme or project of the Company.

(i)

It is also to be distinctly understood that the approval given by NSE and BSE should not in any way be deemed or construed that this DRHP has been cleared or approved by the NSE and BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this DRHP; nor does it warrant that the Equity Shares will be listed or will continue to be listed on the NSE and BSE.

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Build Up of the Book and Revision of Bids (a)

Bids registered by various Bidders through the members of the Syndicate shall be electronically transmitted to the NSE or BSE mainframe on an on-line basis. Data would be uploaded on a regular basis.

(b)

The Price Band can be revised during the Bidding Period, in which case the Bidding Period shall be extended further for a period of three days, subject to the total Bidding Period not exceeding ten working days. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of Price Band can move up or down to the extent of 20% of the floor of the Price Band disclosed in this DRHP.

(c)

Any revision in the Price Band will be widely disseminated by informing the stock exchanges, by issuing a public notice in two national newspapers (one each in English and Hindi) and one regional newspaper and also indicating the change on the relevant websites and the terminals of the members of the Syndicate.

(d)

The book gets built up at various price levels. This information will be available with the BRLMs on a regular basis.

(e)

During the Bidding Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the price band using the printed Revision Form, which is a part of the Bid-cum- Application Form.

(f)

Revisions can be made in both the desired number of Equity Shares and the bid price by using the Revision Form. The Bidder must complete his or her Bid cum Application Form, the details of all the options in his or her Bid cum Application Form or earlier Revision Form and revisions for all the options as per his Bid cum Application Form or earlier Revision Form. For example, if a Bidder has bid for three options in the Bid cum Application Form and he is changing only one of the options in the Revision Form, he must still fill the details of the other two options in the Revision Form unchanged. Incomplete or inaccurate Revision Forms will not be accepted by the members of the Syndicate.

(g)

The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate through whom he or she had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must only be made on that Revision Form.

(h)

Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this DRHP.

(i)

When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised the previous Bid.

(j)

In case of discrepancy of data between NSE or BSE and the members of the Syndicate, the decision of the BRLMs based on the physical book shall be final and binding to all concerned.

Price Discovery and Allocation / Allotment a.

After the Bid/Issue Closing Date, the BRLMs will analyse the demand generated at various price levels and discuss pricing strategy with our Company.

b.

Our Company in consultation with the BRLMs shall finalise the “Issue Price”, the number of Equity Shares to be allotted and the allocation to successful QIB Bidders. The allocation will be decided based on the quality of the Bidder determined broadly based by the size, price and time of the Bid.

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c.

The allocation for QIBs would be upto 50%, of Net Issue of which 5% shall be reserved for Mutual Funds on a proportionate basis. The allocation to Non-Institutional Bidders would be not less than 15% of the Issue Size and allocation for Retail Individual Bidders will be not less than 35% of the Issue Size on proportionate basis, subject to valid Bids being received at or above the Issue Price.

d.

Under subscription, if any, in the Non-Institutional Portion and / or Retail Portion, would be allowed to be met with spill over of demand from any of the other categories, at the sole discretion of the Company and BRLMs. However, if the aggregate demand by Mutual Funds is less than [●] Equity Shares, the balance Equity Shares available for allocation in the Mutual Fund Portion will first be added to the QIB Portion and be allocated proportionately to the QIB Bidders. In the event that the aggregate demand in the QIB Portion has been met, under-subscription, if any, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLMs and the Designated Stock Exchange.

e.

Allocation to QIBs, Non-Residents, FIIs and NRIs applying on repatriation basis will be subject to the terms and conditions stipulated by the RBI while granting permission for Allotment of Equity Shares to them.

f

The BRLMs, in consultation with the Company, shall notify the members of the Syndicate of the Issue Price and allocations to their respective Bidders, where the full Bid Amount has not been collected from the Bidders

g.

The Company reserves the right to cancel the Issue any time after the Bid/Issue Opening Date without assigning any reasons whatsoever. In terms of the SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date.

h.

The allotment details shall be put on the website of the Registrar to the issue

Signing of Underwriting Agreement and RoC Filing (a)

The Company, the BRLMs and the Syndicate Members shall enter into an underwriting agreement on finalisation of the Issue Price and allocation(s) to the Bidders

(b)

After signing the Underwriting Agreement, the company will update and file the Prospectus with RoC, which then would be termed ‘Prospectus’. The Prospectus would have details of the Issue Price, Issue Size, underwriting arrangements and would be complete in all material respects

Filing of the Prospectus with the RoC The Company will file a copy of the Prospectus with the RoC, Chennai, Tamil Nadu,in terms of Section 56, Section 60 and Section 60B of the Companies Act, 1956 Announcement of Pre-Issue Advertisement Subject to Section 66 of the Companies Act, the Company shall after receiving final observations, if any, on this DRHP from SEBI, publish an advertisement, in the form prescribed by the SEBI Guidelines in an English National Daily with wide circulation, one Hindi National Newspaper and a regional language Newspaper with wide circulation in Chennai. Advertisement regarding Issue price and Prospectus The Company will issue a statutory advertisement after the filing of the Prospectus with the RoC in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is situated. This advertisement, in addition to the information (in the format and containing the disclosures specified in Part A of Schedule XX-A of the SEBI Guidelines), that has to be set out in the statutory advertisement shall indicate the Issue Price along with a table showing the number of Equity Shares. Any material updates between the date of RHP and the date of Prospectus will be included in such statutory advertisement.

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AML STEEL LIMITED Issuance of Confirmation of Allocation Note (CAN) (a)

The BRLMs or Registrar to the Issue shall send to the members of the Syndicate a list of their Bidders who have been allocated Equity Shares in the Issue.

(b)

The BRLMs or Syndicate Members would then send the CAN to their Bidders who have been allocated Equity Shares in the Issue. The despatch of a CAN shall be deemed to be valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to such Bidder. Those Bidders who have not paid into the Escrow Account of the Company at the time of bidding shall pay in full the amount payable into the Escrow Account of the Company by the Pay-in Date specified in the CAN.

(c)

Bidders who have been allocated Equity Shares and who have already paid into the Escrow Account of the Company at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, to realisation of their cheque or demand draft paid into the Escrow Account of the Company. The despatch of a CAN shall be deemed to be a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares to be allotted to such Bidder.

Designated Date and Allotment of Equity Shares (a)

All allottees will receive credit for the Equity Shares directly in their depository account. Equity Shares will be offered only in the dematerialised form to the allottees. Allottees will have the option to re-materialise the Equity Shares so allotted, if they so desire, as per the provisions of the Companies Act and the Depositories Act.

(b)

After the funds are transferred from the Escrow Account to the Public issue Account on the Designated Date, the Company would allot the Equity Shares to the allottees. The Company would ensure the allotment of Equity Shares within 15 days of Bid / Issue Closing Date and give instructions to credit to the allottees’ depository accounts within two working days from the date of finalisation of basis of allotment. In case the Company fails to make allotment within 15 days of the Bid/Issue Closing Date, interest would be paid to the investors at the rate of 15% per annum.

(c)

Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated to them pursuant to this Issue.

GENERAL INSTRUCTIONS Do’s: a.

Check if you are eligible to apply;

b.

Read all the instructions carefully and complete the Resident Bid-cum-Application Form (white in colour) or Non-Resident Bid-cum-Application Form (blue in colour), as the case may be;

c.

Ensure that the Bid is only within the Price Band;

d.

Ensure that the details about Depository Participant and Beneficiary Account are correct as Equity Shares will be transferred in the dematerialized form only;

e.

Ensure that the DP account is activated;

f.

Investors must ensure that the name given in the bid cum application form is exactly the same as the Name in which the Depository Account is held. In case, the Bid cum Application Form is submitted in joint names, investors should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form;

g.

Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate;

h.

Ensure that you have been given a TRS for all your Bid options;

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AML STEEL LIMITED i.

Submit Revised Bids to the same member of the Syndicate through whom the Original Bid was placed and obtain a revised TRS;

j.

Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects; and

k.

Ensure that you mention your Permanent Account Number (PAN) allotted under the Income Tax Act, 1961 where the maximum Bid for Equity Shares by a Bidder is for a total value of Rs. 50,000 or more and attach a copy of the PAN Card and also submit a photocopy PAN Card(s) or a communication from the Income Tax authority indicating allotment of PAN along with the application for the purpose of verification of the number, with the Bid-cumApplication Form. In case you do not have a PAN, ensure that you provide a declaration in Form 60 prescribed under the I.T. Act along with the application.

Dont’s: •

Do not Bid for lower than the minimum Bid size;

•

Do not Bid/ revise Bid to a price that is less than the Floor of the Price Band or higher than the Cap of the Price Band;

•

Do not Bid on another Bid-cum-Application Form after you have submitted a Bid to the members of the Syndicate;

•

Do not pay the Bid amount in cash;

•

Do not send Bid cum Application Forms by post; instead hand them over to a member of the Syndicate only;

•

Do not bid at Cut-off price for Non-institutional and QIB Bidders;

•

A Bid from any investor should not exceed the investment limit or maximum number of Equity Shares that can be held by a Bidder under the applicable laws or regulations;

•

Submit Bids accompanied by Stockinvest;

•

Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground.

Instructions for Completing the Bid-cum-Application Form Bidders can obtain Bid-cum-Application Forms and / or Revision Forms from the BRLMs, or Syndicate Members. Bids and Revisions of Bids Bids and revisions to Bids must be: a.

Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white colour for Resident Indians and blue colour for NRI or FII or Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions applying on repatriation basis.)

b.

Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, the Bid cum Application Form and Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected.

c.

For Retail Individual Bidders, the Bids must be for a minimum of [•] Equity Shares and in multiples of [•] thereafter subject to a maximum Bid Amount of Rs. 1,00,000.

d.

For Non Institutional and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds Rs. 1,00,000 and in multiples of [•] Equity Shares thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of shares that can be held by them under the applicable laws or regulations.

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AML STEEL LIMITED e.

In single name or in joint names (not more than three).

f.

In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions but not in the names of minors, firms or partnerships, foreign nationals (excluding NRIs) or their nominees or OCBs.

g.

Thumb impressions and signatures other than in the languages specified in the Eight Schedule in the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under his or her official seal.

Bidders Depository Account Details IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT’S IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM. Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant’s Identification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depository demographic details of the Bidders such as address, bank account details for printing on refund orders and occupation (herein after referred to as Demographic Details). Hence, Bidders should carefully fill in their Depository Account details in the Bid-cum-Application Form. These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/ CANs/Allocation Advice and printing of Bank particulars on the refund order and the Demographic Details given by Bidders in the Bid -cum application Form would not be used for these purposes by the Registrar. Hence, Bidders are advised to update their Demographic Details as provided to their Depository Participants. By signing the Bid-cum-Application Form, Bidder would have deemed to authorize the depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. Refund orders/Allocation Advice/CANs would be mailed at the address of the Bidder as per the Demographic Details received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs may get delayed if the same once sent to the address obtained from the depositories are returned undelivered. In such an event, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at the Bidders sole risk and neither the Bank nor the BRLMs shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or is liable to pay any interest for such delay. In case no corresponding record is available with the Depositories that match three parameters, namely, names of the Bidders (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s identity, then such Bids are liable to be rejected. Bids under Power of Attorney In case of Bids made pursuant to a Power of Attorney or by limited companies, corporate bodies, registered societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the Memorandum and Articles of Association and/or Bye Laws must be

191

AML STEEL LIMITED lodged along with the Bid-cum-Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made by Insurance Companies registered with the Insurance Regulatory and Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made by provident funds with minimum corpus of Rs.2500 lakhs and pension funds with minimum corpus of Rs.2500 lakhs, a certified copy of certificate from a chartered accountant certifying the corpus of the provident fund/ pension fund must be lodged along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made by mutual fund registered with SEBI, Venture Capital Fund registered with SEBI and Foreign Venture Capital investor registered with SEBI, a certified copy of their SEBI registration certificate must be submitted with the Bid cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case without assigning any reason thereof. The Company in its absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the Power of Attorney along with the Bid cum Application form, subject to such terms that we may deem fit, in consultation with the BRLMs. Bids by NRIs, FIIs, Foreign Venture Capital Funds registered with SEBI on a repatriation basis •

NRI, FIIs and Foreign Venture Capital funds Bidders to comply with the following: Individual NRI Bidders can obtain the Bid cum Application Forms from our Corporate Office or from members of the Syndicate or the Registrar to the Issue.

•

NRI Bidders may please note that only such Bids as are accompanied by payment in free foreign exchange through approved banking channels shall be considered for allotment.

•

NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall use the Bid Cum Application form meant for Resident Indians (white in colour).

Bids and revision to Bids must be made: •

On the Bid-cum-Application Form or the Revision Form, as applicable, (blue in colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.

•

In a single name or joint names (not more than three).

