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DRAFT RED HERRING PROSPECTUS

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

AML STEEL LIMITED


(Incorporated on 16 April, 1993 as Ashok Magnetics Limited at Chennai under the Companies Act, 1956 with Registration No. 18-24842. The name of the
Company was changed to AML Steel Limited on 1 August, 2005. The Registered Office of the Company was changed from Raheja Complex, 834, Mount Road,
Madras – 600 002 to the present location on 11 December, 1995.)
Registered Office: B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu – 601 201 Tel: + 91 411 922 2792
Corporate Office: Raheja Complex, New no. 68 (834), Anna Salai, Chennai, Tamil Nadu – 600 002 Tel: + 91 44 2858 3182,
Fax: +91 44 2841 9443, E-mail: corporate@amlsteel.com, website: www.amlsteel.com
Contact Person: Mr.Rajesh Agrawal, Company Secretary & Compliance Officer

PUBLIC ISSUE OF [●] EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PRICE OF RS. [●] PER EQUITY SHARE AGGREGATING
RS.12,000 LAKHS (THE “ISSUE”). THE ISSUE COMPRISES OF PROMOTERS CONTRIBUTION OF [●] EQUITY SHARES OF RS. 10/- EACH
AGGREGATING RS. 2,000 LAKHS AND THE NET OFFER TO THE PUBLIC OF [●] EQUITY SHARES OF RS. 10/- EACH THROUGH 100%
BOOK BUILDING PROCESS AGGREGATING RS. 10,000 LAKHS (THE “NET ISSUE”). THE NET ISSUE WOULD CONSTITUTE [●]% OF THE
FULLY DILUTED POST ISSUE PAID-UP EQUITY CAPITAL OF THE COMPANY.

PRICE BAND: Rs. [••] TO Rs. [••] PER EQUITY SHARE OF FACE VALUE RS. 10/-
THE FLOOR PRICE IS [••] TIMES OF THE FACE VALUE AND THE CAP PRICE IS [••] TIMES OF THE FACE VALUE.
THE PRICE BAND AND THE MINIMUM LOT SIZE FOR THE ISSUE WILL BE DECIDED BY US IN CONSULTATION WITH THE BRLMS
AND ADVERTISED ATLEAST ONE DAY PRIOR TO THE BID/ISSUE OPENING DATE.

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after such revision, subject to the Bidding/ Issue
Period not exceeding 10 working days. Any revision of Price Band and the revised Bid/Issue Period, if applicable will be widely disseminated by notification to
The Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) where the Equity Shares of the Company are proposed to be
listed, whose online IPO systems will be available for bidding, by issuing a press release, and also by indicating the change on the website of the Book Running
Lead Manager and the terminals of the Syndicate.

The Issue is being made through the 100% Book Building Process wherein upto 50% of the Net Issue shall be allocated on a proportionate basis to Qualified
Institutional Buyers (“QIBs”), out of which upto 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the
remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at
or above Issue Price. Further, at least 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and atleast 35%
of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue
Price.
RISK IN RELATION TO THIS ISSUE
The Face Value of the Shares is Rs. 10/- each and the Floor Price is [●] times of the face value and the Cap Price is [●] times of the Face Value. The Price Band
(as determined by our Company in consultation with the Book Running Lead Managers (“BRLMs”) on the basis of assessment of market demand for the Equity
Shares by way of book-building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance
can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take
the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an
investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The Equity Shares offered in the Issue
have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this
Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled “Risk Factors” on page no. [●] of this Draft Red Herring
Prospectus.
COMPANY’S ABSOLUTE RESPONSIBILITY
The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with
regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and
correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are
no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or
intentions misleading in any material respect.
LISTING
The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the BSE, NSE, MSE, DSE and ASE. We have received in-
principle approval from BSE, NSE, MSE, DSE and ASE for the listing of the Equity Shares pursuant to letters dated [•], [•], [•], [•] and [•] respectively. The
Designated Stock Exchange is BSE.
BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE

CENTRUM CAPITAL LIMITED


KARVY INVESTOR SERVICES LIMITED 5th Floor, Khetan Bhavan,
CAMEO CORPORATE SERVICES LIMITED
“Karvy House”, 46, Avenue 4, 198, J. Tata Road, Churchgate Subramanian Building, No.1,
Street No. 1, Banjara Hills, Mumbai - 400 020. Club House Road, Chennai – 600 002.
Hyderabad – 500 034. Tel: +91 22 2202 3838 Tel No: +91 44 28460390
Tel: +91 40 2337 4714 / 2332 0752 Fax: +91 22 2204 6096. Fax No: +91 44 28460129
Fax: +91 40 2337 4714 Email:amlsteel@centrum.co.in e-mail: cameo@cameoindia.com
E-mail: mbd@karvy.com. Website: www.centrum.co.in Website: www.cameoindia.com
Website: www.karvy.com Contact Person : Mr.Mayank Dalal Contact Person: Mr.R.D. Ramasamy
Contact Person :Mr.T.R.Prashanth Kumar
ISSUE PROGRAMME
BID / ISSUE OPENS ON [••] BID / ISSUE CLOSES ON [••]
AML STEEL LIMITED

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

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AML STEEL LIMITED

SECTION I - GENERAL
DEFINITIONS AND ABBREVIATIONS

Term Description
The “Company” or “our Unless the context otherwise requires, refers to AML Steel Limited, a
Company” or “AMLSL” or Company constituted under the Companies Act, 1956, having its Registered
“we” or “our” or “us” Office at B-73, Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu
601 201, India
“Our Subsidiary Company” Unless the context otherwise requires, refers to Ankit Ispat Private Limited,
or “Our Subsidiaries” Ashok Steel Industries Private Limited and AML Steel & Power Limited.

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

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

Issue Related Terms


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

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

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

Company Related Terms


Term Description
AGM Annual General Meeting.
AMLSPL AML Steel & Power Limited.
AIPL Ankit Ispat Private Limited.
ASIPL Ashok Steel Industries Private Limited, Sri Lanka.
Auditors The statutory auditors of the Company, namely M/s.K.P Jain & Co.,
Chartered Accountants.
Board of Directors/Board The Board of Directors of our Company.
Committee Committee of the Board of Directors of the Company authorised to take

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AML STEEL LIMITED

decisions on matters relating to or incidental to this Issue.


Constitutional Documents The constitutional documents of the Company being the certificate of
incorporation, memorandum of association and articles of association of the
Company.
Director(s) Director(s) of the Company, unless otherwise specified
Equity Shares Equity Shares of the Company of Rs. 10/- each unless otherwise specified in
the context thereof.
Equity Shareholders Persons holding Equity Shares of the Company unless otherwise specified
in the context thereof.
Face Value Value of paid up equity capital per Equity Share, in this case being Rs. 10/-
each.
Head Office/ Registered The Registered Office of the Company being B-73, Sipcot Industrial
Office Complex, Gummidipoondi, Tamil Nadu – 601 201, India.

Technical and Industry Terms


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

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TMT Thermo Mechanically Treated


TPA Tonnes Per Annum
TPD Tonnes Per Day
Tpy Tons Per Year
YTD Year-To-Date

Abbreviations
Term Description
AS Accounting Standards as issued by the Institute of Chartered Accountants of
India
ASE Ahmedabad Stock Exchange Limited
AY Assessment Year
A/c Account
BPLR Bank Prime Lending Rate
BSE The Bombay Stock Exchange Limited
CAGR Compounded Annual Growth Rate
CBI Central Bank of India
CC (H) Cash Credit (Hypothecation)
CDSL Central Depository Services (India) Limited
C.I.S Commonwealth of Independent States
DEPB Duty Entitlement Pass Book Scheme
DGFT Directorate General of Foreign Trade
DSE Delhi Stock Exchange Association Limited
EBITDA Earning Before Interest Tax Depreciation and Amortisation
EGM Extraordinary General Meeting
EPS Earnings Per Share i.e., profit after tax divided by outstanding number of
Equity Shares at the year end
ERU Economic Research Unit
ESI Employees' State Insurance
ESPL Elango Steels Private Limited
ESOP Employee Stock Option Plan
FII(s) Foreign Institutional Investors registered with SEBI under applicable laws.
FIPB Foreign Investment Promotion Board
FDI Foreign Direct Investment
GDP Gross Domestic Product
GIR Number General Index Registry Number
HNI High Net Worth Individual
HUF Hindu Undivided Family
ITC (HS) Code Indian Trade Clarification based on Harmonised System
MSE Madras Stock Exchange Limited
NAFTA North America Free Trade Agreement
NOC No Objection Certificate
NRE Account Non-Resident External Account
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OECD Organization for Economic Co-operation and Development
PAN Permanent Account Number
P/E Ratio Price/Earnings Ratio
PLR Prime Lending Rate
QIB Qualified Institutional Buyer
RoC Registrar of Companies, Tamil Nadu situated at Chennai
RONW Return on Net Worth
ROW Rest of the World
Rs. / Rupee(s) / INR Indian Rupee(s)
SL Rs. Sri Lankan Rupees, Currency of Sri Lanka.
SBI State Bank of India
SBI Caps SBI Capital Markets Limited
TDS Tax Deducted at Source

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AML STEEL LIMITED

TN Tamil Nadu
USD or $ or US $ United States Dollar
VAT Value Added Tax
WTO World Trade Organization

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SECTION II-RISK FACTORS

CERTAIN CONVENTIONS; USE OF MARKET DATA

Unless stated otherwise the financial data in this DRHP is derived from our unconsolidated financial
statements prepared in accordance with Indian GAAP and included in this DRHP. The statistical and
operational data in this DRHP is presented on an unconsolidated basis as well as consolidated basis. Our
fiscal year commences on 1 April and ends on 31 March of each year, so all references to a particular
financial year are to the twelve-month period ended 31 March of that year. In this DRHP, any discrepancies
in any table between the total and the sums of the amounts listed are due to rounding.

The degree to which the Indian GAAP financial statements included in this DRHP will provide meaningful
information is entirely dependent on the reader’s level of familiarity with Indian accounting practices. Any
reliance by Persons not familiar with Indian accounting practices on the financial disclosures presented in
this DRHP should accordingly be limited. We have not attempted to explain those differences or quantify
their impact on the financial data included herein, and we urge you to consult your own advisors regarding
such differences and their impact on our financial data.

For additional definitions, please see the section titled “Definitions and Abbreviations” on page no. [●] of
this DRHP. In the section titled “Main Provisions of the Articles of Association” on page no. [●] of this
DRHP, defined terms have the meaning given to such terms in the Articles of Association of the Company.

Unless stated otherwise, industry data and the market data used throughout this DRHP have been obtained
from internal company reports and industry publications and other industry sources. Industry publications
generally state that the information contained in those publications has been obtained from sources believed
to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be
assured. Although we believe that industry data used in this DRHP is reliable, it has not been independently
verified.

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AML STEEL LIMITED

FORWARD LOOKING STATEMENTS

We have included statements in this DRHP that contain words or phrases such as “will”, “aim”, “will likely
result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”,
“seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or
variations of such expressions, that are forward-looking statements.

All forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual
results to differ materially from those contemplated by the relevant forward-looking statement. Important
factors that could cause actual results to differ materially from our expectations include, among others:

• General economic and business conditions in India and other countries;


• Our ability to successfully implement our strategy, growth and expansion plans and technological
initiatives;
• Our ability to respond to technological changes;
• Changes in laws and regulations relating to the industry in which we operate;
• Our ability to retain management team and skilled personnel;
• Our ability to successfully launch new products;
• Any adverse outcome in legal proceedings in which our Company is involved;
• Potential mergers, acquisitions or restructurings;
• The occurrence of natural disasters or calamities affecting the areas in which we have operations or
outstanding credit; and
• Changes in political and social conditions in India.

