vijay industries and projects limited - sebi.gov.in · vijay industries and projects limited ......

LETTER OF OFFER

VIJAY INDUSTRIES AND PROJECTS LIMITEDThe Company was incorporated as a private limited company under the name of “Vijay Fire Protection Systems Limited” on May 6,1981 under the Companies Act, 1956. It became a deemed public company on February 23, 1989 and was converted into a public

limited company on February 24, 1992. On January 19, 1999, the name of the Company was changed to its present name.

Registered Office: 35, Chandivali Village, Off Sakivihar Road, Andheri (E), Mumbai 400 072Tel: (022) 2847 4146 ; Fax (022) 2761 8444; E-mail: [email protected]

Corporate Office: EL-205, TTC Industrial Area Mhape, Navi Mumbai 400 701Tel: (022) 2761 8555 ; Fax (022) 2761 8444; E-mail: [email protected] Website: www.vijayin.com

Issue of 11,385,600 equity shares of Rs. 10/- each for cash at a premium of Rs. 32/- per equity share, i.e. at a price ofRs. 42/- per equity share on rights basis to the existing equity shareholders of the Company in the ratio of 3 (Three) equityshare for every 1(One) equity shares held on Record Date, i.e. August 21, 2004, aggregating Rs. 478.20 mn.

GENERAL RISKS

Investment in equity and equity related securities involves a degree of risk and investors should not invest any funds in thisOffer unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors onpage (i) to page (xvi) carefully before taking an investment decision in this offering. For taking an investment decision,investors must rely on their own examination of the Issuer and the Offer including the risks involved. The securities have notbeen recommended or approved by Securities and Exchange Board of India (“SEBI”) nor does Securities and ExchangeBoard of India guarantee the accuracy or adequacy of this Letter of Offer.

ISSUER’S ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer containsall information with regard to the Issuer and the Issue, which is material in the context of Issue, that the informationcontained in this Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, thatthe opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of whichmakes this document as a whole or any of such information or the expression of any such opinions or intentions misleadingin any material respect.

LISTING

The existing equity shares of the Company (“Shares”) are listed on The Stock Exchange, Mumbai (“BSE” or the “DesignatedStock Exchange”) and the Calcutta Stock Exchange (“CSE”). The Company has received in-principle approvals for thelisting of the securities offered through this Letter of Offer from BSE vide its letter dated July 23, 2004 and CSE vide itsLetter dated July 27, 2004.

The Company’s shares were earlier listed on Ahmedabad Stock Exchange (“ASE”) and Delhi Stock Exchange (“ASE”).Shareholders, at their Annual General Meeting held on September 30, 2003, had approved delisting of equity shares fromASE, CSE and DeSE. While the shares of the Company have been delisted from ASE and DSE, they are yet to be de-listedfrom CSE. Equity shares, however, will continue to be listed on BSE in compliance with the Securities and Exchange Boardof India (Delisting of Securities) Guidelines 2003. If, however, as a result of the Rights Issue, the non-promoter shareholdingfalls below the permissible minimum level, the Promoter will comply with the provisions of Securities & Exchange Board ofIndia (Delisting of Securities) Guidelines – 2003 by offering to buy out the remaining shareholders at the price of the RightsIssue. This may lead to de-listing of the shares from all the stock exchanges, including BSE.

Note: The attention of investors is drawn to the statement of Risk Factors appearing on page (i) to (xvi) of the Letter ofOffer.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

Citigroup Global Markets India Private Limited Adroit Corporate Services Private Limited4th Floor, Bakhtawar, 19, Jaferbhoy Industrial Estate,229, Nariman Point, Makwana Road, Marol Naka,Mumbai 400 021 Andheri (East)Mumbai – 400 059Tel: (022) 5631 9982 Tel: (022) 2850 3748/5692 4437Fax: (022) 5631 9803 Fax: (022) 5692 4438E-mail: [email protected] Email: [email protected]

ISSUE OPENS ON LAST DATE FOR RECEIPT OF ISSUE CLOSES ONREQUESTS FOR SPLIT FORMS

August 31, 2004 September 15, 2004 September 29, 2004

For Private Circulation to the EquityShareholders of the Company only

TABLE OF CONTENTS

Sr. no. Heading Page No

Glossary of Terms / Abbreviations ................................................................................................ a

Risk Factors .................................................................................................................................... i-xvi

Section

I. General Information ....................................................................................................................... 1

II. Capital Structure ............................................................................................................................ 6

III. Terms of the Issue ......................................................................................................................... 9

IV. Tax Benefits .................................................................................................................................... 18

V. Particulars of the Issue .................................................................................................................. 22

VI. Main Objects of the Company ....................................................................................................... 23

VII. History, Company and Management and Present Business ....................................................... 23

VIII. Management Discussion and Analysis ......................................................................................... 48

IX. Stock Market Data ......................................................................................................................... 52

X. Unaudited Working Results for the Latest Period ........................................................................ 53

XI. Promise Vs Performance ............................................................................................................... 54

XII. Outstanding Litigation .................................................................................................................... 54

XIII. Basis For Issue Price ..................................................................................................................... 57

XIV. Mechanism evolved for redressal of Investor grievances ............................................................ 58

XV. Details of material events impacting the Company subsequentto the last financial statements ..................................................................................................... 58

XVI. Expert Opinion ............................................................................................................................... 58

XVII. Option to Subscribe ....................................................................................................................... 58

XVIII. Material Contracts and Inspection of Documents ........................................................................ 58

XIX. Declaration ..................................................................................................................................... 60

GLOSSARY OF TERMS/ ABBREVIATIONS

Act The Companies Act, 1956 as amended to date

Articles Articles of Association of the Company

AS Accounting Standard as issued by the Institute of Chartered Accountants of India

ASE The Ahmedabad Stock Exchange Limited

AY Assessment Year

Bankers to the Issue Citibank N.A., Vijaya Bank

BIFR Board for Industrial and Financial Reconstruction constituted under the Sick IndustrialCompanies (Special Provisions) Act, 1985

Board / Board of Directors Board of Directors of Vijay Industries and Projects Limited (including any Committee ofthe Board)

BSE The Stock Exchange, Mumbai

CAF Composite Application Form

CDSL Central Depository Services (India) Limited

CSE The Calcutta Stock Exchange Association Limited

Committee Committee of the Board of Directors of Vijay Industries and Projects Limited authorised totake decisions on matters related to /incidental to this Issue

Company / VIPL Vijay Industries and Projects Limited

Depositories CDSL and NSDL

DP Depository Participant

DeSE The Delhi Stock Exchange

DSE or BSE Designated Stock Exchange i.e. The Stock Exchange, Mumbai

EGM Extra-ordinary General Meeting of the Shareholders

Draft Letter of Offer Draft letter of offer dated June 24, 2004 filed with SEBI on June 30, 2004

Director(s) Member(s) of the Board of Directors of the Company

EPS Earnings Per Share i.e. profit after tax divided by the outstanding number of equity sharesof the Company at the year end

Equity Shareholders Equity shareholders whose names appear as

� Beneficial owners as per the list to be furnished by the depositories in respect of theshares held in the electronic form and

� On the Register of Members of the Company in respect of the shares held in physicalformat the close of business hours on the Record Date i.e. August 21, 2004 and towhom this Offer is being made

Equity Shares / Shares Equity shares of Rs. 10/- each of the Company, including 11,385,600 equity shares ofRs 10/- each being offered through this Letter of Offer

FEMA Foreign Exchange Management Act, 2000 read with rules and regulations there underand amendments thereto

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

FIPB Foreign Investment Promotion Board

FY Financial year being a period commencing from April 1 of the previous year and endingon March 31 of the year

FY 2004 Period of 12 months commencing from April 1, 2003

GoI Government of India

Issue or Rights Issue by the Company of 11,385,600 equity shares of Rs. 10/- each for cash at aIssue or Offer premium of Rs. 32/- per equity share i.e. at a price of Rs. 42/- per equity share on rights

basis to the existing Equity Shareholders of the Company in the ratio of 3 equity sharesfor every 1 equity share held on Record Date aggregating Rs. 478.20 mn

Issuer The Company, Vijay Industries and Projects Limited

IT Act The Income Tax Act, 1961 as amended to date

a

Kidde Kidde International Limited, a company incorporated in England and Wales under theCompanies Act 1985. Its registered office is situated at Mathisen Way, Colnbrook,Slough, Berkshire SL3 0HB, UK.

Lead Manager to the Issue Citigroup Global Markets India Private Limited

Letter of Offer/ This Letter of Offer circulated to the Equity Shareholders of the CompanyOffer Document

Memorandum Memorandum of Association of the Company

Mn / mn Million

NA Not Applicable

NAV Net Asset Value, being paid up equity share capital plus free reserves (excludingreserves created out of revaluation) less deferred expenditure not written off (includingmiscellaneous expenses not written off) and debit balance of Profit & Loss account,divided by number of issued equity shares

NR Non-resident

NRI(s) Non-resident Indians

NSDL National Securities Depository Limited

OCB(s) Overseas Corporate Body(ies)

Promoter / Principal Unless specified to include others would mean Kidde International Limited., U.K. (Kidde)Shareholder (consequent to the acquisition of shares in accordance with SEBI Takeover Code)

Promoter Group Unless specified to include others would mean Kidde International Limited, U.K. (Kidde)and its holding company, Kidde Plc

RBI The Reserve Bank of India constituted under the Reserve Bank of India Act, 1934

Record Date August 21, 2004

Registrars to the Issue Adroit Corporate Services Private Limited

Rights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to under this Letterof Offer in proportion to his/ her/ its existing shareholding in the Company as on theRecord Date

Sec. Section

SEBI Securities and Exchange Board of India constituted under the Securities and ExchangeBoard of India Act, 1992

SEBI Delisting Guidelines Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 asamended from time to time

SEBI Guidelines Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines,2000 as amended from time to time

SEBI Takeover Code SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as amendedfrom time to time

Security Certificates Equity Share Certificates of the Issuer

Shares Fully paid equity shares of the Company with face value of Rs 10/- each

SICA Sick Industrial Companies (Special Provisions) Act, 1985

Sterling Pound or £ United Kingdom Pound Sterling

USD or $ or US $ United States Dollar

In this Letter of Offer, all references to “Rs.” refer to Rupees, the lawful currency of India and all references to “US$” are tothe United States Dollar. Certain financial details contained herein are denominated in United States Dollars and UK PoundSterling. The Rupee equivalent quoted in each case is calculated in accordance with the RBI reference rates for the US$[translation], namely 1 US$ = Rs. 45.82 and Pound Sterling [translation], namely UK Pound Sterling = Rs 84.13 is sourcedfrom Bloomberg, both as on June 21, 2004. Please note that all financial data contained in this Letter of Offer has, whereappropriate, been rounded off to the nearest mn, except stated otherwise. References to the singular also refer to the pluraland one gender also refers to any other gender, wherever applicable.

b

i

Risk Factors

The investors should consider the following risk factors together with all other information included in this Letterof Offer carefully in evaluating the Company and its business before making any investment decision. Anyprojections, forecasts and estimates contained herein are forward looking statements that involve risks anduncertainties. Such statements use forward looking terminology like “may”, “believes”, “will”, “expect”, “anticipate”,“estimate”, “plan” or other similar words. The Company’s actual results could differ from those anticipated in theseforward-looking statements as a result of a number of factors including those, which are set forth in the “Riskfactors” as appearing on page (i) to (xvi). Neither the Company nor the Lead Manager to the Issue or theirrespective affiliates has any obligation to update, or otherwise revise, any statements, including revisions, if any,to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect theoccurrence of unanticipated events, even if the underlying assumptions do not come to fruition.

Internal risk factors

Note: Unless specified or quantified in the relevant risk factors below, the Company is not in a position toascertain the financial and other implications of any of the risks mentioned below.

1. Reduction in Net worth

Based on the audited financial statement as at March 31, 2004, the Company has accumulated losses of Rs.136.35 mn against total shareholders funds of Rs. 80.28 mn, resulting in a negative networth of Rs. 54.35 mn. TheCompany has received legal advice that the Board is required to refer the Company to BIFR within 60 days of thedate on which the audited accounts of the Company for the financial year are adopted by its shareholders at itsannual general meeting. The financial year of the Company has been extended to September 30, 2004.

The financial statements of the Company have been prepared by the management on a going concern basis(despite the substantial erosion of the net-worth arising from operation losses) considering the following factors:(i) the principal shareholder, Kidde International Limited, U.K. has informed the Company of its intention vide itsletter dated June 10, 2004 to provide financial support to the Company to meet its financial obligations, (ii) theavailable unsecured loan of Rs. 474.93 mn (US $ 10.37 mn) provided by Kidde International Limited, U.K. till dateand further financial support as necessary and (iii) significant order backlog which has been finalised / is under-finalisation.

2. Operating losses

The Company has incurred operating losses in two of the last three years and net losses in each of the last threeyears. The principal reason for such losses has been a significant fall in the sales revenue of the Companywithout concomitant reduction in expenses. The sales revenue dropped mainly on account of slowdown inindustrial / commercial business acitivity in general, as also on account of lower order backlog position of theCompany. On the other hand, the Company’s expenses did not register a similar decline, particularly fixed costsand other administrative costs, resulting in the Company incurring losses.

The Operating loss (PBIDT) and net loss incurred by the Company in the last three years is as under:

(Rs. in mn)

Particulars 31.03.2004 31.03.2003 31.03.2002

PBDIT (13.01) (92.03) 26.01

Net Profit (loss) (52.22) (131.86) (18.58)

3. No specific project

The funds being raised through this Issue are not earmarked for any specific project undertaken by the Company.The Issue proceeds will primarily be used to repay the existing loans of USD 10.37 mn (equivalent to Rs.474.93mn) obtained from the Principal Shareholder, Kidde. However, since Kidde proposes to set off part or full amountsof the existing loans owed by the Company against the subscription money towards its rights entitlement and tothe extent of any additional subscription by Kidde due to undersubscription, the overall debt due to Kidde as onthe date of this Letter of Offer will reduce to such extent pursuant to completion of the Issue.

4. Limited trading in shares

The Company’s shares are infrequently traded on the stock exchanges where they are currently listed. During thelast 12 month period ended June 18, 2004, the average traded volumes of the Company’s shares on the BSEhave aggregated to 4.6 % of the listed shares.

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5. Possibility of De-listing of Shares

In the event the Rights Issue is undersubscribed, Kidde intends to subscribe to additional shares, which couldresult in public shareholding (presently at 17.42%) falling below the permissible minimum level. Consequently, inaccordance with the SEBI Delisting Guidelines, Kidde proposes to take steps to de-list the Company’s sharesfrom the stock exchanges where they are currently listed. In such case, the liquidity of Shares may be adverselyaffected.

The Company will delist as per the extant guidelines of SEBI.

6. Volatility in steel prices

Steel pipes constitute a significant proportion of the Company’s raw material costs. Steel prices in India haverisen significantly over the last couple of years. Possible increase in the prices of steel / steel products couldadversely affect the Company’s revenues and profitability.

7. Recognition of Revenues not consistent with Accounting Standards

In respect of its project related activities, the Company has been consistently following the practice of recognizingrevenue on dispatch of goods and as per the payment terms of the contracts instead of recognizing it onproportionate completion method as specified in Accounting Standard –7, “Accounting for Construction Contracts”issued by Institute of Chartered Accountants of India. The impact of this deviation is not readily ascertainable(Refer Auditor’s report herein and Note 1(g) and 3 to the Schedule 23 to the Notes to Accounts for the periodended March 31, 2004).

8. Outstanding confirmation and reconciliation of overdue balances from debtors & creditors

As at March 31, 2004, the Company had overdue balances aggregating Rs. 221.57 mn recoverable fromcustomers (including retention money of approximately Rs. 139.01 mn which was recoverable after a prolongedperiod owing to the nature of the business) after completion of the respective contracts, and Rs. 2.64 mn towardsadvances and deposits, in respect of which the process of obtaining balance confirmations and completingreconciliation was pending. Pending this, the amount of doubtful debts, if any, could not be ascertained by themanagement. Adjustment required, if any, will be considered by the management on the completion of process ofconfirmation/reconciliation.

Sundry creditors as at March 31, 2004 include an amount of Rs. 2.55 mn, which is outstanding for more thanthree years. While the management has initiated the process of reconciliation and expect no material adjustmentson completion of reconciliation, no assurance can be given in this regard. The details of the creditors for the lastfour years and age-wise analysis of the creditors as on March 31, 2004:

Rs. in mn

As at 31.03.2000 79.1

As at 31.03.2001 76.6

As at 31.03.2002 92.3

As at 31.03.2003 129.7

Rs. in mn

0 to 6 Months Above 6 months Above 12 months Above 36to 12 Months to 36 months months

78.65 2.16 3.16 2.55

(Refer Auditor’s report herein and Note 5 to the Schedule 23 to the Notes to Accounts for the period ended March31, 2004).

9. Inventory records for the businesses acquired in the past are yet to be updated

The inventory records of the Company are in process of being updated due to acquisition of two businesses inthe earlier years by the Company at which time proper inventory records were not maintained. Pendingcompilation of inventory records, the management has determined the value of inventory at Rs. 55.98 mn as atMarch 31, 2004 which is based on stocks physically verified at the end of the period. The valuation of inventoryhas been carried out on the same basis as in the preceding year. (Refer Auditor’s report herein and Note 6 to theSchedule 23 to the Notes to Accounts for the period ended March 31, 2004).

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10. Fixed Asset Register of the Company is not up-to-date

The Company is in process of updating its Fixed Asset Register and reconciling book records with physicalrecords. Adjustments towards discrepancies, if any, as a result of the records being updated and reconciliationcannot be ascertained by the management. (Refer Auditor’s report herein and Note 7 to the Schedule 23 to theNotes to Accounts for the period ended March 31, 2004).

11. Large amount of debtors

As at March 31, 2004, the Company had outstanding debtors of Rs. 350.62 mn (of which debtors outstanding formore than six months aggregated to Rs. 264.86 mn). The sales and other income for the 12-month period endedon the same date was Rs. 427.81 mn. Similarly, for the previous financial year ended on March 31, 2003 thecorresponding figure for debtors was Rs. 331.54 mn (of which debtors outstanding for more than six monthsaggregated to Rs. 225.22 mn). The sales and other income for the year ended on the same date were Rs. 315.47mn. The outstanding debtors represent 111% of the Company’s sales for the period ended March 31, 2004.

12. Sales dependence on public sector undertakings

The Company’s sales are, to a large extent, dependent upon its ability to win large value contracts from itscustomers. Loss of a few contracts can make a significant impact on the Company’s ability to achieve its salesand profitability budgets. Typically, these contracts are entered into with public sector undertakings and are longterm in nature, with execution period ranging between a year to two and four years.

13. Payment of remuneration to managing director and certain key executives

The Company had paid remuneration aggregating Rs. 9.21 mn to the relatives of the erstwhile managing directorof the Company, for the period October 1, 2001 to September 30, 2003 which is subject to the approval of theCentral Government of India, and Rs. 1.14 mn to the present managing director for the period October 1, 2003 toMarch 31, 2004 which was approved by the shareholders at their Extra-odinary General Meeting held April 26,2004, but is subject to approval of the Central Government of India. The extent of consequential adjustments, ifany, which may arise on non-receipt of necessary approvals, are currently not ascertainable by the management.

14. Shortfall in performance vis-à-vis promise made in the last public issue made by the Company

The Company made a public issue through a prospectus in May 1992. The comparative statement of financialprojections given in the prospectus at the time of public issue and actual financials for the said years is givenbelow:

Rs. in mn

Particulars 1992-93 1993-94 1994-95

Projections Actuals % Projections Actuals % Projections Actuals %Variation Variation Variation

Sales 322.3 315.72 -2.04 334.4 355.75 6.38 351.9 423.56 20.36

Net Profit 14.58 17.77 21.88 16.0 20.44 27.75 18.4 26.64 44.78

Cash Accruals 18.6 21.80 17.20 20.1 26.01 29.40 22.4 33.73 50.58

15. Contingent liabilities of the CompanyRs. in mn

As at As at As at31.03.2004 31.03.2003 31.03.2002

(a) Bank Guarantees 200.62 89.77 144.93

(b) Excise Demands 18.40 17.20 17.20

(c) Income Tax Demands 0.46 1.06 -

(d) Sales Tax Demands 0.13 0.13 0.5

(e) Claims Against Company not acknowledged as debt 11.93 9.38 9.38

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16. Income tax cases and other government claims against the Company

Excise duty matters disclosed as contingent liability:

1. An appeal before CEGAT, Mumbai is pending since 1998, involving amount of Rs. 2.78 mn regardingvaluation of goods sold (Case No E/1485/2000). The amount has been shown as a contingent liability.

2. The Company has filed an appeal in Supreme Court against the order passed by the Customs Excise andService Tax Appellate (CESTA) Tribunal, Mumbai involving tax liability of Rs. 6.87 mn. regarding valuation ofgoods sold (Civil Appeal No. 4977-79/ 2004). The amount has been shown as contingent liability.

3. An appeal before Assistant Commissioner of Central Excise, Vapi is pending since 1997 involving amount ofRs. 3.10 mn regarding valuation of goods sold (Case No 168/AC/DMN/97). The amount has been shown ascontingent liability.

4. The Company has filed an appeal with CESTA Tribunal on 14th July 2004 against the order of Commissionerof Central Excise, Vapi confirming demand of Rs. 4.06 mn. regarding classification of goods, as the Companyhad claimed the goods as exempt from excise.The amount has been shown as contingent liability.

5. Various show cause notices issued by the department between 1997 to 2000 aggregating claims of Rs. 1.59mn from the Company. The Company has replied to all the show-cause notices but the department has notpassed order(s) / withdrawn show-cause notices. The amount has been shown as contingent liability.

Income-tax matters disclosed as contingent liability

Pending Income tax liabilities aggregating to Rs. 0.46 mn regarding non receipt of withholding tax certificates forFY 2002, FY 2000 and FY 1999. The amount has been shown as contingent liability.

Commercial tax matters disclosed as contingent liability:

An appeal before Assistant Commissioner of Commercial Tax, Andhra Pradesh is pending since November 2002involving an amount of Rs. 0.13 mn regarding valuation of goods sold (Assessment No 9825/99-2000). Theamount has been shown as contingent liability.

Service tax:

There are no cases pending in this category.

FEMA:

FEMA Appellate Tribunal, at Delhi remanded the case to Assistant Directorate of Enforcement against the ex-parte order passed by the Enforcement Directorate imposing a penalty of Rs. 2.5 mn on account of non-submission of proof of import and utilization of foreign currency and the same is treated as contingent liability. TheCompany has deposited Rs. 0.63 mn as security deposit as per the interim order issued by the FEMA AppellateTribunal.

17. Outstanding Litigations involving the Company/Directors

A. Suits filed by the Company / prosecutions initiated by the Company

(i) Cases under Criminal Laws & Winding Up Petitions: There are no cases pending in this category.

(ii) Litigations & Disputes in Respect of Overdues

1. The Company has filed an appeal before the High Court of Andhra Pradesh, Hyderabad against the orderpassed by the lower court asking the Company to pay Rs. 0.21 mn to one Mr. G. P. Rajababu, (sub-contractor) for services rendered. The Company had earlier refused to make the payment on account of somedispute against the claim made by the contractor. The Company has lost the appeal. The contractor, Mr. G. P.Rajababu, is not traceable. The Company has decided to deposit the amount in the lower court (Case No 119/1987).

2. Kalinga Tubes (India Metal & Ferro Alloys Limited), Cuttack has filed an appeal before District Court,Bhubaneshwar. The claimant had supplied steel tubes to the Company. The Company is contesting the claimon account of the questionable quality of tubes supplied. The suit is to claim recovery of Rs.0.14 mn for thesame (Case No 95/1985).

3. Vishakhpatnam Port Trust had filed a petition before District Court, Vishakapatnam (Andhra Pradesh)involving an amount of Rs. 8.6 mn. The Company was awarded a job for the supply and erection of firefighting equipment at LPG jetty of Vishakhpatnam Port Trust at Vishakapatnam in 1996-97. Vishakhpatnam

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Port Trust cancelled the order subsequently due to a dispute in relation to product specifications, which didnot form a part of the original tender based on which the Company had bid. The job was subsequently re-tendered and awarded to another party at a higher amount. The Vishakhpatnam Port Trust filed a petition inthe Court of District Judge at Vishakapatnam in the year 2000 claiming difference between the amounts of thetwo tenders. The Company is defending the case at Vishakapatnam District Court. The Company has alsofiled a Writ Petition in the High Court of Andhra Pradesh in 1998 seeking to adjudicate the dispute byarbitration. The District Court case has been adjourned but the next date of hearing has not been announced(Case No 94/1999 & 50/2000).

Suits Filed by the Company - Other Commercial Disputes

1. Petition before District Court of Ernakulam against FACT Engineering and Design Organisation (“FEDO”),Cochin involving a sum of Rs. 0.38 mn. FEDO, a division of FACT deducted an amount of Rs. 0.69 mn fromthe amount payable by them as liquidated damages. FEDO did not pay claim of the Company amounting toRs. 2.27 mn towards extra costs incurred for changes in specifications, and other additional charges. TheCourt has ruled in the Company’s favour and awarded the Company a total amount of Rs. 0.375 mn. TheCompany is yet to receive the award amount and summons have been issued for the attachment of theimmovable property of the defendants (Case No 79/2001).

2. Petition before Delhi High Court against Rail Coach Factory Kapurthala involving an amount of Rs. 0.33 mn.The Company has partly objected to the arbitration award for contractual payment and additional claims. Thecase is being shifted to Tees Hazari Court (Case No 52/2000).

3. Petition before Delhi High Court against New Delhi Municipal Corporation (R.K.Puram) (“NMDC”) involvingamount of Rs. 1.14 mn. The Company filed an arbitration petition to resolve the dispute regarding contractualpayment and additional claims of the Company. The Company received an amount of Rs. 0.25 mn in 1st

arbitration award. The second arbitration award was also in favour of the Company. NDMC appealed againstthe award before the Delhi High Court. On the High Court Directive, NDMC deposited Rs. 0.92 mn to admitthe case. NDMC objected to the award in the High Court. The case is being shifted to the Tees Hazari Court,which has jurisdiction given the amount is less than Rs. 1 mn (Case No OMP 101/2000).

4. Petition before the High Court of Madras against the Tamil Nadu Electricity Board/MTPP involving an amountof Rs. 1.26 mn. The Company has filed arbitration proceedings to resolve the contractual payment disputes,and claims for an additional amount. The appointment of the sole arbitrator is pending (Case No 976/2001).

5. Petition before Bilaspur District Court, Chattisgarh against Chattisgarh State Electricity Board involving anamount of Rs. 0.74 mn. A bank guarantee as security deposit was submitted to execute the contract. Thecontract could not be executed because of disputes. Stay on encashment of bank guarantee and appointmentof sole arbitrator is pending (Case No MJC 141/02 & 35/04).

6. Case filed in Delhi High Court against Kanoria Chemical & Industries Ltd. for appointment of an arbitrator asthe customer refused to proceed for an arbitration. Dispute is on account of non payment of contractual duesand claim for additional material supplied (Case No. 161 of 2003).

Arbitration cases

1. Arbitration before Mr. B Gururajan at Chennai against HPCL, Mangalore for amount of Rs. 2.55 mn. TheCompany incurred expenses on account of over stay at the site as well as on account of additional materialand services provided during a one year extended period. Further, HPCL also deducted the liquidateddamages and did not refund the same in-spite of the Company’s requests. The hearing has concluded andthe sole arbitrator is expected to pronounce the award soon.

2. Arbitration before Mr. N Dinakaran at Chennai against IOCL, Kochi for amount of Rs. 1.80 mn. IOCL failed torespond to the Company’s request to release the outstanding payment. Preliminary issues raised by IOCLwere argued before the Sole arbitrator in February 2004. The hearing is over and the sole arbitrator is yet topronounce the interim award.