•

By NRIs – For a minimum of [●] Equity Shares and in multiples of [●] thereafter subject to a maximum Bid amount of Rs.1,00,000 for the Bid to be considered as part of the Retail Portion. Bids for Bid Amount more than Rs.1,00,000 would be considered under Non Institutional Category for the purposes of allocation. For further details see “Maximum and Minimum Bid Size” on page no. [●].

•

By FIIs – for a minimum of such number of Equity Shares and in multiples of [•] that the Bid Amount exceeds Rs. 1,00,000. For further details see section titled “Maximum and Minimum Bid Size” on page no. [●]

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AML STEEL LIMITED •

In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions but not in the names of minors, firms or partnerships, foreign nationals (excluding NRIs) or their nominees or OCBs.

•

Refunds, dividends and other distributions, if any, will be payable in INRs only and net of bank charges and / or commission. In case of Bidders who remit money payable upon submission of the Bid cum Application Form or Revision Form through INR drafts purchased abroad, such payments in INRs will be converted into USD or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post/speed post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.

The Company does not require approvals from FIPB or RBI for the transfer of Equity Shares in this Issue to eligible NRIs, FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral institutions. As per the RBI regulations, OCBs are not permitted to participate in the Issue. There is no reservation for Non-Residents, NRIs, FIIs and foreign venture capital funds and all NonResidents, NRIs, FIIs and foreign venture capital funds applicants will be treated on the same basis with other categories for the purpose of allocation. The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account of benefit of, "U.S. Persons" (as defined in the Regulation S of the Securities Act), except pursuant to any exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares may be offered and sold only (i) in United States to ‘qualified institutional buyers’ as defined in Rule 144A of the Securities Act, and (ii) outside the United States in compliance with Regulations and the applicable laws of the jurisdiction where those offers and sales occur. PAYMENT INSTRUCTIONS The Company shall open an Escrow Account(s) with the Escrow Collection Bank(s) for the collection of the Bid Amounts payable upon submission of the Bid-cum-Application Form and for amounts payable pursuant to allocation in the Issue. Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the following terms: Payment into Escrow Account to the Issue: (i)

The Bidders for whom the applicable margin is equal to 100% shall, with the submission of the Bid cum Application Form draw a payment instrument for the Bid Amount in favour of the Escrow Account of the Company and submit the same to the members of the Syndicate.

(ii).

In case no Margin Amount has been paid by the Bidders during the Bidding Period, on receipt of the CAN, an amount equal to the Issue Price multiplied by the Equity Shares allocated to the Bidder or the balance amount, in case the Margin Amount is less than the Issue Price multiplied by the Equity Shares allocated to the Bidder, shall be paid by the Bidders into the Escrow Account within the period specified in the CAN which shall be subject to a minimum period of two days from the date of communication of the allocation list to the members of the Syndicate by the BRLMs.

(iii).

The payment instruments for payment into the Escrow Account of the Company should be drawn in favour of: •

In case of Resident Bidders: “Escrow Account – AML Steel Public Issue”

•

In case of Non Resident Bidders: “Escrow Account – AML Steel Public Issue -NR”

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AML STEEL LIMITED •

In case of QIB’s: “Escrow Account – AML Steel Public Issue - QIB”

•

In case of Bids by NRIs applying on repatriation basis, the payments must be made through INR Drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in NonResident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident bidder bidding on a repatriation basis. Payment by drafts should be accompanied by Bank Certificate confirming that the draft has been issued by debiting to NRE or FCNR Account.

•

In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by Bank Certificate confirming that the draft has been issued by debiting to Special Rupee Account.

(iv).

Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated, will be refunded to the Bidder from the Escrow Account of the Company.

(v).

The monies deposited in the Escrow Account of the Company will be held for the benefit of the Bidders until Designated Date.

(vi).

On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account of the Company as per the terms of the Escrow Agreement into the Issue Account with the Bankers to the Issue.

(vii).

On the Designated Date and no later than 15 days from the Bid/Issue Closing Date, the Escrow Collection Bank shall also refund all amounts payable to unsuccessful bidders and also the excess amount paid on Bidding, if any, after adjusting for allocation to the Bidders

Payments should be made by cheque or demand draft drawn on any Bank (including a Co-Operative Bank), which is situated at, and is a member of or sub-member of the banker’s clearing house located at the centre where the Bid-cum-Application Form is submitted. Outstation cheques /bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ Stockinvest/ Money Orders/Postal Orders will not be accepted. Payment by Stockinvest In terms of Reserve Bank of India Circular No. 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. Submission of Bid-cum-Application Form All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts shall be submitted to the BRLMs or Syndicate Member at the time of submitting the Bid. The BRLMs/ members of the Syndicate may at their discretion waive the requirement of payment at the time of submission of the Bid cum Application Form and Revision Form except that for QIB bidders, the Synidicate Member shall collect the QIB margin and and deposit the same in the the specified Escrow account No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the BRLMs or Syndicate Member will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder.

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AML STEEL LIMITED

Other Instructions Joint Bids in the case of Individuals Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour of the Bidder whose name appears first in the Bid-cum-Application Form or Revision Form (“First Bidder”). All communications will be addressed to the First Bidder and will be despatched to his or her address. Multiple Bids A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same. The Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all portion Procedure for Application by Mutual Funds In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple bids provided that the Bids clearly indicate the name of scheme concerned for which the Bid has been made. The application made by the AMCs or custodians of a mutual fund shall clearly indicate the name of the concerned scheme for which application is being made. The Company reserves the right to reject, in our absolute discretion, all or any multiple Bids in any or all categories. PAN Where Bid(s) is/are for Rs.50,000 or more, the Bidder or in the case of a Bid in joint names, each of the Bidders, should mention his/her Permanent Account Number (PAN) allotted under the I.T.Act. The copy of the PAN card or PAN allotment letter is required to be submitted with the application form. Applications without this information and documents will be considered incomplete and are liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground. In case the Sole/First Bidder and Joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention “Not Applicable” and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s) should mention “Applied for” in the Bid cum Application Form. Further, where the Bidder(s) has mentioned “Applied for” or “Not Applicable”, the Sole/First Bidder and each of the Joint Bidder(s), as the case may be, would be required to submit Form 60(Form of declaration to be filed by a person of declaration to be filed by a person who does not have a permanent account number and who enters into any transaction specified in rule 114B), or, Form 61 (form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable to income tax in respect of transactions specified in rule 114B), as may be applicable, duly filled along with a copy of any one of the following documents in support of the address: (a)Ration Card (b) Passport (c) Driving License (d) Identity Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address (f) Any document or communication issued by any authority of the Central Government, State Government or local bodies showing residential address (g)Any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and Form 61 have been amended vide a notification issued on December 1, 2004 by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes. All Bidders are requested to furnish, where applicable, the revised Form 60 or 61 as the case may be. UNIQUE IDENTIFICATION NUMBER – MAPIN With effect from 1 July, 2005, SEBI has decided to suspend all fresh registrations for obtaining Unique Identification Number (UIN) and the requirement to contain/ quote UIN under the SEBI (Central Database of Market Participants) Regulations, 2003 and circular issued in connection thereto by its circular bearing number MAPIN/Cir-13/2005.

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AML STEEL LIMITED

Company’s Right to Reject Bids The Syndicate Members have right to reject a Bid received from QIB at the receipt of the Bids. However, the Syndicate Members shall disclose the reasons for not accepting the Bid to the Bidder. In case of NonInstitutional Bidders and Retail Individual Bidders, The Company & BRLMs have a right to reject bids based on technical grounds. Consequent refunds shall be made by cheque or pay order or draft and will be sent to the bidder’s address at the Bidder’s risk. Grounds for Technical Rejections Bidders are advised to note that Bids are liable to be rejected on among others, the following technical grounds: a.

Amount paid doesn’t tally with the highest number of Equity Shares bid for;

b.

Age of First Bidder not given;

c.

Bids by Persons not competent to contract under the Indian Contract Act, 1872, including minors, insane Persons;

d.

PAN not given if Bid is for Rs. 50,000 or more or Copy of Form 60 or Form 61 as required not given;

e.

Bids for lower number of Equity Shares than specified for that category of investors;

f.

Bids at a price less than lower end of the Price Band;

g.

Bids at a price more than the higher end of the Price Band;

h.

Bids at cut-off price by Non-Institutional and QIB Bidders;

i.

Bids for number of Equity Shares which are not in multiples of [●];

j.

Category not ticked;

k.

Multiple bids as defined in this DRHP;

l.

In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;

m.

Bid-cum-Application Form does not have the stamp of the BRLMs, or Syndicate Members;

n.

Bid-cum-Application Form does not have Bidder’s depository account details;

o.

Bid-cum-Application Forms are not delivered by the Bidders within the time prescribed as per the Bid-cum-Application Form, Bid/Issue Opening Date advertisement and this DRHP and as per the instructions in this DRHP and the Bid cum-Application Form

p.

Bids for amounts greater than the maximum permissible amounts prescribed by the regulations.

q.

Bids accompanied by money order/postal order/cash /Stockinvests;

r.

Signature of sole and / or joint bidders missing;

s.

Bids by OCBs;

t.

In case no corresponding record is available with the Depositories that matches the parameters namely, names of the Bidders (including the sequence of names of joint holders), the depositary participant’s identity (DP ID).

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AML STEEL LIMITED

u.

Bids by U.S residents or US persons other than “qualified institutional buyers” as defined in Rule 144A of the U.S. Securities Act of 1933.

v.

In case of bids under Power of Attorney or by limited Companies, Corporate, trust etc. relevant documents are not submitted.

w.

Bank account details (for refund) are not given

Equity Shares in Dematerialised Form with NSDL or CDSL As per the provisions of Section 68B of the Companies Act, the Equity Shares in this Issue shall be allotted only in a de-materialised form, (i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode). In this context, two tripartite agreements have been signed between the Company and the Depositories: •

An agreement dated 9 July, 2002 with NSDL, the Company and Registrars to the Issue;

•

An agreement dated 7 August, 2002 with CDSL, the Company and Registrars to the Issue;

All bidders can seek allotment only in dematerialised mode. Bids from any investor without relevant details of his or her depository account are liable to be rejected. a.

A Bidder applying for Equity Shares must have at least one beneficiary account with either of the Depository Participants of either NSDL or CDSL prior to making the Bid.

b.

The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository Participant’s Identification number) appearing in the Bid-cum-Application Form or Revision Form.

c.

Equity Shares allotted to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.

d.

Names in the Bid-cum-Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the Depository.

e.

Non-transferable allotment advice or refund orders will be directly sent to the Bidder by the Registrar to this Issue.

f.

If incomplete or incorrect details are given under the heading ‘Request for Equity Shares in electronic form’ in the Bid-cum-Application Form or Revision Form, it is liable to be rejected.

g.

The Bidder is responsible for the correctness of his or her demographic details given in the Bidcum-Application Form vis-à-vis those with his or her Depository Participant.

h.

It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where our Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.

i.

The trading of the Equity Shares of the Company would be in dematerialised form only for all investors.

Communications All future communications in connection with Bids made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the sole or First Bidder, Bid-cum-Application Form number, number of Equity Shares applied for, date, bank and branch where the Bid was submitted and cheque/ draft number and issuing bank thereof.

197

AML STEEL LIMITED The Company has appointed Mr.Rajesh Agrawal, Company Secretary, as Compliance Officer. He can be contacted at the Corporate Office of the Company. The Investors can contact the Compliance Officer in case of any pre-issue or post-issue related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account, refund orders, etc. Procedure and Time Schedule for Allotment of Equity Shares and Disposal of Applications and Application Money The Company reserves, at their absolute and uncontrolled discretion and without assigning any reason thereof, the right to accept or reject any Bid in whole or in part. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. In case a Bid is rejected in part, the excess Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. The Company will ensure the allotment of the Equity Shares within 15 days from the Bid/Issue Closing Date. The Company shall pay interest at the rate of 15% per annum (for any delay beyond the periods as mentioned above), if allotment is not made, refund orders are not despatched and/ or dematerialized credits are not made to investors within two working days from the date of allotment. DISPOSAL OF APPLICATIONS AND APPLICATION MONEY The Company shall ensure dispatch of allotment advice, transfer advice or refund orders and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the allotment to the Stock Exchanges within two working days of date of finalisation of allotment of Equity Shares. The Company shall dispatch refund above Rs. 1,500/-, if any, by registered post or speed post at the sole or first Bidder’s sole risk, except for Bidders who have opted to receive refunds through the ECS facility or RTGS or Direct Credit. The Company shall use best efforts to ensure that all steps for completion of the necessary formalities for allotment and trading at all the Stock Exchanges where the Equity Shares are proposed to be listed, are taken within seven working days of finalisation of the basis of allotment. In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, the Company further undertakes that: • allotment of Equity Shares shall be made only in dematerialised form within 15 working days of the Bid/Issue Closing Date; • refund orders, except for Bidders who have opted to receive refunds through the ECS facility, within 15 working days of the Bid/Issue Closing Date would be ensured; and • Interest in case of delay in dispatch of Allotment Letters/ Refund Orders in case of public issues – we shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if allotment is not made and refund orders are not dispatched and/or demat credits are not made to investors within the 15 working day time prescribed above. The Company will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Issue. No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the Syndicate Member will acknowledge the receipt of the Bid-cum-Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder. Mode of making refunds Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depository the Bidders bank account details including nine digit MICR code. Hence, Bidders are advised to immediately update their bank account details asappearing on the records of the depository participant. Please note that failure to do so could result in delays in credit of refunds to Bidders at the Bidders sole risk and neither the BRLMs nor the Bank shall have any responsibility and undertake any liability for the same.