For further discussion of factors that could cause our actual results to differ, see the section titled “Risk
Factors” beginning on page no. [●] of this DRHP. By their nature, certain market risk disclosures are only
estimates and could be materially different from what actually occurs in the future. As a result, actual future
gains or losses could materially differ from those that have been estimated. The Company, the members of
the Syndicate and their respective affiliates do not have any obligation to, and do not intend to, update or
otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the
occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance
with SEBI requirements, the Company and the BRLMs will ensure that investors in India are informed of
material developments until such time as the grant of listing and trading permission by the Stock Exchanges
in respect of the Equity Shares allotted in this Issue.

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AML STEEL LIMITED

RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all the
information in this DRHP, including the risks and uncertainties described below, before making an
investment in the Equity Shares. If any of the following risks actually occur, our business, results of
operations and financial condition could suffer, the trading price of the Equity Shares could decline, and
you may lose all or part of your investment.

Prior to making an investment decision, prospective investors should carefully consider all of the
information contained in this DRHP, including financial statements included in this DRHP beginning on
page no. []. Unless stated otherwise, the financial data in this section is as per our financial statements
prepared in accordance with Indian GAAP.

Unless otherwise stated in the relevant risk factors set forth below, we are not in a position to specify or
quantify the financial or other implications of any of the risks mentioned herein.

Materiality

The Risk factors have been determined on the basis of their materiality. The following factors have been
considered for determining the materiality.

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

INTERNAL RISK FACTORS

1. Project Related Risks

a. With regard to the setting up of an Integrated Steel Plant (the Project) by AMLSPL (our
wholly owned subsidiary), AMLSPL has not yet applied for or is yet to receive certain
statutory clearances and approvals.

AMLSPL has applied for clearance for Operation of Iron and Manganese ore mines from the
Ministry of Environment and Forest on 6 January, 2006, which is pending clearance. It has also
applied for clearance from the Ministry of Coal for coal linkages for the Project on 20 September,
2005 which is pending for approval. It has also applied for the renewal of the licence from the
Government of Jharkhand under the Factories Act 1948, which was valid till 31 December, 2005.

AMLSPL is yet to apply for the following licences/ registrations from the Government of
Jharkhand/ Central Government for the Project:

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

AMLSPL shall be applying for the above-mentioned approvals/licences as the work at the Project
site progresses.

Any delay in receiving the above mentioned critical permissions for the Project may delay
implementation of the Project and hence, the profitability. Please refer to the section “Licences and
Approvals” on page no. [•] of this DRHP for more details.

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AML STEEL LIMITED

b. AMLSPL has not yet acquired the entire land required for the Project or taken possession of
the iron ore mine.

For the Project, AMLSPL would require an area of 70 acres out of which an area of about 60.71
acres has already been acquired. Although AMLSPL is in the process of negotiating with the land
owners, any delay in acquiring the balance area may delay implementation of the Project and
hence, the operations and profitability may be affected.

The Ministry of Mines, GoI, has agreed to the grant to AMLSPL, of a mining lease for a period of
twenty years, over an area of 383.54 acres, for iron and manganese ore in Mauza Bokna District,
West Singhbum, Jharkhand. However, no formal lease agreement has been executed for this
purpose, the possession of the land has not been handed over and mining operations are yet to
commence.

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

i) Leasehold land at Saraikela – Kharsawan- Jharkhand

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

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

ii) Land purchased at Saraikela – Kharsawan- Jharkhand.

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

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

d. AMLSPL is yet to make definitive arrangements for procurement of some of the


equipment/machinery required for the Project, which may cause a delay in implementation
of the Project and a revision in the costs of the Project as estimated.

The proposed Project comprises of a DRI Plant, a steel melt shop and a captive power plant.
AMLSPL has placed orders for equipment constituting around 30.17% of the estimated cost of

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AML STEEL LIMITED

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

e. AMLSPL has not yet received commitments for the remaining portion of the debt
component of the proposed means of finance required for the Project.

AMLSPL has received final sanction for almost 92% of the debt portion of the means of finance
for the Project, from Federal Bank, Central Bank of India and UCO Bank. Any delay in obtaining
the release of the funds, may delay the Project implementation.

Further in case AMLSPL fails to receive commitments for the remaining portion of the debt
component or if internal accruals are insufficient to fund the same, then the Project may be delayed
thereby affecting the operations, profitability and cash flows.

f. Risk factors as envisaged in the Financial Appraisal Report of SBI Caps.

Weakness

The products – sponge iron and billets- proposed to be manufactured by AMLSPL is an industrial
commodity, susceptible to price volatility. There is expected to be a shortfall of around 2 MMTPA
billets as per demand-supply gap estimates by CRIS INFAC during 2006-07. However, the
Promoters have been in the steel business for a considerable time and are confident of facing
adverse price movements. In case of any adverse movements in prices of sponge iron, AMLSPL
can increase the captive consumption of sponge iron, for the production of value added steel
products, thereby minimizing price risk.

Threat

Many greenfield and brownfield ventures have been commissioned over the last 1-2 years in India,
especially in mineral rich states like Jharkhand and Orissa. There is expected to be a shortfall of
around 2 MMTPA billets as per demand-supply gap estimates by CRIS INFAC during 2006-07.
The Promoters with their experience in the steel industry are confident of handling competition.

2. Delay in identifying the proposed fresh acquisitions may affect our profitability.

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

3. We and our subsidiaries have not yet applied for certain permissions and made certain
payments due to which our title and that of our subsidiaries to our units/ the lands on which
our/their units are situate, may not be marketable and we/our subsidiaries could be subject
to related penalties/fines.

We and our subsidiaries have received certain approvals required to establish and operate our
manufacturing units. For further details please refer to “Licences and Approvals” appearing on
page no. [•] of this DRHP. However, we are yet to apply for the following approvals:
a) Conversion orders for the use of the land belonging to the Company at Pondicherry, for
industrial purpose.

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AML STEEL LIMITED

b) Registration under the Shops and Establishments Act for our corporate office premises.
c) Professional tax registration.
d) Registration as a principal employer under the Contract Labour (Regulation and
Abolition) Act, 1970.

Our subsidiary, AIPL has not obtained permission from the Pondicherry Planning Authority under
the Pondicherry Building Bye-Laws and Zoning Regulations, 1972 to erect industrial buildings for
both its units and has also not yet applied for professional tax registration and service tax
registrations.

In view of the failure to obtain the aforesaid permissions, we/our subsidiaries could be subject to
related penalties/fines, including those relating to any building/safety violation, as regards the units
of AIPL.

4. We rely on contract labour for the performance of many of our operations

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

5. Imposition of penalty on the Company by DSE

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

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

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

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

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AML STEEL LIMITED

restrained the Company from alienating, encumbering or dealing with the properties of
the Company until further orders of the Court. The case is still subjudice.

No assurance can be given as to whether these matters will be settled in favour of or


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

7 Significant dependence on top five customers.

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

8. Change in mining policies.

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

9. Failure to comply with environmental laws, rules and regulations may adversely affect our
business or operations.

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

10. Risk related to failure to acquire new acquisitions and to integrate the new acquisitions, if any,
with our existing operations.

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

• Adverse short-term effects on our reported operating results;


• Unanticipated liabilities or contingencies relating to the acquired facility;
• Unidentified operational risks.
• Inability to successfully integrate the acquired facility with our own facilities.

11. We have not taken any insurance for business losses, and claims in respect of workmen’s
compensation, which we might incur/ face.

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

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AML STEEL LIMITED

12. No liquidity in the Company’s shares

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

13. Promise vs. Performance

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

(Rs. in lakhs)
Particulars 1995 – 1996 1996 – 1997 1997-1998
Expected Actual Variance Expected Actual Variance Expected Actual Variance
Sales 833.00 720.82 -112.18 1229.90 1022.32 -207.58 1333.45 911.48 -421.97
Cost of Production 640.89 502.76 -138.13 923.21 768.20 -155.01 1035.13 736.98 -298.15
Gross Profit 192.11 218.06 25.95 306.69 254.12 -52.57 348.32 174.50 -173.82
Administrative and
selling Expenses 42.84 48.45 5.61 63.93 57.97 -5.96 70.94 55.14 -15.80
PBIDT 149.28 169.61 20.33 242.75 196.15 -46.6 277.39 119.36 -158.03
Interest 24.77 18.35 -6.42 61.16 29.13 -32.03 65.85 19.83 -46.02
Depreciation 4.72 6.50 1.78 4.72 8.98 4.26 4.72 9.41 4.69
Misc. Expenses written
off 1.53 0.00 -1.53 1.53 0.00 -1.53 1.53 0.00 -1.53
PBT 118.27 144.76 26.49 175.34 158.04 -17.30 205.29 90.12 -115.17
Provision for Tax 14.52 0.26 -14.26 39.99 0.00 -39.99 51.60 0.00 -51.60
PAT 103.75 144.50 40.75 135.35 158.04 22.69 153.69 90.12 -63.57
Proposed Dividend 26.87 21.79 -5.08 45.00 45.00 0.00 54.00 33.00 -21.00
Proposed Dividend (%) 12.00 12.00 0.00 15.00 15.00 0.00 18.00 10.00 -8.00
Share capital 300.00 300.00 0.00 300.00 300.00 0.00 300.00 300.00 0.00
Reserves and Surplus 116.39 155.30 38.91 206.74 273.61 66.87 306.43 330.74 24.31
EPS 4.33 8.00 3.67 4.51 5.27 0.76 5.12 3.00 -2.12
Book value 13.42 14.76 1.34 16.48 19.10 2.62 19.86 21.03 1.17

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

14. The success of our business is highly dependent upon our ability to implement our growth
strategies effectively.

Our ability to sustain our growth depends, in a large part, on our ability:

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

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

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AML STEEL LIMITED

15. The success of our business is dependent upon retention of our key managerial personnel and
cordial relationship with our employees.

Our success largely depends on the continued services and performance of our management and
other key employees. The loss of any of our key personnel could impair our ability to continue to
manage and expand our business efficiently.

We also rely heavily on employees and the employees’ ability to provide requisite services. We do
not have any labour or employee unions and we have not faced any union related problems.
However, any disagreements with our employees in the future causing shortage of labour or
stoppage of work, could affect our operations including our ability to meet the quality standards in
manufacturing and timely completion of orders, thereby affecting our sales and profitability.

16. Tax benefits that our subsidiaries and we enjoy may not be available to us in future

We currently take advantage of various tax deductions and exemptions like deduction under the
Income Tax Act, 1961 on the profits from steel production at our unit at Pondicherry, and benefits
of Cenvat credit in connection with Central Excise Tariffs and Service tax. We have upgraded our
scale of operations in terms of better capacity utilisation (54.44% for the period ended
31 December, 2005 vis- a vis 36.19% for the year ended 31 March, 2005) and our profits have also
multipled almost four times for the year ended 31 March, 2005 and period ended 31 December,
2005. However, the unavailability of these tax benefits due to the changes in the government
policies or applicable tax regimes could increase our tax obligation and consequently affect our
cash flows.

17. The market price of the equity shares may be adversely affected by any additional issuances
of equity or sales of a large number of the equity shares by our Promoters or principal
shareholders.

There is a risk that we may be required to finance our growth or strengthen our balance sheet
through additional equity offerings. Any further issuance of equity shares will dilute the position of
existing shareholders and could adversely affect the market price of the equity shares.

18. Defaults in the payment of loans could result in the sale of properties / assets belonging to the
Company and its subsidiaries

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

19. We and our subsidiaries have taken unsecured loans which are repayable on demand

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

20. Transactions with related parties

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

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AML STEEL LIMITED

21. Corporate Guarantee given by us to our subsidiary.

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

EXTERNAL RISK FACTORS

1. Cyclicality in the prices and demand for our products, prices and availability of raw
materials may adversely affect our business.