3. Arbitration before Shri A. K. Srivastava (retired Judge) at Delhi against New Delhi Municipal Corporation(Swimming Pool) for an amount of Rs. 0.58 mn. Some disputes were raised during the execution stage. TheCompany completed the job and commissioned the system. Payment against the final bill and the extra worksdone have not been paid. The Company filed petition for appointment of an arbitrator to resolve the dispute.Final arbitration award is yet to be awarded.

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4. Arbitration before Mr. Dhanuka, (Retd. Judge High Court) sole arbitrator against Bharat Diamond Bourseinvolving an amount of Rs. 0.59 mn and the Claim on account of apportioning of the contract, over stayexpenses, additional material, etc. worth Rs. 27.2 mn has been lodged. High Court of Judicature (at Mumbai)appointed a sole arbitrator in April 2004. Arbitration proceedings have begun.

5. Arbitration before Mr. N. K Desai, Sole Arbitrator against Indian Vaccines Corporation Ltd, Delhi involving anamount of Rs.2.0 mn on account short closure of the project resulted in a loss by the Company.

6. Arbitration before a tribunal comprising three independent arbitrators at Delhi, against National Fertilisers Ltd,for settlement of disputed amounts consisting of contractual due payments and additional services providedby the Company aggregating to Rs.1.6 mn.

7. Arbitration before Justice Sawant appointed by Hon’ble Supreme Court of India against Skoda Exports Ltd.involving claim for contractual due payment of Rs. 1.6 mn.

8. Arbitration before Mr. P.M. Abrahm, Sole Arbitrator, against New Manglore Port Trust for claim of Rs. 1.7 mnon account of contractual due payment withheld by the customer and cost of additional material and servicesprovided for Rs. 2.2 mn.

9. Arbitration before Tribunal involving claims of Rs. 7.0 mn for additional material and services provided by theCompany but disputed by the customer, NTPC Delhi.

Insurance Claims1. Petition before State Consumer Forum at Delhi against New India Insurance Company. A claim of Rs. 1.50 mn

against the insurance policy has been repudiated by the insurance company. All pleadings have beencompleted and final award is yet to be pronounced.

2. Petition before National Commission, Delhi against United India Insurance Company is pending. A claim ofRs. 0.35 mn regarding theft of material covered under insurance policy was repudiated by the insurancecompany.

Pending for appointment of an Arbitrator

1. National Engineering Industries Limited has not responded to the Company’s request for release ofoutstanding payment of Rs. 1.45 mn pursuant to a contract between the parties. The matter is pending forappointment of an arbitrator.

2. Durgapur Steel Plant (a division of Steel Authority of India Limited, SAIL) for claim of Rs 3.0 mn on accounton non-release of contractual payment.

Litigations against the DirectorsIn September 1992, one of the directors, Mr. Gyan Dayal, alongwith five other directors of Faber Equipments IndiaPrivate Limited (Faber), was named as a party to a winding-up petition filed against Faber in his capacity as itsdirector. The Delhi High Court accepted the petition filed by a creditor on December 12, 1995 and ordered thatFaber be liquidated. The assets of Faber are now in the possession of the official liquidator. Mr. Dayal has sinceceased to be a director of Faber. Further, Faber has been liquidated although a final order in this regard is yet tobe passed. Mr. Dayal had provided a personal guarantee to Vijaya Bank on behalf of Faber. Mr. Dayal, alongwithother directors, had approached the bank to repay all outstanding dues, which have been repaid and all hisobligations under the said guarantee were settled in 2001.

External risk factors1. Changes in customer preferencesEvolving industry standards, changing customer preferences and new product introductions have an importantbearing on the Company’s business. The Company’s success depends on its ability to keep pace with thesechanges. The timely execution of a project and adhering to delivery schedule is crucial in a project based industry.Past performance plays a very vital role in getting repeat orders from customers. There is no assurance that acustomer may place a repeat order with the Company. In that case the Company may have to alter its businessstrategy and build a reputation to win orders by aggressive marketing and execution tactics. This may have impacton the Company’s turnover and profitability projections.

2. Risk of changes in economic conditions

General economic conditions and the political climate may affect the industrial and business activity in the countryand consequently the business of the Company.

vii

3. Risk of regulatory uncertainty

The business of the Company is subject to the regulations of the Government of India. Changes in the fiscalpolicies adopted by the Government could have an adverse impact on the profitability of the Company. Asignificant change in the Government’s economic liberalization and deregulation policies could affect businessand economic conditions in India and the business of the Company, in particular.

4. Exchange rate risk

Exchange rate fluctuations may affect the Company due to its exposure to external commercial borrowings fromthe Promoter, as also on account of import of raw materials from foreign vendors. As at March 31, 2004, theCompany had outstanding loans amounting to USD 10.37 mn denominated in foreign currency.

During the period ended on March 31, 2004, the Company imported raw materials of approximately Rs. 62.08 mnequivalent in foreign currency.

Fluctuations in the value of the Indian rupee vis a vis currencies in which the Company’s imports aredenominated as also the US dollar in which its foreign currency loans are denominated can adversely affect thefinancial results or position of the Company.

Notes to risk factors

� Investors are advised to refer to “Basis of Issue Price” on page 57 before investing in this Issue.

� Investors are advised to refer to “Steps to Delist from Exchanges Other than BSE in compliance with SEBIDelisting Guidelines” on page 1 before investing in this Issue.

� Net worth of the Company before the Issue as on March 31, 2004 was Rs.(54.35) mn, while the Issue size isRs. 478.20 mn.

� The book value (NAV) of the Equity Shares of the Company as on March 31, 2003 and as on March 31, 2004was Rs. 0.40 (negative Rs. 0.21) and Rs.(14.32) (negative Rs.14.78) respectively. (Figures in bracket denotebook value without taking into account the revaluation reserve).

� The present Issue is of 11,385,600 Equity Shares of Rs. 10/- each for cash at a premium of Rs. 32/- perEquity Share i.e. at a price of Rs. 42/- on rights basis, to the existing equity shareholders of the Company inthe ratio of 3 (Three) equity shares for every 1 (One) equity share held on the Record Date, aggregating toRs. 478.20 mn.

� Cost per share of the Promoter (other than promoters friends, relatives and associates)

Name of the Promoter Average cost of acquisition* per share (Rs.)

Kidde International Limited., U.K. 42.0

* Price paid for acquisition of shares from the erstwhile promoters and the public shareholders, consequent toa public offer made in accordance with SEBI Takeover Code.

� The Promoter and directors of the Company have not undertaken any transactions in the Shares of theCompany during the last six months.

Interest of Promoters/Directors:

Related Party Disclosures as required by Accounting Standard 18, “Related Party Disclosures”, issued by theInstitute of Chartered Accountants of India for the period March 31, 2004 are given below:

I. Enterprises having control over the Company

Kidde Plc, U.K.

Kidde International Limited, U.K.

II. Enterprises under common control

Kidde Fire Fighting

Chemetron Fire Systems

Kidde Italia, S.p.a

Kidde Fenewal, Inc.

viii

Det –Tronics

Kidde Fire Protection Limited

Autronica Fire and Security AS, Norway

Ginge-Kerr Denmark AS

Kidde Deugra Brandschutz System-GmBH

Kidde Asia Fire And Security Pte. Limited

Kidde Finance Limited, U.K.

Guardfire Limited

III. Enterprises where Key Management Personnel together with relatives exercises significant influence

Vijay Systems Engineers

Vijay Security Systems Limited

Vijay Safety Systems Limited

Vijay Sabre Safety Limited

Vijay Latex Products Limited

Vijay Fire Vehicles and Pumps Limited

Vijay Fire Apparatus Company

Vijay Export Agencies

Ace Turnkey Fire Protection Private Limited

Venus Engineering Corporation

Pradeep Electronics

Note: The above enterprises are considered as related parties based on their relationship up to September 30,2003.

IV. Key Management Personnel

Mr. Harish R. Salot - Managing Director (up to September 30, 2003)

Mr. R. D. Mathur – Managing Director (from October 1, 2003)

V. Relatives of Key Management Personnel

Mr. Khantilal R. Salot

Mr. Jitendra R. Salot

Mr. Pradeep R. Salot

Mr. Nishit A. Shah

Mr. Ketan K. Salot

Note: The above individuals are considered as related parties based on their relationship up to September 30,2003.

ix

The Company’s transactions with the above related parties for the last 2 years are given below:

12 month period ended 31.03.2004Rs. in mn

Nature of Transaction Parties Parties Personnel Personnel Totalreferred to referred referred referredin II above to in III to in IV to in V

above above above

Sales, Service and Other Income

Kidde Fire Protection Limited 0.49 – – – 0.49[1.16] – – – [1.16]

Autronica Fire and Security AS, Norway 0.55 – – – 0.55[0.29] – – – [0.29]

Ginge - Kerr Denmark AS 0.85 – – – 0.85- – – – -

Kidde Asia Fire and Security Pte Limited 1.24 – – – 1.24– – – – -

Guardfire Limited 0.07 – – – 0.07– – – – -

Total 3.20 – – – 3.20[1.46] – – – [1.46]

Sales, Services and Other Income – 0.14 – – 0.14Vijay Systems Engineers – [0.15] – – [0.15]

Vijay Security Systems Limited – 0.70 – – 0.70– – – – –

Vijay Fire Vehicles and Pumps Limited – 0.37 – – 0.37– [0.77] – – [0.77]

Others – – – – –– [0.15] – – [0.15]

Total – 1.22 – – 1.22– [1.06] – – [1.06]

Rs. in mn


above above above

Purchases of Goods and Services

Chemetron Fire Systems 1.20 – – – 1.20[0.91] – – – [0.91]

Kidde Fire Protection Limited 11.62 -– – – 11.62[8.82] – – – [8.82]

Autronica Fire and Security AS, Norway 1.13 – – – 1.13[3.60] – – – [3.60]

Ginge - Kerr Denmark AS 10.88 – – – 10.88[7.66] – – – [7.66]

Kidde Asia Fire and Security Pte Limited 13.60 – – – 13.60[20.84] – – – [20.84]

Others 6.04 – – – 6.04 [10.86] – – – [10.86]

Total 44.46 – – – 44.46[52.68] – – – [52.68]

x

Rs. in mn


above above above

Purchases of Goods and Services

Vijay Systems Engineers - - - - -- [0.30] - - [0.30]

Vijay Security Systems Limited - 0.27 - - 0.27- [0.61] - - [0.61]

Vijay Sabre Safety Limited - 0.01 - - 0.01- [0.03] - - [0.03]

Vijay Fire Vehicles and Pumps Limited - 0.11 - - 0.11- [0.31] - - [0.31]

Venus Engineering Corporation - 0.82 - - 0.82- [1.04] - - [1.04]

Pradeep Electronics - 0.17 - - 0.17- [0.47] - - [0.47]

Others - - - - -- [0.16] - - [0.16]

Total - 1.39 - - 1.39- [2.91] - - [2.91]

Rs. in mn


above above above

Purchase of Fixed AssetsOthers - - - - -

[0.32] - - - [0.32]

Total - - - - -[0.32] - - - [0.32]

Sale of Fixed AssetsAce Turnkey Fire Protection Private Limited - 0.25 - - 0.25

- - - - -

Vijay Security Systems Limited - 0.09 - - 0.09- - - - -

Vijay Sabre Safety Limited - 0.05 - - 0.05- - - - -

Vijay Fire Vehicles and Pumps Limited - 0.07 - - 0.07- - - - -

Total - 0.46 - - 0.46- - - - -

Recovery of Expenses incurred onbehalf of other companies

Autronica Fire and Security AS, Norway 0.06 - - - 0.06[0.03] - - - [0.03]

Total 0.06 - - - 0.06[0.03] - - - [0.03]

xi

Rs. in mn


above above above

Recovery of Expenses incurred onbehalf of other companies

Ace Turnkey Fire Protection Private Limited - 0.03 - - 0.03- [0.05] - - [0.05]

Vijay Systems Engineers - - - - -- [0.03] - - [0.03]


Vijay Sabre Safety Limited - 0.16 - - 0.16- [0.17] - - [0.17]

Vijay Fire Vehicles and Pumps Limited - 0.16 - - 0.16- [0.26] - - [0.26]

Others - 0.04 - - 0.04- [0.04] - - [0.04]

Total - 0.46 - - 0.46- [0.63] - - [0.63]

Rs. in mn


above above above

Interest and Discounting charges

Kidde Finance Limited, U.K. 12.31 - - - 12.31[9.71] - - - [9.71]

Total 12.31 - - - 12.31[9.71] - - - [9.71]

Rent PaidVijay Fire Vehicles and Pumps Limited - 0.06 - - 0.06

- [0.03] - - [0.03]

Vijay Fire Apparatus Company - 0.30 - - 0.30- [0.15] - - [0.15]

Total - 0.36 - - 0.36- [0.18] - - [0.18]

Rent Paid - - 0.12 0.36 0.48- - [1.39] [4.19] [5.58]

Total - - 0.12 0.36 0.48- - [1.39] [4.19] [5.58]

xii

Rs. in mn


above above above

Rent Received

Vijay Systems Engineers - 0.06 - - 0.06- - - - -

Vijay Sabre Safety Limited - 0.02 - - 0.02- - - - -

Vijay Fire Vehicles and Pumps Limited - 0.01 - - 0.01- - - - -

Others - 0.00 - - 0.00- - - - -

Total - 0.09 - - 0.09- - - - -

Services Charges Paid

Autronica Fire and Security AS, Norway 0.39 - - - 0.39- - - - -

Kidde Fire Protection Limited 0.02 - - - 0.02- - - - -

Total 0.41 - - - 0.41- - - - -

Rs. in mn


above above above

Expenses reimbursedGuardfire Limited 0.35 - - - 0.35

- - - - -

Total 0.35 - - - 0.35- - - - -

Expenses ReimbursedVijay Fire Vehicles and Pumps Limited - 0.08 - - 0.08

- - - - -

Total - 0.08 - - 0.08- - - - -

Commission PaidVijay Systems Engineers - 0.13 - - 0.13

- - - - -

Total - 0.13 - - 0.13- - - - -

Deposit PaidKidde Asia Fire and Security Pte Limited 0.51 - - - 0.51

- - - - -

Total 0.51 - - - 0.51- - - - -

xiii

Rs. in mn


above above above

Loan / Deposit RepaidVijay Fire Vehicles and Pumps Limited - - - - -

- [0.03] - - [0.03]

Vijay Fire Apparatus Company - - - - -- [0.15] - - [0.15]

Total - - - - -- [0.18] - - [0.18]

Loan / Deposit ReceivedKidde Finance Limited, U.K. 198.66 - - - 198.66

- - - - -

Total 198.66 - - - 198.66- - - - -

Loan / Deposit ReceivedVijay Sabre Safety Limited - - - - -

- [0.58] - - [0.58]

Total - - - - -- [0.58] - - [0.58]

Rs. in mn


above above above

Remuneration - - 2.40 1.44 3.84- - [2.53] [5.29] [7.82]

Unsecured Loan (IncludingOutstanding Interest)Kidde Finance Limited, U.K. 456.92 - - - 456.92

[298.34] - - - [298.34]Total 456.92 - - - 456.92

[298.34] - - - [298.34]Receivable net of payableChemetron Fire Systems 0.13 - - - 0.13

- - - - -Total 0.13 - - - 0.13

- - - - -Receivables net of payablesAce Turnkey Fire Protection Private Limited - 5.85 - - 5.85

- [4.91] - - [4.91]Vijay System Engineers - 0.12 - - 0.12

- - - - -Vijay Sabre Safety Limited - 0.21 - - 0.21

- - - - -Vijay Fire Vehicles and Pumps Limited - 0.47 - - 0.47

- [2.86] - - [2.86]Others - 0.01 - - 0.01

- [1.74] - - [1.74]Total - 6.67 - - 6.67

- [9.51] - - [9.51]

xiv

Rs. in mn


above above above

Payables net of ReceivablesKidde Fire Protection Limited 3.64 - - - 3.64

[4.75] - - - [4.75]

Autronica Fire and Security AS, Norway - - - - -[1.64] - - - [1.64]

Ginge - Kerr Denmark AS 2.52 - - - 2.52[3.14] - - - [3.14]

Kidde Asia Fire and Security Pte Limited 0.82 - - - 0.82[15.67] - - - [15.67]

Others 0.35 - - - 0.35[2.76] - - - [2.76]

Total 7.33 - - - 7.33[27.60] - - - [27.60]

Payable net of ReceivableVijay Systems Engineers - - - - -

- [0.28] - - [0.28]


Vijay Sabre Safety Limited - - - - -- [0.51] - - [0.51]

Vijay Fire Apparatus Company - - - - -- [0.24] - - [0.24]

Venus Engineering Corporation - 0.01 - - 0.01- [0.59] - - [0.59]

Pradeep Electronics - - - - -- [0.15] - - [0.15]

Total - 0.10 - - 0.10- [2.31] - - [2.31]

Notes:Figures in brackets represent corresponding previous year figures.

Year ended March 31, 2003I. Enterprises having control over the Company

Kidde Plc, U.K.Kidde International Limited, U.K.

II. Enterprises under common controlKidde Fire FightingChemetron Fire SystemsKidde Fenewal, Inc.Kidde Italia, S.p.a.Det- TronicsKidde Fire Protection LimitedAutronica Fire and Security AS, NorwayGinge-Kerr Denmark ASKidde Deugra Brandschutz System – GmBHKidde Asia Fire and Security Pte. LimitedKidde Finance Limited., U.K.Guardfire Limited

xv

III. Enterprises where Key Management Personnel together with relatives exercise significant influenceVijay Systems EngineersVijay Security Systems LimitedVijay Safety Systems LimitedVijay Sabre Safety LimitedVijay Latex Products LimitedVijay Fire Vehicles and Pumps LimitedVijay Fire Apparatus CompanyVijay Export AgenciesAce Tumkey Fire Protection Private LimitedVenus Engineering CorporationPradeep Electronics

IV. Key Management Personnel and Relatives:Mr. Harish R. Salot – Managing Director

V. Relatives of Key Management PersonnelMr. Khantilal R. SalotMr. Jitendra R. SalotMr. Pradeep R. SalotMr. Nishit A. ShahMr. Ketan K. Salot

Year ended 31.03.2003 Rs. in mn

Nature of Parties Parties Personnel Personnel Totaltransaction 1.04.2002 to referred to referred to referred to referred to31.03.2003 in II above in III above in IV above in V above

Sale, Services and 1.46 1.06 – – 2.52other Income – (7.35) – – (7.35)

Purchase of Goods 52.68 2.91 – – 55.59and Services (11.45) (16.88) – – (28.33)

Purchase of Fixed 0.32 – – – 0.32Assets – (0.18) – – (0.18)

Sale of Fixed – – – – –Assets – (14.36) (3.83) (26.96) (45.15)

Assignment of – – – – –Business – (31.37) – – (31.37)

Acquisition of – – – – –Business – (85.00) – – (85.00)

Royalty of Expenses 0.02 0.63 – – 0.65incurred on behalf of Other Companies – (0.35) – – (0.35)

Interest and 9.71 – – – 9.71discounting charges – (17.60) – (1.61) (19.21)

Rent Paid – (0.18) 1.39 4.19 5.76– – (0.83) (2.50) (3.32)

Remuneration – – 2.53 5.29 7.82– – (1.52) (2.49) (4.01)

Advance paid – – – – –– (76.36) – – (76.36)

Advance Received – – – – –– (33.34) – – (33.34)

Loan /deposits repaid – 0.18 – – 0.18– (14.66) (3.44) (22.53) (40.62)

Loans/deposits received – 0.58 – – 0.58– (3.44) (0.81) (3.46) (7.72)

xvi

Rs. in mn

Nature of Parties Parties Personnel Personnel Totaltransaction 1.04.2002 to referred to referred to referred to referred to31.03.2003 in II above in III above in IV above in V above

Year-end Balances

Receivables net of payable – 7.21 – – 7.21(1.97) (2.78) – – (4.75)

Payable net of Receivables 27.96 – – – 27.96

Unsecured Loan 298.34 – – – 298.34(including Outstanding Interest) (301.58) (0.11) – – (301.69)

Redemption/Transfer of – – – – –Deep Discount Debentures – (30.02) – (0.16) (30.18)

Note :Figures in brackets represent corresponding previous year figures

The above transactions were carried out in the ordinary course of business and at commercial rates and notprejudicial to the interest of the Company.

Details of remuneration paid to Mr. Rakeshwar D. Mathur Managing Director is furnished under the details ofDirectors of the Company given on page 29.

Related Party Transactions cover the financial transactions carried out in the ordinary course of business and/orin discharge of contractual obligations.

Important Information

� This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners based on the list to befurnished by the Depositories in respect of the Shares held in the electronic form and on the Register of Members of theCompany at the close of business hours on the Record Date.

� Your attention is drawn to the section on “Risk Factors” appearing on page (i) to (xvi) of this Letter of Offer.

� Please ensure that you have received the CAF with this Letter of Offer.

� Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. Theinstructions contained in the CAF are an integral part of this Letter of Offer and must be followed carefully. An applicationis liable to be rejected for any non-compliance terms of the of the Letter of Offer or the CAF.

� All enquiries in connection with this Letter of Offer or the accompanying CAF and requests for Split Application Formsmust be addressed (quoting the Registered Folio Number/ DP and Client ID no., the CAF no. and the name of the firstEquity Shareholder as mentioned on the CAF and super scribed “VIPL— Rights Issue” on the envelope) to the Registrarto the Issue at the following address:

Adroit Corporate Services Private Limited19, Jaferbhoy Industrial EstateMakwana Road, Marol NakaAndheri (East)Mumbai – 400 059Tel: (022) 28590942, (022) 28503748.Fax: (022) 56924438Email:[email protected]

� The Company, its directors, promoters, any of its group/ subsidiary/ associate companies and companies in which itsdirectors are associated with as directors or promoters/ persons in control of above companies have not been prohibitedfrom accessing the capital market under any direction or order of SEBI.

� The Lead Managers and the Issuer shall make all information in respect of the present Issue available to the public andinvestors at large and no selective or additional information would be made available to a section of the investors.

� The Company and the Lead Manager will keep the public informed of any material changes till the commencement of thelisting and trading of the Equity Shares issued through the Letter of Offer.

1

Dear Equity Shareholder(s),

Pursuant to the resolutions passed by the Shareholders at their Extraordinary General meeting held on April 26, 2004 theresolutions passed by the Board of Directors of the Company at its meetings held on June 11, 2004 and the resolutionpassed in the Meeting of the Committee of Directors held on June 24, 2004, it has been decided to make the following offerto the Equity Shareholders of the Company:

Issue of 11,385,600 equity shares of Rs. 10/- each for cash at a premium of Rs. 32/- per Equity Share i.e. at a price ofRs. 42/- per Equity Share on rights basis to the existing Equity Shareholders of the Company in the ratio of 3 (Three) EquityShares for every 1 (One) Equity Share held on Record Date i.e. August 21, 2004 aggregating Rs. 478.20 Mn.

I) General Information

a. Name of the Company and Address of the Registered Office and Corporate Office

Vijay Industries and Projects LimitedRegistered Office: 35, Chandivali Village, Off Sakivihar Road, Andheri (E), Mumbai 400 072Tel: (022) 28474146 ; Fax (022) 27618444 ; E-mail: [email protected] Office:Corporate Office: EL-205, TTC Industrial Area Mhape, Navi Mumbai 400 701Tel: (022) 2761 8555 ; Fax: (022) 2761 8444; E-mail: [email protected]: www.vijayin.com

b. Government Approvals

The Company does not require any consent of the Government of India for the present Issue. The Company hasreceived all the necessary permissions and approvals from the Government of India and other agencies for conductingits business. No further approvals are required by the Company save and except those approvals, which may berequired in the ordinary course of business from time to time. It must be understood that in granting the aboveapprovals the Government of India and the Reserve Bank of India do not undertake any responsibility for the financialsoundness and any of the statements or opinions expressed in this regard.

c. Listing

The existing equity shares of the Company are listed on the BSE (the Designated Stock Exchange) and CSE.

Steps to Delist from Exchanges Other than BSE in compliance with SEBI Delisting Guidelines

The shareholders of the Company, at their Annual General Meeting held on September 30, 2003 had approveddelisting of equity shares from the Stock exchanges at ASE, CSE, and DeSE. Consequently, the Company’s shareshave been delisted from ASE and DeSE. The delisting approval from CSE is still awaited. Pending approval from CSEfor delisting of the Company’s Shares, the Company has obtained in-principle approval from CSE for listing of sharesbeing offered through this Letter of Offer vide CSE’s letter dated July 27, 2004.

The Company has also received in-principle approval for the listing of the shares being offered through this Letter ofOffer, from the Stock Exchange, Mumbai by its letter dated July 23, 2004.

The Company shall make applications to the BSE for: (i) permission to deal in, (ii) for an official quotation and (iii) forlisting in respect of the shares being offered in terms of this Letter of Offer. The Company shall also make similarapplications to CSE if the approval for delisting of shares is not granted by them by such date.

It is proposed that the Shares of the Company however, continue to be listed on The Stock Exchange, Mumbai.However, if as a result of the Rights Issue, the non-promoter shareholding, required to be maintained for continuouslisting in the Company falls below the permissible minimum level, the Promoter will comply with the provisions ofSecurities & Exchange Board of India (Delisting of Securities) Guidelines - 2003 by making an offer to buy out theremaining shareholders at the price of the Rights Issue.

If the permission to deal and an official quotation of the securities is not granted by any of the Stock Exchangesmentioned above, then subject to steps for delisting, within six weeks from the Issue Closing Date, the Company shallforthwith repay, without interest, all monies received from applicants in pursuance of this Letter of Offer. If such moneyis not paid within eight days after the Company becomes liable to repay it, then the Company and every director of theCompany who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay themoney with interest as prescribed under the Section 73 of the Act

d. Issue Schedule

Issue Opening Date August 31, 2004

Last date for receiving requests for split forms September 15, 2004

Issue Closing Date September 29, 2004

The Rights Issue will not be kept open for more than 30 days unless extended, in which case it will be kept open for amaximum 60 days.

2

e. Issue Management Team

Lead Manager to the IssueCitigroup Global Markets India Private Limited4th Floor Bakhtawar229, Nariman Point, Mumbai – 400 021Tel: (022) 5631 9982Fax: (022) 22 5631 9803E-mail: [email protected]

Registrar to the Issue

Adroit Corporate Services Private Limited19, Jaferbhoy Industrial EstateMakwana Road, Marol Naka, Andheri (East)Mumbai – 400 059Tel: (022) 28590942 / 28503748 / 56924437Fax: (022) 56924438E-mail: [email protected]

Legal Advisors to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & Co.Advocates & SolicitorsPeninsula Chambers, Ganpatrao Kadam Marg,Lower Parel,Mumbai – 400 013.Tel: (022) 24964455Fax: (022) 24963666

Company Secretary & Compliance Officer

Mr. Kunal D ShahVijay Industries and Projects LimitedEL-205 TTC Industrial Area, Mhape, Navi Mumbai 400 701Tel No. (022) 27618555, Ext. 411Fax No.(022) 27618444

Note: The investors are advised to contact the Registrars to the Issue/ Compliance Officer in case of any pre-issue/post-issue related problems such as non-receipt of Letter of Offer/ CAF/ Letter of Allotment/ Share Certificates/ creditof shares in the beneficiary account/ Refund Orders, etc.

Auditor of the Company

Price Waterhouse11th Floor, Raheja ChambersNariman PointMumbai-400 021

Bankers to the Issue

Citibank, N.A.Bombay Mutual Building293, D.N. RoadFort, Mumbai - 400 001Tel:(022) 2269 5757Fax: (022) 2270 2241

Vijaya BankRohit ChambersS.A. Brelvi RoadFort, Mumbai - 400 001.