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AML STEEL LIMITED

The payment of refund, if any, would be done through various modes in the following order of preference I. Direct Credit – For investors having their Bank Account with the Escrow Bankers, the refund amount would be credited directly to their Bank Account with the Escrow Banker. II. RTGS – Investors desirous of taking direct credit of refund through RTGS, will have to provide the IFSC code in the Bid cum Application form. III. ECS - Payment of refund would be done through ECS for applicants residing at one of the 15 centres, namely Ahmedabad, Bangalore, Bhuvaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram, where clearing houses for ECS are managed by RBI. This would be subject to availability of complete Bank Account Details including MICR code from the depository. For all the other applicants except for whom payment of refund is possible through I, II and III, the refund orders would be dispatched “Under Certificate of Posting” for refund orders less than Rs. 1500/- and through Speed Post/Registered Post for refund orders exceeding Rs. 1500/-. Interest on refund of excess Bid Amount The Company shall pay interest at the rate of 15% per annum on the excess Bid Amount received if refund orders are not dispatched within 15 working days from the Bid/Issue Closing Date as per the Guidelines issued by the GoI, Ministry of Finance pursuant to their letter No.F/8/S/79 dated July 31, 1983, as amended by their letter No. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines. Basis of allotment or allocation A. For Retail Bidders •

Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The allotment to all the successful Retail Individual Bidders will be made at the Issue Price.

•

The Issue size, less allotment to Non Institutional Bidders, QIB Bidders shall be available for allotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.

•

If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full allotment shall be made to the Retail Individual Bidders to the extent of their demand.

•

If the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, the allotment shall be made on a proportionate basis subject to minimum allocation being equal to the minimum bid/application size of (•) Equity Shares. For the method of proportionate basis of allotment, please refer to “method of proportionate basis of allotment” on page no.[●]- of the DRHP.

B. For Non Institutional Bidders •

Bids received from Non institutional Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The allotment to all successful Non Institutional Bidders will be made at the Issue Price.

•

The Issue size, less allotment to QIBs Bidders, Retail Individual Bidders shall be available for allotment to Non Institutional Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.

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AML STEEL LIMITED •

If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full allotment shall be made to Non Institutional Bidders to the extent of their demand.

In case the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, allotment shall be made on a proportionate basis subject to minimum allocation being equal to the minimum bid/application size of [●] Equity Shares. For the method of proportionate basis of allotment please refer to “method of proportionate basis of allotment” on page no.[●] of the DRHP. C. For QIBs •

Upto 50% of the Net Issue to the Public i.e. [●] Equity shares shall be allotted to QIBs of which 5% is reserved for Mutual Funds i.e [●] Equtiy Shares and balance shares will be available for allocation to all QIBs including Mutual Funds on proportionate basis.

•

Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The allotment to all the QIBs will be made at the Issue Price.

•

The Issue size, less allotment to Non Institutional Bidders, Retail Individual Bidders, shall be available for allotment to QIBs who have bid in the Issue at a price that is equal to or greater than the Issue Price.

•

Allotment shall be undertaken in the following manner (a) In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be determined as follows: (i) In the event that Bids from Mutual Fund exceeds 5% of the QIB Portion, allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion. (ii) In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB Portion, then all Mutual Funds shall get full allotment to the extent of valid bids received above the Issue Price. (iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be available to all QIB Bidders as set out in (b) below; (b) In the second instance allocation to all QIBs shall be determined as follows: (i). The number of Equity Shares available for this category shall be the QIB Portion less allocation only to Mutual Funds as calculated in (a) above. (ii). The subscription level for this category shall be determined based on the overall subscription in the QIB Portion less allocation only to Mutual Funds as calculated in (a) above. (iii). Based on the above, the level of the subscription shall be determined and proportionate allocation to all QIBs including Mutual Funds in this category shall be made. (iv) The aggregate allotment to QIB Bidders shall not be less than [●] Equity Shares

Procedure and Time Schedule for Allotment of Equity Shares The Syndicate Members have the right to reject the Bid received from QIB at the time of receipt of the Bids. However, the Syndicate Members shall disclose the reasons for not accepting the Bid to the Bidder. In case of Non- Institutional Bidders and Retail Individual Bidders, the Company has a right to reject bids based on technical grounds. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. In case a Bid is rejected in part, the excess Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. The Company will ensure allotment of the Equity Shares within 15 days from the Bid/Issue Closing Date, and the Company shall pay interest at the rate of 15% per annum (for any delay beyond the periods as mentioned above), if

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AML STEEL LIMITED Equity Shares are not allotted, refund orders are not dispatched and/ or demat credits are not made to investors within two working days from the date of finalisation of the basis of allotment. Method of proportionate basis of allocation in the QIB, Retail, Non-Institutional Portions In the event of the Issue being over-subscribed, we shall finalize the basis of allotment in consultation with the Designated Stock Exchange. The Executive Director (or any other senior official nominated by them) of the Designated Stock Exchange along with the BRLMs and the Registrar to the Issue shall be responsible for ensuring that the basis of allotment is finalized in a fair and proper manner. The allotment shall be made in multiples of one share, on a proportionate basis as explained below: (a)

Bidders will be categorized according to the number of Equity Shares applied for by them.

(b)

The total number of Equity Shares to be allotted to each portion as a whole shall be arrived at on a proportionate basis, being the total number of Equity Shares applied for in that portion (number of Bidders in the portion multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.

(c)

Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a proportionate basis, being the total number of Equity Shares applied for by each Bidder in that portion multiplied by the inverse of the over-subscription ratio.

(d)

If the proportionate Allotment to a Bidder is a number that is more than [●] but is not a multiple of one (which is the market lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0.5, it would be rounded off to the lower whole number. Allotment to all Bidders in such categories would be arrived at after such rounding off.

(e)

In all Bids where the proportionate Allotment is less than [●] Equity Shares per Bidder, the Allotment shall be made as follows: • Each successful Bidder shall be Allotted a minimum of [●] Equity Shares; and • The successful Bidders out of the total Bidders for a portion shall be determined by draw of lots in a manner such that the total number of Equity Shares Allotted in that portion is equal to the number of Equity Shares calculated in accordance with (b) above; and • Each successful Bidder shall be Allotted a minimum of [●] Equity Shares.

(f)

If the Equity Shares allocated on a proportionate basis to any portion are more than the Equity Shares allotted to the Bidders in that portion, the remaining Equity Shares available for Allotment shall be first adjusted against any other portion, where the Equity Shares are not sufficient for proportionate Allotment to the successful Bidders in that portion. The balance Equity Shares, if any, remaining after such adjustment will be added to the portion comprising Bidders applying for minimum number of Equity Shares.

Letters of Allotment or Refund Orders The Company shall give credit to the beneficiary account with depository participants within 2 working days of finalization of the basis of allotment of Equity Shares. In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Guidelines, the Company further undertakes that: • • •

Allotment of Equity Shares will be made only in dematerialized form within 15 days from the Bid/Issue Closing Date; Dispatch of refund orders will be done within 15 days from the Bid/Issue Closing Date; The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if allotment is not made, refund orders are not dispatched and/or demat credits are not made to investors within the 15 day prescribed time period as mentioned above (or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the clearing system in the disclosed manner) within 15 days from the date of the closure of the issue.

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AML STEEL LIMITED Interest in case of delay in Despatch of Allotment Letters/Refund Orders in case of Public Issues The Company agrees that allotment of securities offered to the public shall be made not later than 15 days after the closure of the public issue. The Company further agrees that it shall pay interest at rate of 15% per annum if the allotment letters/refund orders have not been dispatched to the applicants within 15 days from the date of closure of the Issue. In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional days after revision of Price Band. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated by notification to NSE and BSE , by issuing a press release, and also by indicating the change on the web site of the BRLMs and at the terminals of the Syndicate. Undertakings by the Company The Company undertakes as follows: •

that the complaints received in respect of this Issue shall be attended to expeditiously and satisfactorily;

•

that all steps will be taken for the completion of the necessary formalities for listing and commencement of trading at all the stock exchanges where the Equity Shares are proposed to be listed within seven working days of finalisation of the basis of allotment;

•

that the funds required for despatch of refund orders or allotment advice by registered post or speed post shall be made available to the Registrar to the Issue;

•

that where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 15 working days of closure of the issue, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund.

•

that the refund orders or allotment advice to the NRIs or FIIs shall be dispatched within the specified time; and

•

that no further issue of Equity Shares shall be made till the Equity Shares issued through this DRHP are listed or until the bid monies are refunded on account of non-listing, under-subscription etc.

Utilisation of Issue proceeds The Board of Directors of the Company certify that: •

all monies received out of this Issue shall be transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Companies Act;

•

details of all monies utilized out of this Issue referred above shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such monies have been utilised; and

•

details of all unutilised monies out of this Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilized monies have been invested.

•

utilisation of monies received under Promoter’s contribution shall be disclosed under an appropriate head in the balance sheet of the Company indicating the purpose for which such monies have been utilised; and

•

details of all unutilised monies out of the funds received under Promoter’s contribution, shall be disclosed under a separate head in the balance sheet of the Company indicating the form in which such unutilised monies have been invested.

The Company shall not have recourse to the Issue proceeds until approval for trading of Equity Shares from all the stock exchanges where listing is sought is received. Pending utilisation of net proceeds of this Issue as specified under the section “Objects of the Issue” the net proceeds will be invested by the Company in high quality interest / dividend bearing short term / long term liquid instruments including deposits with banks for the necessary duration. Restrictions on Foreign Ownership of Indian Securities

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AML STEEL LIMITED Foreign investment in Indian securities is regulated through the industrial policy of GoI (“The Industrial Policy”) and FEMA. While the Industrial Policy prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. The government bodies responsible for granting foreign investment approvals are the Foreign

Investment Promotion Board of the Government of India (“FIPB”) and the RBI. Under present regulations, the maximum permissible FII investment in our Company is restricted to 24% of our total issued capital. This can be raised to 100% by adoption of a Board resolution and special resolution by our shareholders; however, as of the date hereof, no such resolution has been recommended to our Board or our shareholders for adoption. By way of Circular No. 53 dated 17 December, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian company in a public Issue without prior RBI approval, so long as the price of Equity Shares to be issued is not less than the price at which Equity Shares are issued to residents. The transfer of Equity Shares of NRIs, FIIs, and Foreign Venture Capital Investors registered with SEBI and Multilateral and Bilateral Development Financial institutions shall be subject to the conditions as may be prescribed by the Government of India or RBI while granting such approvals. Foreign Investment Foreign investment in India is regulated by the Foreign Exchange Management Act, 1999 (FEMA), the regulations framed by the Reserve Bank of India (RBI) and policy guidelines issued by the Ministry of Industry (through various Press Notes issued from time to time). Foreign investment in companies involved in the manufacture of steel is under the automatic route (i.e., prior approval of the Foreign Investment Promotion Board (FIPB) is not required). Foreign investment by way of subscription to equity shares in companies in the above sector currently does not require the prior approval of the RBI or the FIPB, except for a post subscription filing with the RBI in Form FC-GPR within 30 days from the issue of shares by the Company. GoI has indicated that in all cases where foreign direct investment is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary agency for the purposes of monitoring and regulating foreign investment. TRANSFERS OF EQUITY SHARES PREVIOUSLY REQUIRED THE PRIOR APPROVAL OF THE FIPB. HOWEVER, VIDE A RBI CIRCULAR DATED 4 OCTOBER, 2004 ISSUED BY THE RBI, THE TRANSFER OF SHARES BETWEEN AN INDIAN RESIDENT AND A NON RESIDENT DOES NOT REQUIRE THE PRIOR APPROVAL OF THE FIPB OR THE RBI, PROVIDED THAT (I) THE ACTIVITIES OF THE INVESTEE COMPANY ARE UNDER THE AUTOMATIC ROUTE UNDER THE FOREIGN DIRECT INVESTMENT (FDI) POLICY AND TRANSFER DOES NOT ATTRACT THE PROVISIONS OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 (II) THE NONRESIDENT SHAREHOLDING IS WITHIN THE SECTORAL LIMITS UNDER THE FDI POLICY, AND (III) THE PRICING IS IN ACCORDANCE WITH THE GUIDELINES PRESCRIBED BY THE SEBI/RBI.