The Company’s fortunes are linked to those of the iron and steel industry, which is cyclical in
nature. The demand for sponge iron and billeted steel is dependent upon the construction/
infrastructure facilities and any downturn in the same would adversely impact the margins and
hence the financial performance of the Company. The demand, in turn, has a significant impact on
the prices of the products also. Therefore, a fall in the prices would adversely impact the margins
and hence the financial performance of the Company.

The world steel industry is cyclical in nature and has been characterized by changes in prices of
raw material inputs, excess demand in certain markets and excess capacity in other markets, all of
which have resulted in fluctuations in international prices and consumption of steel.

The domestic steel industry has been characterized by changes in prices of raw material inputs like
iron ore, coal etc., and excess demand over supply, all of which have resulted in fluctuations in
steel prices. In addition, domestic freight rates and customs duty in India, may also adversely
affect the price of steel products. The prices of our raw materials are dependent upon global
commodity prices including fuel prices, which are beyond our control. Fuel prices are volatile and
have been rising in the past two years. Increase in the fuel costs could also affect our transport and
handling costs. Any increase in the prices of our raw materials and in our transport and handling
costs may adversely affect our business and results of our operations, if we are unable to
proportionately increase the sale price of our products.

For finished products, on all iron and steel items, the excise duty falling under Chapter 72 has been
increased from 12% to 16% in the Union Budget 2005-06. Thus, the prices of finished products are
also subject to fluctuations, which could adversely impact our profitability.

2. Difficulty in keeping pace with technological advancement may have an adverse impact on
our business

Technology plays an important role in iron and steel manufacturing plants. The Company’s failure
to adapt to or keep abreast of any change in, the latest technology might place its competitors at an
advantage in terms of costs, efficiency and timely delivery of its products.

3. Competition

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

4. Changes in Government policies may affect our operations adversely. Increase in taxes and
other levies imposed by the Central or State Governments in India on the acquisition of
capital goods/components, purchase of raw materials or finished goods may have an adverse
effect on the profitability of the Company.

Since 1991, the Government of India has pursued policies of economic liberalizations. We cannot
assure you that these liberalization policies will continue in future. Protest against liberalization

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AML STEEL LIMITED

could slowdown the pace of economic development. The rate of economic liberalization could
change, specific laws and policies could change, and foreign investment, currency exchange rates
and other matters affecting investing in our securities could change as well.

Withdrawal of any support by the supporting parties to the current Indian Government due to any
reasons could result in political instability, which may have an adverse impact on capital markets
and investor confidence.

Taxes and other levies imposed by the Central or State Governments in India that affect the Steel
industry include excise duties and interstate taxes on purchase of raw materials, components,
capital goods and finished products.

These taxes and levies affect the cost of production and prices of the Company’s products and
hence the demand for its products. An increase in any of these taxes or levies or the imposition of
new taxes or levies in the future may have an adverse impact on the Company’s business and
financial condition.

5. General economic conditions may adversely affect the sales and results of the Company.

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

6. Force majeure events, could adversely affect the financial markets, result in a loss of client
confidence and adversely affect our business, results of operations, financial conditions and
cash flows. Being located in an area prone to naxal attacks, could expose us to loss of life and
property.

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

7. Natural disasters and technical failures

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

8. The price of the equity shares of our Company may be volatile, and you may be unable to
resell your equity shares at or above the Issue price or at all.

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

9. Changes in applicable interest rates and/ or banking policies

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

xix
AML STEEL LIMITED

NOTES TO RISK FACTORS

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

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

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

S.No. Name No. of shares Date of Price per


purchased/(sold) transaction share (in Rs.)
1. Mr. Alok Agarwal 2250 29 December, 2005 10
2. Mr.Ruli Ram Agarwal and 800 1 December, 2005 10
Mrs.Geeta Devi Agarwal

• The average cost of acquisition of one Equity Share for the Promoters is as follows:

Name of the Promoter Average Cost of Acquisition


(Rupees)
Mr. Ashok Agarwal 1.00
Ashok Memory (India) Private Limited 1.60

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

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

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

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

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

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

xx
AML STEEL LIMITED

SECTION III-INTRODUCTION
SUMMARY

Industry Overview
World Steel Production

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

1
AML STEEL LIMITED

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

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

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

The liberalization of industrial policy and other initiatives taken by the Government have given a definite
impetus for entry, participation and growth of the private sector in the steel industry. While the existing
units are being modernized/ expanded, a large number of new/greenfield steel plants have also come up in
different parts of the country based on modern, cost effective, state of-the-art technologies.

IISI has forecasted 4-5% increase in steel demand for whole World and increase of around 7% in
Asia Pacific alone for the year 2006.

IISI Apparent Steel Demand Forecast


1200

1000

800
MMT

600

400

200

0
Central and
Europe CIS NAFTA South Africa Middle East Asia Pacific WORLD
America

2004 192 45 151 33 20 28 502 971

2005 190 45 145 33 20 29 534 998

2006 198 48 149 36 21 31 570 1055

2
AML STEEL LIMITED

Business Overview
We were incorporated as Ashok Magnetics Limited in the year 1993 for manufacturing and marketing
of video cassettes. We ventured into production of PVC pipes in the year 1995 by establishing a PVC
Pipe manufacturing unit at Gummidipoondi, Tamil Nadu. We had our IPO in 1996 and have been listed
on the ASE, DSE and the MSE pursuant thereto We have diversified into steel making since the year
1998 when the first steel project was conceived to be put up in Pondicherry and since then steel has
become our core business. Our Pondicherry plant was commissioned in the year 1998 and since then
the business has been growing rapidly. We are constantly looking at various opportunities available for
business expansion through the mode of acquisitions. With this view we acquired Maruthi Steel Private
Limited, Sri Lanka in the year 2002 and two more steel plants in Karaikal in 2003. Later in the year
2005 our name was changed to AML Steel Limited keeping in view our line of business.

In line with the quest for growth we have embarked upon an Integrated Steel Project in Jharkhand
situated in Eastern part of India where there is a enormous deposit of iron ore as well as coal, both of
which are essential raw materials for steel making. There is a great logistics advantage of putting up a
steel plant in Eastern part of India as against locations in the rest of the country as evident from the fact
that for every 1 tonne of steel produced there needs to be a movement of 3.5 tonnes of raw materials.

We realized the importance of price stability in iron ore supplies and therefore we have sought to
acquire an iron ore mine situated fairly closer to the Project site on a long-term lease. The Ministry of
Mines, GoI has agreed for the grant of a mining lease to us over an area of 383.54 acres in West
Singhbum district, Jharkhand for a period of 20 years subject to the terms and conditions laid down.
We have also made an application to Ministry of Coal for the allotment of a coal mining lease with the
support of Government of Jharkhand. We shall strive hard to maximize the value chain and accordingly
we shall be putting up our own power plant at the Project site for captive use.

We are also engaged in the trading of various steel products such as TMT bars, Tor steel, MS rods,
steel structurals, steel angles and channels, HR plates, HR & CR sheets etc., which contributes
significantly to our revenue.

This is only a summary and does not contain all information that you should consider before
investing in our Equity Shares. You should read the entire DRHP, including the information on
“Risk Factors” and our financial statements and related notes appearing elsewhere in this DRHP,
before deciding to invest in our Equity Shares.

3
AML STEEL LIMITED

THE ISSUE

Equity Shares offered:

Fresh Issue by the Company [●] Equity Shares.


Less:
Promoters contribution to the issue [●] Equity Shares.
Net issue to the Public [●] Equity Shares.
of which:

Upto [●] Equity Shares (allocation on


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

B) Non-Institutional Portion At least [●] Equity Shares (allocation on


proportionate basis)

C) Retail Portion At least [●] Equity Shares (allocation on


proportionate basis)

Equity Shares outstanding prior to the Issue [●] Equity Shares

Equity Shares outstanding after the Issue [●] Equity Shares

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

Note:

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

4
AML STEEL LIMITED

SELECTED FINANCIAL INFORMATION

The following table sets forth the selected historical financial information of AMLSL derived from (i)
its restated and audited consolidated financial statements for the fiscal years ended 31 March 2003,
2004 and 2005 and for nine months period from 1 April, 2005 to 31 December, 2005 and (ii) its
restated and audited unconsolidated financial statements for the fiscal years ended 31 March 2001,
2002, 2003, 2004 and 2005 and for nine months period from 1 April, 2005 to 31 December, 2005, all
prepared in accordance with Indian GAAP, the Companies Act, and SEBI guidelines, and restated as
described in the auditor’s report of M/s K P Jain & Co., included in the section titled “Financial
Information” on page no. [•] of this DRHP and should be read in conjunction with those financial
statements and notes thereon.
CONSOLIDATED STATEMENT OF PROFITS AND LOSSES
(Rs. in lakhs)
PERIOD ENDED ON 31.03.03 31.03.04 31.03.05 31.12.05
INCOME
Sales:
Of Products manufactured by the Company 2,726.13 4,331.36 8,410.51 8,678.12
Of Products traded by the Company - 243.16 2,267.97 7,084.34
Other Income 46.12 16.48 35.07 417.33
Increase / (Decrease) in Inventory 2.90 53.18 9.27 164.36
Total Income 2,775.15 4,644.18 10,722.82 16,344.15

EXPENDITURE
Raw Materials & Goods Consumed 1,679.39 2,818.31 6,927.79 11,945.01
Staff Costs 26.35 37.24 45.34 57.59
Other Manufacturing Expenses 949.78 1,482.11 2,830.70 2,528.70
Selling & Distribution Expenses 74.06 78.53 68.90 189.36
Interest 16.03 45.29 74.04 70.76
Depreciation 25.85 49.59 86.96 65.46
Miscellaneous Expenditure w/o 1.25 1.45 1.45 -

Total Expenditure 2,772.71 4,512.52 10,035.18 14,856.88

Net Profit before Tax & before


Extraordinary items 2.44 131.66 687.64 1,487.27

Provision for Taxation 4.06 20.80 163.90 260.24


Provision for Deferred Taxation 4.81 8.59 21.03 9.95

Net Profit after Tax & before Extraordinary


items (6.43) 102.27 502.71 1,217.08

Extraordinary Items (net of tax) - - - -

Net Profit after Extraordinary Items (6.43) 102.27 502.71 1,217.08

Earlier year Adjustments - - - -

APPROPRIATIONS
Transfer to General Reserve 5.42 9.50 25.00 -
Proposed Dividend 36.00 36.00 45.00 -
Tax on Proposed Dividend 7.20 4.50 6.31 -
Balance Carried to Balance Sheet (55.05) 52.27 426.40 1,217.08

5
AML STEEL LIMITED

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES


(Rs. in lakhs)
AS AT 31.03.03 31.03.04 31.03.05 31.12.05
A Assets
Fixed Assets – Gross Block 933.82 1,487.97 1,627.38 2,619.60
Less: Depreciation 167.86 213.50 293.32 364.61
Net Block 765.96 1,274.47 1,334.06 2,254.99
Less: Revaluation Reserve - - - -
Net Block after adjustment for
Revaluation Reserve 765.96 1,274.47 1,334.06 2,254.99

B Good Will 20.26 25.80 31.11 31.11

C Investments 60.22 12.00 25.14 29.89

D Current Assets, Loans & Advances


Inventories 593.37 1,054.65 1,948.98 3,316.23
Receivables 151.82 512.05 1,515.29 1,496.58
Cash & Bank Balances 334.22 443.45 279.49 838.20
Other Current Assets 87.88 105.83 232.98 371.41
Loans & Advances 56.50 210.46 254.98 629.24

Total Assets 2,070.24 3,638.71 5,622.03 8,967.65

E Liabilities and Provisions


Loan Funds
Secured Loans 274.46 762.77 541.50 720.81
Unsecured Loans 53.92 533.74 549.58 646.09