Bankers to the Company

Citibank, N.ABombay Mutual Building, 293, D.N. RoadFort, Mumbai - 400 001

Hongkong and Shanghai Banking Corporation Limited

52/60 M. G. Road, Fort, Mumbai 400 001

3

f. Credit Rating / Debenture Trustee

This being an issue of equity shares, no credit rating, or appointment of a debenture trustee is required.

g. Impersonation

As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection (1) ofSection 68A of the Companies Act, 1956 which is reproduced below:

“Any person who-

(a) makes in a fictitious name an application to a Company for acquiring or subscribing for any shares therein, or

(b) otherwise induces a Company to allot, or register any transfer of shares therein to him, or any other person in afictitious name,

shall be punishable with imprisonment for a term which may extend to five years.”

h. Allotment Letters / Refund Orders

The Company will issue and dispatch letters of allotment/ securities certificates and/ or letters of regret along withrefund orders or credit the allotted securities to the respective beneficiary accounts, if any within a period of 6 weeksfrom the date of closure of the Issue. If any monies required to be refunded to an Equity Shareholder are not repaidwithin 8 days from the day the Company becomes liable to pay it (i.e. 42 days after the Issue Closing Date), theCompany shall pay such money with interest as stipulated under sub section (2) and (2A) of Section 73 of the Act.

Letters of allotment/ securities certificates/ refund orders above the value of Rs.1,500/- will be dispatched by registeredpost/ speed post to the sole/ first applicant’s registered address. However, refund orders for value not exceedingRs.1,500/- shall be sent to the applicants under postal certificate. Such cheques or pay orders will be payable at par atall the centers where the applications were originally accepted and will be marked “A/c payee” and would be drawn inthe name of the sole/ first applicant. Adequate funds would be made available to the Registrars to the Issue fordispatch of the Letters of allotment/ securities certificates/ refund orders. Bank charges if any, for encashing suchcheques or refund orders will be payable by the applicant.

i. Declaration of Utilisation of Issue Proceeds

The Board of Directors declares that:

– The funds received against this Issue will be transferred to a separate bank account other than the bank accountreferred to sub-section (3) of Section 73 of the Act.

– Details of all moneys utilized out of the Issue shall be disclosed under an appropriate separate head in the balancesheet of the Company indicating the purpose for which such moneys have been utilized.

– Details of all such unutilized moneys out of the Issue, if any, shall be disclosed under an appropriate separate head inthe balance sheet of the Company indicating the form in which such unutilized moneys have been invested.

The funds received against this Rights Issue will be kept in a separate bank account and the Company will not haveany access to such funds unless it satisfies The Stock Exchange, Mumbai (the Designated Stock Exchange) withsuitable documentary evidence that the minimum subscription of 90% of the Issue has been received by theCompany. The funds already brought in by the Principal Shareholder, to the extent of their proposed contribution tothe Rights Issue (including under subscription, if any) shall be excluded from this amount for being transferred to thebank account mentioned above. The Company shall provide suitable documentary evidence to this effect to TheStock Exchange Mumbai.

(For details please refer to Section “Terms of the Issue” on page 9 of the Letter of Offer).

j. Minimum SubscriptionIf the Company does not receive the minimum subscription of 90% of the Issue, application money for the issue theentire subscription shall be refunded to the applicants within 42 days from the date of closure of the issue. If there isa delay in the refund of subscription by more than 8 days after the Company becomes liable to repay the subscriptionamount, (i.e. 42 days after closure of the Issue), the Company will pay interest for the delayed period, at prescribedrates in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.

The minimum subscription mentioned above shall be computed after taking into account the amount already beenbrought in by Kidde, to the extent of their proposed contribution (including any additional amount over and above theirentitlement) to the Rights Issue.

The Issue will be considered undersubscribed after considering the number of shares applied for based on theentitlement plus additional shares. The undersubscribed portion can be applied for only after the close of the Issue. ThePromoter or any other person can subscribe to such undersubscribed portion in accordance with relevant provisions oflaw. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and ifdisclosure is made pursuant to SEBI Takeover Code, such allotment of the undersubscribed portion will be governed bythe provisions of the SEBI Takeover Code.

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The above is subject to the terms mentioned under the “Basis of Allotment” of page 14 to 15 of the Letter of Offer.

Kidde, being the person presently in control of the Company, intends to subscribe to additional shares beyond itsentitlement if the issue is undersubscribed. The acquisition of additional securities in such an event shall be exempt interms of proviso to Regulation 3(1) (b) (ii) of the SEBI Takeover Code. Further, this acquisition will not result in changeof control of the management of the Company.

k. Eligibility for the IssueThe Company has been incorporated under the Act, and its Equity Shares are listed on the CSE and BSE (theDesignated Stock Exchange). The Company is eligible to make this Rights Issue in terms of Clause 2.1 and 2.4.1 (iv)of the SEBI Guidelines.

The Company, its Promoter, its directors or any of the Company’s associates or group companies and companies withwhich its directors are associated as directors or promoters, or directors have not been prohibited from accessing thecapital market under any order or directive passed by SEBI. Further, the Promoters, its relatives, the Company, groupcompanies, and associate companies are not detained as willful defaulters by RBI/Government authorities and thereare no violations of securities laws committed by them in the past or pending against them.

l. Applicable Laws/regulationsAll the legal requirements applicable to the Rights Issue have been complied with.

m. FilingThe draft Letter of Offer was filed with SEBI, Mumbai on June 29, 2004 and SEBI has given its observations vide itsletter dated August 5, 2004.

The draft Letter of Offer was filed with BSE (the Designated Stock Exchange) and CSE in accordance with theprovisions of the Act and the stock exchanges have given their observations on this Letter of Offer by their letter datedJuly 23, 2004 and July 27, 2004.

n. Disclaimer Clause

AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLYUNDERSTOOD THAT THE SUBMISSION OF LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BEDEEMED/ CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKEANY RESPOSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR FOR WHICH THE ISSUEIS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONSEXPRESSED IN THE LETTER OF OFFER. THE LEAD MANAGER M/S CITIGROUP GLOBAL MARKETS INDIAPRIVATE LIMITED MUMBAI HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER AREGENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE ANDINVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORSTO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSOBE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THECORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT,THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANYDISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEADMANAGER CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED MUMBAI HAVE FURNISHED TO SEBI ADUE DILIGENCE CERTIFICATE DATED JUNE 29, 2004 WHICH READS AS FOLLOWS:

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKECOMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHERMATERIAL IN CONNECTION WITH THE FINALIZATION OF THE DRAFT LETTER OF OFFER PERTAINING TOTHE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORSAND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTSCONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THEDOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY;

WE CONFIRM THAT:

i. THE LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS,MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

ii. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES,INSTRUCTIONS ETC., ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENTAUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH;

iii. THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLETHE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO INVESTMENT IN THE PROPOSEDISSUE;

iv. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTEROF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID; AND

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v. THE ISSUE IS NOT BEING UNDERWRITTEN.”

THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANYLIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956 OR FROM THEREQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCE AS MAY BE REQUIRED FORTHE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANYPOINT OF TIME, WITH THE LEAD MANAGER(S) (MERCHANT BANKERS) ANY IRREGULARITIES ORLAPSES IN THE LETTER OF OFFER.

o. Caution – Disclaimer from Issuer and Lead ManagerThe Company and the Lead Managers accept no responsibility for statements made otherwise than in this letter ofOffer or in any advertisement or other material issued by the Company or by any other persons at the instance of theCompany and anyone placing reliance on any other source of information would be doing so at his own risk.

The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selectiveor additional information would be available for a section of the Equity Shareholders in any manner whatsoeverincluding at presentations, in research or sales reports etc. after filing of the Letter of Offer with SEBI.

p. Disclaimer with respect to JurisdictionThis letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulationsthereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Mumbai,India only.

q. Disclaimer Clause of the BSEAs required, a copy of this Letter of Offer has been submitted to the BSE. BSE has given vide its letter dated July 23,2004 permission to use the BSE’s name in the Letter of Offer as one of the stock exchanges on which the securities ofthe Company are proposed to be listed. BSE has scrutinized this Letter of Offer for its limited internal purpose ofdeciding on the matter of granting the aforesaid permission to the Company. BSE does not in any manner:

a. warrant, certify, or endorse the correctness or completeness of any of the contents of this Letter of Offer ; or

b. warrant that the Company’s securities will be listed or will continue to be listed on the BSE; or

c. take any responsibility for the financial or other soundness of the Company, its promoters, its management, or anyscheme, or project of the Company.

And it should not for any reason be deemed or construed that this Letter of Offer has been cleared or approved byBSE. Every person who desires to apply for or otherwise acquire any securities of this Company may do so pursuant toindependent inquiry, investigation and analysis and shall not have any claim against the BSE whatsoever by reason ofany loss which may be suffered by such person consequent to or in connection with such subscription / acquisitionwhether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

r. Disclaimer Clause of CSEThe CSE has given, vide its letter dated July 27, 2004, its permission to the Company to use the name of theexchange in the Offer Document as one of the stock exchanges on which the Company’s securities are proposed to belisted.

The Exchange has scrutinized this Offer Document for its limited internal purpose of deciding on the matter of grantingthe aforesaid permission to the Company. The CSE does not in any manner –

1. warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; or

2. warrant that the Company’s securities will be listed or will continue to be listed on this exchange; or

3. take any responsibility for the financial or other soundness of this Company, its promoters, management or anyscheme or project of this Company;

and it should not be, in any reason be deemed or construed that this Letter of Offer has been cleared or approved bythe CSE. Every person who desires to apply for or otherwise acquires any securities of the Company may do sopursuant to independent inquiry, investigation and analysis and shall not have any claim against the CSE whatsoeverby 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 in the Offer Document or for any other reason whatsoever.

s. Underwriting/ Standby ArrangementsThe present issue is not underwritten.However, Kidde International Limited, the promoter, being persons presently in control of the Company, intend tosubscribe to additional shares beyond their entitlement if the issue is undersubscribed. The acquisition of additionalsecurities in such an event shall be exempt in terms of proviso to Regulation 3(1) (b) (ii) of the SEBI (SubstantialAcquisition of Shares and Takeover) Regulations, 1997. Further, this acquisition will not result in change of control ofthe management of the Company.

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II) Capital Structure of the Company

Share Capital No of shares Face Value Amount (Rs.)

Authorized Share Capital 16,500,000 Equity shares of Rs.10/- each 165,000,000

Issued & Subscribed 3,795,200 Equity shares of Rs.10/- each 37,952,000

Paid-up Capital 3,795,200 Equity shares of Rs.10/- each 37,952,000

Share Forfeited NIL Equity shares of Rs.10/- each, NIL

Present Rights Issue 11,385,600 Equity shares of Rs.10/- each for 113,856,000premium of Rs. 32/- cash at a

Paid up Capital after the Issue 15,180,800 Equity shares of Rs.10/- each 151,808,000

Share Premium AccountExisting share premium account 42,048,000

Share premium account after the allotment of Rights Equity Shares 406,387,200

Notes to Capital Structure:

1 Build up of Equity Capital

Date of Allotment No of equity Face Issue Considera Reasons Shareshares Value Price(Rs.) tion (Cash, for allotment Premium

(Rs.) bonus, consi- (Rs.)deration otherthan cash)

07/04/1981 20 100 100 Cash Subscribers toMemorandum –

03/02/1982 1,390 100 100 Cash Issued to erstwhilepromoter group –





06/08/1988 20,000 100 100 Bonus Ratio of 1:1 –

22/09/1990 40,000 100 100 Bonus Ratio of 1:1 –

05/05/1992 800,000 10 10 Sub-division of Sub-division –face value ofshares fromRs. 100 to Rs.10without increasein capital

05/05/1992 1,200,000 10 10 Bonus Ratio of 3:2 -

05/05/1992 400,000 10 20 Cash Public Issue 4,000,000

05/05/1992 60,000 10 20 Cash 15% over 600,000subscription

17/01/1993 782,000 10 20 Cash Conversion of loan 7,820,000

23/11/1994 300,000 10 75 Cash Private Placement 19,500,000

17/07/1995 253,200 10 50 Cash Conversion of 10,128,000debentures

TOTAL 3,795,200 42,048,000

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2 Details of shares allotted for consideration other than cash excluding Bonus Shares

None

3 Current shareholding pattern of the Company as on August 13, 2004

Category of Share Holder Post Issue capitalPre-Issue assuming all shares

offered are allotted**

Number of % of issued Number of % of issuedshares held capital shares held capital

Promoters

Indian Promoters - -

Foreign Promoters 3,133,906 82.58 12,535,624 82.58

Sub Total 3,133,906 82.58 12,535,624 82.58

Non-Promoters

Mutual Funds and UTI

Banks Financial Institutions and InsuranceCompaniesOriental Insurance Company Limited 46,700 1.23 186,800 1.23

Foreign Institutional Investors

Sub Total 46,700 1.23 186,800 1.23

Private Corporate Bodies 37,036 0.98 148,144 0.98

Non-Resident Indians/ OverseasCorporate Bodies/ Others 57,006 1.50 228,024 1.50

Sub Total 94,042 2.48 376,168 2.48

General Public 520,552 13.71 2,082,208 13.71

GRAND TOTAL 3,795,200 100.00 15,180,800 100.00

** Kidde, being the person presently in control of the Company, intends to subscribe to additional shares beyond theirentitlement if the Issue is undersubscribed. The acquisition of additional securities in such an event shall be exempt interms of proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.Further, this acquisition will not result in change of control of the management of the Company. The above computationdoes not take such subscription by Kidde.

4 Details of the shareholding of the Promoters and Promoter group in the Company as on August 13, 2004 is asfollows:

Name of entities No of shares Percentage (%)

Promoters

Kidde International Limited., U.K. 3,133,906 82.58

5 Details of the earliest and latest market purchases by Promoters and Promoter Group and average purchaseprice of current holding

None

6 The present Issue being a rights issue, the requirement of Promoters’ contribution is not applicable under theSEBI Guidelines.

7 The Promoters, Directors, and Lead Managers to the Issue have not entered into any buy-back, standby, orsimilar arrangements for any of the securities being issued through this Letter of Offer. Kidde, being theperson presently in control of the Company, intends to subscribe to additional shares beyond their entitlementif the Issue is undersubscribed. The acquisition of additional securities in such an event shall be exempt interms of proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeovers)Regulations, 1997. Further, this acquisition will not result in change of control of the management of theCompany.

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8 Details regarding the ten largest shareholders are given below(a) As on 13.08.2004

Name of the Share holder Shares % of Shareholding

Kidde International Limited 31,33,906 82.58The Oriental Insurance Company Limited 46,700 1.23Patheja Forgings & Auto Parts Manufacturers Limited 27,400 0.72Zaverchand Mavji Chheda 21,100 0.56Ram Narayan Davadiga 7,470 0.20Nitin Mansukhlal Shah 6,788 0.18UTI Securities Limited 4,810 0.13Amar N Merani 2,938 0.08Gaurav Arvind Laxman 2,885 0.08Shivhar Baburao Badgare 2,550 0.07

(b) As on August 13, 2002 (Two years prior to the date of the Letter of Offer)


Kidde International Limited 31,33,906 82.58The Oriental Insurance Company Limited 46,700 1.23Patheja Forgings & Auto Parts Manufacturers Limited 27,400 0.72Zaverchand Mavji Chheda 4,346 0.11Sanjay Gupta 1,700 0.04Y.R. Agarwal 1,600 0.04Vandana Nevatia 1,500 0.04Kishore N Vora 1,500 0.04UTI Columbus IFUS 1994 1,400 0.04Credit CIT CO Ltd A/c TMF-TTSS 1,300 0.03

(c) As on August 3, 2004 (10 days prior to the date of Letter of Offer)


Kidde International Limited 31,33,906 82.58The Oriental Insurance Company Limited 46,700 1.23Patheja Forgings & Auto Parts Manufacturers Limited 27,400 0.72Zaverchand Mavji Chheda 21,020 0.56Rama Narayan Davadiga 6,910 0.18Nitin Mansukhlal Shah 6,788 0.18UTI Securities Limted 4,810 0.13Gaurav Arvind Laxman 3,751 0.10Amar N Merani 2,938 0.08Shivhar Baburao Badgare 2,550 0.07

9 The Company made a private placement of 300,000 equity shares of Rs. 10 each at a premium of Rs. 65/- tofinancial institutions, mutual funds and companies in November 1994.

10 The shareholders of the Company do not hold any warrant, option, convertible loan, or debenture, which wouldentitle then to acquire further shares in the Company.

11 The total number of members of the Company as on August 13, 2004 is 4,572.12 The Company has not entered into or availed of “bridge loan” facility to be repaid out of the proceeds of the

Issue. Please refer to the “Objects of the Issue” clause subsequently in the Letter of Offer for details of the loantaken by the Company from Kidde which is proposed to be repaid through the proceeds of the Rights Issue.

13 At any given time, there shall be only one denomination of the equity shares of the Company.14 No further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue

or in any other manner which will affect the equity capital of the Company shall be made during the periodcommencing from the filing of the Letter of Offer with the SEBI and the date on which the rights equity sharesunder this Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue.

15 Kidde, the principal shareholder and the person presently in control of the Company, intends to subscribe to itsown entitlement of the rights issue and additional shares beyond its entitlement if the Rights Issue isundersubscribed.

16. The Company does not at present have any proposal to issue further shares either through rights/bonus/preferential issue within a period of six months from the date of the opening of the present issue.

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III) TERMS OF THE ISSUE

The Equity Shares, now being issued, are subject to the terms and conditions of this Letter of Offer, the enclosed CAF, theMemorandum & Articles of Association of the Company, the approvals from the GoI, FIPB and RBI, if applicable, the provisionsof the Companies Act, 1956, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and forlisting of securities issued by Government of India and/ or other statutory authorities and bodies from time to time, terms andconditions as stipulated in the allotment advise or letter of allotment or security certificate and rules as may be applicable andintroduced from time to time.

Authority for the Issue

The Issue is being made pursuant to

� Resolution from shareholders in the General meeting held on April 26, 2004

� Board resolution dated June 11, 2004 and

� Resolution passed by the Committee of Directors at their meeting held on June 24, 2004.

In terms of the said resolution, if any Equity Shares remain unsubscribed or undersubscribed, the Board shall have fulldiscretion and absolute authority to offer such Equity Shares to whomsoever they may deem fit and proper.

Further, the Board of Directors of the Company has approved the Draft Letter of Offer vide resolution dated June 24, 2004and this Letter of Offer vide resolution dated August 18, 2004 passed by way of circulation. All the directors, including theManaging Director, as well as the Chief Financial Officer i.e. Vice President (Finance) have signed the Draft Letter of Offerand this Letter of Offer.

Basis of the Issue

The Equity Shares are being offered for subscription to those existing Equity Shareholders whose names appear as beneficialowners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Registerof Members of the Company in respect of shares held in the physical form at the close of business hours on the Record Date i.e.August 21, 2004 fixed in consultation with the BSE.

Issue of 11,385,600 equity shares of Rs. 10/- each at a premium of Rs. 32/- per Equity Share i.e. at a price of Rs. 42/- per equityshare on rights basis to the existing equity shareholders of the Company in the ratio of 3 (Three) Equity Shares for every 1 (One)equity shares held on Record Date i.e. August 21, 2004 aggregating Rs. 478.20 mn.

Principal Terms and Conditions of the Issue of Equity Shares

Face value

Each Equity Share shall have the face value of Rs.10/-

Issue price

Each Equity Share is being offered at a price of Rs. 42/- (including a premium of Rs. 32/-) for cash

Rights Entitlement

As you were an Equity Shareholder on the Record Date, you are being made this offer as shown in part A of the enclosed CAF.

Entitlement Ratio

The Equity Shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of 3 (Three)Equity Shares for every 1 (One) equity shares held as on the Record Date.

Nomination facility

In terms of Section 109A of the Act, nomination facility is available in case of equity shares. The applicant can nominate anyperson by filling the relevant details in the CAF in the space provided for this purpose.

Offer to Non-Resident Equity Shareholders/Applicants

Pursuant to regulation 6 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outsideIndia) Regulations 2000, (“FEMA Regulations”) a person resident outside India may purchase equity shares offered on a rightsbasis offered by an Indian company which satisfies the following conditions:

� The offer on rights basis does not result in increase in the percentage of foreign equity already approved or permissibleunder the foreign direct investment scheme in terms of the FEMA Regulations;

� The existing shares against which the shares are issued on right basis were acquired and are held by the person outsideIndia in accordance with the FEMA Regulations;

� The offer on right basis to the persons resident outside India is at a price, which is not lower than at which the offer is madeto resident shareholders.

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The rights shares purchased by the resident outside India shall be subject to the same conditions including restrictions in regardto the repatriability as are applicable to the original shares against which right shares are issued.

Option available to the Equity Shareholders

The CAF clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to.

If the Equity Shareholder applies for an investment in Equity Shares, then he can:

� Apply for his entitlement in full

� Apply for his entitlement in full and apply for additional Equity Shares

� Apply for his entitlement in part

� Apply for his entitlement in part and renounce the other part

� Renounce in full

Renouncees for Equity Shares can apply for the Equity Shares renounced towards them and also apply for additional EquityShares.

Market lot

The market lot for the equity shares in dematerialized mode is one. In case of physical certificates, the Company would issue onecertificate for all the Equity Shares allotted to one person (“Consolidated Certificate”).

Terms of payment

The entire amount shall be payable on application. i.e. Rs. 42/- per equity share, consisting Rs10 /- being share capital and Rs.32/- being share premium account.

Ranking of the Equity Shares

The Equity Shares now being issued shall be subject to the Memorandum and Articles of Association of the Company and shallrank pari passu in all respects including dividends with the existing equity shares of the Company.

How to Apply

Resident Equity Shareholders and Non-resident Equity Shareholders can apply for the Issue by making an application in theCAF which is enclosed herewith. Duplicate of the CAF can be obtained from Registrar to the issue at the address given below

Resident Equity Shareholders

Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed in allrespects, as explained in the instructions indicated in the CAF. Applications will not be accepted by the Lead Manager or by theRegistrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions givenelsewhere in the Letter of Offer.

All applications should be made only on the printed CAF enclosed herewith or on the duplicate CAF obtained in the mannerprovided hereunder or on blank paper in case of non- receipt of the CAF as more particularly provided hereunder.

Non-resident Equity Shareholders

Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, inter alia, be subjectto the conditions as may be imposed from time to time by the FIPB / Reserve Bank of India, in the matter of refund of applicationmoneys, allotment of Equity Shares, issue of Letters of Allotment/ certificates/ payment of dividends etc.

The CAF consists of four parts:

� Part A: Form for accepting the Equity Shares offered and for applying for additional Equity Shares

� Part B: Form for renunciation

� Part C: Form for application for renouncees

� Part D: Form for request for split application forms

Acceptance of the Rights Issue

You may accept the Offer and apply for Equity Shares offered, either in full or in part by filling Block III of Part “A” of the enclosedCAF and submit the same along with the application money payable to the “Bankers to the Issue” or any of the branches asmentioned on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date or such extendedtime as may be specified by the Board thereof in this regard. Applicants at centers not covered by the branches of collectingbanks can send their CAF together with the cheque drawn on a local bank at Mumbai/demand draft payable at Mumbai to theRegistrar to the Issue by registered post. Such applications sent to anyone other than the Registrar to the Issue are liable to berejected.

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Renunciation

As an Equity Shareholder, you have the right to renounce your entitlement for the Equity Shares in full or in part in favour of oneor more person(s). Your attention is drawn to the fact that the Company shall not allot and/or register any Equity Shares in favourof:

� More than three persons including joint holders

� Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable trustlaws and is authorised under its constitution to hold Equity Shares of a company).

Any renunciation from resident to non-residents or any renunciation for consideration from non-residents to residents is subjectto the renouncer(s)/renounces(s) obtaining the necessary FIPB / RBI approval, if required, under FEMA and the said permissionshould be attached to CAF. Applications not accompanied by the requisite approvals are liable to be rejected. Allotment of suchshares to renouncee(s) of non-resident shareholders shall be subject to the receipt of applicable approvals of RBI under FEMA.

Procedure for renunciation

To renounce the whole Offer in favour of one renouncee:

If you wish to renounce the Offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all jointholders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part Cof the CAF. In case of joint renouncees, all joint renouncees must sign Part C of the CAF.

To renounce in part/or renounce the whole to more than one person(s)

If you wish to either accept this Offer in part and renounce the balance or renounce the entire Offer in favour of two or morerenouncees, the CAF must be first split into requisite number of forms.

Please indicate your requirement of split forms in the space provided for this purpose in Part D of the CAF and return the entireCAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requestsfor split forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraphabove shall have to be followed.

In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimenregistered with the Company, the application is liable to be rejected.

Renouncee(s)

The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the Application Form and submitthe entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money.

Change and/ or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person or persons, not more than three, who is/are not already jointholder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed.Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated aboveshall have to be followed. However, this right of renunciation is subject to the express condition that the Board of Directors of theCompany shall be entitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigningany reason thereof.

Please note that:

(a) Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used,this will render the application invalid.

(b) Request for split form should be made for a minimum of 100 Equity Shares or in multiples thereof and one Split ApplicationForm for the balance Equity Shares, if any.

(c) Only the person to whom this Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounceand to apply for Split Application Forms. Forms once split cannot be split again.

(d) Split form(s) will be sent to the applicant(s) by post at the applicant’s risk.

Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, providedthat you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any otherperson(s). Applications for additional Equity Shares shall be considered and allotment shall be made in the manner prescribedelsewhere in the Letter of Offer under the “Basis of Allotment”. The renouncees applying for all the Equity Shares renounced intheir favour may also apply for additional Equity Shares.

Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would bemade on a fair and equitable basis in consultation with the Designated Stock Exchange.

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The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following optionswith regard to the Equity Shares offered, using the enclosed CAF:

Option Available Action Required

1. Accept whole or part of your entitlement without Fill in and sign Part A(All joint holders must sign)renouncing the balance.

2. Accept your entitlement in full and apply for Fill in and sign Part A including Block III relating to theadditional Equity Shares acceptance of entitlement and Block IV relating to additional

Equity Shares(All joint holders must sign)

3. Renounce your entitlement in full to one person Fill in and sign Part B (all joint holders must sign) indicating(Joint renouncees are considered as one). the number of Equity Shares renounced and hand it over to

the renouncee. The renouncees must fill in and sign Part C(All joint renouncees must sign)

4. Accept a part of your entitlement and Fill in and sign Part D (all joint holders must sign) requestingrenounce the balance to one or more for Split Application Forms. Send the CAF to the Registrar torenouncee(s) the Issue to reach them on or before the last date for

O R receiving requests for Split Forms. Splitting will be permittedRenounce your entitlement to all the only once.On receipt of the Split Form take action asEquity Shares offered to you to more indicated below;than one renouncee

� For the Equity Shares you wish to accept, if any, fill in andsign Part A.

� For the Equity Shares you wish to renounce, fill in and signPart B indicating the number of Equity Shares renouncedand hand it over to the renouncees. Each of the renouncesshould fill in and sign Part C for the Equity Shares acceptedby them.

5. Introduce a joint holder or change the sequence This will be treated as a renunciation. Fill in and sign Part Bof joint holders and the renouncees must fill in and sign Part C.

Availability of duplicate CAF

In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF onthe request of the applicant who should furnish the registered folio number/ DP and Client ID no. and his/ her full name andaddress to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should notutilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the applicant violatesany of these requirements, he/ she shall face the risk of his duplicate application being rejected.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make anapplication to subscribe to the Rights Issue on plain paper, along with an Account Payee Cheque drawn on a local bank atMumbai/ Demand draft payable at Mumbai and send the same by registered post directly to the Registrar to the Issue.

The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recordedwith the Company, must reach the office of the Registrar to the Issue before the Date of Closure of the Issue and should containthe following particulars:

� Name of Issuer

� Name and address of the Equity Shareholder including joint holders

� Registered Folio Number/ DP and Client ID no.

� Number of shares held as on Record Date

� Number of Rights Equity Shares entitled

� Number of Rights Equity Shares applied for

� Number of additional Equity Shares applied for, if any

� Total number of Equity Shares applied for

� Total amount paid @ Rs.42/- per Equity Share

� Particulars of Cheque/ Draft

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� Savings/Current Account Number and name and address of the bank where the Equity Shareholder will be depositing therefund order

� PAN/GIR number and Income Tax Circle/Ward/District where the application is for Equity Shares of a total value ofRs.50,000 or more (i.e. Number of shares applied X Issue price inclusive of share premium) for the applicant and for eachapplicant in case of joint names, and

� In case of non-resident shareholders, NRE/FCNR/NRO Account no., name and address of the bank and branch.

� Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of theCompany

Payments in such cases, should be through a cheque/ demand draft payable at Mumbai be drawn in favour of the “Bankers to theIssue VIPL- Rights Issue A/c.”, and marked “A/c Payee”, for instance, “Citibank VIPL- Rights Issue A/c.”.

Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce theirrights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If theapplicant violates any of these requirements, he/she shall face the risk of rejection of both the applications and the amountsremitted along with the applications shall be refunded.

Last date of Application

The last date for submission of CAF is September 29, 2004. The Board will have the right to extend the said date for such periodas it may determine from time to time but not exceeding 60 days from the date the Issue opens.

If the CAF together with the amount payable is not received by the Bankers to the Issue/ Registrar to the Issue on or before theclose of banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee, the offer containedin this Letter of Offer shall be deemed to have been declined and the Board/ Committee shall be at liberty to dispose off theEquity Shares hereby offered, as provided under the heading “Basis of Allotment”.

Mode of Payment

a. Mode of payment for Resident Equity Shareholders/ Applicants

Only one mode of payment per application should be used. All cheques / drafts accompanying the CAF should be drawnin favour of the Bankers to the Issue (specified on the reverse of the CAF), crossed “A/c Payee only” and marked “Bankersto the Issue - VIPL Rights Issue A/c.”, for instance, “Citibank VIPL-Rights Issue A/c”.

If payment is made by cheque/ demand draft such instrument must be drawn on any of the banks, including a co-operativebank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicatedon the reverse of the CAF where the application is to be submitted.

Applicants residing at places other than places where the bank collection centers have been opened by the Company forcollecting applications (as listed in the CAF), are requested to send their applications together with Demand Draft orcheque for the full application amount favoring the Bankers to the Issue, crossed “A/c Payee only” and marked “Name ofthe Bank - VIPL Rights Issue A/c” payable at Mumbai directly to the Registrar to the Issue by registered post so as to reachthem on or before the Issue Closing Date. Such application can be made after deducting demand draft charges from theamount payable on application. Such application if sent to any person other than the Registrar to the Issue is liable to berejected. The Company or the Registrar will not be responsible for postal delays or loss of applications in transit, if any.

Outstation cheques/drafts will not be accepted and application(s) accompanied by such cheques/drafts will be rejected.

b. Mode of payment for Non-Resident Equity Shareholders/ Applicants

As regards the application by non-resident Equity Shareholders, the following further conditions shall apply:

Payment by non-residents must be made by demand draft / cheque payable at Mumbai or funds remitted from abroad inany of the following ways:

1. Application with repatriation benefits

(a) By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from abroad (submittedalong with Foreign Inward Remittance Certificate); or

(b) By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in Mumbai; or

(c) By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable in Mumbai; or

(d) By funds remitted from a special non-resident rupee deposit account in case of FIIs registered with SEBI.

2. Application without repatriation benefits

As far as non-residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above,payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account maintained in Mumbai or RupeeDraft purchased out of NRO Account maintained elsewhere in India but payable at Mumbai. In such cases, the allotmentof Equity Shares will be on non-repatriation basis.

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All cheques/drafts submitted by non-residents should be drawn in favour of “Citibank - VIPL Rights Issue A/c - NR”,payable at Mumbai and must be crossed “A/c Payee only” for the amount payable. The CAF duly completed together withthe amount payable on application must be deposited with Bankers to the Issue indicated on the reverse of the CAFbefore the close of banking hours on the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

Applicants may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case maybe, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting theNRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise, the application shall be considered incompleteand is liable to be rejected.

Note:

In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in EquityShares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961.

In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Sharescannot be remitted outside India.

In case application received from non-residents, allotment, refunds and other distribution, if any, will be made inaccordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittanceand subject to necessary approvals.

Kidde’s application for the rights issue need not be accompanied by a cheque / pay order or remittances fromoverseas, but shall be made by way of an application, alongwith CAF, to the Board seeking adjustment of such amountof the their loan(s) into equity shares at the rights issue price as is equivalent to their entitlement and additional shares,if any.

Since Kidde intends to subscribe to additional shares beyond their entitlement if the Issue is undersubscribed, suchadditional subscription shall also be adjusted against the loan already granted to the Company, subject to RBIapproval.

Disposal of application & application money

No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue/ Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip atthe bottom of each CAF.

The Board reserves its full, unqualified, and absolute right to accept or reject any application on technical grounds, in wholeor in part, and in either case without assigning any reason thereto.

In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an applica-tion is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will,subject to applicable law be refunded to the applicant within six weeks from the close of Issue.

Basis of Allotment

1) Subject to provisions contained in this Letter of Offer, the Articles of Association of the Company and approval of TheStock Exchange, Mumbai, the Board will proceed to allot the Equity Shares in the following order of priority:

a) Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in partand also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part.

b) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as rights andhave also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as faras possible on an equitable basis having due regard to the number of Equity Shares held by them on the RecordDate, provided there is an under-subscribed portion after making full allotment in (a) above. The allotment ofsuch Equity Shares will be at the sole discretion of the Board/Committee in consultation with the BSE as a part ofthe Rights Issue and not preferential allotment.

c) Allotment to the renouncees who having applied for the Equity Shares renounced in their favour have alsoapplied for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in(a) and (b) above. The allotment of such additional Equity Shares will be made on a proportionate basis at thesole discretion of the Board but in consultation with the BSE as a part of the Rights Issue and not preferentialallotment.

2) The Issue will become undersubscribed after considering the number of shares applied as per entitlement plusadditional shares. The under-subscribed portion can be applied for only after the close of the Issue. The Promoters orany other persons can subscribe to such under-subscribed portion. If any person presently in control of the Companydesires to subscribe such under-subscribed portion and the disclosure is made pursuant to SEBI (SubstantialAcquisitions of Shares and Takeover) Regulations, 1997 such allotment of the under-subscribed portion will begoverned as per the Regulation 3(1)(b) of SEBI (Substantial Acquisitions of Shares and Takeover) Regulations 1997.

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Such allotment to promoters or persons in control of the Company shall be in compliance with clause 40A of theListing Agreement.

3) After taking into account the allotments made under 1(a), 1(b) and 1(c) above, if there is still any under subscription,the under-subscribed portion shall be disposed of by the Committee/Board authorized in this behalf by the Boardupon such terms and conditions, and in such manner as the Rights Committee/Board may in its absolute discretiondeem fit

4) The Company shall retain no over subscription.

5) The Board reserves its full unqualified and absolute right to accept and reject any application on technical grounds inwhole or in part, without assigning any reason whatsoever. In case the application is rejected in full, the whole of theapplication monies shall be refunded. Where an application is rejected in part, the balance of the application money,if any, after adjusting all monies due on Equity Shares allotted, will be refunded.

Underwriting

The present Issue is not underwritten.

However, Kidde being the person presently in control of the Company, intends to subscribe to additional shares beyondtheir entitlement if the Issue is undersubscribed. The acquisition of additional securities in such an event shall be exemptin terms of proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1997. Further this acquisition will not result in change of control of the management of the Company.

Allotment / Refund

The Company will issue and dispatch letters of allotment/ securities certificates and/ or letters of regret along withrefund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of 6 weeksfrom the Date of Closure of the Issue. If such money is not repaid within 8 days from the day the Company becomesliable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act.

Letters of allotment/ securities certificates/ refund orders above the value of Rs.1,500/- will be dispatched byRegistered Post/ Speed Post to the sole/ first applicant’s registered address. However, refund orders for value notexceeding Rs.1,500/- shall be sent to the applicants under Postal Certificate. Such cheques or pay orders will bepayable at par at all the centers where the applications were originally accepted and will be marked “A/c payee” andwould be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to theIssue for the dispatch of Letters of allotment/ securities certificates and refund orders.

In case the Company issues Letters of allotment, the corresponding Security Certificates will be kept ready within 3months from the date of allotment thereof or such extended time as may be approved by the Company Law Boardunder Section 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested topreserve such Letters of Allotment, which would be exchanged later for the Security Certificates.

As regards allotment/ refund to Non - Residents, the following further conditions shall apply

In case of non-residents, who remit their application monies from funds held in NRE/ FCNR accounts, refunds and/orpayment of interest/ dividend and other disbursement, if any, shall be credited to such accounts, details of which shouldbe furnished in the CAF. Subject to the approval of the FIPB / RBI as applicable, in case of non-residents, who remittheir application monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/interest and any other disbursement, shall be credited to such accounts (details of which should be furnished in theCAF) and will be made net of bank charges/ commission in US Dollars, at the rate of exchange prevailing at such time.The Company will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupeeamount into US Dollars. The Equity Share certificate(s) will be sent by registered post at the Indian address of the non-resident applicant.

Letters of Allotment / Equity Share certificates

Letter(s) of Allotment/ Equity Share certificates or Letters of Regret will be dispatched to the registered address of thefirst named applicant or respective beneficiary accounts will be credited within 6 weeks, from the date of closure of thesubscription list. In case the Company issues Letters of Allotment, the relative Equity Share certificates will bedispatched within 3 months from the date of allotment. Allottees are requested to preserve such Letters of allotment (ifany) to be exchanged later for Equity Share certificates. Export of Letters of Allotment (if any)/ Equity Share certificatesto non-resident allottees will be subject to the approval of RBI.

Option to receive Equity Shares in Dematerialized Form

Applicants to the Equity Shares of the Company issued through this Rights Issue shall be allotted the securities indematerialized (electronic) form or physical form at the option of the applicant. The Company and the Registrar to theIssue have signed a tripartite agreement with National Securities Depository Limited (NSDL) and with the CentralDepository Services (India) Limited (CDSL), which enables the investors to hold and trade in securities in adematerialized form, instead of holding the securities in the form of physical certificates.

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In this Rights Issue, the allottees who have opted for Equity Shares in dematerialized form will receive their EquityShares in the form of an electronic credit to their beneficiary account with a depository participant. Investor will have togive the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accuratelycontain this information, will be given the share certificates in physical form. No separate applications for securities inphysical and demat form should be made. If such applications are made, the application for physical securities will betreated as multiple applications and is liable to be rejected.

The Equity Shares of the Company will be listed on the BSE (Designated Stock Exchange), and the CSE subject toPara on “C. Steps to Delist from Exchanges Other than BSE in compliance with SEBI Delisting Guidelines” on page 1of this Letter of Offer. The shares allotted pursuant to the Issue shall be traded in demat segment only for all investors.

Procedure for availing this facility for allotment of Equity Shares in this Issue in the electronic form is as under:

1) Open a Beneficiary Account with any Depository Participant (care should be taken that the Beneficiary Account shouldcarry the name of the holder in the same manner as is exhibited in the records of the Company. In case of joint holding, theBeneficiary Account should be opened carrying the names of the holders in the same order as with the Company). In caseof Investors having various folios in the Company with different joint holders, the investors will have to open separateaccounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need notadhere to this step.

2) For Equity Shareholders already holding equity shares of the Company in dematerialized form as on Record Date, thebeneficial account number shall be printed on the CAF. For those who open accounts later or those who change theiraccounts and wish to receive their Rights Equity Shares by way of credit to such account, the necessary details of theirbeneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of securitiesarising out of this Issue may be made in dematerialized form even if the original equity shares of the Company are notdematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the EquityShareholders and the names are in the same order as in the records of the Company.

3) Responsibility for correctness of applicant’s details and other details given in the CAF vis-a-vis those with the applicant’sDepository Participant would rest with the applicant. Applicants should ensure that the names of the applicants and theorder in which they appear in CAF should be same as registered with the applicant’s Depository Participant.

4) If incomplete / incorrect Beneficiary Account details are given in the CAF the applicant will get Equity Shares in physicalform.

5) The Rights Equity Shares allotted to investors opting for dematerialized form, would be directly credited to the BeneficiaryAccount as given in the CAF after verification. Allotment advice, Refund Order (if any) would be sent directly to theapplicant by the Registrar to the Issue but the applicant’s Depository Participant will provide to him the confirmation of thecredit of the rights Equity Shares to the applicant’s Depository Account.

6) Renouncees will also have to provide the necessary details about their Beneficiary Account for allotment of securities inthis Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

Undertaking by the Company

� The complaints received in respect of the Rights Issue shall be attended to by the Company expeditiously andsatisfactorily.

� All steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges wherethe securities are to be listed will be taken within 7 working days of finalization of basis of allotment.

� The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post shall be made availableto the registrar to the captioned Rights Issue.

� The certificates of the securities/ refund orders to the non-resident Indians shall be dispatched within the specified time.

� No further issue of securities affecting equity capital of the Company shall be made till the securities issued/ offeredthrough the Rights Issue are listed or till the application moneys are refunded on account of non-listing, under-subscriptionetc.

General instructions for applicants

a. Please read the instructions printed on the enclosed CAF carefully.

b. Application should be made on the printed CAF, provided by the Company and should be completed in all respects. TheCAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completedin conformity with the terms of this letter of Offer are liable to be rejected and the money paid, if any, in respect thereof willbe refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled inEnglish and the names of all the applicants, details of occupation, address, father’s / husband’s name must be filled inblock letters.

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c. The CAF together with cheque / demand draft should be sent to the Bankers to the Issue /Collecting Bank or to theRegistrar and not to the Company or Lead Managers to the Issue. Applicants residing at places other than cities where thebranches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to makepayment by Demand Draft payable at Mumbai send their application forms to the Registrar to the Issue by REGISTEREDPOST. If any portion of the CAF is / are detached or separated, such application is liable to be rejected.

d. Applications for a total value of Rs.50,000/- or more, i.e. where the total number of securities applied for multiplied by theIssue price, is Rs.50,000/- or more the applicant or in the case of application in joint names, each of the applicants, shouldmention his/ her permanent account number allotted under the Income-Tax Act, 1961 or where the same has not beenallotted, the GIR number and the Income-Tax Circle / Ward / District. In case where neither the permanent account numbernor the GIR number has been allotted, the fact of non-allotment should be mentioned in the CAF. Forms without thisinformation will be considered incomplete and are liable to be rejected.

e. Applicants are advised to provide information as to their savings/current account number and the name of the Bank withwhom such account is held in the CAF to enable the Registrar to print the said details in the Refund Orders, if any, after thenames of the payees. Application not containing such details is liable to be rejected.

f. The payment against the application should not be effected in cash if the amount to be paid is Rs.20,000/- or more. In casepayment is effected in contravention of this, the application may be deemed invalid and the application money will berefunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions asmentioned above, should be made only to the Bankers to the Issue.

g. Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule of theConstitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Publicor a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per thespecimen signature recorded with the Company.

h. In case of an application under Power of Attorney or by a body corporate or by a society, a certified true copy of therelevant Power of Attorney or relevant resolution or authority to make investment and sign the application along with acopy of the Memorandum & Articles of Association and / or bye laws must be lodged with the Registrar to the Issue givingreference of the serial number of the CAF. In case these papers are sent to any other entity besides the Registrar to theIssue or are sent after the issue closure date then the application is liable to be rejected.

i. In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimensignature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicantsshould not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and allcommunication will be addressed to the first applicant.

j. Application(s) received from Non-Resident / NRIs, or persons of Indian origin residing abroad for allotment of EquityShares shall, inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matterof refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest,export of Equity Share certificates, etc. In case a Non-Resident or NRI Equity Shareholder has specific approval from theRBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF.

k. All communication in connection with application for the Equity Shares, including any change in address of the EquityShareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting thename of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation forchange of address of Equity Shareholders, after the date of allotment, should be sent to the Company in the case of EquityShares held in physical form and to the respective DP, in case of Equity Shares held in demat form.

l. Split forms cannot be re-split.

m. Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain splitforms.

n. A separate cheque / draft must accompany each CAF. Post-dated cheques and postal / money orders will not be acceptedand applications accompanied by such money orders or postal orders will be rejected.

o. Applicants must write their CAF number at the back of the cheque/ demand draft.

p. No receipt will be issued for application money received. The Bankers to the Issue / Registrar will acknowledge receipt ofthe same by stamping and returning the acknowledgment slip at the bottom of the CAF.

For further instructions, please read the CAF carefully.

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IV) TAX BENEFITS

The following tax benefits and deductions are available to various parties under the provisions of the relevant Acts, Rules andRegulations for the time being in force subject to the fulfilment of the requirements of the relevant provisions as certified by theAuditors of the Company:

“We hereby report that the enclosed annexure states the possible tax benefits available to (A) Vijay Industries and ProjectsLimited (the “Company”) and (B) its shareholders under the provisions of the Income-tax Act, 1961 and other direct and indirecttax laws presently in force. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditionsprescribed under the relevant tax laws.

The benefits discussed below are not exhaustive. This statement is only intended to provide general information to the investorsand is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the taxconsequences, the changing tax laws each investor is advised to consider in his/ her own case the tax implications of aninvestment in the shares.

We neither express any opinion nor provide any assurance as to whether:

� the Company or its shareholders will continue to obtain these benefits in future; or

� the conditions prescribed for availing the benefits have been/would be met with.

The content of this annexure is based on information, explanations and representations obtained from the Company and on thebasis of our understanding of the business activities and operations of the Company.

A. To the Company - Under the Income-tax Act, 1961

1. Exemption of dividend from income tax

As per the provisions of Section 10(34) of the Income-tax Act, 1961 dividend income referred to in Section 115 O of theIncome-tax Act, 1961 is exempt from tax in the hands of the shareholder.

2. As per the provisions of Section 10(33) of the Income-tax Act, 1961 any income arising from the transfer of a capital asset,being a unit of the Unit Scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of undertaking andRepeal) Act 2002 and where the transfer of such asset takes place on or after the 1st day of April 2002 is exempt from taxin the hands of the Company.

3. Computation of Capital Gains Tax

Capital assets may be categorised into short-term capital assets and long-term capital assets based on the period ofholding. In the case of shares in the company, if they are held for a period exceeding 12 months, they are treated as long-term capital asset. Section 48 of the Income-tax Act, 1961, which prescribes mode of computation of capital gains,provides for deduction for cost of acquisition/improvement and expenses incurred in connection with the transfer from thesale consideration to arrive at the amount of capital gains. However, in respect of long-term capital gains, it offers a benefitby permitting substitution of cost of acquisition/improvement with the indexed cost of acquisition/improvement which isadjusted for cost inflation index as prescribed from time to time.

As per the provisions of Section 112 of the Income-tax Act, 1961, long-term gains as computed above would be subject totax at a rate of 20 percent (plus applicable surcharge). However, as per the proviso to Section 112(1), the Company hasan option to offer long-term capital gains resulting on transfer of listed securities or units at a concessional rate of 10percent (plus applicable surcharge), if the benefits of indexation of cost of acquisition/ improvement are not claimed tocompute the amount of long-term capital gains.

B. To the Members of the Company - Under the Income-tax Act, 1961

B.1 Resident Members


As per the provisions of Section 10(34) of the Income-tax Act, 1961, dividend income referred to in Section 115 O ofthe Income-tax Act, 1961 is exempt from tax in the hands of the shareholder.

2. In terms of Section 10(23D) of the Income-tax Act, 1961 all Mutual Funds set up by Public Sector Banks or PublicFinancial Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized bythe Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from income tax on alltheir income, including income from investment in the shares of the Company.

3. Computation of capital gains

Capital assets may be categorised into short-term capital assets and long-term capital assets based on the period ofholding. In the case of shares in the company, if they are held for a period exceeding 12 months, they are treated aslong-term capital asset. Section 48 of the Income-tax Act, 1961, which prescribes mode of computation of capital

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gains, provides for deduction for cost of acquisition/ improvement and expenses incurred in connection with thetransfer from the sale consideration to arrive at the amount of capital gains. However, in respect of long-term capitalgains, it offers a benefit by permitting substitution of cost of acquisition/ improvement with the indexed cost ofacquisition/ improvement which is adjusted for cost inflation index as prescribed from time to time.

As per the provisions of Section 112 of the Income-tax Act, 1961, long-term gains would be subject to tax at a rate of20 percent (plus applicable surcharge). However, as per the proviso to Section 112(1), the Shareholder has an optionto offer long-term capital gains resulting on transfer of listed securities or units at a concessional rate of 10 percent(plus applicable surcharge), if the benefits of indexation of cost of acquisition/ improvement are not claimed tocompute the amount of long-term capital gains.

4. Exemption of capital gains from income tax

4.1.1 As per the provisions of Section 54EC of the Income-tax Act, 1961 and subject to the conditions specified therein,long-term capital gains arising on the transfer of shares of the Company shall be exempt from tax if the capital gainsare invested in certain notified bonds within six months from the date of transfer. However, if the shareholder sells ortransfers the notified bonds within a period of three years from the date of its acquisition, the amount of capital gainsexempted earlier would become chargeable as capital gains in the year in which the bonds are transferred or sold.

As per the provisions of Section 54ED of the Income-tax Act, 1961 and subject to the conditions specified therein,capital gains arising from transfer of long-term assets, being listed securities or units shall be exempt from capitalgains tax, if such gains are invested within six months from the date of transfer in equity shares forming part of an‘eligible issue of share capital’ and held for a period of at least one year. Eligible issue of share capital has beendefined as an issue of equity shares which satisfies the following conditions –

� the issue is made by a public company formed and registered in India; and

� the shares forming part of the issue are offered for subscription to the public.

4.2 Under section 54F of the Income-tax Act, 1961 long-term capital gains arising to an individual or Hindu UndividedFamily (HUF) on transfer of shares of the Company will be exempt from capital gain tax subject to other conditions, ifthe sale proceeds from such shares are used for purchase of residential house property within a period of one yearbefore or two years after the date on which the transfer took place or for construction of residential house propertywithin a period of three years after the date of transfer.

B.2 Non-Resident Indians / Non-Residents (other than Foreign Institutional Investors and Foreign Venture CapitalInvestors)


As per the provisions of Section 10(34) of the Income-tax Act, 1961, dividend income referred to in Section 115 O ofthe Income-tax Act, 1961 is exempt from tax in the hands of the shareholder.

2. Computation of capital gains

Under the first proviso to Section 48 of the Income-tax Act, 1961, in case of a non-resident, in computing the capitalgains arising from transfer of shares of the company acquired in convertible foreign exchange (as per exchangecontrol regulations) protection is provided from fluctuations in the value of rupee in terms of foreign currency in whichthe original investment was made. Cost indexation benefits will not be available in such a case. The capital gain/lossin such a case is computed by converting the cost of acquisition, sales consideration and expenditure incurred whollyand exclusively in connection with such transfer into the same foreign currency which was utilised in the purchase ofthe shares.

3. Options available under the Income-tax Act, 1961

Where shares have been subscribed in convertible foreign exchange - option of taxation under Chapter XII-A of theIncome-tax Act, 1961

Non-Resident Indians as defined in Section 115C(e) of the Income-tax Act, 1961, being shareholders of theCompany, have the option of being governed by the provisions of Chapter XII-A of the Income-tax Act, 1961, whichinter-alia entitles them to the following benefits in respect of income from shares of a Company acquired out ofconvertible foreign exchange:

� As per the provisions of Section 115E of the Income-tax Act, 1961 and subject to the conditions specified therein,long-term capital gains on the transfer of shares, will be subject to tax at the rate of 10 percent (plus applicablesurcharge), without aggregating any other income earned in India which is taxed separately.

� As per the provisions of Section 115F of the Income-tax Act, 1961 and subject to the conditions specified therein,full/ proportionate exemption from tax on long-term capital gains is available in cases where the net considerationarising from the transfer of the long-term capital asset is invested in certain specified assets or savingscertificates referred to in Section 10(4B) of the Income-tax Act, 1961 within six months from the date of transfer ofthe long-term capital asset.

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� As per the provisions of Section 115G of the Income-tax Act, 1961 and subject to the conditions specifiedtherein, Non- Resident Indians are not obliged to file a return of income under Section 139(1) of the Income-taxAct, 1961, if their only source of income is income from investments or long-term capital gains earned on transferof such investments or both, provided tax at source has been deducted from such income as per the provisionsof Chapter XVII-B of the Income-tax Act, 1961.

� Under Section 115H of the Income-tax Act, 1961, where the Non-Resident Indian becomes assessable as aresident in India, along with his return of income for that year, he may furnish a declaration in writing to theAssessing Officer under Section 139 of the Income-tax Act, 1961 to the effect that the provisions of the ChapterXII-A shall continue to apply to him in relation to such investment income derived from the specified assets forthat year and subsequent assessment years until such assets are converted into money.

� As per the provisions of Section 115I of the Income-tax Act, 1961, a Non-Resident Indian may elect not to begoverned by the provisions of Chapter XII-A for any assessment year by furnishing his return of income forthat assessment year under Section 139 of the Income-tax Act, 1961 declaring therein that the provisions ofChapter XII-A shall not apply to him for that assessment year and accordingly his total income for thatassessment year will be computed in accordance with the other provisions of the Income-tax Act, 1961.

Where the shares have been subscribed in Indian Rupees:-

As per the provisions of Section 112 of the Income-tax Act, 1961, long-term gains computed with availing the benefitof indexation would be subject to tax at a rate of 20 percent (plus applicable surcharge). However, as per the provisoto Section 112(1), long-term capital gains on transfer of specified assets, including listed shares of a Company canalso be offered to tax at a concessional rate of 10 percent (plus applicable surcharge) without claiming benefits ofindexation of cost of acquisition/ improvement.

Further, the following exemptions would be available to Non-Resident Indians where the shares have beensubscribed in Indian Rupees:

� As per the provisions of Section 54EC of the Income-tax Act, 1961 and subject to the conditions specified therein,long-term capital gains arising on the transfer of shares of the Company shall be exempt from tax if the capitalgains are invested in certain notified bonds within six months from the date of transfer. However, if theshareholder sells or transfers the notified bonds within a period of three years from the date of its acquisition, theamount of capital gains exempted earlier would become chargeable as capital gains in the year in which thebonds are transferred or sold.

� As per the provisions of Section 54ED of the Income-tax Act, 1961 and subject to the conditions specified therein,capital gains arising from transfer of long-term assets, being listed securities or units, shall be exempt fromcapital gains tax if the said capital gains are invested within six months from the date of transfer in equity sharesforming part of an ‘eligible issue of share capital’ and held for a period of at least one year. Eligible issue of sharecapital has been defined as an issue of equity shares which satisfies the following conditions –



� Under section 54F of the Income Tax Income-tax Act, 1961, long term capital gains arising to an individual orHindu Undivided Family (HUF) on transfer of shares of the Company will be exempt from capital gain tax subjectto other conditions, if the sale proceeds from such shares are used for purchase of residential house propertywithin a period of one year before or two years after the date on which the transfer took place or for constructionof residential house property within a period of three years after the date of transfer.

B.3 Foreign Institutional Investors (FIIs)

1. Exemption of dividend from Income-tax

As per the provisions of Section 10(34) of the Income-tax Act, 1961, dividend income referred to in Section 115-O ofthe Income-tax Act, 1961 is exempt from tax in the hands of shareholders of the company.

2. The income by way of short term capital gains or long term capital gains realised by FIIs on sale of shares in theCompany would be taxed at the following rates as per Section 115AD of the Income-tax Act, 1961.

Short-term capital gains – 30% (plus applicable surcharge)Long-term capital gains – 10% (without cost indexation Plus applicable surcharge)

(Shares held in a company would be long-term capital asset provided they are held for a period exceeding 12 months)

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3. Exemption of capital gains from income tax

3.1 As per the provisions of Section 54EC of the Income-tax Act, 1961 and subject to the conditions specified therein,long-term capital gains arising on the transfer of shares of the Company shall be exempt from tax if the capital gainsare invested in certain notified bonds within six months from the date of transfer. However, if the shareholder sells ortransfers the notified bonds within a period of three years from the date of its acquisition, the amount of capital gainsexempted earlier would become chargeable as capital gains in the year in which the bonds are transferred or sold.