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SECTION VIII- DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION RIGHTS OF MEMBERS Rights of members regarding voting, dividend, lien on shares and the process of modification of such rights and forfeiture of shares are contained in the Articles of Association of the Company and as per the provisions of the Companies Act 1956. MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION The salient features of the Articles of Association of the Company are as under: Article 1 provides as under: 1. The regulations contained in Table A, Schedule I, to the Companies, 1956, shall not apply to the company except so far as the same are reproduced or contained in or expressly made applicable by these Articles or the Act. The regulations for the management for the Company and for the observance of the Members thereof and their representatives shall, subject to any exercise of the Company’s power to modify, alter or add to its regulations, be such as are contained in these Articles. Article 3 provides as under: 1. Save as permitted by section 77 of the Act, the funds of the Company shall not be employed in the purchase of or lent on the security of, shares of the Company and the Company shall not give, directly or indirectly, any financial assistance, whether by way of loan, guarantee, the provision of security or otherwise, or the purpose of or in connection with any purchase of or subscription for shares in the company or any company of which it may, for the time being, be a subsidiary. 2. This Article shall not be deemed to effect or restrict the power of the company to enforce repayment of loan to members or to exercise a lien conferred by Article 28. Article 4 provides as under: Increase in the share capital 4. 2. (a) The Company shall have power to increase or reduce the capital of the company and to alter, convert, classify into several classes of stock of shares, divide or sub-divide and consolidate the same with power to attach thereto respectively such preferential, deferred or special rights, privileges or conditions or restrictions as may be determined by, or in accordance with the regulations of this Company, from time to time, subject to provisions of the Companies Act, 1956.

(b) Subject to the provisions of Section 81 of the Act and these Articles any unclassified shares (whether forming part of the original share capital or of any increased share capital of the company may be issued by the Board either with the sanctions of the Company in General Meeting and upon such terms and conditions and with such rights and privileges annexed thereto as the General Meeting sanctioning the issue of such shares may direct, and if no such direction be given and in all other cases, as the Board shall determine, and in particular, with such rights and privileges to participate in the distribution of the Assets of the Company. Issue of preference shares 3 Subject to the provisions of the Articles, the Company shall have power to issue preference shares carrying right to redemption out of profits which would otherwise be available for dividend, or out of the proceeds of a fresh issue of shares made for the purposes of such redemption, or liable to be redeemed at the option of the Company and the Board may subject to the provisions of Section 80 of the Act exercise such power in such manner as in it thinks fit.

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Issue of debentures 4 Any debentures, debenture-stock or other Securities may be issued at a discount, premium or otherwise and may be issued on condition that they shall be convertible into shares of any denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of shares, attending (but not voting) at the General meeting, Appointment of Directors and otherwise Debentures with the right to conversion into or allotment of shares shall be issued only with the consent of the Company in the General meeting by a Special Resolution. Article 5 provides as under Shares at disposal of the Directors 5 1) Subject to the provisions of the Articles and to section 81 of the Act, the shares shall be under the control of the Board who may allot or otherwise dispose of the same to such person, on such terms and conditions, at such times, either at par or at a premium, or subject to Section 79 of the Act, at a discount, and for such consideration as the Board thinks fit, provided that option or right to call of shares shall not be given to any person without the sanction of the Company in General Meeting. Article 7 provides as under 7. 1. The money (if any) which the Board shall on allotment of any shares being made by them require to be paid by way of allotment money, call or otherwise in respect of those shares shall immediately on the insertion of the name of the allottee in the Register as the holder of such shares, shall become a debt due to and recoverable by the company from the allottee thereof and shall be paid by him accordingly. 2. If, by the conditions of allotment of any shares, the whole or part of the amount or issue price thereof shall be payable by installment, every such instalment shall, when due be paid to the Company by the person who, for the time being, shall be the registered holder of the share or by his executor or administrator. Article 8 provides as under 8. 1. The joint holders of a share shall be severally as well as jointly liable for the payment of all instalments and calls due in respect of such share. 2. On the death of any of the joint holders of a share the survivors shall be the wholly person or persons recognised by the Company as having any title to or interest in such share, but the Board may require such evidence of death as it may deem fir and nothing herein contained shall be taken to release the estate of a deceased’ joint holder from any liability of such share. 3. Any one of such joint holders may give effectual receipts of any dividends or other moneys payable in respect of such share. 4. Only the person whose name stands first in the register as one of the joint holders of any share, unless otherwise directed by all of them in writing, shall be entitled to delivery of the certificate relating to such share or to receive documents from the company and any documents served on or set to such person shall be deemed served on all the joint holders. 5. Any one of two or more joint holders of a share may vote at any meeting either personally or by Attorney or by proxy in respect of such shares as if he were solely entitled thereto and if more than one of such joint holders be present at any meeting personally or by Attorney or by proxy then that one such person so present whose name stands higher on the register in respect of such shares shall alone be entitled to vote in respect thereof but the other joint holders shall be entitled to be present at the meeting. Provided that a joint holder present at any meeting personally shall be entitled to vote in preference to a joint holder present by a Attorney or proxy although the name of such joint holder Present by Attorney or proxy stands higher in the register in respect of such shares. 6. Except as provided in this Article the person first named in the register as one of the joint holders of a share shall be deemed to be the sole holder thereof for matters connected with the company.

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Article 9 provides as under 9. Save as herein otherwise provided, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction, or as by statute required, be bound to recognise any equitable or other claim or interest in such share on the part of any other person. Article 11 provides as under Share certificates 11. 1. The issue of share certificates and duplicates, and the issue of new share certificates on consolidation or sub-division or in replacement of share certificates which are surrendered for cancellation due to their being defaced, torn, old, decrepit or worn out or the cages for recording transfers having been utilised or of share certificates which are lost or destroyed shall (issue of share certificates) Rules 1960, or any statutory modification or re-enactment thereof. If any share certificate be lost or destroyed, then, upon proof thereof to the satisfaction of the Board and on such indemnity as the Board thinks fit being given, a new certificate in lieu thereof shall be given to the party entitled to the shares to which such lost or destroyed certificate shall relate. 2) Every member shall be entitled, without payment, to one or more certificates in marketable lots for all the shares of each class or denomination registered in his name, or if the Directors so approve (upon paying such fee as the Directors may from time to time determine) to several Certificates, each for one or more of such shares and the company shall complete and have ready or delivery such certificates, within three months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within one month of the receipt of application of registration of transfer, transmission, sub-division, consolidation of renewal of any of its shares as the case may be, every certificate of shares shall be under the seal of the Company and shall specify the numbers and distinctive numbers of shares in respect of which it is issued and amount paid up thereon and shall be in such form as the Directors may prescribe or approve, provided that in respect of a share or shares held jointly by several persons, the company shall not be bound to issue more than one certificate and delivery of a certificate of shares to one of several joint holders shall be sufficient delivery to all such holders. The Company shall not charge any fee for sub-division or consolidation of shares/debentures certificates or for sub-division of letter of allotment, or for splitting, consolidation or renewal of pucca transfer receipts into denominations corresponding to market units of trading or for issue of new certificates in replacement of those which are old and worn out or where the cases on the reverse for recording transfers have been fully utilised. 3) Except where a duplicate certificate is issued in lieu of one that is lost or destroyed, in accordance with the Companies (Issue of share certificates) Rules 1960, the Board shall not issue a new share certificate relating to any share or shares in the Company, save as provided herein before unless the certificate previously issued in respect of the said share or shares has been surrendered to the Company. Article 17 and 18 provide as under 17. The Board may, if it thinks fit, receive from any member willing to advance the same, all or any part of the money due upon the shares held by him beyond the sums actually called for, 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 in respect of which such advance has been made, the Company may pay interest at such rate not exceeding, unless their Company in General Meeting shall otherwise direct, six percent per annum to the Member paying such sum in advance as the Board may agree upon. Money so paid in excess of the amount of calls shall not rank for dividends or confer right to participate in profits. The Board may at any time repay the amount so advanced upon giving to such member not less than three months notice in writing. 18. The members shall not be entitled to any voting rights in respect of the moneys paid by him until the same would, but for such payment, become presently payable. The provisions of these Articles shall mutadis mutanis apply to the calls on debentures of the Company.

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Article 19 provides as under 19. If any member fails to pay any call or instalment of a call, on or before, the day appointed for the payment of the same the board may, at any time thereafter during such time as a call or instalment remains unpaid, serve a notice on such Member requiring him to pay the same, together with any interest that may have accured to the company by reason of such non-payment. Article 20 provides as under 20. 1) The notice shall name a day (not being less than 14 days from the date of notice) and a place or places on and at which such call or installment and such interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time, and at the place appointed, the shares in respect of which call was made or installment is payable will be liable to be forfeited. 2) Neither a judgement in favour of the Company for calls or other moneys due in respect of any shares nor any part payment or satisfaction thereunder nor the receipt by the Company of a portion of any money, which shall from time to time from any member to the 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 proceeding to enforce a forfeiture of such shares as hereinafter provided. Article 21 provides as under 21. If the requisitions 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 instalments, 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. Article 22 provides as under 22. When any share shall have been so forfeited notice of the resolution and for forfeiture shall be given to the Members in whose name it stood immediately prior to the forfeiture and a entry of the forfeiture, with the date thereof, shall forthwith be made in the register, but no forfeiture shall in any manner be invalidated by any commission or neglect to give such notice or to make such entry as aforesaid. Article 23 provides as under 23. Any share so forfeited shall be deemed to be the property of the company and the Board may sell, reallot or otherwise dispose of the same in such manner as it thinks fit. Article 24 provides as under 24. The Board may, at any time before any share so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit. Article 25 provides as under 25. A person whose share has been forfeited shall cease to be a Member in respect of the forfeited share, but shall, notwithstanding such forfeiture, remain, liable to pay, and shall forthwith pay to the company all calls, or instalments, interests and expenses owing upon or in respect of such shares, at the time of the forfeiture, together with interest thereon, from the time of forfeiture until payment, at eighteen percent, per annum and the Board may enforce the payment thereof, or any part thereof, without any deduction or allowance for the value of the shares at the time of forfeiture, but shall not be under any obligation to do so. Article 28 provides as under 28. The fully paid shares shall be free from all lien and the company shall have a first and par amount lien upon all the shares/debentures (other than fully paid-up shares/debentures) registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for all moneys

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whether presently payable or not called or payable at a fixed time in respect of such shares/debentures and no equitable interest in any share shall be created except upon the footing and condition that his Article will have full effect. And such lien shall extend to all dividends and bonuses from time to time declared in respect of such shares/debentures. Unless otherwise agreed the registration of a transfer of shares/debentures shall operate as a waiver of the company’s lien if any, on such shares/debentures. The Directors may at any time declare any shares/debentures wholly or in part to be exempt from the provisions of this clause. Article 33 to 35 provide as under 33. Subject to the provisions of Section 108 of the Act no transfer of shares shall be registered 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 has been delivered to the Company together with the certificate, or if no such certificate is in existence the letter of allotment of the shares and such other evidence as Board may require to prove the title of the transferor or his right to transfer the shares. The transferor shall be deemed to remain the Member in respect of such shares until the name of the transferee is entered in the register in respect thereof. 34. 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 case of a partly paid share, be affected unless the Company gives notice of the application to the transferee in the manner prescribed by section 110 of the Act and subject to the provisions of the Articles the Company shall, unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the register the name of the transferee in the same manner and subject to the same conditions as if the application for registration of the transfer was made by the transferee. 35. The instrument of transfer shall be in the form prescribed by the Act or by Rules made thereunder. The instrument or transfer shall be in writing and all the provisions of section 108 of the Companies Act and of any statutory modification thereof for the time being shall be duly complied within respect or all transfers or shares and registration thereto. Article 36 provides as under 36. 1. Subject to the provisions or Section 111 of the Act and Section 22A of the Securities Contacts ( Regulation) Act,1956, the Directors may, at their own absolute and uncontrolled discretion and by giving reasons, decline to register or acknowledge any transfer of shares whether fully paid or not and the right of refusal shall not be affected by the circumstances that the proposed transferee is already a member of the Company but in such cases, the Directors hall within one month from the date of which the instrument of transfer was lodged with the Company, send to the transferee and transferor notice of the refusal to register such transfer. 2. The board may refuse to register any transfer of shares upon which the Company has lien and in the case of shares not fully paid up may refuse to register a transfer of shares to a transferee of whom the Board does not approve. Provided that the registration of transfer of a share shall not be refused on the grounds of the transferor being either alone or jointly with any other person indebted to the Company on any account whatsoever. Article 37 provides as under 37. If the Company refuses to register the transfer of any share or transmission of any share, the Company shall within one (1) month from the date on which the instrument of transfer was delivered to the Company, send notice of the refusal to the transferee and the transferor or to the person giving information of the transmission, as the case may be. Article 39 provides as under 39. Every instrument of transfer together with the documents and evidence mentioned in Article 33 shall be left at the office for registration. Every instrument of transfer which shall be registered shall be retained by

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AML STEEL LIMITED the Company, but any instrument of transfer which the, Board may refuse to register shall be returned to the person depositing the same. Provisions of the Depositories Act to apply 39A. Nothing contained in Articles 33, 35 and 39 shall apply to the transfer of shares effected by the transferor and the transferee, both of whom are entered as beneficial owners in the records of the Depository. 39B. In the case of transfer of shares where the company has not issued any certificates and where shares and securities are being held in an electronic and fungible form, the provisions of the Depositories Act shall apply. Provided that in respect of the shares held by the depository on behalf of a beneficial owner as defined in the Depositories Act, Section 153, 153A, 187B, 187C and 372 of the Act, shall not apply. Article 40 provides as under: 40. 1. (i)

The Company shall not charge any fee for: registration of transfer of its shares and debentures.