Current Liabilities & Provisions


Sundry Liability 580.23 1,087.48 2,619.45 2,963.75
Provisions (Including Deferred Tax) 78.39 101.03 303.52 521.74

F Net Worth
Represented by
Shareholders Funds
Share Capital 300.00 303.00 303.00 750.00
Share Application Money - - - 1,368.61
Reserves & Surplus 818.84 886.46 1,338.68 2,105.75
Less: Revaluation Reserve - - - -
Reserves (Net of Revaluation Reserve) 818.84 886.46 1,338.68 2,105.75
Less: Miscellaneous Expenditure not
written off 35.61 35.77 33.70 109.10

Total Net Worth 1,083.23 1,153.69 1,607.98 4,115.26

Total of Liabilities and Provisions 2,070.23 3,638.71 5,622.03 8,967.65

6
AML STEEL LIMITED

UNCONSOLIDATED STATEMENT OF PROFITS AND LOSSES


(Rs. in lakhs)
PERIOD ENDED ON 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
INCOME
Sales:
Of Products manufactured by the
Company 3,455.72 4,539.91 2,616.09 2,791.29 3,469.84 3,585.99
Of Products traded by the Company 484.51 622.38 - 228.60 2,250.65 7,072.56
Other Income 30.25 35.38 46.12 15.27 34.48 415.46
Increase / (Decrease) in Inventory (8.57) 3.88 2.90 3.14 0.83 25.15
Total Income 3,961.91 5,201.55 2,665.11 3,038.30 5,755.80 11,099.16

EXPENDITURE
Raw Materials & Goods Consumed 2,553.53 3,715.92 1,618.49 1,916.36 4,021.89 8,730.01
Staff Costs 17.91 17.19 21.38 16.30 11.83 14.30
Other Manufacturing Expenses 967.26 1,186.55 862.00 920.64 1,178.01 1,133.85
Selling & Distribution Expenses 51.72 51.37 67.62 51.93 42.75 91.28
Interest 36.26 26.57 15.63 30.34 36.83 42.75
Depreciation 29.58 29.70 25.85 27.85 31.22 24.29
Miscellaneous Expenditure w/o 1.25 1.25 1.25 1.25 1.25 -
Total Expenditure 3,657.51 5,028.55 2,612.22 2,964.67 5,323.78 10,036.48

Net Profit before Tax & before


Extraordinary items 304.40 173.00 52.89 73.63 432.02 1,062.68

Provision for Taxation 26.82 13.52 4.06 19.19 134.50 180.93


Provision for Deferred Taxation - 26.33 4.81 1.72 2.07 -

Net Profit after Tax & before


Extraordinary items 277.58 133.15 44.02 52.72 295.45 881.75

Extraordinary Items (net of tax) - - - - - -

Net Profit after Extraordinary Items 277.58 133.15 44.02 52.72 295.45 881.75

Earlier year Adjustments - - - 2.59 - -

APPROPRIATIONS
Transfer to General Reserve 10.00 10.00 5.42 7.50 15.00 -
Proposed Dividend 45.00 30.00 36.00 36.00 45.00 -
Tax on Proposed Dividend 4.50 - 7.20 4.50 6.31 -
Balance Carried to Balance Sheet 218.08 93.15 (4.60) 4.72 229.14 881.75

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

7
AML STEEL LIMITED

UNCONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

(Rs. in lakhs)
AS AT 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
A Assets
Fixed Assets - Gross Block 752.81 751.53 716.29 712.85 762.05 765.28
Less: Depreciation 108.65 135.99 159.48 183.57 208.23 232.52
Net Block 644.16 615.54 556.81 529.28 553.82 532.76
Less: Revaluation Reserve - - - - - -
Net Block after adjustment for
Revaluation Reserve 644.16 615.54 556.81 529.28 553.82 532.76

B Investments 10.00 85.00 324.66 437.28 450.42 463.17

C Current Assets, Loans & Advances


Inventories 237.91 1,016.44 558.59 718.89 1,007.73 1,919.58
Receivables 213.76 468.29 151.82 334.41 1,761.06 1,480.28
Cash & Bank Balances 453.24 513.91 280.35 353.41 207.65 229.75
Other Current Assets 85.05 172.32 87.88 104.18 152.10 285.54
Loans & Advances 121.68 52.82 52.91 51.06 118.42 1,860.84

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

D Liabilities and Provisions


Loan Funds
Secured Loans 225.63 312.74 274.46 458.32 318.71 356.15
Unsecured Loans 3.04 24.18 22.64 21.65 42.64 139.15

Current Liabilities & Provisions


Sundry Liability 285.52 1,237.86 382.10 684.51 2,147.77 2,154.56
Provisions (Including Deferred Tax) 76.32 69.85 78.39 92.55 225.20 354.83

E Net Worth
Represented by
Shareholders Funds
Share Capital 300.00 300.00 300.00 300.00 300.00 750.00
Share Application Money - - - - - 1,368.61
Reserves & Surplus 885.41 988.56 963.05 977.85 1,222.00 1,653.74
Less: Revaluation Reserve - - - - - -
Reserves (Net of Revaluation
963.05 977.85 1,222.00 1,653.74
Reserve) 885.41 988.56
Less: Miscellaneous Expenditure not
written off 10.12 8.87 7.62 6.37 5.12 5.12

Total Net Worth 1,175.29 1,279.69 1,255.43 1,271.48 1,516.88 3,767.23

Total of Liabilities and Provisions 1,765.80 2,924.32 2,013.02 2,528.51 4,251.20 6,771.92

8
AML STEEL LIMITED

GENERAL INFORMATION

Registered Office

AML Steel Limited (Registration No. 18-24842)


B-73, Sipcot Industrial Complex,
Gummidipoondi, Tamil Nadu – 601201
Tel: + 91 411 922 2792.

Corporate Office

AML Steel Limited


Raheja Complex, New no 68(834),
Anna Salai, Chennai, Tamil Nadu – 600 002.
Tel: + 91 44 2858 3182, Fax: +91 44 2841 9443
E-mail:corporate@amlsteel.com., website:www.amlsteel.com
Contact Person: Mr.Rajesh Agrawal, Company Secretary

Our Company is registered with the RoC, Tamil Nadu situated at Block 6, IInd Floor, Shastri Bhavan,
26, Haddows Road, Chennai - 600 006.

Board of Directors
The Company is currently managed by the Board of Directors comprising of six Directors. Mr. Ruli
Ram Agarwal is currently the Chairman of the Board and Mr. Ashok Agarwal is the Managing
Director.

Our Board comprises of:


Sr. No Name Designation
1. Mr. Ruli Ram Agarwal Non – Executive Chairman
2. Mr.Ashok Agarwal Promoter cum Managing Director
3. Mr.Ajay Agarwal Non – Executive Director
4. Mr.Poonam Chand Jangir Non – Executive Director
5. Mr. Vinay Kishore Kasat Independent Director
6. Mr. S. Kolandai Raj Independent Director
For further details of our Chairman, Managing Director and other Directors of the Board please see the
section titled “Our Management” on page no. [●] of this DRHP.

Company Secretary and Compliance Officer

Mr Rajesh Agrawal,
Raheja Complex, New no 68 (834),
Anna Salai, Chennai, Tamil Nadu – 600 002.
Tel: + 91 44 2858 3182 Fax: +91 44 2841 9443
e-mail:corporate@amlsteel.com, website:www.amlsteel.com

Investors can contact the Compliance Officer in case of any pre-Issue or post-Issue related problems
such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account
and refund orders.

Legal Advisors to the Issue

J. Sagar Associates, Advocates & Solicitors


4121/B, 6th Cross, 19A Main
HAL II Stage Extension
Bangalore - 560 038
Karnataka, India
Tel no.: +91 80 2520 0045
Fax no.: +91 80 2520 0044
E-mail: bangalore@jsalaw.com

9
AML STEEL LIMITED

Book Running Lead Managers

Karvy Investor Services Limited


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

Centrum Capital Limited


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

Syndicate Members

[●] (Will be updated at the time of RoC Filing)

Registrar to the Issue

Cameo Corporate Services Limited


Subramanian Building, No.1,
Club House Road,
Chennai – 600 002.
Tel No: +91 44 2846 0390
Fax No: +91 44 2846 0129
E-mail: cameo@cameoindia.com
Website: www.cameoindia.com
Contact Person: Mr. R D. Ramasamy

Auditors

K. P Jain and Co.,


Chartered Accountants,
130, Thambu Chetty Street,
Chennai – 600 001.
Tel No: +91 44 2524 1033

Banker(s) to the Company

Central Bank of India


Mount Road Branch, Raheja Complex,
First Floor, 69, Anna Salai,
Chennai – 600 002.
Tel No: +91 44 2841 0901
Telefax:- +91 44 2852 8752
Website:- www.centralbank.co.in
E-mail:- cmchn0879@centralbank.co.in

Banker (s) to the Issue and Escrow Collection Bank

[●] (Will be updated at the time of RoC Filing)

10
AML STEEL LIMITED

Brokers to the Issue

All members of the recognized Stock Exchanges would be eligible to act as Brokers to the Issue.

Statement of Inter Se Allocation of Responsibilities for the Issue

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

11
AML STEEL LIMITED

Credit Rating
As the Issue is of equity shares, a credit rating is not required.

Grading
We have not opted for grading of this Issue.

Trustees
As the Issue is of equity shares, the appointment of Trustees is not required.

Appraising Entity and Monitoring Agency


The proposed project to be undertaken by AMLSPL, a wholly owned subsidiary of the Company, has
been financially appraised by SBI Capital Markets Limited which has submitted its report dated
30 July, 2005 to AMLSPL and the cost of the Project and and means of finance are based on this
report.

SBI Capital Markets Limited,


202, Maker Tower, ‘E’ Cuffe Parade,
Mumbai – 400 005
Tel: +91 22 2218 9166,
Fax: +91 22 2218 8332

We shall be appointing a monitoring agency for monitoring the utilization of the proceeds to be
received through this Issue.

Book Building Process


Book building refers to the process of collection of Bids, on the basis of the DRHP within the Price
Band. The Issue Price is fixed after the Bid Closing Date/Issue Closing Date.

The principal parties involved in the Book Building Process are:


• The Company;
• Book Running Lead Managers;
• Syndicate Members who are intermediaries registered with SEBI or registered as brokers with
BSE/NSE and eligible to act as Underwriters. Syndicate Members are appointed by the BRLMs;
• Escrow Collection Bank(s); and
• Registrar to the Issue.

The SEBI Guidelines have permitted an issue of securities to the public through the 100% Book
Building Process, wherein upto 50% of the Issue shall be allocated on a proportionate basis to QIBs out
of which up to 5% shall be available for allocation on a proportionate basis to Mutual Funds and the
balance to all QIBs including Mutual Funds. Further, not less than 15% of the Issue shall be available
for allotment on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue
shall be available for allotment on a proportionate basis to Retail Individual Bidders, subject to valid
Bids being received at or above the Issue Price. We will comply with the SEBI Guidelines for this
Issue. In this regard, we have appointed the BRLMs to manage the Issue and to procure subscriptions
to the Issue.

Pursuant to amendments to the SEBI Guidelines, QIB Bidders are not allowed to withdraw their Bid(s)
after the Bid Closing Date/Issue Closing Date and for further details see the section titled “Terms of
The Issue” on page no. [●] of this DRHP.

Illustration of Book Building and Price Discovery Process (Investors should note that this example
is solely for illustrative purposes and is not specific to the Issue)

Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to
Rs.24 per share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which
are shown in the table below. A graphical representation of the consolidated demand and price would
be made available at the bidding centres during the bidding period. The illustrative book as shown
below shows the demand for the shares of the company at various prices and is collated from bids from
various investors.