3.2 As per the provisions of Section 54ED of the Income-tax Act, 1961 and subject to the conditions specified therein,capital gains arising from transfer of long-term assets, being listed securities or units, shall be exempt from capitalgains tax if the said capital gains are invested within six months from the date of transfer in equity shares forming partof an ‘eligible issue of share capital’ and held for a period of at least one year. Eligible issue of share capital has beendefined as an issue of equity shares which satisfies the following conditions –



B.4 Venture Capital Companies/ Funds

In terms of section 10(23FB) of the Income-tax Act, 1961 any income of Venture capital companies/ funds registeredwith Securities and Exchange Board of India, is exempt from income tax, subject to the conditions specified in the saidsection.

C. Benefits to Members of the Company under the Wealth Tax Act, 1957

Shares of the Company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) ofWealth Tax Act, 1957; hence Wealth Tax Act will not be applicable.

D. Benefits to Members of the Company under the Gift Tax Act

Gifts made including of shares of the Company, after September 30, 1998 do not attract Gift tax.

Notes:

The stated benefits will be available only to the sole/first named holder in case the shares are held by joint holders.

In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject to anybenefits available under the applicable Double Taxation Avoidance Agreements, if any.

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V) PARTICULARS OF THE ISSUEObjects of the Issue

The present issue of Equity Shares is being made to:

1. Augment the networth of the Company and repay the existing loans of USD 10.37 mn (equivalent to Rs. 474.93 mn)availed of by the Company from Kidde, the principal shareholder and promoter of the Company, and

2. Meet the expenses related to the proposed Rights Issue.

Uses of Funds

Sr. No Particulars Amount (Rs. in mn)

1 Repayment of Loans 474.93

2 Issue Expenses 18.00

Total 492.93

Means of Finance

Sr. No Particulars Amount (Rs. in mn)

1 Rights Issue 478.20

2 Internal Accruals 14.73

Total 492.93

1. Repayment of Loan from Kidde Finance LimitedThe Company had availed of a loan of USD 6,165,228.11 (apprx. USD 6.17 mn or Rs. 282.5 mn) from Kidde FinanceLimited during March, 2002. This loan is due for repayment in March, 2005. Subsequently during March, 2003, theCompany availed of another loan of USD 4,200,000 (Rs. 192.4 mn) from Kidde Finance Limited. The second loan isdue for repayment in March, 2006 vide agreements dated January 4, 2004 and March 1, 2004, amongst theCompany, Kidde Finance Limited and Kidde, the said loans were assigned in favor of Kidde, the principal shareholderof the Company and the approvals from the Reserve Bank of India for the same have been duly obtained.

In view of the accumulated losses incurred by the Company and having regard to the fact that the networth of theCompany has been fully wiped out, Kidde has decided to convert these loans aggregating to Rs. 474.93 mn intoequity through the proposed Rights Issue. Kidde’s entitlement to the Rights Issue amounts to Rs. 394.90 mn. Kiddeproposes to convert an amount equivalent to its entire entitlement of the Rights Issue into equity shares. Additionally,Kidde also proposes to subscribe to additional Shares beyond its entitlement in the case the issue isundersubscribed.

The Company has received the approval of Reserve Bank of India vide its letter dated August 17, 2004 for conversionof the two outstanding loans into equity share capital. The Reserve Bank of India’s approval, inter-alia, provides thatshares issued against the conversion of the loans shall have lock-in-period commensurate with the maturity of theoriginal loans.

The accumulated losses of the Company as on March 31, 2004 amount to Rs.136.35 mn (as per the audited results),which have exceeded the networth of the Company. The necessary filings/reporting and/or other procedures, inrelation to the erosion of the networth, will be made/followed by the Company with the relevant authorities inaccordance with law. The Company has received legal advice that the requirement of filings/reporting with therelevant regulatory authorities should be applicable within a period of 60 days from the date of finalization of dulyaudited accounts for the full financial year, i.e. the date of adoption of annual accounts by shareholders in an annualgeneral meeting. Considering the proposed Rights Issue and Kidde’s commitment to support the Rights Issue bysubscribing to its own entitlement in full as also the unsubscribed portion of the Rights Issue, in the event the othershareholders of the Company do not subscribe to their entitlement, an amount of approximately Rs. 430.38 mn, i.e.90% of the Rights Issue amount is expected to be infused in the Company which will augment the networth of theCompany to that extent. This is expected to make the networth of the Company positive.

2. Expenses related to the Rights IssueThe expenses related to the proposed Rights Issue are estimated at Rs. 18.0 mn, comprising fees and expensespayable to the Lead Manager to the Issue, Bankers to the Issue, Registrar to the Issue, Auditor, legal advisor to theIssue, printing and stationery expenses, advertising expenses and marketing expenses and all other expenses forlisting the Equity Shares on the Stock Exchanges.

Utilisation of Issue ProceedsPending the deployment of funds towards the objects of the Issue, the funds may be deployed in liquid instrumentslike government securities, mutual fund schemes investing exclusively in debt instruments and/or governmentsecurities, corporate debentures, bank deposits or in any other manner beneficial to the Company. The managingdirector of the Company shall authorize all such investments.

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VI) Main Objects of the Company as per Memorandum of Association

The object clauses of the Memorandum of Association of the Company enable it to undertake the activities for which the fundsare being raised in the present Issue. Furthermore, the activities the Company has been carrying out until now is in accordancewith the objects of the Memorandum. The objects for which the Company is established are:

“To manufacture, fabricate, manipulate, alter, assemble, made, produce, buy, sell, install, survey, import, export and deal in firefighting equipments and fire protection systems.”

VII) History of the Company the Management and Present Business

Incorporation

The Company was incorporated as “Vijay Fire Protection Systems Limited” on May 6, 1981 under the Companies Act, 1956 asa private limited company. It became deemed public company on February 23, 1989 and was converted into a public limitedcompany on February 24, 1992. On January 19, 1999 the name of the Company was changed to its present name.

History and Present Business of the Company

The Company was originally promoted by Mr. Khantilal R. Salot, Mr. Jitendra R. Salot, Mr. Pradip R. Salot and Mr. Harish R. Salot(together referred to as the “Erstwhile Promoters”). On incorporation, the Company took over the operations and business of M/s Vijay Machinery Stores, a partnership firm.

The Company is currently engaged in manufacture and assembling of various types of fire fighting equipments and supplies awide range of fire protection systems on a turnkey basis involving complete design, manufacture, erection, testing and commis-sioning of the systems.

The Equity Shares of the Company are listed on the BSE and CSE.

The Company had issued successive bonus Shares during 1989 to 1993. In the year 1992, the Company made an Initial PublicOffering (IPO) of 400,000 equity Shares at Rs. 20/- per share (including premium of Rs. 10/-) and 100,000 fully convertibledebentures of Rs. 250/- each for cash at par through prospectus, together aggregating to Rs. 33 million.

The present promoter, Kidde, acquired 2,490,054 equity Shares representing 65.61% of the outstanding equity share capital ofthe Company from the Erstwhile Promoters through a share purchase agreement dated May 17, 2001 at price of Rs. 42/- pershare in cash. Kidde made a Public Announcement for an open offer in compliance with the Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeovers) Regulations 1997 on May 22, 2001 to buy out the remaining 1,305,146equity Shares representing 34.39% of the outstanding equity Share capital at a price of Rs. 42/- per fully paid up equity Sharepayable in cash. Consequent to the aforesaid public offer, Kidde’s shareholding in the Company increased to 82.58%.

Business

The Company executes a wide range of fire protection systems projects on a turnkey basis involving complete design, manufac-ture, erection, testing and commissioning of the systems. The systems installed by the Company include smoke/heat detectors,automatic/manual fire alarm systems, CO2 system, automatic Halon 1301 extinguishing systems, hydrant, sprinklers, spray/water deluge systems, automatic fixed foam installation systems etc.

The Company’s product range covers various aspects of fire protection systems from a small fire extinguisher to the state-of-artcomputerised fully automatic fire protection systems for large companies. The Company has to its credit introduction of Halonsystems in India, manufacture of a fire crash tender with the latest technology involving CO2, Monex Dry Powder, AFFF Foamand Halon for a Naval Project and the design and manufacture of ionisation type smoke detectors.

Production Capacities

2004 2003 2002 2001 2000

Components & Accessories For FireProtection System Sets 100 100 100 100 100

Pollution Control Equipment Numbers - - 1 1 1

Pumps Numbers - - 50 50 50

Fire Extinguishers Numbers 10,000 10,000 10,000 5,000 5,000

Fire Vehicles Numbers - - 75 75 75

The Company’s business is strategically divided into three divisions catering to different segment of the market viz.

� Industrial Project Division;

� Safety Systems Division, and

� Product Division.

The Industrial Project Division primarily caters to the oil, power and major industrial units having significant amount of engineer-ing and design work. Safety Systems Division is mainly engaged in providing total solution for fire, control and alarm for small

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plant, commercial premises, software parks and residential units. Product Division is mainly carrying on the business of tradingin own manufactured products like fire alarm and detection systems, fire extinguishers, etc as well as products manufactured byvarious Kidde group companies spread across the world.

Future Business Strategy

The future business strategy of the Company includes strengthening its position in the industry with the help of its principalshareholder Kidde and the Kidde Group’s technical and product support. In view of this special thrust is being given by theCompany for speedier and timely execution of its projects. The Company’s brand “Vijay” is recognized in the fire industry in Indiaand “Kidde” enjoys strong brand equity in the global fire industry. The Company proposes to make an effort to take benefit of thisbrand equity.

At present, the Company has three branches, located at Delhi, Bangalore and Kolkata, with its Head Office at Navi Mumbai. TheCompany wants to further strengthen the marketing network by appointing sales team and representatives in the fast emergingcities such as Hyderabad and Chennai.

The Company believes that being a cost efficient player would be a key to improving its profitability in the industry. Therefore, itproposes to make serious efforts to carry out value engineering with the help of team of qualified and experienced designengineers. To control the working capital management, new ERP system has been put to use and full year benefit of the same willenable the Company reduce its inventory and receivables level. This will enable the Company to lower its cost of borrowings.

The Company has got itself registered as approved vendor with various major customers, Public Sector Undertakings and othergovernment organizations. Further efforts will be made to get the Company register with various new entrants and multinationalcompanies in the Indian market.

The process of registering with a Public Sector Undertaking “PSU” is a fairly time consuming process, and requires fulfillment ofvarious technical and financial criteria that are laid down by such PSU’s. These include evaluation of past track record, manufac-turing capabilities, manpower strength, design and engineering capabilities, financial strength, etc. Obtaining such a registrationenables the Company to bid for PSU business, which is usually of a large value and has lesser credit risk because of governmentownership. The Company has registered itself with a number of PSU’s such as National Thermal Power Corporation, NuclearPower Corporation, ONGC. HPCL, BPCL, IOC, etc.

Industry Overview

(as per the Company’s estimates)

The fire fighting industry in India is undergoing a transformation, from its traditional stage to becoming a more modern industry.The industry, which was earlier driven largely by the customers’ objectives of getting discounts on the insurance premium and tomeet the conditions laid out for borrowing by banks and financial institution, is gradually changing with customers becomingmore and more conscious of the need to protect their assets from fire hazards.

The industry is adopting new technologies rapidly. The latest technologies introduced in the developed countries reach Indianshores in a short time.

Unlike the developed world, the fire fighting systems in India are designed and installed by specialist fire fighting contractorshaving in-house ability to design and install such systems. Consultants and architects do have a role to play in the formation ofthe specifications and data sheets for specific projects. However, the final design engineering of the systems rests with thespecialist contractors.

Market

(as per the Company’s estimates)

There are no authentic, third party sources that undertake research in this industry and publish data on the same. Therefore, theestimates regarding the industry size and growth are based on management’s own assessment. According to the management,the total fire fighting market in India is estimated to be around Rs. 4,500 million. This includes both the organized and unorga-nized sector. The organized sector includes players such as the Company, Tyco, Steelage, Technofab, etc. and is estimated tohave a total turnover of around Rs. 2,500 million, while the balance comprises the unorganized sector.

Customers

Some of the major industries catered to by the Company include:

� Power Sector;� Refineries;� Petrochemical complexes;� Nuclear Power Plants;� Ports and terminals;� Petroleum Industry;� Fertilizer Plants;� Commercial and Industrial Parks, and� Residential Complex.

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Background of Promoters

The Company was originally promoted and managed by Mr. Khantilal R. Salot, Mr. Jitendra R. Salot, Mr. Pradip R. Salot, Mr.Harish R. Salot and the companies / firms controlled by them (“Erstwhile Promoters”). Kidde and its ultimately holding company,Kidde, Plc acquired control and management of the Company in compliance with SEBI Takeover Code in May 2001. Kidde hadobtained necessary FIPB and RBI approval for acquisition of Shares and for holding and transferring such Shares in the name ofKidde. Hence, Consequent to the aforesaid acquisition, Kidde has become the Principal Shareholder / Promoter of the Com-pany.

Kidde is a wholly owned subsidiary of Kidde Holdings Limited, which in turn is a wholly owned subsidiary of Kidde Plc, U.K.(“Kidde, Plc”). Kidde Plc is a widely held company and is listed on the London Stock Exchange.

Promoter / Promoter Group

Kidde Plc’s present activities are the result of a reorganization of erstwhile Williams Plc, U.K. Williams Plc was a company listedon the London Stock Exchange, and had various business divisions and companies engaged in the manufacture and marketingof fire protection, safety products, and security services.

On March 7, 2000, Williams Plc announced its intention to demerge and reorganize its businesses / companies under twoseparate quoted companies, Kidde Plc and Chubb Plc. The reorganization was approved by shareholders of Williams Plc onOctober 16, 2000 and implemented through a series of steps. Pursuant to a scheme of arrangement, the fire protection andsafety product companies and businesses of Williams Plc were transferred to Kidde Plc, while the securities services companiesand businesses were grouped under Chubb Plc.

Kidde International Limited (Kidde)

1) Kidde is a wholly owned subsidiary of Kidde Holdings Limited, which in turn is a wholly owned subsidiary of Kidde Plc,U.K.. Kidde was incorporated on December 21, 2000 and registered as a private limited company in England and Walesunder the Companies Act 1985. Its registered office is situated at Mathisen Way, Colnbrook, Slough, Berkshire SL3 0HB,UK. Kidde international is not listed on any stock exchange.

2) Kidde is the holding company for several group companies which it acquired from Kidde Plc. Thus, its main business is toact as group holding company and not engaged in any commercial activities.

3) Kidde had a share capital of Pound Sterling 953.53 mn (Rs. 80,220 million) as at December 31, 2003 comprising953,532,803 ordinary shares of UK Pound Sterling 1 each. The entire shareholding of Kidde is held by Kidde HoldingsLimited, which in turn is held entirely by Kidde Plc.

4) The Board of Directors of Kidde as March 31, 2004 comprises the following persons:

Name & Designation Address

Mr. Dean Byrne 1 Cearn Way, Coulsdon, Surrey, Cr5 2lhExecutive Director

Mr. John Hargreaves Glebe House, Blakes Lane Hare Hatch, Reading, Berkshire, Rg10 9tdExecutive Director

Mr. Diane Quinlan 11 Derwent Yard, Derwent Road, Ealing, London, W5 4twExecutive Director

Kidde Nominees Limited Mathisen Way, Colnbrook, Slough, Berkshire SL3 0HB, UKCorporate Director

Kidde Corporate Services Limited Mathisen Way, Colnbrook, Slough, Berkshire SL3 0HB, UKCorporate Director

Consolidated financials of Kidde for the last two years, and since inception are given below:

Profit and Loss Account Pound in mn Rs. in mn

For the year ended Dec. 31 2003 2002 2001 2003 2002 2001

Administrative expenses (10.5) (5.3) (1.3) (883.4) (445.9) (109.4)Operating (loss) (10.5) (5.3) (1.3) (883.4) (445.9) (109.4)Profit (loss) on disposal ofsubsidiary companies (506.1) 13.7 - (42,578.2) 1,152.6 -Income from participating interests 587.9 0.9 53.7 49,460.0 75.7 4,517.8Profit on ordinary activities before tax 71.3 9.3 52.4 5,998.5 782.4 4,408.4Taxation 0.1 0.1 (0.8) 8.4 8.4 (67.3)Profit on ordinary activities after tax 71.4 9.4 51.6 6,006.9 790.8 4,341.1Dividends - - (49.8) - - (4,189.7)Retained profits transferred to reserves 71.4 9.4 1.8 6,006.9 790.8 151.4

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Balance Sheet

Pound in mn Rs. in mn

As at Dec 31 2003 2002 2001 2003 2002 2001

Called up share capital 953.5 949.7 949.7 80,218.0 79,898.3 79,898.3

Profit and loss account 82.6 11.2 1.8 6,949.1 942.3 151.4

Equity shareholders’ funds 1036.2 960.9 951.5 87,175.5 80,840.5 80,049.7

Fixed Assets

Investments 1,252.8 944.2 947.2 105,398.1 79,435.5 79,687.9

Current Assets

Debtors 151.9 106.7 148.0 12,779.3 8,976.7 12,451.2

Cash at bank and in hand 0.1 0.7 0.7 8.4 58.9 58.9

Creditors – amounts falling due inless than one year (368.7) (90.6) (145.9) (31,018.7) (7,622.2) (12,274.6)

Net Current Assets (216.6) 16.8 2.8 (18,222.6) 1,413.4 235.6

Net Assets 1,036.2 960.9 950.0 87,175.5 80,840.5 7,9923.5

EPS 0.07 0.01 0.06 5.89 0.84 4.64

Book Value/Share 1.08 1.01 1.00 90.86 85.12 84.29

Face Value 1.00 1.00 1.00 84.13 84.13 84.13

Kidde Plc

1) Kidde Plc was incorporated on July 24, 2000 in England and Wales under the Companies Act 1985 as Venturedemand Plc and subsequently changed its name on September 15, 2000 to Kidde Plc. Its registered office is situatedat Mathisen Way, Colnbrook, Slough, Berkshire SL3 0HB, UK.

Kidde Plc is a professionally managed company with its shares listed on the London Stock Exchange. As on March31, 2004, Kidde Plc had an issued capital of U.K. Pound Sterling of 841,111,422 ordinary shares of U.K. PoundSterling 10 pence each (Rs. 8.4 per share). As on June 24, 2004, the shares of Kidde Plc traded at U.K. PoundSterling 1.20 (Rs. 101.0). Kidde Plc has no identified promoter/promoter group, but has a widely distributedinstitutional and public shareholding.

2) The composition of the Board of Directors of Kidde Plc is given below:

Name & Designation Address

Mr. Michael Harper Barley End, Stocks Road, Aldbury, Tring, Hertfordshire,Chief Executive Hp23 5rz

Mr. John Nicholas Group 89 Almners Road, Lyne, Chertsey, Surrey,Finance Director Kt16 0bh

Mr. Norman Askew Independent Offerton House, Offerton, Hathersage, Hope Valley,Non-Executive Chairman Derbyshire, S32 1bp

The Rt Hon John Gummer 46 Queen Annes Gate, London, Sw1h 9auIndependent Non-Executive Director

Mr. John W Poulter 8 Milford House, Queen Anne Street, London,Independent Non-Executive Director W1g 9hn

Mr. Michael J Kirkwood 33 Canada Square, London, E14 5lbIndependent Non-Executive Director

Mr. Richard Gillingwater 2 Lichfield Road, Kew, Richmond, Surrey, Tw9 3jrIndependent Non-Executive Director

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3) Consolidated financials of Kidde Plc for the last five years are given below:

Profit and Loss Account Pound in mn Rs. in mn

For the yearended Dec. 31 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999

Total Income 938 880 901 1113 1189 78,922 74,009 75,801 93,611 99,989

Total Expenses 824 780 799 917 1037 69,315 65,647 67,254 77,139 87,243

Profit before Interest and Tax 114 99 102 196 152 9,608 8,363 8,548 16,473 12,746

Interest (28) (31) (35) (72) (52) (2,330) (2,608) (2,902) (6,032) (4,350)

Profit Before Tax 87 68 67 124 100 7,277 5,754 5,645 10,441 8,396

Tax 27 (22) (25) (127) (28) 2,280 (1,859) (2,103) (10,668) (2,347)

Profit After Tax 114 46 42 (3) 72 9,557 3,895 3,542 (227) 6,049

Balance Sheet Pound in mn Rs. in mn

As at Dec 31 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999

Equity Capital 84 83 83 83 83 7,050 6,991 6,974 6,974 6,974

Revaluation Reserve 0 0 0 1 2 - - - 84 160

Share premium 5 1 0 0 0 412 84 - - -

Profit and loss account (21) (46) (63) (78) (422) (1,725) (3,870) (5,317) (6,520) (35,528)

Net Worth 68 38 20 6 (338) 5,738 3,205 1,657 538 (28,394)

Total Debt 259 290 316 351 1244 21,806 24,431 26,577 29,563 104,641

Deferred tax 0 0 0 0 0 - - - - -

Fixed Assets 226 222 230 228 288 18,971 18,677 19,358 19,165 24,255

Investments 55 41 32 29 7 4,619 3,458 2,667 2,415 623

Current Assets 405 397 373 410 986 34,081 33,358 31,372 34,519 82,961

Current Liabilities (358) (331) (299) (309) (376) (30,127) (27,855) (25,146) (25,996) (31,591)

Net Current Assets 47 65 74 101 611 3,954 5,502 6,226 8,522 51,370

Total Assets 327 329 336 358 906 27,544 27,637 28,251 30,102 76,247

EPS 7 6 5 -1 2 597 471 429 (76) 193

Book Value/NAV 0 0 0 0 0 0 0 0 0 (0)

Face value 10 10 10 10 10 841 841 841 841 841

(Source: Annual Reports)

Stock Market Data:

Name of Stock Exchange London Stock Exchange

High/ Low price in the last 6 months £1.23/ £0.91

Market price per share as on August 13, 2004 £1.12

Market capitalization as on August 13, 2004 £933.2 million

Prices as on London Stock Exchange (source: Bloomberg)

Some of the companies in which Kidde or Kidde Plc have an equity stake have ongoing business dealings with theCompany as suppliers of certain components, raw materials used by the Company. The details of such transactions havebeen disclosed under the “Related Party Transactions” elsewhere in this document.

28

Management of the Company

Directors

The details of the Board of Directors of the Company are as follows:

Name & address Age Date of Designation Qualification Other Directorshipsof the Director joining

Rakeshwar Dayal Mathur 52 01.10.2003 Managing B. Tech. NoneIndian Director (Mechanical)Neelam Housing Society, IIT, DelhiSector 29, Vashi,Navi Mumbai 400 705

Micheal James 34 05.08.2002. Director B.A. (Hons), Guardfire Ltd.British FCCA Guardfire International Ltd.8th Floor, Teo Hong Bangna Siam Pyrene Ltd.Building., 42/2 MOO 10, Kidde Australia Pty Ltd.Bangna Tara Road, Kidde InternationalBangna, Bangkok, Protection Systems Pte Ltd.Thailand –10260 Kidde Asia Pte. Ltd.

Kidde China Ltd.Guardall China Ltd.Shanghai Chubb NationalFoam Co. Ltd.Hepburn Systems Ltd.

Derek James 48 30.08.2001 Director None Guardfire Ltd.Addison Guardfire International Ltd.Thai Siam Pyrene Ltd.2002/210, Windull Park, Shanghai Chubb NationalBangnatrad Road, Foam Co.Ltd.Bangpleeyal, Kidde Australia Pty Ltd.Samutprakarn, Heien-Larsen (South-EastThailand –10540 Asia) Pte. Ltd.

Kidde InternationalProtection Systems Pte. Ltd.KiddeAsia Pte LtdKidde China Ltd.Guardall China Ltd.Hepburn Systems Ltd.

Gyan Kapilaeshwar Dayal, 48 04.07.2003 Director B.Sc NoneIndian (Chemistry),6, Mohmmedbhai Mansion, Master of7, N S Patkar Marg, ManagementMumbai 400 036 Studies

There are no outstanding litigations (other than the one mentioned below), disputes, disputes towards tax liabilities,defaults, non payment/ overdues of statutory dues, overdues to banks/ financial institutions, defaults against banks/financial institutions, proceedings initiated for economic/civil/any other offences (including past cases where penaltiesmay or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 ofschedule XIII of the Companies Act, 1956) against the Directors of the Company and further there are no criminalprosecutions launched against the Directors for any alleged offences (irrespective of whether they are covered under Part1 of Schedule XIII of the Companies Act, 1956).

In September 1992, one of the directors, Mr. Gyan Dayal, alongwith five other directors of Faber Equipments India PrivateLimited (Faber), was named as a party to a winding-up petition filed against Faber in his capacity as director. The DelhiHigh Court accepted the petition filed by a creditor on December 12, 1995 and ordered that Faber be liquidated. Theassets of Faber are now in the possession of the official liquidator. Mr. Dayal has since ceased to be a director of Faber.Further, Faber has been liquidated although a final order in this regard is yet to be passed. Mr. Dayal had provided apersonal guarantee to Vijaya Bank on behalf of Faber. Mr. Dayal, alongwith other directors, had approached the bank torepay all outstanding dues, which have been repaid and all his obligations under the said guarantee were settled in 2001.

29

Appointment of the Managing Director

Mr. Rakeshwar D Mathur was appointed as the Managing Director of the Company for a period of five years with effectfrom October 1, 2003 on the following terms and conditions:

RemunerationI. Salary scale : Rs.130,000 – Rs. 200,000 per month.

II. Incentive remuneration : Maximum up to 6 months salary, to be paid at thediscretion of the Board annually based on performance

III. Perquisites : Perquisites in addition to salary as under and restricted toRs. 750,000/- per annum.

In addition to the salary payable, the managing director shall beentitled to perquisites and allowances like house rent allowance,medical reimbursement, leave travel concession for himself and hisfamily, medical insurance and such other perquisites and allowancesin accordance with rules of the Company or as agreed by the Board ofDirectors and such perquisites and allowances will be subjectmaximum of Rs. 750,000/- per annum.

For the purpose of calculation of the above ceiling, perquisites andallowances shall be evaluated as per Income Tax rules, whereverapplicable. In the absence of any such rules, perquisites andallowances shall be evaluated at actual cost.

Benefits under Provident Fund Scheme and the Pension/Superannuation Fund Scheme in accordance with Company’s rulesand regulations in force from time to time shall not be included in thecomputation of the ceiling on perquisite to the extent either singly orput together are not taxable, under the Income Tax Act 1961. Gratuity,payable as per the rules of Company and encashment of leave at theend of tenure, shall not be included in the computation of limits forremuneration or perquisites/ allowances aforesaid.

Provision for use of the Company’s car for office and personal useand telephone at residence shall not be included in computation ofperquisites for the purpose of calculation of the said ceiling, but willbe added as perquisite values as per Income Tax rules.

So long as Mr. Rakeshwar D Mathur functions as the managing director of the Company, he shall not be subject toretirement by rotation and shall not be paid any sitting fees for attending the meetings of the Board or any Committeethereof.

The appointment may be terminated at any time by either party by giving to the other party 6 month’s notice of suchtermination and neither party will have any claim against the other for damages or compensation, by reason of suchtermination. In any event, Mr. Rakeshwar D Mathur shall not be entitled to payment of compensation for loss of office incases mentioned in Section 318(3) of the Act.

Details of remuneration /sitting fee paid to all the Directors on the Board for attending Board/ Committee Meetings duringApril 1, 2003 to 31st March, 2004 are given below:

Name of Director Date of Meeting Amount( Rs.)

Mr.Gyan Dayal 04.07.2003 500/-

Mr.Gyan Dayal 30.07.2003 1,000/-

Mr.Gyan Dayal 01.09.2003 Absent

Mr.Gyan Dayal 22.09.2003 500/-

Mr.Gyan Dayal 31.10.2003 2,500/-

Mr.Gyan Dayal 31.01.2004 1,000/-

Mr.Gyan Dayal 29.03.2004 500/-

Total 6,000/-

The Company does not have a policy of advancing any loans to its directors. It has not so far paid, any commission onprofits to any director of the Company. The non-executive directors, apart from receiving sitting fee for attending boardmeetings and committee meetings, do not have any other pecuniary relationship or transaction with the Company.