(ii)

Sub-division and consolidation of shares and debenture certificates and for sub-division of letters of allotment and split, consolidation, renewal and pucca transfer receipts into denominations corresponding to the market units of trading.

(iii)

sub-division of renouncable letter of rights.

(iv)

Issue of new certificates in replacement of those which are old, decrepit, or worn out or where the cages on the reverse or recording transfers have been fully utilised.

(v)

Registration of any power of Attorney, probate, letters of administration or similar other documents.

Articles 45 to 49 provide as under ALTERATION OF SHARE CAPITAL 45. 1. The Company in General Meeting may, from time to time, by special resolution, increase its capital by the creation of new shares of one or more classes and of such amount or amounts as may be deemed expedient. 2. When at any time subsequent to the first allotment of shares in the Company it is proposed to increase the subscribed capital of the Company by the issue of new share, then subject to any directions to the contrary which may be give by the Company in General Meeting and subject only to those directions such new shares shall be offered to the persons who at the date of the offer are holders of the equity shares in 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 a notice specifying the number of shares offered and limiting a time not being less than 15 days from the date or the offer within which the offer, if not accepted, will be deemed to have been declined. After the expiry of the time specified in the notice aforesaid or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner as they think most beneficial to the Company. 3. Nothwithstanding anything herein contained the new shares aforesaid may be offered to any persons, whether or not those persons include the persons who, at the date of the offer, are holder’s of the equity shares of the Company, in any manner whatsoever; (a)

if a special resolution to that effect is passed by the Company in General Meeting; or

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AML STEEL LIMITED (b) where no such special resolution is passed, if the votes cast (whether on a show of hands or on a poll, as the case may be) in favour of the proposals contained in the resolution moved at the general meeting sanctioning the issue of such share (including the casting vote, if any of the chairman by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the vote, if any, cast against the proposal by members so entitled to vote and the Central Government is satisfied on an application made by the Board of Directors in that behalf that the proposal is most beneficial to the Company. 4. Nothing in this Article shall apply to the increase of the subscribe capital of the Company caused by the exercise of a option attached to the debentures issued or loans raised by the Company; (i) to convert such debentures or loans into shares in the Company; (ii) to subscribe for shares in the Company (where such option is concerned in the Articles or otherwise), provided that the terms of issue of such debentures or the terms of such loans include a term providing or such option and such term. (a) either has been approved by the Central Government before the issue of the debentures or the raising of the loans, or is in conformity with the rules, if any, made by the Government in this behalf and (b) in the case of the debentures or loans other than debentures issued to, or loans obtained from the Government or any institution specified by the Central Government in this behalf, has also been approved by the special resolution passed by the company in General Meeting before the issue of the debentures or the raising of the loans. 46. 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 to such persons (whether members or not) in such proportion and on such terms and conditions and (subject to compliance with the provisions or section 78 and 79 of the Act) either at a premium or at par or at a discount at such general meeting shall determine and with full power to give any person (whether a member or not) the option to call for or be allotted shares or any class of the Company either call or be allotted shares of any class of the Company either at a premium or at par or at a discount (subject to compliance with the provisions of section 78 and 79 of the Act, in either case) such option being exercisable at such times and for such consideration as may be directed by such general meeting; or the company in general meeting may make any other provision whatever for the issue, allotment or disposal of any shares. 47. 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 existing capital of the Company and shall be subject to the provisions herein contained with reference to the payment or dividends, calls and instalments, transfer and transmission, forfeiture, lien, surrender, voting and otherwise. 48. If, owing to any equality in the number of new shares to be issued, and the number of shares held by Members entitled to have the offer of such new share, any difficulty shall arise in the apportionment of such new shares or any of them amongst the members, such difficulty shall, in the absence of any direction in the resolution creating the shares by the Company in General Meeting, be determined by the Board. 49. The Company may, from time to time by special resolution reduce its capital and any capital Redemption Reserve Account or share premium account in any manner and with and subject to any incident authorised and consent required by law Article 50 provides as under Consolidation, sub-division and cancellation of shares 50.

The company in General Meeting may, from time to time, by ordinary resolution;

(a)

consolidate and divide all or any of its capital into shares of larger amount than its existing shares;

(b) sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum, so, however, that in the sub-division the proportion between the amount paid and the

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AML STEEL LIMITED amount, if any, unpaid or such reduced share shall be the same as it was in the case of the share from which the reduced share is derived; (c) 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 and diminish the amount of its share capital by the amount of the shares so cancelled. Article 54 provides as under Borrowing powers 54. Subject to the provisions of Section 292 and 293 of the Act, the Directors may, from time to time, at their discretion, by a resolution passed at a meeting of the Board accept, deposits from members, either in advance of calls, or otherwise, and generally raise or borrow or secure the payments of moneys for the purpose of the Company, not exceeding the aggregate of the paid up capital of the Company and its free reserves (not being reserves set apart for any specific purposes). Provided however, where the moneys to be borrowed (apart from temporary loans obtained from the companies bankers in the ordinary course of business) exceed the aforesaid aggregate, the Directors, shall not borrow such moneys without the consent of the company by special resolution in General Meeting and secure payment or repayment or any moneys borrowed in such manner and upon such terms and conditions in all respects as they think it and, in particular, by the issue of bonds or debentures of the Company, or any mortagage, charge, or other security upon all or any part of the undertaking or property of the company (both present and future) including its uncalled capital for the time being. Articles 55 to 57 provide as follows Issue of debentures 55. Any debentures, debenture-stocks, bonds or other securities may be issued at a discount, premium or otherwise and with any special privileges, as to redemption, surrender, drawings, allotment of shares, appointment of Directors and otherwise. Debentures, debenture-stocks bonds, and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued. Provided that debentures with the right to allotment of or conversion into shares shall not be issued except in conformity with provisions of section 81 (3) of the Act and subject to the provisions of section 117 thereof. 56. Save as provided in section 108 of the Act, no transfer of debentures shall be registered unless a proper instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the company together with the certificates or certificate of the debentures. 57. Subject to the provisions of section 111 of the Act the Board may without assigning any reason refuse to register the transfer of any debentures and in such event shall within one month from the date of which the instrument of transfer was lodged with the company send to the transferee and the transferor notice of such refusal. Articles 58 to 62 provide as follows 58. The Company shall, in addition to any other meetings, in each year hold a General Meeting as its Annual General Meeting in accordance with the provisions of section 166 of the Act at such time and place as may be determined by the Board and shall specify the meeting as such in the notice calling it. Any other meeting of the company shall be called an Extra-ordinary General Meeting. 59. The Board may whenever it thinks fit, and shall on the requisition of the Members in accordance with section 169 of the Act, proceed to call a Extra-ordinary General Meeting. In default of the Board convening the same, the requisitionists may convene the same, as provided by section 169 of the Act. Provided that unless the Board shall refuse in writing to permit the requisitionists to hold the said meeting at the office, it shall be held at the office. 60. The Company shall comply with the provisions of section 188 of the Act as to giving notice or the resolution and circulation of statements on the requisition of members.

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61. Save as provided in sub-section (2) of section 171 of the Act a General Meeting of the Company may be convened by giving not less than 21 days notice in writing specifying the place, the day and the hour of the meeting and in case of special business the general nature of such business shall be given to the Members and others as provided under section 172(2) of the Act. Where under provisions of the Act, a special notice is required to any resolution a notice of intention to move such resolution as provided under section 173 of the Act shall be given to the Company not less than 14 days before the meeting at which it is to be moved and the company shall comply with the provisions of section 190(2) of the Act. The Accidental omission to give any such notice to or its or receipt by any member or other person to whom it should be given shall not invalidate the proceedings of the meeting. 62. The ordinary business of an Annual General Meeting shall be to receive and consider the Profit & Loss Account, the Balance Sheet and the report of the Directors and of the Auditors, to declare dividends, to appoint Directors in the place of those retiring by rotation, and to appoint Auditors and fix their remuneration. All other business transacted at an Annual meeting and all business transacted at an extraordinary General Meeting shall be deemed special business. Articles 63 to 126 provide as under PROCEEDING AT GENERAL MEETINGS 63. Five members present in person shall be a quorum for a General Meeting. A body corporate being a Member shall be deemed to be personally present if it is represented in accordance with section 187 of the Act. 64. If within half an hour from the time appointed for the meeting a quorum not being present, the meeting, if convened upon the requisition of members shall be dissolved, but in any other case it shall stand adjourned in accordance with provisions of sub-sections (3), (4) and (5) of Section 174 of the Act. 65. Any act resolution which under the provisions of the Act is permitted or required to be done or passed by the company in General Meeting shall be sufficiently so done or passed if effective by an ordinary resolution as defined in section 189 (1) of the Act unless either the Act or the Articles specifically require such act to be done or resolution passed by a special resolution as defined in section 189 (2) of the Act. 66. The chairman of the Board shall be entitled to take the chair at every General Meeting. If there be no such chairman or if at any meeting he shall not be present within 15 minutes after the time appointed for holding such meeting or is unwilling to act, the vice-chairman of the Board if present, shall be entitled to take the chair at such meeting but if the vise-chairman is not present or is unwilling to act, 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, on a show of hands or on a poll if properly demanded, elect one of their number being a member entitled to vote, to be chairman of the meeting. 67. Every question submitted to a meeting shall be decided in the first instance by a show of hands, and in the case of an equality of votes, both on a show of hands and on a poll, the chairman of the meeting shall have a casting vote in addition to the vote to which he may be entitled as a member. 68. At any General Meeting, unless a poll is (before or on the declaration of the result of the show of hands) demanded in accordance with the provisions of section 179 of the Act, a declaration by the chairman that the resolution has or has not been carried either unanimously or by a particular majority, and a entry to that effect in the book containing the minutes of the proceedings of the company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of, or against the resolution. 69. Before or on the declaration of the result of the 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. (i) by atleast five members having the right to vote on the resolution and present in person or by proxy, or

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(ii) by any member or members present in person or by proxy and having not less than one-tenth of the total voting power in respect of the resolution or (iii) by any Member or Members present in person or by proxy and holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up on which is not less than one-tenth of the total sum paid up on all the shares conferring that right. 70. 1. If a poll be demanded on a question taken of adjournment or election of a chairman, the poll shall be taken forthwith. A poll demanded on any other question shall be taken at such time, not being later than forty eight hours from the time when the demand was made, and in such manner and at such place as the chairman of the meeting may direct. 2. The demand of a poll shall not prevent the continuance of a meeting or the transaction of any business other than the question on which a poll has been demanded. 3. Where a poll is to be taken, the chairman of the meeting shall appoint two scrutineers atleast one of whom shall be a member (not being an officer or an employee of the Company) present at the meeting provided that such a Member is willing to scrutinize the votes. 71. The chairman of a General Meeting may, with the consent of the General Meeting, adjourn from time to time and from place to place, but no business shall be transacted at by adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. It shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting, if adjournment is for not mote than 30 days. 72. Where a resolution is passed at an adjourned meeting of the company of the holders of any class of shares in the Company, the resolution shall, for all purposes, be treated as having been passed on the date or which it was, in fact, passed and shall not be deemed to have been passed on any earlier date. VOTES OF MEMBERS 73. 1. On a show of hand every members present in person and being a holder of equity shares and as duly authorised representative of a body corporate, being a holder of an equity share shall have one vote in respect of every resolution or question placed before the meeting. 2. On a poll the voting rights of a holder of an equity share shall be as specified in section 87 of the Act. 3. No body corporate shall vote by proxy so long as a resolution of its Board of Directors under the provisions of Article 74 of the Articles is in force and the representative named in such resolution is present at the General Meeting at which the vote by proxy tendered. 74. Any Company or body corporate which is a member of the Company shall be entitled, through a resolution of its Board of Directors, to authorise such person as it thinks fit to act as its representative at any meeting of the Company. A duly authorised representative of a member Company as aforesaid shall be entitled to exercise the same rights and powers, including the right to vote by proxy, which such company or body corporate could exercise if it were a individual member. 75. If any member be a lunatic, idiot or non composementis, he may vote whether on a show of hands or at a poll by his committee, curator bonis or other legal curator and such last mentioned person may give their votes by proxy provided that forty-eighty hours atleast before the time of holding the meeting or adjourned meeting as the case may be, at which any such person proposes to vote he shall satisfy the Board of his right under the Transmission Article to the share in respect of which he proposes to exercise his right to vote at such meeting in respect thereof. 76. On a poll votes may be given either personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes in the same way. 77. 1. Subject to the provisions of section 176 of the Act the instrument appointing a proxy shall be in writing under the hand of the appointer or of his Attorney duly authorised in writing or if such appointer is a body corporate be under its common seal or the hand of its officer or Atorney duly authorised. A proxy