12
AML STEEL LIMITED

Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription


500 24 500 16.67%
1,000 23 1,500 50.00%
1,500 22 3,000 100.00%
2,000 21 5,000 166.67%
2,500 20 7,500 250.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is
able to issue the desired number of shares is the price at which the book cuts off, i.e., Rs. 22 in the
above example. The issuer, in consultation with the book running lead managers, will finalise the issue
price at or below such cut off price, i.e., at or below Rs. 22. All bids at or above this issue price and
cut-off bids are valid bids and are considered for allocation in the respective categories.

Steps to be taken by the Bidders for bidding:


• Check eligibility for bidding, see the section titled “Issue Procedure - Who Can Bid?” on page
no. [●] of this DRHP;
• Ensure that the Bidder has a demat account; and
• Ensure that the Bid cum Application Form is duly completed as per instructions given in this
DRHP and in the Bid cum Application Form.

Underwriting Agreement
After the determination of the Issue Price and allocation of our Equity Shares but prior to filing of the
Prospectus with the RoC, our Company will enter into an Underwriting Agreement with the
Underwriters for the Equity Shares proposed to be offered through this Issue.

The Underwriters have indicated their intention to underwrite the following number of Equity
Shares:

(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with
the RoC)
Name and Address of the Underwriters Indicative Number of Amount Underwritten
Equity Shares to be (Rs. lakhs)
Underwritten
[•] [•] [•]
[•] [•] [•]

The above-mentioned amount is indicative underwriting and this would be finalized after pricing and
actual allocation. The above Underwriting Agreement is dated [●].

In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the
resources of all the above mentioned Underwriters are sufficient to enable them to discharge their
respective underwriting obligations in full. All the above-mentioned Underwriters are registered with
SEBI under Section 12(1) of the Securities and Exchange Board of India Act, 1992 or registered as
brokers with one or more of the Stock Exchanges. The above Underwriting Agreement was accepted
by the Board of Directors of our Company at their meeting held on [●] and our Company has issued
letters of acceptance to the Underwriters.

Allocation among Underwriters may not necessarily be in proportion to their underwriting


commitments. In the event of any default, the respective Underwriter in addition to other obligations
to be defined in the Underwriting Agreement will also be required to procure/subscribe to the extent
of the defaulted amount. Notwithstanding the above table, the Underwriters shall be severally
responsible for ensuring payment with respect to Equity Shares allocated to investors procured by
them, provided, however, it is proposed that pursuant to the terms of the Underwriting Agreement, the
BRLMs shall be responsible for bringing in the amount devolved in the event that their respective
Syndicate Members do not fulfill their underwriting obligations.

13
AML STEEL LIMITED

CAPITAL STRUCTURE

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

B) ISSUED, SUBSCRIBED AND PAID UP EQUITY


SHARE CAPITAL
75,00,000 equity shares of Rs.10/- each fully paid up 750.00

C) PRESENT ISSUE IN TERMS OF THIS DRHP


[●] Equity Shares of Rs.10/- each at a premium of 12,000.00
Rs. [●]/- each. [●]

OUT OF WHICH

PROMOTERS CONTRIBUTION.
[●] Equity Shares of Rs.10/- each at a premium of
Rs. [●]/- each. [●] 2,000.00

NET OFFER TO THE PUBLIC THROUGH


THIS DRHP
[●] Equity Shares of Rs.10/- each at a premium of
Rs. [●]/- each. [●] 10,000.00

D) PAID UP EQUITY CAPITAL AFTER THE


ISSUE
[●] Equity Shares of Rs.10/- each. [●] [●]

E) SHARE PREMIUM ACCOUNT


Before the Issue Nil Nil

After the Issue [●]

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

Date of change Nature of Number of Face Number of Face Authorized


increase/change Equity Shares Value Preference Value Share
Issued (Rs.) Shares Capital
(Rs.)
16 April, 1993 With Memorandum 5,00,000 10 Nil Nil 50,00,000

21 April, 1995 Increase in 25,00,000 10 Nil Nil 3,00,00,000


authorised capital
15 June, 1995 Increase in 2,50,000 10 Nil Nil 3,25,00,000
authorised capital
19 July, 2005 Increase in 2,67,50,000 10 Nil Nil 30,00,00,000
authorised capital

14
AML STEEL LIMITED

Notes to Capital Structure

1. Share Capital History of AML Steel Limited

Date of Number of Face Issue Cumulative Consideration Reason for Cumulative


Allotment Equity Value Price share capital (cash, bonus, allotment share
Shares (Rs.) (Rs.) (Rs.) consideration (bonus, swap premium
other than etc.,) (Rs.)
cash)

16 April, 1993 700 10 10 7,000 Cash Subscription to Nil


the
Memorandum
and Articles
14 August, *4,64,000 10 10 46,47,000 Partly for cash Private Nil
1993 and partly for placement*
consideration
other than cash.
15 June, 1995 13,94,100 10 10 1,85,88,000 Bonus Bonus Nil

12 January, 11,41,200 10 10 3,00,00,000 Cash Issue of shares Nil


1996 (Public issue)

23 August, 45,00,000 10 10 7,50,00,000 Bonus Bonus Nil


2005
* The Company had taken over the business of Trans Asia Exports, a proprietary concern of Mr. Ashok
Agarwal and 1,50,000 equity shares of the Company were issued to him towards the consideration for
the takeover of the said business. The balance 3,14, 000 equity shares were issued in the normal course.

Note: - Save and except as mentioned below all the above shares are listed and trading permission has
been obtained from MSE, DSE and ASE. For the 45,00,000 allotted as Bonus Shares on 23 August,
2005, we have obtained the listing and trading permission from MSE and ASE vide their letters dated
15 February, 2006 and 13 March, 2006 respectively. We have obtained in – principle approval from
DSE, vide their letter dated 21 January, 2006. We are in the process of getting the listing and trading
approval for the same from DSE.

2. Promoters Contributions and Lock-In

Our shares are listed on the MSE, DSE and the ASE. We have declared equity dividend in the last five
years. Please refer to the section on “Dividend Policy” on page no. [●] of this DRHP. Thus, in terms of
clause 4.10.1(a) of the SEBI Guidelines, the requirement of promoters contribution and consequently,
lock-in thereof, is not applicable to us.

Promoters’ participation in the proposed issue:

a. The Promoters will bring in Rs. 2,000 lakhs one day before the opening of the Issue.
b. A Chartered Accountants’ certificate confirming the receipt of money would be submitted to SEBI.
c. The Board of Directors of our Company would pass a Resolution, stating that our Company has
received Rs.2,000 lacs from the Promoters and allotment of shares (total number of shares to be
allotted to be decided on the finalisation of Issue Price through Book building route) to the
Promoters, would be done along with the allotment to all the applicants in the Public Issue.
d. A certified copy of the Resolution would be submitted to SEBI before the opening of the Issue.

3.(i) None of our Directors, the Promoters, we and the BRLMs have entered into any buyback and/or
standby arrangements for the purchase of our Equity Shares from any person.

(ii) An over subscription to the extent of 10% of the Net Issue can be retained for the purpose of
rounding off to the nearer multiple of the minimum allotment bid, while finalising the basis of
allotment.

15
AML STEEL LIMITED

4. (a) Our top 10 shareholders and the Equity Shares held by them on the date of filing the DRHP are
as follows:

S. No. Name No. of Equity Shares %


1. M/s.Ashok Memory (India) Pvt. Ltd 30,36,500 40.49
2. Mr.Ashok Agarwal 15,01,000 20.01
3. M/s.Corbin Trades Investments Ltd. 3,25,500 4.34
4. Mrs.Anita Agarwal 2,61,000 3.48
5. M/s.Betala Global Securities Ltd. 2,02,500 2.70
6. Ashok Agarwal (HUF) 2,00,000 2.67
7. Mr. Ankit Agarwal 1,90,000 2.53
8. Mr..Janba Chougle 97,000 1.29
9. Mr.Mulchand Golchha 73,750 0.98
10. Ruli Ram Agarwal & Sons (HUF). 60,000 0.80

(b) Our top 10 shareholders and the Equity Shares held by them 10 days prior to the date of filing
the DRHP are as follows:

S. No. Name No. of Equity %


Shares
1. M/s.Ashok Memory (India) Pvt. Ltd 30,36,500 40.49
2. Mr.Ashok Agarwal 15,01,000 20.01
3. M/s.Corbin Trades Investments Ltd. 3,25,500 4.34
4. Mrs.Anita Agarwal 2,61,000 3.48
5. M/s.Betala Global Securities Ltd. 2,02,500 2.70
6. Ashok Agarwal (HUF) 2,00,000 2.67
7. Mr. Ankit Agarwal 1,90,000 2.53
8. Mr.Janba Chougle 97,000 1.29
9. Mr.Mulchand Golchha 73,750 0.98
10. Ruli Ram Agarwal & Sons (HUF) 60,000 0.80

(c) Our shareholders and the Equity Shares held by them two years prior to the date of filing the
DRHP are as follows:

S. No. Name No. of Equity Shares %


1. M/s.Ashok Memory (India) Pvt. Ltd 12,36,300 41.21
2. Mr.Ashok Agarwal 6,00,400 20.01
3. M/s.Corbin Trades Investments Ltd. 1,30,200 4.34
4. Mrs.Anita Agarwal 1,04,400 3.48
5. M/s.Betala Global Securities Ltd. 81,000 2.70
6. Ashok Agarwal (HUF) 80,000 2.67
7. Mr. Ankit Agarwal 76,000 2.53
8. Mr.Janba Chougle 38,800 1.29
9. Ruli Ram Agarwal & Sons (HUF). 24,000 0.80
10. Mr.Mulchand Golecha 19,700 0.66

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

16
AML STEEL LIMITED

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

Particulars Equity Shares owned Equity Shares owned


prior to the Issue after the Issue
Shareholder Category Number % Number %
Promoters
Mr. Ashok Agarwal. 15,01,000 20.01 [●] [●]
M/s. Ashok Memory (India) Private Limited. 30,36,500 40.49 [●] [●]
Sub-total (A) 45,37,500 60.50 [●] [●]
Promoter Group
Mr. Ruli Ram Agarwal 11,250 0.15 [●] [●]
Mr. Ruli Ram Agarwal/ Mrs. Geeta Devi 800 0.01 [●] [●]
Agarwal
Ruli Ram Agarwal & Sons (HUF) 60,000 0.80 [●] [●]
Mr. Alok Agarwal 2,250 0.03 [●] [●]
Mrs. Sunita Bansal 1,000 0.01 [●] [●]
Mr. Ankit Agarwal. 1,90,000 2.53 [●] [●]
Mrs. Anita Agarwal 2,61,000 3.48 [●] [●]
Mr. Ajay Agarwal. 14,000 0.19 [●] [●]
Ashok Agarwal (HUF). 2,00,000 2.67 [●] [●]
Mrs. Shweta Agarwal 5,250 0.07 [●] [●]
M/s. Corbin Trades Investments Limited 3,25,500 4.34 [●] [●]
Sub- Total (B) 10,71,050 14.28 [●] [●]
Total of Promoter and Promoter Group 56,08,550 74.78 [●] [●]
holding [C=A+B]
Directors of Ashok Memory (India) Private
Limited are Mr. Ruli Ram Agarwal, Mr.
Ashok Agarwal and Mrs Anita Agarwal are
already covered in A and B above.
Others including Indian Public (D). 18,91,450 25.22 [●] [●]
Total pre issue share capital 75,00,000 100 - -
(E=A+B+C+D)
Public Issue (F) [●]
Total post-Issue share capital (G=E+F) [●]

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

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

S.No. Name No. of shares Date of Price per


purchased/(sold) transaction share (Rs.)
1. Mr. Alok Agarwal 2,250 29 December, 2005 10
2. Mr.Ruli Ram Agarwal and 800 1 December, 2005 10
Mrs.Geeta Devi Agarwal

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

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

17
AML STEEL LIMITED

35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual
Bidders, subject to valid Bids being received at or above the Issue Price. Under-subscription, if
any, in any category would be met with spill over from other categories in the sole discretion of
our Company in consultation with the BRLMs.

11. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Issue,
subject to the maximum limit of investment prescribed under relevant laws applicable to each
category of investor.

12. There would be no further issue of capital whether by way of issue of bonus shares, preferential
allotment, and rights issue or in any other manner during the period commencing from submission
of the DRHP with SEBI until the equity shares offered hereby have been listed.

13. The Company presently does not have any intention or proposal to alter its capital structure for a
period of six months commencing from the date of opening of this Issue, by way of split/
consolidation of the denomination of Equity Shares or further issue of Equity Shares or securities
convertible into Equity Shares, whether on a preferential basis or otherwise. However, during such
period or at a later date, we may undertake an issue of shares or securities linked to equity shares
to finance an acquisition, merger or joint venture by us or as consideration for such acquisition,
merger or joint venture, or for regulatory compliance or such other scheme of arrangement if an
opportunity of such nature is determined by our Board to be in the interest of the Company.

14. There will be only one denomination of the Equity Shares of the Company unless otherwise
permitted by law and the Company shall comply with such disclosure and accounting norms as
may be specified by SEBI from time to time. The Equity Shares offered through the Issue will be
fully paid up.

15. Our Company has not issued any Equity Shares out of revaluation reserves.

16. Our Company has not issued any shares or agreed to issue any shares for consideration other than
cash except the following:

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

17. We have 1320 members as of 17 March, 2006.

18. As on the date of filing this DRHP with SEBI, there are no outstanding financial instruments or any
other right, which would entitle the Promoters or shareholders of our Company or any other person any
option to receive Equity Shares after the Issue.

19. The Company does not have any stock option plan.

18
AML STEEL LIMITED

OBJECTS OF THE ISSUE

The Objects of the Issue are as stated below:

I. To finance the following capital expenditure programmes:

a. Investment in AMLSPL, a wholly owned subsidiary, to set up an Integrated Steel Plant in


Saraikela District, Jharkhand.
b. Acquisition of existing steel plants.

II. To invest in the existing subsidiaries to fund their working capital requirement.

III. To meet our working capital requirement.

IV. To meet the expenses of the issue.

V. To enable listing of the Equity Shares offered through this Issue on the Stock Exchanges.

REQUIREMENT OF FUNDS AND MEANS OF FINANCE

The total estimated fund requirement is as follows: (Rs. in lakhs)

S.NO. PARTICULARS COST


I Capital Expenditure Programme
A. Investment in AMLSPL, our wholly owned subsidiary, to 6,000.00
set up an Integrated Steel Plant in the state of Jharkhand.
B. Acquisition of existing steel plants. 2,000.00
Total 8,000.00
II Investment in the existing subsidiaries to fund their working 2,002.00
capital requirement
III Meet our working capital requirement. 1,129.00
IV To meet the expenses of the issue. 869.00
TOTAL 12,000.00

Means of Finance:

Particulars Amount (Rs. in lakhs)


Equity Capital
Promoters contribution 2,000.00
Public 10,000.00
TOTAL 12,000.00

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

19
AML STEEL LIMITED

I. CAPITAL EXPENDITURE PROGRAMME

A. Investment in AMLSPL, our wholly owned subsidiary, to set up an Integrated Steel Plant in
Saraikela District, Jharkhand.

AMLSPL, incorporated on 30 January, 2004, has signed a MoU with the Jharkhand State
Government, dated 26 February, 2004, for setting up of an Integrated Steel Plant and for assistance
in obtaining major raw materials such as iron ore, coal and other minerals and providing the
required infrastructure. The Integrated Steel Plant will consist of:

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

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

iii. A captive power plant of 9.6 MW capacity.

For further details about the incorporation, business and financial highlights of AMLSPL please refer
to the section on “History and Corporate Matters” on page no [●] of this DRHP.

Appraisal

The financial viability of the capital expenditure programme for the Integrated Steel Plant for the
manufacture of sponge iron and steel billets has been appraised by SBI Caps vide their Financial
Appraisal Report dated 30 July, 2005. SBI Caps vide their letter dated 10 December, 2005 have given
their consent for their name being included in the DRHP and for their Financial Appraisal Report being
used in this document, wherever required. According to the Financial Appraisal Report, the overall
financial, liquidity and profitability parameters of the capital expenditure programme project are
considered reasonable and satisfactory and has been viewed as financially viable.

Total Cost of the Project

The total fund requirement to set up an Integrated Steel Plant is estimated to be Rs.11,403.00 lakhs.
The different heads of the Project cost are detailed in the table given below:

PARTICULARS COST (Rs. in lakhs)


Land and site development 150.00
Building 2,534.00
Iron Ore Mining 1,000.00
Plant and machinery 6,200.00
Miscellaneous fixed assets 310.00
Provision for contingencies 306.00
Total hard cost 10,500.00
Pre-operative expenses 150.00
Interest during construction 381.00
Working capital margin 353.00
Upfront fees 19.00
Total soft cost 903.00
TOTAL COST 11,403.00

(Source: SBI Caps Financial Appraisal Report)

20
AML STEEL LIMITED

Details of the Major Heads of Expenditure:

The detailed break up of the cost under each of the major heads of expenditure such as land and site
development, building, iron ore mining, plant and machinery and miscellaneous fixed assets have been
estimated by the Management.

Land and Site Development:


It is estimated that to set up the Integrated Steel Plant, 70 acres of land will be required. AMLSPL has
acquired approximately 60.71 acres of land for the project near village Saldih, in Saraikela district in
Jharkhand state out of which 59.41 acres have been purchased and 1.30 acres has been agreed to be
given on lease for a period of 90 years by the State Government of Jharkhand vide their letter dated
7 July, 2005. AMLSPL has already spent an amount of Rs.81.27 lakhs (approx.) on acquisition of land
and site development.

Building:
The estimated built up area of the Control buiding, DG building and other buildings is estimated to be
730 square metre. AMLSPL has appointed M/s. Hari Environmental Systems for civil construction and
mechanical fabrication and erection, who have estimated Rs.2,534.34 lakhs to be the cost of
construction of building, the break up of which given below:

Civil Construction:
(Rs. in lakhs)
STRUCTURE MATERIALS LABOUR
4X100 TPD Sponge iron plant
Kiln Section 100.00 60.00
Stock House and its circuit 22.00 15.00
Product House and its circuit 18.00 12.00
Coal Shed 21.00 14.00
Iron Ore Ground Hopper 6.00 3.00
Coal Ground Hopper 6.00 3.00
Coal Crusher House 4.00 1.00
Iron Ore Crusher House 5.00 1.50
Control Building, DG 32.00 11.00
Building and other buildings
Sub Total 214.00 120.50
9.6 MW Power Plant
Boilers 10.00 20.00
ESP 20.00 11.00
Chimney 1.50 1.00
TG Building 100.00 80.00
Cooling Tower 80.00 70.00
AFBC 5.00 7.00
DM Plant 22.00 15.00
Pipe Rack 20.00 12.00
Other Miscellaneous 20.00 13.00
Sub Total 278.50 229.00
Steel Plant (2X8 MT Furnace)
Induction Furnace 14.75 10.00
Steel Melt Shop 17.00 11.12
Control Room 18.00 11.50
Hydraulic Room 5.00 3.40
CCM 8.50 5.12
Scale Pit 6.50 4.50
Cooling Bed 0.75 0.65
Overhead Tank 12.00 10.00
Steel RB-3 42.00 28.00

21
AML STEEL LIMITED

Sub Total 124.50 84.29


Miscellaneous
Boundary Wall 55.00 43.00
Road 100.00 70.00
ADM Building 6.00 4.00
Paving 20.00 12.00
Sub Total 181.00 129.00
TOTAL 798.00 562.79

Mechanical Fabrication and Erection:


(Rs. in lakhs)
STRUCTURE MATERIALS LABOUR
Sponge iron
First kiln with accessories
600 MT Fabrication & Erection 168.00 43.20
320 MT Erection 17.92
Second kiln with accessories
200 MT Fabrication & Erection 56.00 14.40
320 MT Erection 17.92
Third kiln with accessories
250 MT Fabrication & Erection 70.00 18.00
320 MT Erection 17.92
Fourth kiln with accessories
200 MT Fabrication & Erection 56.00 14.40
220 MT Erection 1.79
Miscellaneous 80.00 30.00
Sub Total 430.00 175.55
Power Plant
200 MT Fabrication & Erection 84.00 21.60
220 MT Erection -- 11.20
Miscellaneous 55.00 25.00
Sub Total 139.00 57.80
Steel Plant
800 MT Fabrication & Erection 224.00 57.60
350 MT Erection -- 19.60
Miscellaneous 50.00 20.00
Sub Total 274.00 97.20
TOTAL 843.00 330.55

TOTAL COST 1,641.00 893.34


(Civil + Mechanical)

TOTAL COST 2,534.34


(Materials+Labour)

Plant and Machinery for the Integrated Steel Plant:

To install the necessary equipments and accessories in the Integrated Steel Plant, for all the units viz.,
DRI Plant, Steel Melt Shop and the captive power plant, AMLSPL requires Rs.6,200.00 lakhs approx.).
The estimated break up of the cost is given below:

S.No. Particulars Cost (Rs. in lakhs)


1. For DRI Plant 2,666.02
2. For captive power plant 541.95
3. For Steel melt Shop 2,994.31
TOTAL 6,202.28

22
AML STEEL LIMITED

For these estimates, AMLSPL has relied upon the purchase orders for the equipments which have been
ordered, the quotations invited for the equipments for which orders are yet to be placed and its past
experience. The detailed break up of the cost of the equipments and accessories are given below:

(a) Equipment required for the DRI plant:

AMLSPL has identified the major equipment required for the DRI Plant. They have been classified as:

i. Plant and machinery for which firm purchase orders have been placed.

ii. Plant and machinery for which suppliers have been identified but firm purchase orders have not
been placed.

iii. Plant and machinery for which supplier has not yet been identified and AMLSPL is in the
process of inviting and receiving quotations.

i. The details of the plant and machinery for which firm purchase orders have been placed are as
under:

Description Quantity Amount Name of the Date of placement Date/Expected date


(Rs. in supplier of order and no. of supply
lakhs)
Complete set of kiln and 2 sets 462.12 Hari Machines ASPL/PO/001 dated Delivery date for 1
cooler 25.02.05 & set: 9 January, 2006
ASPL/PO/006 dated Delivery date for 2nd
03.06.05 set: 15 April, 2006
S.S.Components 2 sets 32.64 Dwarkesh ASPL/PO/002 dated 4 March, 2006
Engineering 06.05.05
Drive systems 4 sets 79.84 Elecon ASPL/PO/003 dated 5 March, 2006
Engineering 07.05.05
Vibrating screens 4 Nos. 20.20 Hari machines ASPL/PO/004 dated 15 March, 2006
26.05.05
Electrostatic precipitator 1 No. 61.70 Associated ASPL/PO/007 dated 25 February, 2006
Cements 6.06.05
Wet Scrapper Chain 2 Sets 11.49 Bevcon Wayers ASPL/PO/008 dated 15 March, 2006
13.06.05
Slip Rings and D.P.valves 2 Sets 13.78 Bemci Industries ASPL/PO/009 dated 30 March, 2006
14.06.05
Hydraulic and Pneumatic 4 Sets 22.26 Vamsee ASPL/PO/010 dated 18 March, 2006
Equipments Engineering 15.06.05
Screw Compressor 2 Nos. 8.53 Elgi Equpments ASPL/PO/011 dated 16 February, 2006
15.06.05
Vibratory Equipments and 8 Nos. 16.69 Electro Zovad ASPL/PO/012 dated 14 March, 2006
Feeders 17.06.05
Single and Double Roller 1 Set 19.05 Moktali ASPL/PO/013 dated 14 March, 2006
Crushers Engineering 22.06.05
Cooling Tower 1 No. 5.18 Paharpur Cooling ASPL/PO/014 dated 24 February, 2006
Towers 22.06.05
100 Tonne Electronic 1 No. 11.37 Sanmar ASPL/PO/015 dated 28 January, 2006
Weigh Bridge Engineering 25.06.05
Bag filters 1 No. 18.15 Reico Industries ASPL/PO/016 dated 28 February, 2006
27.06.05
Conveyor belts 5 items 21.39 Sempetrans ASPL/PO/017 dated 16 February, 2006
Nirlon Ltd., 4.07.05
TOTAL 804.39

23
AML STEEL LIMITED

ii. The details of the plant and machinery for which suppliers have been identified but firm
purchase orders have not yet been placed are given below.