30

Other Key Managerial Personnel

The Company is led by key senior managerial personnel who are professionally qualified and have rich experience in theindustry:

Name Qualification Designation Experience No of years Date of Last Remuneration recd.(In years) with the Joining Employment during April-March

Company 2004 (Rs. in mn)

Sushil Sancheti B.Com, VP 20 3 17.12.2001 Ecoboard 1.29A.I.C.W.A, (Finance) Industries Ltd.L.L.B,C.S. (Inter)

Anand Singhal B.Tech (Elect) VP 25 Less than 01.09.2003 RPG Transmission 1.01(Operations) a year Ltd.

K.A. Khan B.E. (Mech) VP 21 2 01.08.2002 Al-Awal Llc, 0.77(Marketing) Muscat

Nishit A. Shah B.E. (Mech), Divisional 17 3 01.09.2001 Vijay Systems Ltd. 1.69M.M.S Head

(Product)

The persons whose names appear as key management personnel are on the rolls of the Company as permanentemployees. None of the key management personnel are on a fixed term basis. As per the Company’s records, none of thekey management personnel hold any Shares in the Company.

Advances to Key Managerial Personnel

No advances are outstanding against key managerial personnel other than those in the ordinary course of employment.

Changes in the Key Managerial Personnel in the last 3 years

Name Designation Date of change Reason

Khantilal R. Salot Chairman 27.09.2001 Divestment of Shares in the Company

Jitendra R. Salot Managing Director 27.09.2001 Divestment of Shares in the Company

Pradip R. Salot Executive Director 27.09.2001 Divestment of Shares in the Company

Harish R. Salot Managing Director 30.09.2003 Resignation

Ketan K. Salot Divisional Head 31.07.2003 Resignation

Miten K. Salot Chief Financial 31.03.2003 ResignationExecutive

Corporate Governance

The Company is committed to maintaining high standards of corporate governance, and protection of customers,shareholders interests and the Company endeavors to maintain transparency at all levels. The Company has compliedwith SEBI Guidelines in respect of Corporate Governance specially with respect to broad basing of the Board, constitutingthe committees as required. Significant measures taken by the Company to conform to the Code of CorporateGovernance introduced by SEBI in April 2000 include the following:

Composition of the Board of Directors

The current policy of the Company is to have an appropriate mix of executive and independent directors to maintain theindependence of the Board and to separate functions of governance and management. As per the Articles of Associationof the Company, the Board shall consist of not less than 3 and not more than 12 members. As on date, the Boardcomprises of 4 members, one of whom is an executive director, 2 non-executive directors and 1 independent director.Given that the Chairman of the Company is an executive Chairman, the Company is required to have a half of its directorsas independent directors. Since the resignation of Mr. Amrut Nabriya in September, 2003, the Company does not havethe requisite number (two) of independent directors. The Company is proposing to appoint one more independent directorto enable it to broad base its Board and comply with the SEBI Guidelines in respect of Corporate Governance. The Boardbelieves that the proposed strength of its board (including the proposed addition of 1 more independent director) shall beappropriate given its present level of operations.

The managing director is in charge of the day-to-day affairs of the Company, assisted by the top executives of theCompany. The Board considers, inter alia, matters relating to strategy and business plans, annual operating andexpenditure budgets, compliance with statutory requirements, adoption of periodical report, etc.

31

Audit Committee

As per Section 292A of the Companies Amendment Act, 2000 and in accordance with Clause 49 of the Listing Agreement,an Audit Committee under the Chairmanship of Mr. Amrut Nabriya was set up on July 4, 2003 consisting two independentdirectors one non-executive director and one internal auditor. The Audit Committee did not meet during the financial yearas there were no independent directors in the Committee. One meeting was held on 31st July, 2003 before the approval ofaccounts by the Board of Directors. The recommendations of the audit committee were considered and adopted by theBoard of Directors.

Remuneration Committee

The Board of Directors of the Company had constituted Remuneration Committee during FY 2002-03 and the Committeemeeting was held on October 1, 2003. Susequently, upon resignation of the independent director, Amrut Nabriya, theCommittee ceased to exist.

Shareholders Committee

The objective of the committee is to look into redressal of grievances of shareholders/investors relating to non-receipt ofbalance sheet, share certificates, transmission, etc. The members of the Committee are:

Name Designation

Mr. Derek James Addison Chairman

Mr. Mike Abbott Member

Changes in Directors & Auditors

Changes in the auditors in the last three years

The Company had appointed Price Waterhouse, as its auditors in place of Chaturvedi Sohan & Co. w.e.f. September 30,2002. The Auditors of the Company were changed to PriceWaterhouse Coopers (PWC) subsequent to Kidde acquiringcontrol of the Company since PWC are the main auditors to Kidde Group for its various companies across the globe.

Changes in the Directors in the last three years

There have been no changes in the Board of Directors in the last three years other than as follows:

Name Date of Change Reason

Mr. Khantilal R. Salot 27.09.2001 Resigned

Mr. Jitendra R. Salot 27.09.2001 Resigned

Dr. B. D. Dikshit 30.08.2001 Resigned

Mr. Shantilala J. Parekh 30.08.2001 Resigned

Mr. Pradip R. Salot 27.09.2001 Resigned

Mr. Harish R. Salot 30.09.2003 Resigned

Mr. Derek James Addison 30-09-2002 Appointed as director

Mr. Mike Abbott 30-09-2002 Appointed as director

Mr. Douglas John Vaday 30.08.2001 Appointed as director

Mr. Douglas John Vaday 05-08-2002 Resigned

Mr. Amrut Nabriya 04-07-2003 Appointed as additional director30-09-2003 Reappointed as director31.10.2003 Resigned

Mr. Gyan Dayal 04-07-2003 Appointed as additional director30-09-2003 Reappointed as director

Mr. Rakeshwar Dayal Mathur 01-10-2003 Appointed as Managing Director

Mr. Rajan Ramanlal Vora 31-07-2004 Appointed as director

Mr. Rajan Ramanlal Vora 18-08-2004 Resigned

None of the present directors of the Company hold any Shares in the Company.

32

Date of expiration of the current term of Directors in the Company

Name of Director Last date of re-appointment Date of expiration of the current term

Mr. Derek James Addison 30-09-2003 Up to the next AGM

Mr. Mike Abbott 30-09-2003 Up to the next AGM

Mr. Gyan Dayal 30-09-2003 Up to the next AGM

Litigations against Promoters / Directors of the Company

There are no outstanding litigations, disputes, defaults, non payment of statutory dues, overdues to banks/financialinstitutions, defaults against banks/Financial institutions, contingent liabilities not provided for, proceedings initiated foreconomic/civil/any other offences (including past cases here penalties may or may not have been awarded andirrespective of whether they are specified under paragraph (i) of Part 1 of Schedule XIII of the Act) against the Promoter/ Promoter Group / Directors of the Company in India, except that against Mr. Gyan Dayal mentioned earlier.

The Promoter/Promoter Group have not defaulted in payment of any statutory dues and/or dues to any bank or financialinstitutions in India. There are no other litigations pending against the Promoter / Promoter Group in India.

None of the bodies corporate/natural persons as stated above have been restrained from accessing the capital market forany reasons by SEBI or any other authorities.

Against Group / Associate Companies

Kidde does not have any group or associate company in India.

Particulars of Listed Companies under the Same Management

There are no listed Companies under the same management within the meaning of Section 370 (1-B) of the Act.

33

AUDITORS’ REPORT

ToThe Board of DirectorsVijay Industries and Projects LimitedEL-205, TTC Industrial AreaMahapeNavi Mumbai 400 701

Dear Sirs

We have examined the Financial Information of Vijay Industries and Projects Limited (‘the Company’) prepared by theManagement of the Company for the five financial years ended March 31, 2004 as attached to this report, and as approvedby the Board of Directors/ Members of the Company, read with remarks given in Paragraph A. below, stamped by us foridentification, which has been prepared in accordance with –

� Paragraph B (1) of Part – II of Schedule II of the Companies Act, 1956, of India (‘the Act’) and amendments thereof;

� Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (‘the Guidelines’) issuedby the Securities and Exchange Board of India (SEBI) on January 19, 2000 and the amendments from time to timethereto, to the extent applicable;

� The instructions dated June 7, 2004 received from the Company, requesting us to carry out the assignment inconnection with the Letter of Offer being issued by the Company for the Rights Issue of Equity Shares.

A. Financial Information of:

The Company

We have examined the attached Summary of Assets and Liabilities (Annexure I) of the Company as at March 31, 2000,2001, 2002, 2003 and 2004 and the related Summary of Profit and Loss Account (Annexure II) for each of the yearsended on those dates, together referred to as ‘Summary Statements’, subject to the non-adjustments as set out inAnnexure IV below.

The Summary Statements for the years ended March 31, 2000, March 31, 2001 and March 31, 2002 have beenextracted from the published financial statements audited by other independent Chartered Accountants and we do nottake responsibility for the year ended March 31, 2000, March 31, 2001 and March 31, 2002, as detailed below andhave been approved by the Board of Directors and by the members at the respective Annual General Meetings of theCompany:

Year Ended Auditors

March 31, 2000 Chaturvedi Sohan & Co.



The Summary Statements for the year ended March 31, 2003 have been extracted from the financial statementsaudited by us and approved by the Board of Directors and adopted by the members at the Annual General Meeting ofthe Company. The Summary Statements for the year ended March 31, 2004 has been extracted from the auditedfinancial statements for the year ended March 31, 2004 as approved by the Board of Directors on June 11, 2004.

Based on our examination of these Summary Statements we confirm that:

a. Regroupings have been made in the Summary Statements to reflect the significant accounting policies (asdisclosed in Annexure III to this report) as adopted by the Company as at March 31, 2004,

b. The material adjustments, qualifications in the auditors’ reports relating to relevant previous years as set out inAnnexure IV, have not been made in the Summary Statements.

B. Dividends:

We have examined the Statement of Dividend paid by the Company on equity shares in respect of the financial yearsended March 31, 2000, 2001, 2002, 2003 and 2004 as disclosed in Annexure XIII. We confirm that the Company has noother class of issued and paid-up shares during those years.

C. Other Financial Information:

We have examined the following financial information relating to the Company, proposed to be included in the Letter ofOffer, as approved by the Board of Directors of the Company and attached to this report:

i Tax Shelter Statement, enclosed as Annexure XIV.

34

ii Summary of accounting ratios based on the profits relating to earnings per share, net asset value and return onNetworth, enclosed as Annexure IX.

iii Capitalisation Statement as at March 31, 2004 of the Company, enclosed as Annexure X.

iv Statement of Unsecured Loans, enclosed as Annexure VII.

v Details of Sundry Debtors, enclosed as Annexure XI.

vi Details of items of Other Income, enclosed as Annexure XII.

vii Details of Share Capital, enclosed as Annexure VI.

viii Statement of Contingent Liabilities, enclosed as Annexure VIII.

In our opinion, the financial information of the Company as mentioned in paragraphs A. to C. above, read with thesignificant accounting policies after making regroupings and subject to non-adjustment of matters as stated inAnnexure IV as impact of these matters is not ascertainable, have been prepared in accordance with Part II ofSchedule II of the Act and the Guidelines issued by SEBI.

This report is intended solely for your information and for inclusion in the Letter of Offer being issued by the Companyin connection with the Issue of the Company and is not to be used, referred to or distributed for any other purposewithout our prior written consent.

Yours truly,

P. N. GhataliaPartner

For and on behalf ofPrice WaterhouseChartered Accountants.

MumbaiDate: June 24, 2004

35

ANNEXURE - I

SUMMARY OF ASSETS AND LIABILITIES

Assets and Liabilities of the Company as at the end of each financial year read with significant accounting policies(Refer Annexure III below), subject to non- adjustment of certain matters as stated in the notes to the accounts (ReferAnnexure IV below) and notes to the summary statement (Refer Annexure V below), are set out below:

Rs. in mn

As at As at As at As at As atParticulars 31st March 31st March 31st March 31st March 31st March

2004 2003 2002 2001 2000

A. Fixed Assets

Gross Block 225.05 222.37 219.58 214.48 228.51

Less: Depreciation 116.59 95.35 73.39 73.01 67.77

Net Block 108.46 127.02 146.19 141.47 160.74

Add: Capital Work –in-Progress - - 0.45 0.45 2.39

Less: Revaluation Reserve 1.72 1.74 1.76 39.50 39.96

Net Block after adjustment forRevaluation Reserve 106.74 125.28 144.88 102.43 123.17

B. Investments - 0.23 0.31 0.59 0.59

C. Current Assets, Loans and Advances :

Inventories 55.98 69.19 75.05 62.87 69.45

Sundry Debtors 350.62 331.54 320.29 293.90 264.10

Cash and Bank Balances 18.39 9.18 48.35 48.47 40.77

Loans and Advances 37.49 34.89 28.09 28.14 35.19

Other Current Assets 0.23 0.79 - - -

Total 462.70 445.58 471.78 433.37 409.51

D. Liabilities and Provisions:

Secured Loans 0.07 67.08 6.33 143.17 151.94

Unsecured Loans 481.73 332.73 338.43 91.32 92.98

Deferred Tax Liability (Net) - - 3.49 - -

Current Liabilities and Provisions 143.72 171.49 137.78 128.76 117.12

Total 625.51 571.29 486.03 363.25 362.04

E. Net worth(A+B+C-D) (56.07) (0.20) 130.94 173.14 171.23

F. Represented by

1. Share Capital 37.95 37.95 37.95 37.95 37.95

2. Reserves and Surplus 88.10 92.67 92.70 154.92 167.23

Less : Transfer to Fixed Assets (1.72) (1.74) (1.76) (39.50) (39.96)

Less : Profit and Loss Account (180.19) (127.97) 3.89 22.47 10.02

Less: Miscellaneous Expenses(to the extent not written off or adjusted) (0.21) (1.12) (1.84) (2.70) (4.02)

Total (94.02) (38.16) 92.99 135.19 133.27

Networth (1+2) (56.07) (0.20) 130.94 173.14 171.23

36

ANNEXURE - II

SUMMARY OF PROFIT AND LOSS ACCOUNT

The profit/ losses of the Company for five financial years ended March 31, 2004, read with significant accounting policies(Refer Annexure III below), subject to non adjustment of certain matters as stated in the notes to the accounts (referAnnexure IV below) and notes to the summary statement (Refer Annexure V below), are set out below:

Rs. in mn

For the For the For the For the For the year ended year ended year ended year ended year ended31st March 31st March 31st March 31st March 31st March

2004 2003 2002 2001 2000

INCOME

Sales 384.22 308.80 310.18 522.72 508.50

Less : Excise Duty 8.26 9.11 4.49 4.29 5.20

375.97 299.69 305.69 518.42 503.30

Other Income (Refer Annexure XII) 51.84 15.78 46.37 8.02 10.14

Increase/ (Decrease) in Inventories 1.64 (1.65) 6.63 (10.30) 5.64

Total 429.45 313.82 358.69 516.14 519.07

EXPENDITURE AND OTHER CHARGES

Raw Materials Consumed 247.76 224.49 177.05 302.50 258.42

Staff Costs 46.47 41.74 37.22 38.68 37.05

Other Manufacturing Expenses 72.11 66.43 59.05 56.89 103.01

Administration and Other Expenses 64.37 63.32 56.68 47.84 51.49

Selling and Distribution Expenses 11.76 9.87 8.18 7.78 9.92

Interest 16.19 19.08 37.59 39.69 34.70

Depreciation 24.07 23.17 15.63 8.78 8.65

Total 482.71 448.11 391.39 502.15 503.24

NET PROFIT/ (LOSS) BEFORE TAX ANDPRIOR PERIOD ITEMS (53.27) (134.29) (32.70) 14.00 15.83

Add : Prior Period Items 1.05 (2.25) - - -

PROFIT/ (LOSS) BEFORE TAX (52.22) (136.54) (32.70) 14.00 15.83

Less : Provision for Tax

- Current Tax - - - 1.30 2.50

- Deferred Tax Credit - (3.50) (20.99) - -

- Income Tax/ Sales Tax for earlier years - (1.19) 6.88 0.25 1.80

PROFIT/ (LOSS) AFTER TAX (52.22) (131.86) (18.58) 12.45 11.53

Add : Profit and Loss Account,(Deficit)/ Surplus Brought Forward (127.97) 3.89 22.47 10.02 1.27

Profit/ (Loss) Available for Appropriation (180.19) (127.97) 3.89 22.47 12.80

APPROPRIATIONS

Final Dividend - - - - (2.28)

Tax on Dividend - - - - (0.50)

Profit and Loss Account,(Deficit)/ SurplusCarried Forward to Balance Sheet (180.19) (127.97) 3.89 22.47 10.02

TOTAL (180.19) (127.97) 3.89 22.47 10.02

37

ANNEXURE – III

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation of Financial Statements:

These financial statements have been prepared under the historical cost convention on an accrual basis and comply withthe Accounting Standards issued by the Institute of Chartered Accountants of India and referred to in Section 211 (3C) ofthe Companies Act, 1956, of India (the Act).

2. Fixed Assets and Depreciation/ Amortisation:

Fixed assets are stated at cost of acquisition/construction less accumulated depreciation and adjusted for revaluation andgrant received.

Tangible Assets

(i) Depreciation is provided on pro-rata basis with reference to the month of addition/ installation/ disposal of assets,except in case of assets costing Rs. 5,000 or less, which are depreciated 100 % in the year of acquisition.

Depreciation on assets capitalised on or after December 16, 1993 is provided on Straight Line Method at the ratesprescribed under Schedule XIV to the Act, and the assets capitalised prior to December 16, 1993 are depreciated atthe old rates prescribed under Schedule XIV to the Act, which are as follows:

Assets Rate of Depreciation(% p.a.)

Plant and Machinery 5.15

Electric Installations 3.34

Furniture and Fixtures 3.33

Office Equipments 3.34

Vehicles 7.07

(ii) Leasehold Land is amortised on a straight-line basis over the period of lease.

Intangible Assets

(i) Goodwill on acquisition of business is amortised over a period of five years.

(ii) Computer Software is amortised over a period of six years.

(iii) Technical know-how fees are amortised over a period of eight years. (Refer Note A(ii) on Annexure IV).

3. Borrowing Cost:

Borrowing costs directly attributable to the acquisition/ construction of fixed assets are apportioned to the cost of the fixedassets up to the date on which the asset is put to use/ commissioned.

4. Foreign Currency Transactions:

Transactions in foreign currencies are recognised at the exchange rates prevailing on the transaction dates. Realisedgains and losses on settlement of foreign currency transactions are recognised in the Profit and Loss Account. Foreigncurrency assets and liabilities at the year-end are translated at the year-end exchange rates, and the resultant exchangedifference is recognised in the Profit and Loss Account, except for the exchange differences arising on translation offoreign currency liabilities incurred for acquisition of fixed assets, which are adjusted with the carrying value of therespective fixed assets.

5. Investments:

Long-term investments are valued at cost. Provision for diminution in the value of long-term investments is made only ifthe decline is considered to be of permanent nature.

6. Inventories:

Inventories are valued at lower of cost and net realisable value.

(i) Cost of Raw Materials and Components is computed on first-in-first-out basis.

(ii) Cost of Work-in-Progress and Finished Goods include raw material cost, cost of conversion and other costs incurredin bringing the inventories to their present location and condition.

38

7. Sales:

Sales and Services include excise duty, sales tax, adjustment for liquidated damages and price variation. Revenues inrespect of projects related activities are recognised on despatch of goods and as per terms of payment by the Company.

8. Excise Duty:

Excise Duty is accounted on the basis of both, payments made in respect of goods cleared and provision made for goodslying in excise Bonded Warehouses.

9. Retirement Benefits:

(i) Liability towards Gratuity has been recognised on the basis of premium paid/ payable under Group Gratuity policy ofLife Insurance Corporation of India (LIC). The adequacy of the accumulated fund balance available with LIC hasbeen confirmed on the basis of actuarial valuation obtained at the year end and shortfall, if any, has been provided inthe accounts.

(ii) Liability for Superannuation payable to the eligible employees is determined in accordance with the schemeformulated by the Company and contribution as per rules of the said scheme is made to the fund administered by LIC.

(iii) Liability for Leave encashment by employees is recognised on the basis of unavailed leave balance to their credit atthe year end.

10. Deferred Tax:

Deferred Tax is recognised, subject to the consideration of prudence, on timing differences, being the differencebetween taxable income and accounting income that originate in one period and are capable of reversal in one ormore subsequent periods. Deferred Tax Asset is not recognised unless there are timing differences the reversal ofwhich will result in sufficient income or there is virtual certainty that sufficient future taxable income will be availableagainst which such deferred tax asset can be realised.

11. Miscellaneous Expenditure (to the extent not written off or adjusted):

Preliminary and Share Issue Expenses are amortised over a period of ten years.Deferred Revenue Expenditure is amortised over a period of five years.

ANNEXURE – IV

NON-ADJUSTMENT TO THE SUMMARY STATEMENT

A. Change in Accounting Policies/ Estimates

(i) In the financial year 2001-2002, in accordance with the Accounting Standard- 22

‘Accounting for Taxes on Income’ issued by Institute of Chartered Accountants of India, the company has recordednet Deferred tax liability of Rs. 24.4.9 mn as a charge to General Reserve. Further, Deferred Tax Asset of Rs. 20.99mn for the year has been recognised as income in the Profit and Loss Account.

The Company has not restated the profits for the financial year ended March 31, 2000 and March 31, 2001 to reflectwhat the profits of those years would have been if a uniform accounting policy was followed, as the necessary data forcomputing the Deferred tax asset/ liability is not available.

(ii) In view of Accounting Standard – 26, “Intangible Assets” issued by Institute of Chartered Accountants of India,becoming mandatory with effect from April 1, 2003, the Company has retrospectively revised the useful life of theintangible asset “Technical Know-How Fees” from 21 years to 8 years. Accordingly, the additional charge of Rs. 4.55mn is debited to General Reserve as at March 31, 2004. The Company has not restated the profit/loss for thefinancial years ended March 31, 2000, March 31, 2001, March 31, 2002 and March 31, 2003 to reflect what the profit/loss of those financial years would have been if an uniform accounting policy was followed.

(iii) The Company has changed its accounting policy relating to accounting of customs duties from “on clearance” basisfollowed for the financial years ended March 31, 2000, March 31, 2001 and March 31, 2002 to “accrual basis” from thefinancial year ended March 31, 2003 onwards, to conform to the mandatory Accounting Standard – 2 “Valuation ofInventories”, issued by Institute of Chartered Accountants of India. The above change does not have any impact onthe profit for the financial years ended March 31, 2000, March 31, 2001 and March 31, 2002. Accordingly, RawMaterials Consumed, Inventories and Liabilities is lower by Rs. 0.46 mn, Rs. 1.37 mn and Rs. 2.41 mn for the financialyears ended March 31, 2000, March 31, 2001 and March 31, 2002, respectively.

(iv) Up to the financial years ended March 31, 2002, the Company did not amortise the leasehold land since the leasewas for a long period. However, effective financial year ended March 31, 2003, the Company is following the policy ofamortising the leasehold land on a straight line basis over the period of lease. The Company has not restated the

39

profits for the financial year ended March 31, 2000, March 31, 2001 and March 31, 2002 to reflect what the profits ofthose years would have been if an uniform accounting policy was followed.

B. Qualifications in Auditors’ Report

Appearing in the Auditors’ Report for the year ended March 31, 2000, regarding:

� Expenses and Income pertaining to earlier years amounting to Rs. 1.41 mn and Rs. 2.02 mn, respectively, have beendebited / credited to respective head of accounts during the year.

� The Collection Accounts, Refund Money Account, Allotment Money Account, Debenture Interest Accounts andDividend Account are under reconciliation.

� Non-provision of hire charges of Rs. 2.09 mn and depreciation of Rs. 3.27 mn and non-accrual of lease income of Rs.3.52 mn on account of lease transaction under dispute.

� Non-disclosure of dues of small-scale industrial undertakings.



� Pending reconciliation and confirmation of Sundry Debtors and Loans and Advances balances.

� Adjustment of written down value of fixed asset of Rs. 0.74 mn, against the liabilities related to disputed HirePurchase and Lease Transaction.

� Non-disclosure of dues of small-scale industrial undertakings.



� Pending reconciliation and confirmation of Sundry Creditors, Sundry Debtors, some of Bank Accounts and Loans andAdvances balances.

� Pending approval of the shareholders and Central Government of India for appointment/ increase in remuneration ofpersons covered under Section 269 and 314 of the Companies Act, 1956, of India.

� Pending approval of some of the lenders pertaining to sale of assets of the Company.

� Pending compilation and reconciliation of inventory with physical verification of stocks carried out by theManagement.

� Non-compliance of Accounting Standard- 2 “Valuation of Inventories”, issued by Institute of Chartered Accountants ofIndia.

Appearing in the Auditors’ Report for the year ended March 31, 2003 regarding:

� Recognition of revenue in respect of project related activities, consistently on despatch of goods and as per paymentterms of contracts instead of recognising it on proportionate completion method in accordance with AccountingStandard- 7 “Accounting for Construction Contracts”, issued by Institute of Chartered Accountants of India. Theimpact of this deviation is not ascertainable by the Management.

� Balance confirmations and reconciliation in respect of overdue balances aggregating Rs. 190.84 mn recoverablefrom customers including retention money of approximately Rs. 90.00 mn and Rs. 3.89 mn towards advances anddeposits. The amount doubtful of recovery, if any, cannot be ascertained by the Management at this stage.

� Pending updation of inventory records and pending reconciliation of book stocks with physical stocks. The extent ofadjustments, which may arise on updation of inventory records, is currently not ascertainable by the Management.

� Pending updation of assets register and pending reconciliation of book records with physical records. Adjustmentstowards discrepancies, if any, which may arise on updation of fixed assets register and completion of reconciliation iscurrently not ascertainable by the Management.

� Payment of remuneration aggregating Rs. 3.80 mn to the Managing Director and Rs. 7.68 mn to his relatives for theperiod October 1, 2001 to March 31, 2003, which is subject to approval of the Central Government of India. Theextent of consequential adjustments, which may arise on non-receipt of necessary approvals, is currently notascertainable by the Management.

� Non- disclosure of necessary item-wise quantitative information in respect of finished goods and traded goods andconsumption of raw materials required pursuant to Part II of Schedule VI to the Companies Act, 1956, of India.

40


� Recognition of revenue in respect of project related activities, consistently on despatch of goods and as per paymentterms of contracts instead of recognising it on proportionate completion method in accordance with AccountingStandard- 7 “Accounting for Construction Contracts”, issued by Institute of Chartered Accountants of India. Theimpact of this deviation is not ascertainable by the Management.

� Balance confirmations and reconciliation in respect of overdue balances aggregating Rs. 221.57 mn recoverablefrom customers including retention money of approximately Rs. 139.01 mn and Rs. 2.64 mn towards advances anddeposits. The amount doubtful of recovery, if any, cannot be ascertained by the Management at this stage.

� Pending updation of inventory records and pending reconciliation of book stocks with physical stocks. The extent ofadjustments, which may arise on updation of inventory records, is currently not ascertainable by the Management.

� Pending updation of assets register and pending reconciliation of book records with physical records. Adjustmentstowards discrepancies, if any, which may arise on updation of fixed assets register and completion of reconciliation iscurrently not ascertainable by the Management.

� Payment of remuneration aggregating Rs. 9.21 mn to relatives of the then Managing Director for the period October1, 2001 to September 30, 2003, which is subject to approval of the Central Government of India and regardingpayment of remuneration of Rs. 1.14 mn to Managing Director for the period October 1, 2003 to March 31, 2004,which is subject to approval of Central Government of India. The extent of consequential adjustments, which mayarise on non-receipt of necessary approvals, is currently not ascertainable by the Management.

� Non- disclosure of necessary item-wise quantitative information in respect of finished goods and traded goods andconsumption of raw materials required pursuant to Part II of Schedule VI to the Companies Act, 1956, of India.