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AML STEEL LIMITED shall be valid only for the meeting to which it related and it cannot be used for more than one meeting and any adjourment thereof. 2. A person may be appointed by proxy though he is not a Member of the Company and every notice convening a meeting of the Company shall state this and that Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of himself 78. 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 that power of authority, shall be deposited at the office not less than 48 hours before the time for holding the meting at which the person named in the instrument purports to vote in respect thereof and in default the instrument of proxy shall not be treated as valid. 79. 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 principle, 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, revocation or transfer of the shares shall have been received by the company at the office before the vote is give. 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. 80. Every instrument appointing a proxy shall be retained by the Company and shall as nearly as circumstances admit, shall be in any of the forms set out in Schedule IX to the Act. 81. No member shall be entitled to exercise any voting rights either personally or by proxy at any meeting of the Company in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the Company has, and has exercised any right of lien. 82. 1. Any objection as to the admission or rejection of rejection of a vote at a meeting, either, on votes a show of hands, or on a poll made in due time, shall be referred to the Chairman who shall forthwith determine the same, and such determination made in good faith shall be final and conclusive. 2. No objection shall be raised as to validity of any vote except at the meeting or adjourned meeting at which the vote objected to is given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. DIRECTORS 83. The Company shall have not less than three and not more than twelve Directors including all kinds of Directors. 84. 1. Not less than two-thirds of the total number of Directors of the Company shall be persons whose period of office is liable to termination by retirement of Directors by rotation. One third of the total number of Directors appointed in accordance with the provisions of the Articles shall not be liable to retire by rotation. 85. Notwithstanding anything to the contrary contained in the Articles, so long as any moneys remain owing by the Company to the Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation of India Limited (ICICI), Tourism Finance Corporation of India Ltd., (TFCI) the shipping Credit and Investment Corporation of India Limited (SCICI), Industrial Reconstruction Bank of India (IRBI) and Life Insurance Corporation of India (LIC) or to any other Finance Corporation or Credit Corporation or to any other financing Company or body out of any loans granted by them to the Company or so long as IDBI, IFCI, ICICI, SCICI, IRBI, LIC and Unit Trust of India (UTI) or any other Financing Corporation or Credit, Corporation or any other Financing Company or Body (each or which IDBI, IFCI, ICICI, SCICI, IRBI, LIC and UTI or any other Company or Body is herein after in this article referred to as the Corporation) continue to hold debentures in the Company as a result of underwriting or direct subscription or private placement, or so long as the Corporation holds shares in the Company as a result of underwriting or direct subscription or so long as any liability of the Company arising out of any guarantee furnished by the Corporation on behalf of the

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AML STEEL LIMITED Company remains outstanding, the Corporation shall have a right to appoint from time to time, any person or persons as a Director Directors, wholetime or non-whole time, (which Director or Directors, is/are hereinafter to as nominee Director/s) or the Board of the Company and to remove from such office any person or persons so appointed and to appoint any person or persons so appointed and to appoint any person or persons so appointed and to appoint any person or persons in his or their place/s. The Board of Directors of the Company shall have no power to remove from office the Nominee Director/s. At the option of the corporation such Nominee Director/s shall not be required to hold any share qualification in the Company. Also at the option of the corporation such Nominee Director/s shall not be liable to retirement by rotation of Directors. Subject as aforesaid, the Nominee Director/s shall be entitled to the same rights and privileges and be subject to the same obligations as any other Director of the Company. The Nominee Director/s so appointed shall hold the said office only so long as any moneys remain owing by the company to the corporation or so long as the corporation holds Debentures in the Company as a result of underwriting or direct subscription or private placement or so long as the corporation holds shares in the Company as a result of underwriting or direct subscription or the liability of the company arising out of any guarantee is outstanding and the Nominee Director/s so appointed in exercise of the said power shall ipso facto vacate such office immediately the moneys owing by the Company to the corporation is paid off or of the corporation ceasing to hold debentures/shares in the company or in the satisfaction of the liability of the Company arising out of any guarantee furnished by the corporation. The Nominee Director/s appointed under this Article shall be entitled to receive all notice of and attend all General Meetings, Board Meetings and Meetings of the committee of which the Nominee Director/s is/are Member/s as also the minutes of such meetings. The Corporation shall also be entitled to receive all such notices and minutes. The Company shall pay to the Nominee Director/s sitting fees and expenses which the other Directors of the Company are entitled, but if any other fees, Commission, moneys or remuneration in any form is payable to the Directors of the Company, the fees commission moneys and remuneration in relation to such Nominee Director/s shall accrue to the corporation and same shall accordingly be paid by the company directly to the corporation. Any expenses that may be incurred by the corporation or such Nominee Director/s in connection with their appointment or Directorship shall also be paid or reimbursed by the Company to the corporation or as the case may be to such Nominee Director/s. Provided that if any such Nominee Director/s is an officer of the corporation, the sitting fees, in relation to such Nominee Director/s shall also accrue to the corporation and the same shall accordingly be paid by the company directly to the corporation. Provided also that in the event of the nominee Director/s being appointed as whole-time Director/s such Nominee Director/s shall exercise such powers and duties as may be approved by the corporation and have such rights as are usually exercised or available to a whole-time Director, in the management of the affairs of the Borrower. Such Nominee Director/s shall be entitled to receive such remuneration, fees, commission and moneys as may be approved by the corporation. 86. Any trust deed securing and covering the issue of debentures of the Company may provide for the appointment of a Director (in these presents referred to as the Debenture Director) for and on behalf of the Debenture holders for such period as there is provided not exceeding the period for which the debentures or any of them shall remain outstanding and for the removal from office such Debenture Director and on a vacancy being caused whether by resignation, death, removal or otherwise, of a Debenture director in the vacant place. The Debenture director shall not be liable to retire by rotation or be removed from office except as provided as aforesaid. 88. Unless otherwise determined by the company in general meeting, a director shall not be required to hold any qualification shares in the company. 89. Each Director other than a Managing Director or whole-time Director shall be entitled to receive out of the funds of the company for his services in attending meetings of the Board or a Committee thereof, a fee not exceeding the amount specified under Section 310 as may, from time to time, be fixed by the Board for each such meetings of the Board or Committee thereof attended by him. In addition to this, the Directors may, subject to the Act, allow and pay to any Director who is not a resident of the place where the registered office of the company is situated or where the meeting of the Board is ordinarily held and who

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AML STEEL LIMITED shall come to such place for the purpose of attending a meeting of the Board or a committee thereof, such sum as the Directors may consider reasonable for travelling, hotel and other expenses. 90. If any Director, shall be called upon to perform extra services or to made any special exertions or efforts, which expressions shall include work done as a member of a committee of the Board, the Board may subject to the provisions of section 198, 309, 310 and 314 of the Act remunerate, the Directors so doing either by a fixed sum or otherwise and such remuneration may be either in addition to or in substitution for any other remuneration to which he may be entitled. 91. The continuing, Directors may act, not-withstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by the articles as the necessary quorum of Directors, the continuing Directors shall not act except for the purpose of increasing the number of Directors or for summoning a General Meeting. 92. The office of Director shall become vacant if: (i) he falls to obtain within the time specified in subsection 270 or at any time thereafter ceases to hold the share qualification, if any, required of him by the Articles of the Company (ii) he is found to be of unsound mind by a court of competent jurisdiction. (iii) he applies to be adjudicated an insolvent (iv) he is convicted by a court for any office involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months (v) he fails to pay any call in respect of shares of the Company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call, unless the Central Government has, by notification in the official gazette, remove the disqualification incurred by such failure (vi) he absents himself for three consecutive meetings of Board of Directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board. (vii) he (whether by himself or by any person for his benefit or on his account) or any firm in which he is partner or any private company of which he is a Director accepts, a loan or from any guarantee or security for loans, from the Company in contravention or Section 295 of the Act. (viii) he acts in contravention of Section 299 of the Act (ix) he becomes disqualified by an order of court under Section 203 of the Act; (x) he is removed from office by pursuant to Section 284 of the Act; or (xi) having been appointed a Director by virtue of his holding any office or other employment in the Company, he ceases to hold such office or other employment in the Company. 93. No Director or other person referred to in Section 314 of the Act shall be appointed to or hold any office or place of profit under the Company or under any subsidiary of the Company except in accordance with provisions of Section 314 of the Act. 94. Subject to compliance with the provisions of sections 297, 299, 300 and 314 of the Act and save as herein provided no Director shall be disqualified to hold any office or place of profit under the company or under any Company in which this Company shall be a shareholder or otherwise interested, or from contracting with the Company either as vendor, purchaser, agent, broker or otherwise, not shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in anywise interested be avoided, not shall any /director be liable to account to the Company for profit arising from any contract or arrangement by reason only of such Director holding that office or of the fiduciary relation thereby established.

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AML STEEL LIMITED

95. 1. Every Director of the Company who is in any way whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement entered or to be entered into, by or on behalf of the Company, shall disclose the nature of his concern or interest at a meeting of the Board of Directors, in the manner provided in Section 299 (2) of the Act. 2.(a) In the case of a proposed contract or arrangement, the disclosure required to be made by a Director under clause (1) shall be made at the meeting of the Board at which the question of entering into the contract or arrangement is first taken to consideration, or if the Director was not at the date of that meeting, concerned or interested in the proposed contract or arrangement at the first meeting of the Board held after he be so concerned or interested. (b) In case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the Director becomes concerned or interested in the contract or arrangement. 3. (a) For the purpose of clause (1) and (2) a general notice given to the Board by a Director to the effect that he is a Director or a member of a specified body corporate or is a member of specified firm and is to be registered as concerned or interested in any contract or arrangement which may, after the date of the notices, entered into with that body corporate or firm, shall be deemed to be sufficient disclosure of concern or interest in relation to any contract or arrangement so made. (b). Any such general notice, shall expire at the end of the financial year in which is is given but may be renewed for further period of one financial year at a time fresh notice given in the last month of financial year in which it would otherwise expire. (c) No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the Board, or the Director concerned takes reasonable steps to secure that it is brought up and read at the first meeting of the Board after it is given. (d) Nothing in this Article shall apply to ant contract or arrangement entered into or to be entered into between the Company and any other Company where any one or two or more of Directors together holds or hold not more than two percent of the paid up share capital in the other Company. 96. Subject to the provisions of Sections 297 of the Act neither shall a Director be disqualified from contracting with the Company either as vendor, purchaser or otherwise for goods, materials or services or for underwriting the subscription of any shares in or debentures of the Company nor shall any such contract or arrangement entered into by or on behalf of the company with a relative of such Director, or a firm in which such Director or relative is a partner or with any other partner in such firm or with a private company of which such Director is a Member or Director, be avoided nor interested be liable to account to the Company for any profit realised by any such contact or arrangement by reason of such Director holding office or on account of the fiduciary relation thereby established. 97. Every Director shall comply with provisions of Section 299 of the Act in regard to disclosure of his concern or interest in any contract or arrangement entered into or to be entered into by the Company. 98. Save as permitted by Section 300 of the Act or any not other applicable provisions of the Act no Director shall as a Director, take any part in the discussion of, or vote on any contract or arrangement in which he is in any way, whether directly or indirectly concerned or interested, nor shall his presence count for the purpose of forming a quorum at the time of such discussions or vote. 99. At each Annual General Meeting of the Company one-third of such of the Directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three then the number nearest to one-third shall retire from office. 100. The Directors to retire by rotation at an Annual General Meeting shall be those who have been longest in Office since their last appointment but as between persons who became Directors on the same day, those to retire shall, in default of and subject to any agreement among themselves, be determined by lot. 101. Save as permitted by Section 263 of the Act, every resolution of a General Meeting for the appointment of a Director shall relate to one named individual only.