The cost estimates of these equipments have been arrived on the basis of the above-mentioned purchase
orders, placed for a part of the same type of plant and machinery.

Description Quantity Amount Basis of cost estimate


(Rs. in lakhs)
2 sets of kiln and cooler 2 sets 462.12 Ref. ASPL/PO/001 25.02.05
S.S.Components 4 sets 65.27 Ref. ASPL/PO/002 06.05.05
Drive systems 8 sets 159.68 Ref. ASPL/PO/003 07.05.05
Vibrating screens 8 Nos. 40.40 Ref. ASPL/PO/004 26.05.05
Slip Rings and D.P.valves 4 Sets 27.55 Ref. ASPL/PO/009 14.06.05
Hydraulic and Pneumatic Equipments 8 Sets 44.53 Ref. ASPL/PO/010 15.06.05
Screw Compressor 4 Nos. 17.06 Ref. ASPL/PO/011 15.06.05
Conveyor belts 10 items 42.77 Ref. ASPL/PO/017 04.07.05
TOTAL 859.38

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

Description Quantity Amount Details of quotations


(Rs. in lakhs) (Name, reference and date)
Pumps 4 sets 23.42 Basic Engineers:
Q-3151-05 dt.01.09.2005
PCC and MCC Panels 4 sets 81.78 Chaitanya Electricals:
336:05-06 dt.19.11.2005
Electrical Fittings 4 sets 18.44 Philips India:
D62/PIL/SR/05-088 dt.19.10.2005
Motors 4 sets 121.07 Electromech (India):
EMI/177/05-06 dt.21.11.2005
Refractories – Ref Cast 4 sets 156.15 Sharada Ceramics SCPL:
HYD /AML/07.07 dt.07.07.2005
Refractories – Bricks 4 sets 47.61 Sharada Ceramics
SCPL: HYD/AML/07.07 07.07.2005
Refractories – Lining Work 4 sets 20.56 Sharada Ceramics
SCPL:HYD/AML/07.07 07.07.2005
Idlers Rollers & Pulleys 4 sets 192.01 Swastik Systems:
SS/ASPL/8706 dt.12.08.2005
Non Metallic Expansion Joint 4 sets 5.08 Ke Burgman
Fabrics P.1105.0926.SRS.CHN 14.11.2005
15 KVA & 125 KVA Diesel 4 sets 32.42 Powrica Limited
Genset Q04/0171/KMK/1 dt.28.10.2005
Variable Frequency Drive with 4 sets 227.91 Larsen & Turbo Ltd.,
complete set CPCM/SID/AML/24102005 dt 31.10.2005
Fans 4 sets 48.10 Nadi Airtechnics Pvt. Ltd
0700/R001 dt.16.11.2005
Fans and Blowers 4 sets 27.70 Aircon System
OFF 115 dt.12.02.2004
TOTAL 1,002.25

(b) Equipment required for the steel melt shop for manufacturing steel billets:

AMLSPL has identified the major equipments required for manufacturing steel billets and is in the
process of receiving quotations for the same. No purchase orders have been placed yet.

24
AML STEEL LIMITED

Description Quantity Amount Details of quotation


(Rs. in lakhs) (Name, reference and date)
Continuous Casting Machine - 2 strand, 12 1 Set 120.97 Concast (India) Ltd
tonne Capacity CC/SALES dt. 12.11.03
Continuous Casting Machine - 3 strand, 30 1 Set 278.24 Concast (India) Ltd
tonne Capacity CC/SALES dt. 12.11.03
Induction Steel Melting Line 1 Set 142.74 Megatherm Electronics Pvt. Ltd.
MT/SQIT/967
TOTAL 541.95

(c) Equipment required for the captive power plant:

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

Description Quantity Amount Details of quotation


(Rs. in lakhs) (Name, reference and date)
Oil Filled transformer 4 Sets 162.97 Crompton Greaves YNV/T-RNC
Oil burner and fuel handling system 4 Sets 80.00 Westman thermal Engineering
WTH/AML
Cooling tower for power plant 4 Sets 203.24 Paltach Cooling Towers Ltd.,
PCTE/3333 dt. 8.03.04
Power unit 4 Sets 210.49 Inductotherm (India) Pvt. Ltd
QBA 040064 dt. 2.07.04
Grease Lubrication 4 Sets 106.46 Cenlub Industries CIL/2089 dt. 12.02.04
Coal Crushing & Screening 4 Sets 445.18 Puzzolana Machinery Fabricators
PMFH/8277 dt. 04.03.04
Magnetic Drum Separator 4 Sets 168.15 P.R.Projects PRP/159 dt. 18.03.04
HT panels – complete set 4 Sets 288.83 ABB Limited ABBL/AML
EOT Cranes 4 Sets 391.47 Elite Steels Pvt. Ltd.
ESPL/0358 dt. 10.07.04
40 Tonne Hydraulic truck loader 10 Nos. 78.63 Jaypee Engineering Co. Pvt. Ltd.
JEHECL/642 dt. 18.11.04
Crushing Plant 1 set 96.77 Bhagwati Prasad Agarwala
BPA 5741 dt. 29.4.2004
25 Tonne Capacity Crane 1 Set 29.00 Avon Cranes Pvt. Ltd
AC-1901865 dt. 26.04.2004
Helical Gear Box 1 Set 139.82 Shanthi Gears Ltd.
SGM/623 dt.02.12.2005
Waste Heat Recovery Boiler 1 Set 509.80 Sitson India Pvt Ltd
SI/HRSG/0702 dt.07.02.2004
DG Set – 1250 KVA 1 Set 66.60 Powerica Limited
Q04-1005-RTM dt.27.12.2005
Electrical Installations – PCC, 6 nos. 16.90 Chaitanya Elctricals
MCC Panel 336: dt.19.11.2005
TOTAL 2,994.31

Miscellaneous Fixed Assets:

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

Description Amount (Rs. in lakhs)


Electrical installations 100.00

25
AML STEEL LIMITED

Fire extinguishing equipments 75.00


(Fire extinguishers, dry powder type, safety equipments for workmen, heat
proof, aprons, goggles etc.,)
Vehicles 50.00
Furniture and fittings 50.00
Communication systems 20.00
Miscellaneous 15.00
TOTAL 310.00

Iron Ore Mining:

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

S.No. Particulars Amount (Rs.in lakhs)


1. Cost of mining equipments 400.00
2. Cost of mine development 600.00
TOTAL 1,000.00
(Source: SBI Caps Financial Appraisal Report)

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

Details of the plant and machinery required for iron ore mining are as follows:

The break up of the cost of equipment required for mining is given below:

Description Quantity Rate Amount


(Rs. in lakhs) (Rs. in lakhs)
Hydraulic Excavator- 2.8-4 cu.mt 1 No. 70.00 70.00
Dozers - 320-410 HP 2 Nos. 50.00 100.00
Dumpers- 20 Tonne 3 Nos. 20.00 60.00
Drills with compressors - 150 mm 2 Nos. 35.00 70.00
Motor grader 1 No. 30.00 30.00
Explosive van 1 No. 20.00 20.00
Pay loader - 4.5 cu.mt. 1 No. 25.00 25.00
Water tanker 1 No. 12.00 12.00
Diesel tanker 1 No. 13.00 13.00
TOTAL 400.00
No quotations have been invited for the above-mentioned equipments.

26
AML STEEL LIMITED

Provision for Contingencies:

The total estimated project cost is based on estimates, quotation received and some purchase orders
placed for capital equipment. Considering that some pricing assumptions may change, the provision for
contingency has been estimated at Rs.306.00 lakhs, which is 3% of the total hard cost of
Rs.10,194.00 lakhs.

(Source: SBI Caps Financial Appraisal Report)

Pre Operative Expenses:

Preliminary and pre operative expenditure includes expenses for both technical services as well as
expenses such as legal fee, printing and stationery, salary, electricity, travelling etc., incurred during the
construction phase of the project. The cost component is estimated at Rs.150.00 lakhs.

(Source: SBI Caps Financial Appraisal Report)

Interest During Construction:

Interest during construction has been calculated on the debt drawn down schedule estimated by
AMLSPL, which is based on the capex implementation plan of the project. The commercial date of
operation for the project is estimated to be 1 November, 2006. Also it is assumed that approximately
50% of the equity will be brought in upfront and the balance equity will be brought, alongwith debt, on
a pro rata basis. The interest rate on term loan has been considered at 9%. The amount is estimated to
be Rs.381.00 lakhs.

(Source: SBI Caps Financial Appraisal Report)

Working Capital Margin:

The break up of the estimated working capital requirement, as included in the total cost of project of
the Integrated Steel Plant, is given below:

PARTICULARS COST (RS. IN LAKHS)


Raw Materials – 0.75 months 324.00
Work in Progress – 0.03 months 17.00
Finished goods – 1 month 850.00
Debtors – 1 month 979.00
TOTAL 2,170.00
Less: Creditors – 1 month 756.00
Working capital gap 1,414.00
Margin money (25%) 353.00

(Source: SBI Caps Financial Appraisal Report)

Raw Materials:

The major raw materials estimated to be required for producing sponge iron are 1,76,000 TPA of iron
ore, 1,32,000 TPA of coal and 3,300 TPA of dolomite and the primary major raw materials required for
the production of Steel Billets metal shop are 39,070 TPA of Sponge Iron and 8,750 TPA of Pig Iron.

For further details on the raw material used by us in our existing business and that required for the
proposed project, please refer to the section on “Business Overview” on page no.[●] of this DHRP.

Utilities and Manpower:

The power requirement for the Project will be utilised from the captive power plant proposed to be set
up in the integrated steel plant and the water supply would be sourced from bore well and intake well

27
AML STEEL LIMITED

situated inside the plant premises and from Saraikela River. For manpower, AMLSPL proposes to
employ 222 people at different levels of operations.

For details on the requirement of utilities and manpower please refer to the section on “Business
Overview” on page no [●] of this DRHP.

Government Approvals/Licensing Arrangements for the Project

We need to obtain several licences/approvals/permissions under various statutes from several


authorities prior to setting up of the Integrated Steel Plant. For details of licences/ approvals/
permissions obtained/ applied for the project kindly refer to the section titled ‘Licences and Approvals’
on page no [●] of this DHRP.

Schedule of Implementation for the Integrated Steel Plant:

Activity Expected date of commencement Expected date of completion


Land and site development August 2005 October 2006
Civil works
DRI Plant November 2005 July 2006
Steel melt shop March 2006 August 2006
Procurement and installation of
plant and machinery
DRI Plant September 2005 September 2006
Steel Melt Shop October 2005 October 2006
Trial production
DRI Plant November 2006 November 2006
Steel Melt Shop November 2006 November 2006
Commencement of commercial
production
DRI Plant November 2006 November 2006
Steel Melt Shop November 2006 November 2006

Means of Finance:

The proposed means of finance given by the Management is as follows:

Description Amount (Rs. in lakhs)


Equity 6,000.00
Debt 5,403.00
Total 11,403.00

The SBI Caps Financial Appraisal Report had envisaged in its means of finance, an equity component
of Rs.3,801.00 lakhs and a debt component of Rs.7,602.00 lakhs.