ANNEXURE – V

NOTES TO THE SUMMARY STATEMENT

Extracted from the audited published financial statements for the year ended March 31, 2000

1. Sales Tax Demands raised by the Assessing Authorities amounting to Rs. 0.68 mn (Previous year Rs. 0.95 mn)have not been provided for in the accounts, as the matter is contested by the Company before AppellateAuthorities. The liability/ refund, if any, on these accounts will be accounted for in the year of payment.

2. Expenses and Income pertaining to earlier years amounting to Rs. 1.41 mn (previous year Rs. 1.98 mn) and Rs.2.02 mn (Previous year Rs. 2.28 mn) have been debited/ credited to respective head of accounts during the year.

3. The Collection Accounts, Refund Money Account, Allotment Money Account, Debenture Interest, Dividend Accountare under reconciliation and in some of the cases balance confirmation from Sundry Debtors, Sundry Creditorsand advances are still awaited.

4. Loans and Advances include Rs. 2.50 mn in respect of which company has taken legal actions for recovery.

5. Additional charge due to Bad debts determined during the year amounting to Rs. 5.27 mn is debited to Profit & LossA/c and an equivalent amount has been withdrawn from General Reserves and credited to the Profit & Loss A/c.

6. On account of a dispute between the Company and a Finance Company about Hire Purchase and LeaseTransaction of certain assets, the Company on a prudential accounting policy has decided neither to recognise theincome from lease transaction amounting to Rs. 3.52 mn (Previous Year Rs. 3.84 mn) nor to provide the hirecharges and depreciation on fixed assets amounting to Rs. 2.09 mn (Previous Year Rs. 2.28 mn) and Rs. 3.27 mn(Previous Year Rs. 3.27 mn). Consequently, the Profits for the year are overstated by Rs. 1.51 mn (Previous YearRs. 1.70 mn).

7. The Company has sought information regarding SSI status from its creditors and the feedback is awaited. Hencethe Company at this stage is unable to quantify separately the outstandings to SSI units.


1. Sales Tax Demands raised by the Assessing Authorities in respect of various assessment years amounting to Rs.0.62 mn (Previous year Rs. 0.68 mn) have not been provided for in the accounts, as the matter is contested by theCompany before Appellate Authorities. The liability/ refund, if any, on these accounts will be accounted for in theyear of payment.

2. Expenses and Income pertaining to earlier years amounting to Rs. 1.16 mn (Previous Years Rs. 1.41 mn) and Rs.0.87 mn (Previous Years Rs. 2.02 mn) have been debited/ credited to respective head of accounts during the year.

3. Sundry Debtors, Loans and Advances are subject to Reconciliation and confirmation from parties. Directors are ofthe view that the provision for bad debts is adequate.

41

4. Additional charge due to Bad debts determined during the year amounting to Rs. 11.86 mn (Previous Year Rs. 5.27mn) is debited in Profit & Loss Account. and an equivalent amount has been withdrawn from General Reservesand credited to the Profit & Loss Account.

5. On account of a dispute between the Company and a Finance Company about Hire Purchase and LeaseTransaction of certain assets, on a prudential accounting policy Company has decided neither to recognise theincome from lease transaction nor to provide the hire charges and depreciation on fixed assets. During the yearthe Company has adjusted the written down value of Fixed Assets against the liabilities and the net difference ofRs. 0.74 mn is written off to Profit and Loss Account.

6. The Company has sought information regarding SSI status from its creditors and the feedback is awaited. Hencethe Company at this stage is unable to quantify separately the outstandings to SSI units.


1. Sales Tax Demands raised by the Assessing Authorities in respect of various assessment years amounting to Rs.0.52 mn (Previous year Rs. 0.62 mn) have not been provided for in the accounts, as the matter is contested by theCompany before Appellate Authorities. The liability/ refund, if any, on these accounts will be accounted for in theyear of payment.

2. Expenses and Income pertaining to earlier years amounting to Rs. 6.57 mn (Previous Year Rs. 1.16 mn) and Rs.1.09 mn (Previous Year Rs. 0.87 mn) have been debited/ credited to respective head of accounts during the year.

3. Sundry Debtors, Loans and Advances are subject to Reconciliation and confirmation from parties. Debtorsoutstanding for more than three years amounts to Rs. 55.08 mn. Directors are of the view that the provision for baddebts is adequate. Sundry Creditors are net off advances amounting to Rs. 14.50 mn.

4. Additional charge due to Bad debts determined during the year amounting to Rs. 0.39 mn (Previous Year Rs. 11.86mn) is debited in Profit & Loss Account. and an equivalent amount has been withdrawn from General Reservesand credited to the Profit & Loss Account during previous year.


1. In respect of project related activities, the Company consistently follows the practice of recognising revenue ondespatch of goods and as per payment terms of contracts instead of recognising it on proportionate completionmethod as specified in Accounting Standard- 7 “Accounting for Construction Contracts” issued by Institute ofChartered Accountants of India. The impact of this deviation is not readily ascertainable.

2. The Company is in process of obtaining balance confirmations and completing reconciliation in respect of overduebalances aggregating Rs. 190.84 mn recoverable from customers including retention money of approximately Rs.90.00 mn which is recoverable after a pro-longed period (being the nature of industries/customers are in) aftercompletion of the respective contracts, and Rs. 3.89 mn towards advances and deposits. Pending which, theamount of doubtful debts, if any, cannot be ascertained by the Management at this stage. Adjustment required, ifany, will be considered on the completion of process of confirmation/ reconciliation.

3. Considering the substantial erosion of the net-worth of the Company arising from operating losses, the holdingcompany, Kidde International Limited, U.K. (being a largest shareholder and promoter), has informed the Companyof its intention vide its letter dated August 30, 2003, to provide financial support to the Company to meet itsfinancial obligations considering the available unsecured loan of Rs. 493.11 mn provided by Kidde till date andfurther financial support as necessary, and considering significant order backlog finalised/ under-finalisation, thefinancial statements have been prepared on going concern basis by the Management.

4. The Company has paid remuneration of Rs. 3.80 mn to Managing Director and Rs. 7.68 mn to his relatives forperiod October 1, 2001 to March 31, 2003, which was subsequently approved by the shareholders at the AnnualGeneral Meeting held on September 30, 2002. Application to Central Government of India under Sections 269 and314 of The Companies Act, 1956, of India has been made on December 30, 2002 and approval from CentralGovernment of India is awaited.

5. Inventory records are in process of updation due to acquisition of two businesses during the previous year whereproper inventory records were not maintained. Pending compilation of inventory records, the Management hasdetermined the value of inventory of Rs. 69.19 mn, which is based on stocks physically verified at the year-end.The valuation of inventory has been carried out on the same basis as in the preceding year.

6. The Company is in process of compiling inventory records and hence necessary disclosure of item-wisequantitative information in respect of finished goods and traded goods and consumption of raw materials requiredpursuant to Part II of Schedule VI to the Companies Act, 1956, of India has not been made.


1. In respect of project related activities, the Company consistently follows the practice of recognising revenue ondespatch of goods and as per payment terms of contracts instead of recognising it on proportionate completion

42

method as specified in Accounting Standard- 7 “Accounting for Construction Contracts” issued by Institute ofChartered Accountants of India. The impact of this deviation is not readily ascertainable.

2. The Company is in process of obtaining balance confirmations and completing reconciliation in respect of overduebalances aggregating Rs. 221.57 mn recoverable from customers including retention money of approximately Rs.139.01 mn which is recoverable after a pro-longed period (being the nature of industries/customers are in) aftercompletion of the respective contracts, and Rs. 2.64 mn towards advances and deposits. Pending which, theamount of doubtful debts, if any, cannot be ascertained by the Management at this stage. Adjustment required, ifany, will be considered on the completion of process of confirmation/ reconciliation.

3. The Company is in process of updating Fixed Asset Register and reconciling book records with physical records.Adjustments towards discrepancies, if any, as a result of updation of records and reconciliation are not readilyascertainable.

4. Sundry Creditors include amount of Rs. 2.55 mn which are outstanding for more than three years. TheManagement has initiated the process of reconciliation and no material adjustments are anticipated on completionof reconciliation by the management.

5. Considering the substantial erosion of the net-worth of the Company arising from operating losses, the holdingcompany, Kidde International Limited, U.K. (being a largest shareholder and promoter), has informed the Companyof its intention vide its letter dated June 10, 2004 to provide financial support to the Company to meet its financialobligations considering the available unsecured loan of Rs. 451.41 mn provided by Kidde till date and furtherfinancial support as necessary, and considering significant order backlog finalised/ under-finalisation, the financialstatements have been prepared on going concern basis by the Management.

6. The Company had appointed relatives of the then Managing Director as executives effective October 1, 2001 videemployment agreement dated April 6, 2002. In terms of the agreement, the Company has paid remuneration(excluding provision for gratuity) of Rs. 9.21 mn for period October 1, 2001 to September 30, 2003. Application tothe Central Government of India under Section 314 of the Companies Act, 1956, of India was made on December26, 2002 and approval from Central Government is awaited.

7. The Company has appointed a new Managing Director effective October 1, 2003 vide employment agreementdated October 31, 2003. In terms of the agreement, the Company has paid remuneration (excluding provision forgratuity) of Rs. 1.14 mn for period October 1, 2003 to March 31, 2004. The Company is in process of making anapplication to Central Government for obtaining necessary approvals.

8. The Company is in process of compiling inventory records and hence necessary disclosure of item-wisequantitative information in respect of finished goods and traded goods and consumption of raw materials requiredpursuant to Part II of Schedule VI to the Companies Act, 1956, of India has not been made.

ANNEXURE –VI

3. Details of Share CapitalRs. in mn

As atMarch 31,

Particulars 2004 2003 2002 2001 2000

Authorised Capital :

5,300,000 Equity Shares of Rs. 10 each 53.00 53.00 53.00 53.00 53.00

20,000 12% Redeemable Preference Shares of Rs. 100 each 2.00 2.00 2.00 2.00 2.00

Issued and Subscribed :

3,795,200 Equity Shares of Rs. 10 each, fully paid-up 37.95 37.95 37.95 37.95 37.95

Notes:Of the above, effective September 26, 2001, 3,133,906 Equity Shares of Rs. 10 each, fully paid-up, are held by KiddeInternational Ltd., U.K., the Holding Company and the ultimate Company is Kidde Plc., U.K.

43

ANNEXURE – VII

4. Schedule of Unsecured Loans as at March 31, 2004

Name of Institute Outstanding Repayment Rate of InterestRs. in mn Schedule %pa

A. External Commercial Borrowings

Kidde Finance Limited U.K. 451.41 See Note See Note(Refer Notes 2 and 3 below) 1 Below 1 Below

B. Short Term Demand Loan (Refer Note 4 below)

Citibank N.A. 7.50 June 2004 8.50

Citibank N.A. 10.00 August 2004 8.50

Citibank N.A. 12.50 August 2004 8.30

Note:1. Foreign Currency Loan of USD 10,365,228 obtained from Kidde Finance Limited, U.K., under External Commercial

Borrowings Scheme. Interest Rate per annum computed at 3 months LIBOR + 100 basis points. USD 6,165,228 isrepayable on March 6, 2005 and USD 4,200,000 is repayable on March 31, 2006.

2. During the year ended March 31, 2004, the Company had obtained foreign currency loan of USD 4,200,000 fromKidde Finance Limited, which was not taken on record by Reserve Bank of India. This loan was subsequentlyassigned to Kidde International Limited, U. K. vide agreement dated March 1, 2004. Subsequent to March 31, 2004,the Company has received necessary approvals from Reserve Bank of India vide letter dated May 15, 2004.

3. During the year ended March 31, 2004, Kidde Finance Limited, U. K. has assigned the foreign currency loan of USD6,165,228 to Kidde International Limited, U. K. vide agreement dated January 4, 2004. The Company has applied toReserve Bank of India for obtaining necessary approvals for assignment of loan which is yet to be received.

4. Corporate guarantee on the Short Term Demand Loan has been given by Kidde Plc. U.K., the ultimate holdingcompany to the bank on behalf of the Company.

ANNEXURE – VIII

5. Contingent Liablities as at:Rs. in mn

As at March31,Particulars 2004 2003 2002 2001 2000

Guarantees (net of expired guarantees)issued by bank on behalf of the Company 200.62 89.77 144.93 173.03 230.72

Claims against the Company notacknowledged as debt 11.93 9.38 9.38 9.38 1.25

Demands raised by Excise authoritieswhich are contested by the Company 18.40 17.20 17.20 17.63 17.44

Demands raised by the Sales Tax authoritiesagainst which the Company has filed appeals 0.13 0.13 - - -

Demands raised by the Income Tax authoritiesagainst which the Company has filed appeals 0.46 1.06 - - -

Guarantee given to bank for various bankingfacilities to Vijay Sabre Safety Ltd., Vijay Fire

Apparatus Co. in which some of the Directorsare interested - - - 30.00 30.00

Bond executed against Excise Deposit - - - - -Letter of Credit - - 16.39 41.40 15.70

44

ANNEXURE – IX

KEY ACCOUNTING RATIOS

As at March 31, Particulars 2004 2003 2002 2001 2000

Basic Earning Per Share (Rs.) (13.76) (34.74) (4.90) 3.28 3.04

Net Asset Value per Share (Rs.) (14.72) 0.24 34.98 46.33 46.18

Return on Networth (%) - * - * (14.00) 7.08 6.58

* Due to substantial erosion of net worth as at March 31, 2003 and negative net worth as at March 31, 2004, the ratio“Return on Networth” has not been calculated as it gives misleading figures.Formulae:

Basic Earning Per Share (Rs.) = Net Profit/ (Loss) After Tax

Number of equity shares at the end of year

Net Asset Value per Share (Rs.) = Networth excluding Revaluation Reserve

Number of equity shares at the end of year

Return on Networth (%) = Net Profit/ (Loss) After Tax

Net Worth excluding Revaluation Reserve

ANNEXURE X

CAPITALISATION STATEMENT

Rs. in mn

Particulars Pre Issue as at As adjusted forMarch 31, 2004 the issue*

Borrowings

Short Term Debts 30.32 3.53

Long Term Debts 451.41 –

Total Debts 481.73 3.53

Shareholders Fund

Share Capital 37.95 151.81

Reserves and Surplus 86.39 450.73

Less: Profit and Loss Account (180.19) (180.19)Total Shareholder’s Fund (55.85) 422.34

Long Term Debts/ Shareholder’s Fund ** --

* Assuming that Right Issue is fully subscribed

** Due to negative Shareholders’ Fund as at March 31, 2004 the ratio ‘Long Term Debts/ Shareholders’ Fund’ has notbeen calculated as it is misleading.

45

ANNEXURE XI

Break-up of Sundry Debtors balances recoverable from Related and Unrelated Parties:

Rs. in mn

Particulars As at March 31, 2003 As at March 31, 2004

Vijay Systems Engineers 0.05 0.44

Vijay Safety Systems Limited 0.14 --

Vijay Latex Products Limited 0.01 0.01

Vijay Fire Vehicles and Pumps Limited 0.90 0.47

Ace Turnkey Fire Protection Private Limited 6.83 5.84

Autronica Fire and Security As, Norway 0.29 --

Total 8.21 6.76

Unrelated parties 323.33 343.86

Total 331.54 350.62

ANNEXURE XII

DETAILS OF OTHER INCOME, FORMING PART OF SUMMARISED PROFIT AND LOSS ACCOUNT

Rs. in mn

For the For the For the For the For the Natureyear ended year ended year ended year ended year ended Income31st March 31st March 31st March 31st March 31st March

2004 2003 2002 2001 2000

OTHER INCOME

Exchange Gain (Net) 42.09 4.38 - - - Non - Recurring

Interest Received 1.09 2.17 1.72 1.35 2.43 Non - Recurring

Profit on Sale of Fixed Assets 0.18 - 37.99 - 1.00 Non - Recurring

Miscellaneous Income 8.49 9.23 6.66 6.67 6.72

Total 51.84 15.78 46.37 8.02 10.14

ANNEXURE XIII

Statement of dividend declared by the Company

Year Ended 31st March 31st March 31st March 31st March 31st March 2004 2003 2002 2001 2000

For the Year 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000

Number of shares (in Nos) 3,795,200 3,795,200 3,795,200 3,795,200 3,795,200

Rate of Dividend 0.0% 0.0% 0.0% 0.0% 6.0%

46

ANNEXURE XIV

Tax Shelter StatementRs. in mn

Year Ended Year Ended Year Ended Year Ended Year EndedParticulars 31st March, 31st March, 31st March, 31st March, 31st March,

2004 2003 2002 2001 2000

Profit/ (Loss) before Tax,as per Books (A) (52.22) (136.54) (32.70) 14.00 15.83

Tax Rate (including surcharge) 35.88% 36.75% 35.70% 39.55% 38.50%

Notional Tax Payable (18.73) (50.18) (11.67) 5.54 6.10

Permanent Differences

Donations - 0.01 0.01 0.01 0.10

Profit on sale of Investments (0.18) (0.01) - - -

Dividend Income (0.01) - (0.05) (0.06) (0.06)

Others - - (0.21) (0.36) 0.02

Total of Permanent Differences (B) (0.19) (0.00) (0.25) (0.41) 0.07

Timing Differences

Difference between Tax

Depreciation and Book Depreciation 7.39 3.95 (8.61) 0.62 (1.25)

Diminution in value of Investments - 0.07 0.28 - -

(Profit) / Loss on sale of Fixed Asset 4.65 0.05 0.82 0.36 (0.85)

Disallowances under Section 43B - 1.80 1.33 (1.14) 0.97

Bad Debts - - - (11.86) (5.27)

Expenses pertaining to Y2K 0.53 0.53 - - (2.13)

Total of Timing Differences (C) 12.57 6.40 (6.18) (12.00) (8.52)

Net Adjustments (B+C) 12.38 6.40 (6.42) (12.41) (8.46)

Brought Forward Losses Adjusted (D) - - - - -

Tax Burden / (Saving) thereon 4.45 2.35 (2.29) (4.91) (3.26)

Tax as per Income Tax Return - - - 0.62 2.84

Profit/ Loss as per Income Tax Return (39.84) (130.14) (39.12) 1.60 7.38

(E)=(A)+(B)+(C)+(D)

Carried Forward Loss (209.10) (169.27) (39.12) - -

Note:

1. The above statement has been prepared for the past five financial years ended March 31, 2004, as per Income Tax Act,1961.

2. The figures in the above statement for the year 2003-2004 (A.Y. 2004 - 05) are provisional and would be finalised atthe time of filing the return for A.Y. 2004-05.

3. The figures of all other years are as per the returns of income filed.

4. The difference between Tax as per Income Tax Return and provision for tax as per books of accounts have not beenadjusted in the Summary of Profit and Loss Account.

47

Clarification regarding note to the auditors’ report (Refer Annexure V, note 6 on page 41 and note 8 on page 42) (Notforming part of the Auditor’s Report)

The inventory records of the Company are in process of being updated due to acquisition of two businesses in the earlieryears by the Company, at which time proper inventory records were not maintained. Pending compilation of inventoryrecords, the management has determined the value of inventory as Rs. 69.19 mn and Rs. 55.98 mn as at March 31, 2003and March 31, 2004 respectively, which is based on stocks physically verified at the end of the period. The Company hascarried out physical verification of stocks and the management believes that all available stock is usable and there is nodamaged stock. In view of this the management does not envisage any impact on profitability.

Loans availed of by the Company

The Company has availed of the following working capital / term loan facilities:

Working Capital Demand Loan (WCDL) from Citibank, N.A.Rs. in mn

Amount Availed on Maturity Tenure Rate of OutstandingInterest % pa on 31.07.2004

12.50 09.02.2004 08.08.2004 6 Months 8.30 12.50

10.00 17.02.2004 16.08.2004 6 Months 8.50 10.00

5.00 25.06.2004 24.09.2004 3 Months 8.50 5.00

Security Details

First charge on parri passu basis as a continuing security of all current assets of the company present and future ashypothecated

ECBs from Kidde Finance Limited (assigned to Kidde International Limited, U.K)

First ECB

Nature General corporate working capital

Date of Availment 31.3.2002

Loan Amount USD 6.17 mn (Rs. 282.5 mn)

Loan Tenor in years 3 years

Amount outstanding as on August 18, 2004 USD 6.17 mn

Repayment Bullet on March 6, 2005

Interest rate (% pa) 1% above 3 months USD Libor, payable quarterlyin arrears within 30 days of end of quarter(net of withholding tax if any)

Security Unsecured

Second ECB

Nature Refinance existing bank debt and generalcorporate working capital

Date of Availment 31.3.2003

Loan Amount (Sterling pound in mn) USD 4.2 mn (Rs. 192.4 mn)

Loan Tenor in years 3 years

Amount outstanding as on August 18, 2004 USD 4.2 mn

Repayment Bullet on March 31, 2006

Interest rate (% pa) 1% above 3 months USD Libor, payable quarterly inarrears within 30 days of end of quarter(net of withholding tax if any)

Security Unsecured

48

VIII. Management discussion and analysis

The following analysis and discussion should be read in conjunction with the Company’s financial statements and relatednotes that appear in the previous section of this Letter of Offer.

A. Analysis of Financial Performance

Statement of Assets and Liabilities as per the Auditor’s Reports

Rs. in mn

As at March 31, 2003 - 04 2002-03 2001-02 2000-01 1999-00

A. Fixed Assets

Gross Block 225.05 222.37 219.58 214.48 228.51

Less: Depreciation 116.59 (95.35) (73.39) (73.00) (67.77)

Net Block 108.46 127.02 146.19 141.48 160.74

Less: Revaluation Reserve (1.72) (1.74) (1.76) (39.50) (39.96)

Net Block after adjustment forRevaluation Reserve 106.74 125.28 144.43 101.98 120.78

Capital Work in Progress 0.00 0.00 0.45 0.45 2.39

B. Investments 0.00 0.23 0.31 0.59 0.58

C. Current Assets, Loans and advances

Inventories 55.98 69.18 75.05 62.87 69.45

Sundry Debtors 350.62 331.54 320.29 293.90 264.10

Cash and Bank Balances 18.39 9.18 48.35 48.47 40.77

Loans and Advances 37.49 34.89 28.09 28.14 35.19

Other Current Assets 0.22 0.79 0.00 0.00 0.00

Deferred Tax Asset 20.11 24.83 23.40 – –

482.81 470.40 495.42 433.37 409.51

D. Liabilities and Provisions

Secured Loans 0.07 67.08 6.33 143.17 151.94

Unsecured Loans 481.73 332.73 336.26 91.32 92.98

Current Liabilities and Provisions 143.72 171.49 140.19 128.76 117.12

Deferred Tax Liability 20.11 24.83 26.90 0.00 0.00

645.62 596.12 509.68 363.25 362.04

NWC (162.81) (125.72) (14.26) 70.12 47.47

E. Net worth (56.07) (0.20) 130.94 173.14 171.23

F. Represented by

1. Share capital 37.95 37.95 37.95 37.95 37.95

2. Reserves 44.26 44.29 96.58 177.39 177.25

Less: Revaluation reserve (1.72) (1.74) (1.76) (39.50) (39.96)

Less: Misc Expenses not written off (0.21) (1.12) (1.84) (2.70) (4.02)

Less: Profit & Loss account (136.35) (79.59) 0.00 0.00 0.00

Net worth (56.07) (0.20) 130.94 173.14 171.23

49

Statement of Profits and Losses as per the Auditor’s Reports Rs. in mn

Year ended March 31, 2003-04 2002-03 2001-02 2000-01 1999-00

Income:

Sales 375.97 308.80 310.18 522.72 508.50

Other Income 51.84 15.78 46.37 6.67 7.71

Total 427.81 324.58 356.55 529.39 516.21

Expenditure:

Consumption of Raw Material 246.12 226.14 170.41 373.98 361.00

Manufacturing and other Expenses 72.10 75.54 63.54 - -

Employee Compensation & Benefits 46.47 41.74 37.21 38.68 37.05

Sales, Distribution and Administrative Expenses 76.13 73.19 64.86 55.62 55.92

Total 440.82 416.61 336.02 468.28 453.97

Profit/(Loss) before Interest, Depreciation,Amortization & Tax (13.01) (92.03) 20.53 61.11 62.24

Interest & Finance Charges (16.19) (19.08) (37.59) (38.34) (37.76)

Profit/(Loss) before Depreciation,Amortization & Tax (29.20) (111.11) (17.06) 22.77 24.48

Depreciation & Amortization (24.07) (23.17) (15.63) (8.78) (8.65)

Profit/(Loss) before Taxation and prior period item (53.27) (134.28) (32.69) 13.99 15.83

Prior period Expenses/(Income) (1.05) 2.25 0.00 0.00 0.00

Profit/(Loss) after prior period item andbefore taxation (52.22) (136.53) (32.69) 13.99 15.83

Provision for Taxation (write back &deferred tax credit negative) 0.00 (4.68) (20.99) 1.30 2.50

Profit/(Loss) after Tax (52.22) (131.85) (11.70) 12.69 13.33

Prior period Income/Sales Tax 0.00 0.00 6.88 (0.03) (1.80)

Net profit/(Loss) (52.22) (131.85) (18.58) 12.66 11.53

FY 2004 consists of a period of 12 months commencing from 1st April 2003. The Company has extended its currentfinancial year from March 31, 2004 September 30, 2004.

B. 1 Comparison of FY 2004 and FY 2003

Turnover during FY 2004 increased by 24.4% over the corresponding period of the previous year FY 2003 mainly due toexecution of major orders like Nuclear Power Corporation of India Ltd. and Business Park Mauritius Ltd. Healthy executableorders booked in last quarter of FY2003 enabled the Company to register the growth in sales.

Other Income

Other income during FY 2004 was mainly on account of exchange gain of Rs. 42 mn on External Commercial Borrowingtaken in USD as against exchange gain of Rs. 4.4 mn in FY 2003. Other income was in line with the earlier period.

Raw Material Consumed

Raw Material cost as % to sales came down by about 10% during FY 2004 over FY 2003 on account of improvement inmargins and better buying practices.

Staff Cost

Staff cost went up by 12% during FY 2004 over FY 2003 mainly due to inflationary rise and appointment of qualified andexperienced employees during the year.

Other Manufacturing expenses

Other manufacturing cost as a % to sales came down from 22% to 19% during FY 2004 mainly due to absorption of fixedcost over higher turnover base.

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Sales, Distribution and Administration Expenses

Sales, Distribution and Administration Expenses went up marginally during FY 2004 as compared to FY 2003 due toincrease in turnover and general inflationary rise.

Interest

Interest cost came down during FY 2004 as compared to FY 2003 mainly due to receipt of additional financial support fromKidde by way of External Commercial Borrowing of Rs. 19.8 mn which enabled the Company to repay the working capitalloan which was carrying higher rate of interest.

Depreciation

Depreciation was marginally higher during FY 2004 over FY 2003 on account of addition to Computers and cost incurred onfurnishing of Head Office Premises.

Provision for Tax

Due to loss during the year and carried forward loss, the management has taken a decision not to recognize deferred taxasset on the basis of prudent accounting policy.

Loss after tax

Due to increase turnover and efforts taken to keep the cost under the control the company has managed to reduce thelosses during the year from Rs. 131.8 mn to Rs. 52.2 mn.

B. 2 Comparison of FY 2003 and 2002

Income

Turnover remained almost stagnant due to overall depression in the capital market coupled with the attack on twin tower on9th September and Indian parliament on 11th December 2002. The industry witnessed one of the worst periods.

Other Income

Other income during FY 2002 was mainly on account of profit on sale of assets of non-core business amounting to Rs.38 mn. In the FY 2003 Company had exchange gain of Rs. 4.4 mn due to strengthening of Indian Rupee vs. US Dollar.

Total Expenditure

Expenditure during FY 2003 showed a steep increase of 26% over FY 2002 mainly due to increase in cost of material onaccount closure of old projects and reorganization.

Interest and Financial Charges

Interest and financial charges came down 5.9% of turnover, primarily due to repayment of high cost debt by taking low costexternal commercial borrowings.