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102. At the Annual General Meeting at which a Director retires as aforesaid, the Company may fill up the vacancy by appointment the retiring Director or some other person thereto. If the place of the retiring Director is not so filled up, the provisions of Section 256 (4) of the Act shall apply. 103. The Company may remove any Director before the expiration or his period of office in accordance with the provisions of Section 284 of the Act and may subject to the provisions of the Section and Articles 105 of the Articles appoint another person in his stead. 104. Subject to Articles 105 of Articles, the Board shall have power, from time to time, to appoint one or more persons an additional Director on the Board. However, the total number of Directors shall not any time exceed the number as fixed under Article 83 of the Articles. A retiring Director shall be eligible for reelection. 105. Subject to the provisions of the Sections 261, 264 and 284 (6) of the Act and article 103 of the Articles, the Board shall have the power to fill any casual vacancy occurring in the office of a Directors who has vacated his office before his term of office will expire in the normal course. Any person so appointed shall hold office only upto the date on which the Director in whose place he is appointed would have held office if it had not been vacated by him. Provided that the Board shall to fill such a casual vacancy by appointing thereto any person who has been removed from the office of Director under Article 92. 106. The Board of Directors of the Company may appoint an alternate Director to act for a director (herein after called the original Director) during his absence for a period of not less than three months from the state in which the meetings of the Board are ordinarily held and such appointment shall have effect and such appointee, whilst he holds office as an alternate Director shall be entitled to notice of meeting of the Directors and to attend and vote there at accordingly. An alternate Director appointed under the Article shall not hold office as such for a period longer than that permissible to the original Director in whose place he has been appointed and shall vacate office if and when the original Director determined before he so returns to the state in which the meetings of the Board are ordinarily held in any provision in the Act or in the Articles for the automatic reappointment of retiring Directors in default to another appointment shall apply to the original Director and not to the alternate Director. In case an alternate Director shall be appointed in place of an original Director appointed by the Promoters or Tamil Nadu Industrial Development Corporation, the Board shall appoint such person as an alternate Director who has been approved by The Promoters or Tamil Nadu Industrial Development Corporation as the case may be. 107. 1. A person, who is not a retiring Director, shall subject to the provisions of the Act, be eligible for appointment to the office of a Director at any General Meeting, if he or some Member intending to propose him has, not less than fourteen days before the meeting, left at the office of the Company a notice in writing under his hand signifying his candidature for the office of a Director or the intention of such a Member to purpose him as a candidate for that office, as the case may be. 2. Every person (other than a person who has left at the office of the Company a notice under sub-clause (1) of the Article signifying his candidature for the office of a Director) proposed as a candidate for the office of a Director shall sign, and file with the Company his consent in writing to act as a Director, if appointed. 3. A person other than a Director re-appointed after retirement by rotation shall not act as a Director of the Company unless he has within thirty days of his appointment signed and filed with the Registrar his consent in writing to act as such Director. 108. 1. The Company shall keep at its registered office as register containing the particulars of its Directors, Managers, and other persons mentioned in Section 303 of the Act and shall send to the Registrar a Return containing the particulars specified in the said section and shall otherwise comply with the provisions of the said section in all respects. 2. The Company shall in respect of each of its Directors keep at its office a Register required by Section 307 of the Act, shall otherwise duly comply with provisions of the said section in all respects.

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109. 1. Every Director (including a person deemed to be a Director by virtue of the explanation to subsection (1) of Section 303 of the Act). Managing Director, Manager or Secretary of the Company shall, within twenty days of his appointment to any of the above office in any other body corporate disclose to the Company the particulars relating to this office in the other body corporate which are required to be specified under sub-section (1) of Section 303 of the Act. 2. Every Director and every person deemed to be a Director of the Company by virtue of sub-section (1) of Section 307 of the Act, shall give notice to the Company of such matters relating to himself as may be necessary for the purpose of enabling the Company to comply with the provisions of that section. PROCEEDINGS OF THE BOARD 110. The Board shall meet together at least once in every three months, and at least four such meetings shall be held in every year. Not less than seven (7) days notice shall be given for every meeting of the Board. Every notice of a meeting shall contain a statement of the business to be transacted there at. Notice may be waived or a meeting be called by giving shorter notice with the consent of a majority of Directors, of whom atleast one Director should be the nominee of the Promoter. 111. The Managing Director may, at any time, and the Secretary shall upon the request of any two Directors convene a meeting of the Board. 112. 1. The Board may elect from their body of Directors a Chairman of its meeting and determine the period for which he is to hold office. 2. If no such Chairman is elected, or if at any meeting the Chairman is not present within five minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be Chairman of the meeting. 113. 1. Subject to section 287 of the Act the Quorum for a meeting of the Board of Directors shall be onethird of its total strength (excluding Directors, if any, whose places may be vacant at the time and any fraction contained in that one-third being rounded off as one) or two Directors whichever is higher, provided where at any time the number of interested Directors at any meeting exceeds or is equal to twothirds of the total strength the number of the remaining Directors, (that is to say, the number of Directors who are not interested), present at the meeting being not less than two shall be quorum during such time. 2. For the purpose of clause (1) – (i) Total strength of the Board of Directors of the Company shall be determined in pursuance of the Act, after deducting therefrom the number of Directors, if any, whose places may be vacant at the time, and (ii) Interested Directors means any Director whose presence cannot by reason of Articles 98 hereof or any other provisions in the Act court for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter. 114. Subject to the provisions as aforesaid a meeting of the Board at which a quorum be present shall be competent to exercise all or any of the authorities, powers and discretions which by or under the articles or the Act are for the time being vested in or exercisable by the Board. 115. The following powers shall be exercised by the Board in a meeting by a resolution. (i)

Appointment of Manager, Managing Director or wholetime Director.

(ii)

Employment of any person whose salary exceeds Rs.4,000/- per month.

(iii)

Entering into contracts having a term of more than three years.

(iv)

Borrowing moneys other than long term loans, at a time in excess of Rupees ten (10) lakhs.

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AML STEEL LIMITED (v)

Creating any mortgage, charge or other encumbrance in respect of the Company’s properties and assets except in connection with loans obtained pursuant of Articles 115 (1) (iv) above.

(vi)

Undertaking any new business or substantial expansion of the existing business of the Company.

(vii)

Capital expenditure exceeding Rs.5,00,000 or buying or selling fixed assets or lease terms where the total values of such property exceeded Rs.5,00,000/-.

(viii)

Registration of the Transfer of shares of the Company and the issue of the shares of the Company.

(ix)

Granting loans, other loans to employees of the Company in excess of a total of Rs.50,000/- at any one time.

(x)

Guarantee obligations of third parties.

(xi)

Appointment of any selling agents/ distri-butors for the sale of the products manufactured by the Company.

(xii)

Declaration of Dividends.

(xiii)

Making calls on the Members.

(xiv)

Filling any casual vacancy on the Board of Directors.

(xv)

Obtaining any long term loan or altering any term or condition of any such loan.

(xvi)

Merger or amalgamation of the Company with any other Company.

(xvii)

The sale, lease, exchange or other disposition of all or substantially all of the assets of the Company.

(xviii)

Voluntary liquidation of the Company.

(xix)

Entering into contract with Members of the Company or other companies owned by them or with Companies in which the Members have a direct or indirect interest.

(xx)

Formation acquisition or dissolution of any Company by the Company.

116. The Board may, subject to the provision of the Act, from time to time and at any time, delegate any of its powers to a committee consisting of Directors as it thinks fit and may, from time to time, revoke such delegation. Any committee so formed shall, in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed upon it by the Board. 117. The meetings and proceedings of any such committee shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board in so far as the same are applicable thereto; and are not superseded by any regulations made by the Board under the last proceeding Article. 118. Acts done by a person as a Director shall be valid notwithstanding that it may afterwards be discovered that his appointment was invalid by standing reason of any defect or disqualification or had defective terminated by virtue of any provisions contained appointment in the Act or in the Articles. Provided that nothing in these Articles shall be deemed to give validity to acts done by a Director after his appointment has been shown to the Company to be invalid or to have terminated. 119. Except as provided by section 262, 292, 297, 316, 372 (5) and 386 of the Act or any other provisions of the Act and subject to Article 115 hereof a resolution passed at a meeting of the Board shall be as valid and effectual as it has been passed at a meeting of the Board, or committee of the Board, a the case may be duly called and constituted, if it is passed by circulation in the manner provided in Section 289 of the Act.

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AML STEEL LIMITED

120. 1. The Board shall, in accordance with the provisions of the Act, cause minutes to be kept of every General Meeting of the Company and of every meeting of the Board and of every committee of the Board. 2. Any such, minutes of any meeting of the Board or any committee of the Board of the Company in General Meeting, kept in accordance with the provisions of the act, shall be evidence of the matters stated in such minutes. The minute books of General Meetings of the Company shall be kept at the office and shall be open to inspection by Members during the hours of 11 a.m to 1 p.m on such business days as the Act requires them to be kept open for inspection. POWERS OF THE BOARD 121. Subject to the provisions the act, the control of the Company shall be vested in the Board who shall be entitled to exercise all such powers and to do all such acts and things as the Company is authorised to exercise and do. Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by the Act or any other statute or by the Memorandum of the Company or by the Articles or otherwise, to be exercised or done by the Company in General Meeting. Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions in that behalf contained in the Act or any other Statute or in the Memorandum of the Company or in the Articles, or in any regulations not inconsistent there with and duly made there under, including regulation made by the Company in General Meeting, but no regulation made by the Company in General Meeting shall invalidate any prior act of the Board which would have been valid if that regulation has not been made. 122. The Board of Directors shall exercise the following powers only if authorised by a special resolution passed at a General Meeting. The said powers shall be; (i) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the Company, or where the Company owns more than one undertaking of the whole, or substantially the whole of any such undertaking; (ii) remit, or give time for the repayment of any debt due by a Director except due in ordinary course of business; (iii) invest money otherwise than in trust, securities (the amount of compensation received by the Company in respect of the compulsory acquisition) of any such undertaking as is referred to in clause (i), or of any premises of properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time; (iv) borrow money where the moneys to be borrowed, together with the moneys already borrowed by the Company, (apart from temporary loans obtained from the Companys bankers in the course of business) will exceed the aggregate of the paid up capital of such Company and its free reserves, that is, any reserves not set apart for any specific purposes; or (v) contribute, after the commencement of the Act, to charitable and other purposes not directly relating to the business of the Company or the welfare of its employees any amounts the aggregate of which will, in any financial year, exceed fifty thousand rupees, or five percent of its average net profits as determined in accordance with the provisions of Sections 349 and 350 during the three financial years immediately preceding, whichever is greater. MANAGING DIRECTORS/WHOLE-TIME DIRECTORS 123. 1. The Board may from time to time, with such sanction of the Central Government as may be required by law, appoint one or more of their persons to the office of the Managing Director or Managing Directors or wholetime Director(s). 2. The Directors may from time to time resolve that there shall be either one or more Managing Directors or wholetime Directors.

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3. In the event of any vacancy arising in the office of a Managing Director or whole time Director, if the Directors resolve to increase the number of Managing Directors or wholetime Directors, the vacancy shall be filled by the Board of Directors and the Managing Director or wholetime Director so appointed shall hold the office for such period as the Board of Directors may fix. 124. Subject of the provisions of Section 255 of the Act, a Managing Director/wholetime Director shall not while he continues to hold that office, be subject to retirement by rotation, but (subject to the provisions of any contract between him and the company) he shall be subject to the same provisions as to resignation and removal, as the other Directors and he shall, ipso facto and immediately ceases to be Managing Director or whole-time Director if he ceases to hold the office of Director from any cause. 125. Subject to the provisions of sections 198, 309, 310 and 311 of the Act, a Managing Director and/or whole-time Director shall receive such remuneration from time to time as may be sanctioned by the Company in General Meeting and approved by Central Government, where ever such approval is necessary. 126. Subject to the provisions of the Act and in particular to the prohibitions and restrictions contained in Section 292 thereof, the Board may, from time to time, entrust to and confer upon a Managing Director or whole-time Director for the time being such of the powers exercisable under these provisions by the Board as it may think fit and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions and with such restrictions as it thinks fit; and the Board may confer such powers either collateraly with or to the exclusion of, and in substitution for all or any of the powers of the Board on that behalf; and may, from time to time, revoke, withdraw, alter or vary all or any of such powers. Article 132 to 135 provides as under Reserves 132. The Board, may from time to time, before recommending any dividend, set apart any and such portion of the profits of the company as it thinks fit as a Reserve to meet contingencies or for the liquidation of any debentures, debts or other liabilities of the company, for equalization of dividends, for repairing, improving or maintain any of the property of the Company and for such other purposes of the company as the board in its absolute discretion thinks conducive to the interests of the company and may, subject to the provisions of the section 372 of the Act, invest the several sums so set aside upon such investments (other than shares of the company) as it may think fit, and from time to time deal with and vary such investments and dispose of all or any part thereof for the benefit of the company, and may divided the reserves into such special funds, as it thinks fit with full power to employ the reserves or any part thereof in the business of the company and that without being bound to keep the same separate form the other assets. 133. Any General Meeting may upon the recommendation of the Board resolve that any moneys, investments or other assets forming part of the undivided profits of the company standing to the credit of a Reserve of/and capital Redemption Reserve Account, or in the hand of the Company and available for payment of dividends or representing premium received on the issue of shares and standing to the credit of the share premium account be capitalised and distributed amongst such of the shareholders 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 shareholders in paying up in full any unissued shares or debentures of the company which shall be distributed accordingly or in or towards payment of the uncalled liability on any issued shares, and that such shareholders in full satisfaction of their interest in the said capitalised sum. Provided that any sum standing to the credit of the share premium account or any capital redemption reserve account may, for the purposes of Articles, only be applied in the paying up of be issued share to be issued to members of the Company as fully paid bonus shares. 134 . The Company in General Meeting may at any time and from time to time resolve that any surplus moneys in the hands of the company representing capital profits arising from moneys received or recovered in respect of or arising from the sale or disposal or any capital assets of the Company or any investments representing the same, instead of being applied in the purchase of other capital assets or other capital purposes, be distributed amongst the equity shareholders on the footing that they receive the same as capital