Depreciation

Depreciation increased by Rs. 7.6 mn due to addition of cost goodwill on acquisition of certain business coupled withaddition to gross block.

Loss before tax

Loss has gone up by Rs. 107 mn mainly due to increase in cost without having corresponding increase in turnover.

Provision for tax

The Company has made provision for past tax liability as per the newly introduced accounting standard in FY 2002 butreversed the provision following prudent accounting policies as company has incurred heavy loss.

B.3 Comparison of FY 2002 over FY 2001

Turnover

Turnover for the FY 2002 was lower by more than 40% mainly on account of overall slowdown in the market, which wasfurther aggravated by September 11 attack in the USA, and the December 11 attack on the Indian Parliament.

Other Income

Other Income includes an exceptional profit on sale of fixed assets belonging to the Company’s non core businessesamounting to Rs. 37.99 mn.

Raw Material Consumed

Raw material consumption as a percentage of turnover increased by about 4%, mainly on account of cost & time overrunsin some of the projects under execution during the year.

Staff Cost

Staff cost in absolute terms came down marginally due to restructuring of staff on account of acquisition and sale ofbusinesses during the year.

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Selling, Administration and Other Expenses

Selling, administration and other expenses increased by Rs. 9.2 mn on account of loss on assignment of business, Rs. 3.5mn higher rent paid for office premises, and Rs.3.6 mn because of increase in other miscellaneous expenditure.

Interest and Financial Charges

Interest and financial charges reduced by Rs.2 mn as high costs borrowings were replaced by low cost borrowings.

Depreciation

Depreciation for the year went up by Rs. 6.8 mn largely on account of provision of depreciation for a period of 6 months onthe cost of Goodwill on acquisition of certain businesses.

Loss before tax

The Company suffered a loss mainly due to a slowdown in operations, coupled with addition cost of raw materialsconsumed, increases in expenditure, and increased depreciation as discussed above.

Provision for Tax

The Company made a provision for deferred tax liability and income, as per the Accounting Standard -22 on Taxes onIncome issued by the Institute of Chartered Accountants on India introduced during the year.

C. Factors affecting the Financial Performance

C.1 Unusual or Infrequent Events

The prospects of the industry and consequently the Company depend largely on new investments in Oil refineries, Powergeneration, other large scale industries and services sector like telecom, BPO, Software park, etc. Apart from above, extentof upgradation of existing facilities in these industries also affects the prospects of the Company.

There are no major unusual or infrequent events or transactions known to the Company which could have a material affecton its revenues or operations.

C.2 Significant economic changes that materially affected or are likely to affect income from continuing operations

Various economic factors such as industrial growth, interest rates, international and domestic prices of key raw materials,import duties, foreign exchange rate, etc could have an effect on the Company’s operations.

C.3 Known trends or Uncertainties that have had or are expected to have material adverse impact on sales, revenuesor income from continuing operations

Other than the factors that normally affect the industry in which the Company operates in and other economical and politicalfactors that effect economic and industrial growth in general, there were no known trends or uncertainties and there are nosuch known trends or uncertainties that are expected to have a material adverse impact on sales, income or revenue fromcontinuing business.

C.4 Future changes in relationship between Costs and Revenues

The Company does not anticipate any major changes in relationship between cost and revenue.

C.5 The extent to which business is seasonal

The business of the Company is not seasonal in nature.

C.6 Competitive conditions

The market in India is competitive due to presence of a large number of domestic as well as multinational players. TheCompany faces competition through its emphasis on research and development, creation of brands and marketing efforts.

C.7 Total turnover of each major industry segment in which the Company operated

The Company does not have more than one reporting segment in accordance with the Accounting Standard 17 – Segmentreporting issued by the Institute of Chartered Accountants of India.

C.8 Any discontinued business

The Company has not discontinued any business during last year.

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IX) Stock market data

The high, low and average prices in the last three years and period to date, recorded at the Mumbai Stock Exchange aswell as the monthly high or low prices during the last six months recorded at the Mumbai Stock Exchange are shown below:

BSE High Date of Volume Weighted LowPrice Date of Volume Weighted VolumePrice High price on High average Low price on Low average

day on the day day on theof High day of Low

Year ended Rs. No of Rs. Rs. No of Rs. No of31-December shares shares shares

2003 90.00 July 9 485 87.77 27.05 May 20 208 27.13 113,009

2002 57.20 Nov. 29 10 56.10 20.90 Feb. 8 32 25.13 12,301

2001 45.90 Feb. 19 4,100 44.38 18.50 May 11 500 18.60 133,670

BSE High Date of Volume Weighted Low Date of Volume Weighted VolumePrice High on High average Price Low on average

price day on the day price Low day on theof High day of Low

Rs. No of Rs. Rs. No of Rs. No ofshares shares shares

August 2004(till August 13) 35.55 August 12 706 34.65 27 August 4 662 30.45 5,744

June 2004 30.0 June 3 2,292 29.62 17.8 June 22 300 17.82 28,118

July 2004 39.0 July 15 300 36.88 20.75 July 1 260 21.04 26,085

May 2004 49.5 May 14 10 47.2 28 May 28 200 28 5,680

April 2004 33.15 April 19 10 33.1 28 April 8 550 28.01 1,901

March 2004 36.30 March 4 260 33.81 27.00 March 29 20 29.2 18,801

February 2004 36.15 Feb 3 200 36.15 30.00 Feb. 25 400 31.49 2,277

The market price immediately on April 26, 2004, the date on which the shareholders passed a resolution approving theRights Issue and on June 24, 2004, the date on which the the Committee of Directors approved the Rights Issue size andprice are given as follows:

Stock Exchange BSE

Date High Low

April 26, 2004 No Trading

June 24, 2004 20.0 19.6

The Company’s shares have not traded on the Calcutta Stock Exchange during the last three years.

As mentioned in the risk factor no. 4, the Company’s shares are infrequently traded and this could be one of thereasons for the shares to show wide fluctuations.

The Promoter/Promoter Group and directors of the Company have not directly or indirectly undertaken transactions inthe securities of the Company during the last six months.

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X) Unaudited Working Results For The Latest Period

Information as required to be given vide Ministry of Finance circular No. S2/SE/76 dated February 5, 1977 read withcircular of even number dated March 8, 1977 is given below:

Unaudited Working results of the Company for the period starting from April 1, 2004 to July 31, 2004 during the currentfinancial year are given below:

Particulars Rs. in mn

Revenues from Operations 165.6

Other Income (28.6)

Operating Expenditure 177.1

Gross Profit before interest, depreciation and tax (45.7)

Interest and financial charges 5.6

+Gross Profit/ (Loss) after Interest but before Depreciation and tax (45.7)

Depreciation and non-cash write-offs 7.0

Profit/ (Loss) before taxation and extra-ordinary items (52.7)

Extraordinary item –

Provision for taxation –

Net Profit/(Loss) after tax and extraordinary items (52.7)

Paid up equity share capital 379.52

Share Price of the Company:

1. Weekend prices for the last four weeks (July to August, 2004) (On BSE)

Week ended on Closing price (Rs. Per share)

August 13 35.2

August 6 30.7

July 30 33.0

July 23 33.9

2. The closing price in the BSE as on August 12 was Rs. 35.2(cum-rights price).

Expenses to the Issue

The overall expenses of the issue payable by the Company is estimated at a maximum of Rs. 18 mn and will be met out ofthe proceeds of the issue. Fees payable to the Lead Manager and the registrar will be as per the terms of the mandate,copies of which are available for inspection at the Registered Office of the Company.

Defaults

The Company has not defaulted in meeting any statutory / institutional / bank dues towards instrument holders in respect ofinstruments such as debentures, fixed deposits, preference shares, etc.

Details of Commission or Brokerage on previous issues (during the last 5 years)

The Company has not paid any commission or brokerage on previous issues in the last 5 years.

Issue of shares otherwise than for cash

The Company has not issued shares otherwise than for cash, except as stated in this Letter of Offer.

Revaluation of assets

The Company has not revalued its assets in the last 5 years.

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XI) Promise Vs Performance

The Company made a public issue through a prospectus in May 1992 of 400,000 equity shares of Rs. 10/- each at a priceof Rs. 20/- per share (including a premium of Rs. 10/- per share), and 100,000 14% secured fully convertible debentures ofRs. 250/- each, together aggregating to Rs. 25 million. The objective of the issue was to finance setting of a project tomanufacture certain critical components used in the fire fighting industry as also to meet the margin money requirementsfor working capital.

The comparative statement of financial projections as given in the above mentioned prospectus and actual financials for thesaid years is given below:

Rs. in mn

Particulars 1992-93 1993-94 1994-95

Projections Actuals % Projections Actuals % Projections Actuals % Variation Variation Variation

Sales 322.3 315.72 -2.04 334.4 355.75 6.38 351.9 423.56 20.36

Net Profit 14.58 17.77 21.88 16.0 20.44 27.75 18.4 26.64 44.78

Cash Accruals 18.6 21.80 17.20 20.1 26.01 29.40 22.4 33.73 50.58

The above issue was made to part finance a project of Rs 60 mn undertaken by the Company, which included expansion ofcapacity, including plant & machinery, buildings, miscellaneous fixed assets, technical know how fees, etc (togetheraggregating to Rs. 37.06 mn), augmenting long term working capital resources of the Company (Rs. 14.94 mn) and formeeting issues expenses (Rs. 8 mn).

The proceeds were utilized for the purpose they were raised.

XII) Outstanding litigations

Outstanding Litigations involving the Company

Suits filed by the Company / prosecutions initiated by the Company

Cases under Criminal Laws & Winding Up Petitions: There are no cases pending in this category.

Excise duty matters disclosed as contingent liability:

1. An appeal before CEGAT, Mumbai is pending since 1998, involving amount of Rs. 2.78 mn regarding valuation ofgoods sold (Case No E/1485/2000). The amount has been shown as a contingent liability.

2. The Company has filed an appeal in Supreme Court against the order passed by the Customs Excise and ServiceTax Appellate (CESTA) Tribunal, Mumbai involving tax liability of Rs. 6.87 mn. regarding valuation of goods sold. (CivilAppeal No. 4977-79/ 2004). The amount has been shown as contingent liability.

3. An appeal before Assistant Commissioner of Central Excise, Vapi is pending since 1997 involving amount of Rs. 3.10mn regarding valuation of goods sold (Case No 168/AC/DMN/97). The amount has been shown as contingent liability.

4. The Company has filed an appeal with CESTA Tribunal on 14th July 2004 against the order of Commissioner ofCentral Excise, Vapi confirming demand of Rs. 4.06 mn regarding classification of goods, as the Company hadclaimed the goods as exempt from excise.The amount has been shown as contingent liability.

5. Various show cause notices issued by the department between 1997 to 2000 aggregating claims of Rs. 1.59 mn fromthe Company. The Company has replied to all the show-cause notices but the department has not passed order(s) /withdrawn show-cause notices. The amount has been shown as contingent liability.

Income-tax matters disclosed as contingent liability

Pending Income tax liabilities aggregating to Rs. 0.46 mn regarding non receipt of withholding tax certificates for FY2002, FY 2000 and FY 1999. The amount has been shown as contingent liability.

Commercial tax matters disclosed as contingent liability:

An appeal before Assistant Commissioner of Commercial Tax, Andhra Pradesh is pending since November 2002 involvingan amount of Rs. 0.13 mn regarding valuation of goods sold (Assessment No 9825/99-2000). The amount has beenshown as contingent liability.

Service tax:

There are no cases pending in this category.

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FEMA:

FEMA Appellate Tribunal, at Delhi remanded the case to Assistant Directorate of Enforcement against the ex-parte orderpassed by the Enforcement Directorate imposing a penalty of Rs. 2.5 mn on account of non-submission of proof of importand utilization of foreign currency and the same is treated as contingent liability. The Company has deposited Rs. 0.63 mnas security deposit as per the interim order issued by the FEMA Appellate Tribunal.

Litigations & Disputes in Respect of Overdues

1. The Company has filed an appeal before the High Court of Andhra Pradesh, Hyderabad against the order passed bythe lower court asking the Company to pay Rs. 0.21 mn to one Mr. G. P. Rajababu, (sub-contractor) for servicesrendered. The Company had earlier refused to make the payment on account of some dispute against the claim madeby the contractor. The Company has lost the appeal. The contractor Mr. G. P. Rajababu is not traceable. The Companyhas decided to deposit the amount in the lower court (Case No 119/1987).

2. Kalinga Tubes (India Metal & Ferro Alloys Limited), Cuttack has filed an appeal before District Court, Bhubaneshwar.The claimant had supplied steel tubes to the Company. The Company is contesting the claim on account of thequestionable quality of tubes supplied. The suit is to claim recovery of Rs.0.14 mn for the same (Case No 95/1985).

3. Vishakhpatnam Port Trust had filed a petition before District Court, Vishakapatnam (Andhra Pradesh) involvingamount of Rs. 8.6 mn. The Company was awarded a job for the supply and erection of fire fighting equipment at LPGjetty of Vishakhpatnam Port Trust at Vishakapatnam in 1996-97. Vishakhpatnam Port Trust cancelled the ordersubsequently due to a dispute in relation to product specifications, which did not form a part of the original tenderbased on which the Company had bid. The job was subsequently re-tendered and awarded to another party at ahigher amount. The Vishakhpatnam Port Trust filed a petition in the Court of District Judge at Vishakapatnam in theyear 2000 claiming difference between the amounts of the two tenders. The Company is defending the case atVishakapatnam District Court. The Company has also filed a Writ Petition in the High Court of Andhra Pradesh in1998 seeking to adjudicate the dispute by arbitration. The District Court case has been adjourned but the next date ofhearing has not been announced (Case No 94/1999 & 50/2000).

Suits Filed by the Company - Other Commercial Disputes

1. Petition before District Court of Ernakulam against FACT Engineering and Design Organisation (“FEDO”), Cochininvolving a sum of Rs. 0.38 mn. FEDO, a division of FACT deducted an amount of Rs. 0.69 mn from the amountpayable by them as liquidated damages. FEDO did not pay claim of the Company amounting to Rs. 2.27 mn towardsextra costs incurred for changes in specifications, and other additional charges. The Court has ruled in theCompany’s favour and awarded the Company a total amount of Rs. 0.375 mn. The Company is yet to receive theaward amount and summons have been issued for the attachment of the immovable property of the defendants(Case No 79/2001).

2. Petition before Delhi High Court against Rail Coach Factory Kapurthala involving an amount of Rs. 0.33 mn. TheCompany has partly objected to the arbitration award for contractual payment and additional claims. The case isbeing shifted to Tees Hazari Court (Case No 52/2000).

3. Petition before Delhi High Court against New Delhi Municipal Corporation (R.K.Puram) (“NMDC”) involving amount ofRs. 1.14 mn. The Company filed an arbitration petition to resolve the dispute regarding contractual payment andadditional claims of the Company. The Company received an amount of Rs. 0.25 mn in 1st arbitration award. Thesecond arbitration award was also in favour of the Company. NDMC appealed against the award before the Delhi HighCourt. On the High Court Directive, NDMC deposited Rs. 0.92 mn to admit the case. NDMC objected the award in theHigh Court. The case is being shifted to the Tees Hazari Court, which has jurisdiction given the amount being lessthan Rs. 1 mn (Case No OMP 101/2000).

4. Petition before the High Court of Madras against the Tamil Nadu Electricity Board/MTPP involving an amount of Rs.1.26 mn. The Company has filed arbitration proceedings to resolve the contractual payment disputes, and claims foran additional amount. The appointment of the sole arbitrator is pending (Case No 976/2001).

5. Petition before Bilaspur district Court, Chattisgarh against Chattisgarh State Electricity Board involving an amount ofRs. 0.74 mn. A bank guarantee as security deposit was submitted to execute the contract. The contract could not beexecuted because of disputes. Stay on encashment of bank guarantee and appointment of sole arbitrator is pending(Case No MJC 141/02 & 35/04).

6. Case filed in Delhi High Court against Kanoria Chemical & Industries Ltd. for appointment of an arbitrator as thecustomer refused to proceed for an arbitration. Dispute is on account of non payment of contractual dues and claimfor additional material supplied (Case No. 161 of 2003).

Arbitration cases

1. Arbitration before Mr. B Gururajan at Chennai against HPCL, Mangalore for amount of Rs. 2.55 mn. The Companyincurred expenses on account of over stay at the site as well as on account of additional material and servicesprovided during a one year extended period. Further, HPCL also deducted the liquidated damages and did not refund

56

the same in-spite of the Company’s requests. The hearing has concluded and the sole arbitrator is expected topronounce the award soon.

2. Arbitration before Mr. N Dinakaran at Chennai against IOCL, Kochi for amount of Rs. 1.80 mn. IOCL failed to respondto the Company’s request to release the outstanding payment. Preliminary issues raised by IOCL were argued beforethe Sole arbitrator in February 2004. The hearing is over and the sole arbitrator is yet to pronounce the interim award.

3. Arbitration before Shri A. K. Srivastava (retired Judge) at Delhi against New Delhi Municipal Corporation (SwimmingPool) for an amount of Rs. 0.58 mn. Some disputes were raised during the execution stage. The Company completedthe job and commissioned the system. Payment against the final bill and the extra works done have not been paid.The Company filed petition for appointment of an arbitrator to resolve the dispute. Final arbitration award is yet to beawarded.

4. Arbitration before Mr. Dhanuka, (Retd. Judge High Court) sole arbitrator against Bharat Diamond Bourse involving anamount of Rs. 0.59 mn and the Claim on account of apportioning of the contract, over stay expenses, additionalmaterial, etc. worth Rs. 27.2 mn has been lodged. High Court of Judicature (at Mumbai) appointed a sole arbitrator inApril 2004. Arbitration proceedings have begun.

5. Arbitration before Mr. N. K Desai, Sole Arbitrator against Indian Vaccines Corporation Ltd Delhi involving an amountof Rs.2.0 mn on account short closure of the project resulted in a loss by the Company.

6. Arbitration before a tribunal comprising three independent arbitrators at Delhi, against National Fertilisers Ltd, forsettlement of disputed amounts consisting of contractual due payments and additional services provided by theCompany aggregating to Rs.1.6 mn.

7. Arbitration before Justice Sawant appointed by Hon’ble Supreme Court of India against Skoda Exports Ltd. involvingclaim for contractual due payment of Rs. 1.6 mn.

8. Arbitration before Mr. P.M. Abrahm, Sole Arbitrator, against New Manglore Port Trust for claim of Rs. 1.7 mn on account ofcontractual due payment withheld by the customer and cost of additional material and services provided for Rs. 2.2 mn.

9. Arbitration before Tribunal involving claims of Rs. 7.0 mn for additional material and services provided by the companybut disputed by the customer, NTPC Delhi.

Insurance Claims

1. Petition before State Consumer Forum at Delhi against New India Insurance Company. A claim of Rs. 1.50 mn against theinsurance policy has been repudiated by the insurance company. All pleadings have been completed and final award isyet to be pronounced.

2. Petition before National Commission, Delhi against United India Insurance Company is pending. A claim of Rs. 0.35 mnregarding theft of material covered under insurance policy was repudiated by the insurance company.

Pending For appointment of an Arbitrator

1. National Engineering Industries Limited has not responded to the Company’s request for release of outstanding paymentof Rs. 1.45 mn pursuant to a contract between the parties. The matter is pending for appointment of an arbitrator.

2. Durgapur Steel Plant (Division of SAIL) for claim of Rs 3.0 mn on account on non-release of contractual payment.

Litigations against the Directors

In September 1992, one of the directors, Mr. Gyan Dayal, alongwith five other directors of Faber Equipments India PrivateLimited (Faber) was named as a party to a winding-up petition filed against Faber in his capacity as director. The Delhi HighCourt accepted the petition filed by a creditor on December 12, 1995 and ordered that Faber be liquidated. The assets of Faberare now in the possession of the official liquidator. Mr. Dayal has since ceased to be a director of Faber. Further, Faber hasbeen liquidated although a final order in this regard is yet to be passed. Mr. Dayal had provided a personal guarantee to VijayaBank on behalf of Faber. Mr. Dayal, alongwith other directors, had approached the bank to repay all outstanding dues, whichhave been repaid and all his obligations under the said guarantee were settled in 2001.

57

XIII) Basis For Issue Price

Quantitative Factors

1 Adjusted Earnings per Share (EPS)

Year/ Period Ended Earning Per Share (Annualized) (Rs.)

31.3.2002 (4.90 )

31.3.2003 (34.74)

31.3.2004 (13.76)

Based on the above, the weighted average EPS is Negative.

2. Price Earning Multiple (PEM) for the Rights Issue shares

Issue Price Rs. 42

Weighted EPS Negative

PEM based on weighted EPS Not Applicable

PEM based on EPS as on 31.03.2004 Not Applicable

3. Return on Net worth (RONW)

Year/Period Ended RONW (%)

31.3.2001 7.08%

31.3.2002 Not Applicable



Based on the above, the weighted average Return on Net Worth is Negative.

4. Minimum return on Total Net Worth after issue required to maintain pre – issue EPS

Not Applicable as pre-issue EPS is Negative.

5. Net Asset Value (NAV)

NAV as at 31.03.2004 (Rs.) (14.78)

NAV after the Issue (Rs.) 35.19

Issue Price Rs. 42

6. Comparison of all accounting ratios of the Company with industry average and accounting ratios of peergroup companies

There are no known listed companies in India which are substantially in the same line of business as that of theCompany’s, and hence a comparison of the Company’s P/E, RONW and NAV cannot be carried out.

Given the fact that the Company has been making losses and has a negative net worth, none of the abovequantitative factors are relevant for justification of the issue price.

Other Quantitative / Qualitative Factors

1. The present promoter / principal shareholder, Kidde, acquired 82.58% shareholding in the Company at a price of Rs.42/- per share in 2001.

2. During the last 12-month period, the share price touched a high of Rs. 73.6 (December 12, 2003) and low of Rs. 17.8(June 22, 2004) per share.

3. The average of the weekly high and low of the closing prices of the shares for the past 26 weeks ended on August 13,2004 was Rs. 30.5 and the average of the daily high and low during the previous two weeks ended on August 13, 2004was Rs. 31.55 per share.

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XIV) Mechanism evolved by the Company for the redressal of investor grievancesThe Company has been handling physical share transfer work in-house at its, Administrative Office, EL-205, TTC industrialArea, Mhape, Thane, New Mumbai 400 701. The Company has appointed M/s Adroit Corporate Services Pvt. Limited, 19,Jeferbhoy Industrial Estate, 1st floor, Makwana Road, Marol Naka, Andheri (East) Mumbai 400 059 as registrar for electronicconnectivity and also physical share transfer work. The Company’s registrar is entrusted with responsibility for attending to thecorrespondence / queries of its investors. The Company ensures that all the correspondence / queries of its investors arereplied to satisfactorily and promptly.

As on August 13, 2004, the Company had no outstanding investor complaints which have not been attended to for over amonth. Earlier, there were some complaints related to cases of non-receipt of refund orders/ allotments, conversion ofdebentures, etc. in connection with the public issue made by the Company in 1992, prior to Kidde’s acquisition which wereoutstanding for a long period of time. These have now been attented to by the management.

The Company has appointed Adroit Corporate Services Pvt. Limited, a Category I registrar, registered with SEBI as itsRegistrar to the Issue. The Company did not receive any complaints subsequent to making the draft offer document public.

XV) Material developmentsIn the opinion of the Company, no circumstances have arisen since the date of the last financial statements (i.e. March 31,2004), which would materially and adversely affect or are likely to affect the trading or profitability of the Company, or the valueof the assets, or its ability to pay its liabilities within the next 12 months.

XVI) Expert opinionSave and otherwise stated in the Letter of Offer, the Company has not obtained any expert opinions.

XVII) Option to subscribeThe Equity Shareholders are given the option to receive the security certificates or hold securities in dematerialized form witha depository.

XVIII) Material contracts and inspection of documents

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company), whichare or may be deemed material have been entered or are to be entered into by the Company. These contracts and also thedocuments for inspection referred to hereunder, have been delivered to the BSE (Designated Stock Exchange) and areavailable for inspection at the Registered Office of the Company from 11:00 am to 1:00 p.m. on all working days, from the dateof this Letter of Offer until the date of closure of the Subscription List.

Material contracts

(1) Memorandum of Understanding entered into between the Company and Citigroup Global Markets dated June 9, 2004.

(2) Memorandum of Understanding entered into between the Company and Adroit Corporate Services Pvt. Limited,Registrar to the Issue dated June 11, 2004.

(3) Tripartite agreement dated March 21, 2001 entered between the Company, National Securities Depository Limited andAdroit Corporate Services Pvt. Limited.

(4) Tripartite agreement dated March 30, 2001 entered into between the Company, Central Depository Services (India)Limited and Adroit Corporate Services Pvt Limited.

(5) Loan agreement dated March 4, 2002 entered into between the Company and Kidde Finance Limited for availment ofloan of USD 6.17 mn by the Company.

(6) Loan agreement dated March 31, 2003 between the Company and Kidde Finance Limited for availment of loan of USD4.20 mn by the Company.

(7) Agreements for assignment of loans of USD 6.17 mn and USD 4.20 mn dated January 4, 2004 and March 1, 2004respectively, entered into amongst the Company, Kidde Finance Limited and Kidde.

Documents for Inspection

(1) Memorandum and Articles of Association of the Company.

(2) Listing agreements with BSE and CSE.

(3) Applications made to CSE for delisting of the shares.

(4) Applications dated June 30, 2004 made to BSE for seeking in-principle approval for listing of the securities offered in thisissue and their in-principle approval dated July 23, 2004 thereof.

(5) Approval dated July 28, 2004 from ASE for delisting of the shares of the Company.

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(6) In-principle approval dated July 27, 2004 from CSE for listing of the securities offered in this Issue.

(7) Approval dated July 20, 2004 from DeSE for delisting of the shares of the Company.

(8) Resolution passed at the Extraordinary meeting of shareholders held on April 26, 2004.

(9) Board resolutions dated June 11, 2004 and resolution dated June 24, 2004 and August 18, 2004 by the Committee ofDirectors.

(10) Letter no. CFD/DIL/17232/2004 dated August 5, 2004 issued by SEBI.

(11) Consents from Directors, Auditors, Advisors, Bankers to the Issue, Bankers to the Company, Lead Managers to the Issueand the Registrars to the Issue.

(12) Annual reports of the Company for the last five years, including the audited financial statement for the period endedMarch 31, 2004.

(13) Auditors’ reports for the Company, dated June 24, 2004 giving the financial information which is contained in this letterof Offer.

(14) Auditors’ certificate dated June 24, 2004 regarding tax benefits.

(15) Letters of intent for the subscription to rights entitlement and unsubscribed portion, received from Kidde InternationalLimited.

(16) Letter dated February 17, 2004 from the Company to The Hongkong and Shanghai Banking Corporation Ltd., AuthorisedDealer, requesting for seeking an approval from the RBI for the assignment of loans of USD 6.17 mn from Kidde FinanceLimited in favor of Kidde and approval dated July 5, 2004 from Reserve Bank of India for the same.

(17) Approval dated August 17, 2004 by Reserve Bank of India to the Company for conversion of the existing loan of USD6.17 mn and USD 4.2 mn into equity share capital.

(18) Letter dated June 10, 2004 from Kidde International Limited addressed to the Board of Directors of the Companyconfirming Kidde’s financial support to the Company until the Company ceased to be its subsidiary.

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Declaration

No statement made in this letter of offer shall contravene any of the provisions of the Companies Act 1956 and the rules madethereunder. All the legal requirements connected with the said issue as also the guidelines, instructions, etc, issued by SEBI,Government or any other competent authority in this behalf have been duly complied with.

Yours faithfully,

For

(RAKESHWAR DAYAL MATHUR) (MICHAEL JAMES ABBOTT)Managing Director Director

(DEREK JAMES ADDISON) (GYAN KAPILAESHWAR DAYAL)Director Director

(SUSHIL SANCHETI)Chief Financial Officer

Place: Mumbai

Date: August 18, 2004

Encl:Composite Application Form

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