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AML STEEL LIMITED in the proportions in which that they would have been entailed to received the same if it had been distributed by way of dividends. Provided always that no such profits as aforesaid shall be so distributed unless there shall remain in the hands of the company sufficiency of other assets to answer in full the whole of the liabilities and paid up shares capital of the company for the time being. 135. For the purpose of giving effect to any resolution under the two last preceding Articles the Board may settle any difficulty which may arise in regard to the distribution as it thinks 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 member upon the footing of the value so fixed in order to adjust the rights of all parties and may vest such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend of capitalised fund as may seem expedient to the Board. Where requisite a proper contract shall be filed in accordance with section 75 of the Act, and the Board 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. Article 136 to 150 provides as under 136. Subject to the rights of Members entitled to shares with preferential rights attached thereto, the profits of the company shall be divisible amongst the Members in proportion of the amount of capital paid up or credited as paid up with respect to the shares held by them. The amount paid up in advance of calls on any shares shall not, however, carry a right to dividend or to participate in profits. 137. 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 the provisions of Section 207 of the Act, fix the time for payment. 138. No larger dividend shall be declared than that recommended by the Board, but the Company in General Meeting may declare a smaller dividend. 139. Subject to the provisions of Section 205 of the Act, no dividend shall be payable except out of the profits of the company or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of any guarantee given by such government and no dividend shall carry interest against the company. 140. The declaration of the board as to the amount of the net profits of the company shall be conclusive. 141. The board may, from time, pay to the Members such interim dividends as appears to the Board to be justified by the profits of the ‘company. 142. The board may deduct from any dividend payable to any member all sum of money, if any, presently payable by him to the Company on account of calls or otherwise in relation to the shares to the Company. 143. 1. 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 made payable at the same time as the dividend and the dividend may be set off against the call. 2. The Board may retain dividends payable on shares in respect of which any person is entitled under Article 44 to become a Member or to transfer the shares, until such person shall become a Member in respect of such shares or shall duly transfer the same. 144. No dividend shall be payable except in cash; provided that nothing in the foregoing shall be deemed to prohibit the capitalisation of profits or reserves of the Company for the purpose of issuing fully paid up bonus shares or paying up any amount for the time being unpaid on the shares held by the Members of the Company. 145. If shares or issued for the purpose of raising money to defray the expenses of the construction of any work or building or the provision of any plant, which cannot be made profitable for a long period, the board of Directors may, on behalf of the Company:

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AML STEEL LIMITED a. pay interest on so much of that share capital as is for the time being paid up, for the period and subject to the conditions and restrictions mentioned in sub-section 3 to 7 of section 208 of the Act; and b. charge the sum so paid by way of interests to capital as part of the cost of construction of the work or the provisions of the plant. 146. A transfer of shares shall not pass the rights to any dividend declared thereon before the registration of the transfer by the company 147. No dividend shall be paid in respect of any share except to the registered holder of such share or to his order or to his bankers but nothing contained in this Articles shall be deemed to require the bankers of a registered shareholders to make a separate application to the company for the payment of the dividend. Nothing in this article shall be deemed to effect in any manner the operation of Article 146. 148. Any one of several persons who are registered as the joint-holders of any share may give effectual receipts for all dividends, bonuses, and other payments in respect of such shares. 150. Unclaimed dividends shall be dealt with in accordance to the provisions of section 205 (A) of the Act. No unclaimed dividends shall be forfeited by the Board of the Company. Articles 151 to 165 provide as under BOOKS AND DOCUMENTS 151. The Board shall cause to be kept in accordance with section 209 of the Act proper books of account with respect to: (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place: (b) all sales and purchases of goods by the company; (c) the assets and liabilities of the company and (d) the particulars relating to utilisation of material or labour or to other items of costs as may be prescribed in accordance with the provisions of section 209 (1) (d) of the Act. 152. 1.The books of account shall be kept at the office or at such other place in India as the board may decide; and when the board so decides, the company shall, within seven days of the decision, file with the registrar a notice in writing giving the full address of that other places. 2. The books of account of the company together with the vouchers relevant to any entry in such books of account relating to a period of not less than eight years immediately preceding this current year shall be preserved in good order. 153. At every Annual General Meeting the Board shall lay before the company a Balance Sheet and Profit and loss Account made up in accordance with the provisions of section 210 of the Act and such Balance sheet and Profit and Loss Account shall comply with the requirements of section 210,211,212,215 and 216 and of schedule VI of the Act so far as they are applicable to the company but, save as aforesaid, the Board shall not be bound to disclose greater details of the result or extent of the trading and transactions of the company that it may deem expedient. 154. There shall be attached to every Balance sheet laid before the company’s board, a report by the board complying with section 217 of the Act. 155. A copy of every Balance Sheet (including the Profit & Loss Account, the Auditors Report and every document required by law to be annexed or attached to the Balance Sheet) shall, as provided by Section 219 of the Act, not less than twenty one days before the meeting be sent to every such Member, debenture holder, trustee and other person to whom the same is required to be sent by the said section.

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AML STEEL LIMITED 156. The Company shall comply with Section 220 of the Act as to filing copies of the Balance Sheet and Profit and Loss Account and document and documents required to be annexed thereto with the Registrar. AUDIT 157. At least once in every year the books of account of the Company shall be examined by one or more Auditors. 158. 1. The Company at each Annual General Meeting shall by ordinary resolution appoint or reappoint an Auditor or Auditors to hold office from the conclusion of that meeting until the conclusion of the next Annual General Meeting and shall, within seven days of the appointment, give intimation thereof to every Auditor or Auditors. The appointment, remuneration, rights and duties of the Auditor or Auditors shall be regulated by Section 224 to 227 of the Act. 2. The first Auditor or Auditors of the Company shall be appointed by the Board within one month from the date of registration of the Company and the Auditor or Auditors so appointed shall hold office until the conclusion of the first Annual General Meeting of the Company. 159.

Where the Company has a branch of office the provision of section 228 of the Act shall apply.

160. All notices of and other communications relating to any General Meeting of the Company which any Member of the Company is entitled to have sent to him shall also be forwarded to the Auditors of the Company, and the Auditors shall be entitled to attend any General Meeting and to be heard at any General Meeting which he attends on any part of the business which concerns him as Auditor. 161.The Auditors Report including Auditors separate, special or supplementary report, if any, shall be read before the Company in General Meeting and shall be open to inspection by any Member of the Company. 162. Every Balance Sheet and Profit and Loss Account of the Company when audited and adopted by the Company in General Meeting shall be con-clusive except as regards any error discovered therein within three months next after the approval thereof. Whenever such error is discovered within that period, the accounts shall forthwith be corrected and henceforth shall, subject to the approval of the Company in General Meeting be conclusive. SERVICE OF NOTICES AND DOCUMENTS 163. A Notice or other document may be given by the Company to its members in accordance with Section 53 of the Act. 164. Every person who by operation of law, transfer, or other means whatsoever, shall become entitled to any share shall be bound by every notice in respect of such share, which to his name and address being entered on the register shall have been duly given to the person from whom he derives his title to such share. 165. Subject to the provisions of Article 164 any notice or document delivered or sent by post to or left at the registered address of any Member in pursuance of the Articles shall, notwithstanding such Members be then deceased and whether or not the Company have notice of his demise, be deemed to have been duly served in respect of any registered share, whether held solely or jointly with other persons by such member until some other person be registered in his stead as the holder or joint-holder thereof and such service shall of all purposes of these provisions to be deemed a sufficient service of such notice or document on his heirs, executors or administrators and all person, if any, jointly interested with him in any such share.

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SECTION IX-OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company or contracts entered into more than two years before the date of filing of this RHP) which are or may be deemed material have been entered or to be entered into by the Company. These contracts, copies of which have been attached to the copy of this RHP have been delivered to the RoC, Chennai for registration and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company located B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu 601201, from 10.00 a.m. to 4.00 p.m. on working days from the date of filing of this RHP until the date of closure of this Issue. MATERIAL CONTRACTS 1. 2. 3. 4. 5. 6. 7.

Letters dated 21 October, 2005 appointing Karvy Investor Services Limited and Centrum Capital Limited as BRLMs. Letter dated 18 November, 2005, appointing Cameo Corporate Services Limited, as Registrar to the Issue. Memorandum of Understanding amongst our Company and the BRLMs dated 1 March, 2006. Memorandum of Understanding executed by our Company and the Registrar to the Issue dated 1 March, 2006. Escrow Agreement dated [•] between The Company, the BRLMs, Escrow Collection Bank and the Registrar to the Issue. Syndicate Agreement dated [•] between The Company, the BRLMs and the Syndicate Members. Underwriting Agreement dated [•] between The Company, the BRLMs and the Syndicate Members.

MATERIAL DOCUMENTS 1. 2. 3. 4. 5.

6. 7.

8.

9. 10. 11. 12. 13. 14. 15. 16. 17.

The Memorandum and Articles of Association of the Company, as amended from time to time. All the Certificates of Incorporation of the Company including the last dated 1 August, 2005 and the certificate of Commencement of Business. Resolutions passed in the Extraordinary General Meeting of our Company on 19 July, 2005. Copies of the Annual Reports of the Company and its Subsidiaries for the years ended 31 March, 2001, 2002, 2003, 2004 and 2005 and audit report of the Auditors for the period ended 31 December, 2005. Consents of Auditors, Bankers to the Company, BRLMs, Syndicate Members, Legal Advisors to this Issue, Directors, Company Secretary, Registrar to this Issue, Bankers to this Issue, Compliance Officer as referred to, in their respective capacities. Memorandum of Understanding dated 26 February, 2004 executed by AMLSPL with the Government of Jharkhand. Resolution of the members of the Company passed at the Annual General Meeting held on 22 August, 2005, appointing Mr.Ashok Agarwal as the Managing Director for a period of 5 years with effect from 22 August, 2005. Copy of letter dated 24 February, 2006 from the Auditors of the Company, M/s K.P Jain and Co, Chartered Accountants confirming Tax benefits as mentioned in this DRHP, certificate dated 1 March, 2006 for the deployment of funds in the proposed Project by AMLSPL and certificate dated 1 March, 2006 for the deployment of funds towards the objects of the issue by AMLSL. Due Diligence Certificate dated 24 March, 2006 from BRLMs. Listing Agreement dated 24 January, 1996 with MSE. Listing Agreement dated 24 January, 1996 with DSE. Listing Agreement dated 24 January, 1996 with ASE. Tripartite agreement dated 9 July, 2002 between the Company, Cameo Corporate Services Limited, and NSDL, for offering depository services. Tripartite agreement dated 7 August, 2002, between the Company, Cameo Corporate Services Limited, and CDSL, for offering depository services. SEBI Observation letter dated [•]. Copy of Intial listing applications dated [•] filed with NSE and BSE. Copy of the In-principle listing approval dated [•],[•],[•],[•] and [•] from NSE, BSE, MSE, DSE and ASE.

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AML STEEL LIMITED

18. Copy of the Board Resolution of the Company dated 24 March, 2006, approving this DRHP. 19. Geological report dated 26 July, 2005 prepared by Mr. Pradip Kumar Sen. 20. Financial Appraisal Report of SBI Caps dated 30 July, 2005 and their consent to use their name and contents of the Financial Appraisal Report in the DRHP dated 10 December, 2005. 21. Agreements for technical know-how dated 21 February, 2005 and 8 June, 2005 executed between the AMLSPL and Popuri Engineering & Consultancy Services. 22. Letters dated, 25 January, 2006 from Central Bank of India, UCO Bank dated 24 January, 2006, Federal Bank Limited dated 8 September, 2005, sanctioning the term loans to AMLSPL for the proposed Project. Any of the contracts or documents mentioned in the DRHP may amended or modified at any time if so required in the interest of The Company or if required by the other parties, without reference to the shareholders subject to compliance of the applicable laws.

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AML STEEL LIMITED

DECLARATION All the relevant provisions of the Companies Act, 1956, and the guidelines issued by the GoI or the guidelines issued by the Securities and Exchange Board of India, as the case may be, have been complied with and no statement made in this DRHP is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules made thereunder or guidelines issued, as the case may be. Further, we certify that all the disclosures made in the DRHP are true and correct. SIGNED BY ALL DIRECTORS

Mr. Ruli Ram Agarwal, Chairman

Mr. Ashok Agarwal, Managing Director

Mr.Vinay Kishore Kasat, Director

Mr. Poonam Chand Jangir, Director

Mr. Ajay Agarwal, Director

Mr. S. Kolandai Raj, Director

Signed by Mr.Viswanathan.P, Chief Financial Officer Date: Place: Chennai.

, 2006.

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