The Management proposes to increase the equity component in the means of funding the total cost of
the Project in order to circumvent the risk of burden of interest associated with debt and also to have a
larger equity base that will afford flexibility to AMLSPL to raise funds in future.

Funding Plan:

Foer the equity portion, we plan to invest in AMLSPL to the tune of Rs.6,000.00 lakhs. No dividends
are assured for the investment made by us and it will depend upon the operational and financial
performance of AMLSPL.

For the debt component, AMLSPL has been sanctioned term loans by the Banks, totalling to
Rs.5,000.00 lakhs.

28
AML STEEL LIMITED

The details are given below:

S.No. Name of the Bank Amount Major Conditions of sanction


(Rs. in lakhs)
1.
The Federal Bank Limited vide 1,000.00 Period - 88 Months
their letter dated 8 September,
2005. Rate - BPLR- 2.5 (9%) PF – 0.25%

Repayment - Repayable by 20 Quarterly instalments.


First instalment due on 31 March 2008.

Security - Primary: Paripassu charge on the project


assets (excluding soft cost such as WC margin,
interest etc) value – Rs.10,194/- (hard cost) Margin –
25%.

Collateral: Second charge on pari-passu basis on


current assets

Personal Guarantees of the following Promoter


Directors to be executed: Mr.Ashok Agarwal, Mr.Ajay
Agarwal and Mrs.Anita Agarwal.

Predisbursement conditions: The limit will be


released only after the Promoters invest a minimum of
Rs.2,223 lakhs up front and only after the debt
component is fully tied up and a consortium is formed
with SBI/CBI assuming leadership.

2. UCO Bank vide their letter 2,000.00 Rate – Concessional rate of interest at BPLR- 2%
Ref.NPT/ADV/170/2006 dated which will be 9% p.a. at present. Interest to be
24 January, 2006 serviced during the moratorium period.

Moratorium period: 12 months from commercial


operation date (COD).

Repayment - 20 Quarterly instalments commencing


after moratorium period of 12 months from COD.

Security - Primary:

i. First pari passu charge on all fixed assets of


AMLSPL including equitable mortgage of
immovable properties shared along with other
member banks.

ii. Second charge on pari passu basis with other


term lenders on all the current assets of the
company i.e., stocks, receivables etc.,

Personal Guarantees of Mr.Ashok Agarwal, Mr.Ajay


Agarwal and Mrs.Anita Agarwal.

Predisbursement conditions: The facilities are to be


extended strictly under consortium arrangements with
other banks. No disbursement should be made unless
means of finance are fully tied up and formalities for
consortium arrangement are completed for the total

29
AML STEEL LIMITED

requirement of Rs.7,602.00 lakhs and government


clearances obtained. Promoters should bring in atleast
50% of the capital upfront. Corporate guarantee of all
group companies to be obtained.

3. Central Bank of India vide their Rs.2,000.00 Interest : BPLR (presently at 10%)
letter no.MTR/ADV/2005-06/314
dated 25 January, 2006 Margin: 30%

Security: Pari passu first charge on projected block


assets of Integrated Steel Plant whose estimated cost is
Rs.110.00 crores.

Sub limit within Term Loan

Letter of Credit (Inland/Foreign) DP/DA for


capital goods with usance maximum upto 180 days.

Limit: Rs.500.00 lakhs.

Interest: as per C.O. circular.

Margin: 25%

Security: Document of title to current and future


machineries.

Collateral security: The proposed aggregate term


loan of Rs.7,600.00 lakhs shall be collaterally secured
by the pledge of 100% of the shares (value estimated
at Rs.38.00 crores) to be held by the holding company
AML Steel Ltd., in their subsidiary AML Steel &
Power Limited. The proposed term loan of
Rs.7,600.00 lakhs is to be covered by the guarantee of
Mr.Ashok Agarwal, Mrs.Anita Agarwal, Mr.Ajay
Agarwal, Mr.Poonam Chand Jangir and corporate
guarantee of the holding company, M/s. AML Steel
Limited.

The company to achieve financial closure by receipt of


regular sanction from lenders for the entire proposed
term loan component of Rs.7,600.00 lakhs in full. The
Company to submit copies of sanction letters received
from other participating term lenders. Consortium is to
be formed and joint documents to be got executed.

TOTAL 5,000.00

The above-mentioned term loans have been sanctioned by the Banks based on the debt requirement of
Rs.7,600.00 lakhs given in the SBI Caps Financial Appraisal Report.

With respect to the proposed project to be executed by AMLSPL, we confirm that firm arrangements of
finance through verifiable means towards 75% of the stated means of finance, as estimated by the
Management, excluding the amount of Rs.6,000.00 lakhs to be invested by us out of the proceeds of our
proposed public issue, have been made.

30
AML STEEL LIMITED

Deployment of funds by AMLSPL for the proposed Project

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

“In our opinion and to the best of our information and explanations given to us, we certify that till
28 February, 2006 the company has already made an investment of Rs.14,78,76,130.00 (Rupees
Fourteen Crores Seventy Eight Lakhs Seventy Six Thousand One Hundred and Thirty Only) as per the
details given.

Details of Investments made in Project till 28.02.2006


PARTICULARS AMOUNT (in Rs.)
Land 81,26,897.00
Civil Construction 7,90,50,673.55
Advances against plant and machinery 4,81,88,017.30
Vehicles 7,09,008.00
Miscellaneous fixed assets 16,78,617.80
Preliminary and preoperative expenses 1,01,22,916.35
TOTAL 14,78,76,130.00

The above expenditure has been met out of the funds received from the promoters of the company
against Equity Issue.
Yours faithfully,
For K.P.Jain & Co.,
Chartered Accountants
Sd/-
Kishore Kumar P.Jain
(Proprietor)
Membership No:27236

B. Acquisition of Existing Steel Plants.

We have been studying the possibility of strategic acquisitions within the steel sector. We have
identified a couple of existing plants manufacturing billets with downstream rolling mills producing
structural steel and reinforcement bars to the tune of 50,000 to 60,000 MTs. We are still in the process
of discussions and have not signed a MoU/Letter of Intent in this regard and therefore, the form of
investment is not yet decided. In case the acquisition price exceeds the amount allocated for in this
present issue, the Company will bridge the gap via internal accruals or by raising additional debt.

II. INVESTMENT IN SUBSIDIARIES TO HELP THEM MEETING THEIR WORKING


CAPITAL REQUIREMENT.

Our subsidiaries, AIPL and ASIPL have been recording growth in the form of increased sales. While
AIPL has a working capital limit of Rs.350.00 lakhs with Central Bank of India, ASIPL and AMLSPL
have not availed any such facility till date. The Project for setting up of the Integrated Steel Plant is
proposed to be executed by AMLSPL. To enable them carry on their existing operations smoothly and
meet their future requirements, we propose to invest in our subsidiaries by way of equity to the tune of
Rs.2,002.00 lakhs, which will be deployed by these entities in the form of working capital.

The working capital requirement of the subsidiaries has been arrived as follows:

(Rs. in lakhs)
AIPL ASIPL AMLSPL Total
Inventory:
Raw Materials 230.00 161.00 324.00 715.00
Work in Progress 9.00 6.00 17.00 32.00
Finished Goods 428.00 270.00 850.00 1548.00

31
AML STEEL LIMITED

Total Inventory 667.00 438.00 1191.00 2296.00


Debtors 461.00 294.00 979.00 1015.00
Total Current Assets 1128.00 732.00 2170.00 4030.00
Less: Creditors for Raw materials 276.00 193.00 756.00 1225.00
Net Working Capital 852.00 539.00 1414.00 2805.00
Less: 1. Banking facilities available
with Central Bank of India 150.00 0.00 0.00 150.00
2. Working capital margin added to
Project cost 0.00 0.00 353.00 353.00
3. Working capital sanctioned 0.00 0.00 300.00 300.00
Working Capital need to be met
out of Public issue 702.00 539.00 761.00 2002.00

Notes:

1. Raw material is assumed to be at a level of 25 days consumption of Raw Materials


2. Work in Progress is assumed to be at just 1 day's consumption of Raw Material alone
3. Finished goods is assumed to be at a level of 30 days of Cost of Sales
4. Debtors is assumed to be at a level of 30 days of Gross Sales
5. Creditors is assumed to be at al level of 30 days of Raw Material Consumption

AMLSPL has been sanctioned a working capital of Rs.300.00 lakhs by Central Bank of India, vide
their letter no. MTR/ADV/2005-06/314 dated 25 January, 2006. The terms and conditions which are
included in the afore said letter include the following:

For working capital in the form of CC (H):


Interest: BPLR (presently at 11%)
Margin: 25%
Security: Pari passu first charge on current assets inventory and Trade receivables with age upto 90
days.

III. OUR WORKING CAPITAL REQUIREMENT.

Our working capital limits with the banks has not been proportionate to the increase in sales recorded,
which has caused some strain on our resources and profitability. To ensure smooth functioning of our
operations and also for meeting our future requirements, we intend to use Rs.1,129.00 lakhs out of the
public issue proceeds to meet our enhanced working capital requirement.

The calculations for the working capital requirement is given below:

Particulars Amount (Rs. in lakhs)


Inventory:
Raw Materials 695.00
Work in Progress 28.00
Finished Goods 1010.00
Total Inventory 1733.00
Debtors 1080.00
Total Current Assets 2813.00
Less: Creditors for Raw materials 834.00
Net Working Capital 1979.00
Less: 1. Banking facilities available with Central Bank of India 850.00
2. Working capital margin added to Project cost 0.00
Working Capital need to be met out of Public issue 1129.00

32
AML STEEL LIMITED

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

Our existing working capital limits:

Currently we have working limit of Rs.250.00 lakhs with the Central Bank of India.
Nature of limit Amount Security Margin Interest
(Rs. in lakhs)
Fund based along with sub limits
Cash credit (H) 250.00 Hypothecation of stocks and 25%
bookdebts age upto 90 days 50% PLR+2%

IV. The expenses for this Issue includes underwriting and management fees, selling commission,
distribution expenses, legal fees, fees to advisors, stationery costs, advertising expenses and
listing fees payable to the Stock Exchanges, among others. The estimated issue expenses are as
follows:

S.No. Preliminary and preoperative expenses Amount (Rs. in lakhs)


1. Issue Management [●]
2. Registrars fee [●]
3. Printing of stationery [●]
4. Advertising and marketing expenses [●]
5. Underwriting, brokerage and selling commission [●]
6. Other expenses [●]
TOTAL [●]

Year Wise Break Up of Utilisation of Issue Proceeds

The Company plans to utilise the entire Issue Proceeds as follows: (Rs. in lakhs)
S.No. Particulars Quarter wise deployment of funds
31 March, 2006 1Q 2Q 3Q 4Q 31 March, 2007 Total
(I) (II=1Q+2Q+3Q+4Q) (I+II)
1. Capital
Expenditure
programme
A. Investment in 2,000.00 1,000.00 1,000.00 1,000.00 1,000.00 4,000.00 6,000.00
AMLSPL, to set
up an Integrated
Steel Plant.
B. Acquisition of -- 1,000.00 1,000.00 -- -- 2,000.00 2,000.00
existing steel
plants
Total capital 2,000.00 2,000.00 2,000.00 1,000.00 1,000.00 6,000.00 8,000.00
expenditure
(A+B)
2. Investment in -- 2,002.00 -- -- -- 2,002.00 2,002.00
subsidiaries to
fund their
working capital
requirement
3. Working capital -- 1,129.00 -- -- -- 1,129.00 1,129.00
requirement
4. Issue expenses 27.00 842.00 -- -- -- 869.00 869.00
Total 2,027.00 5,973.00 2,000.00 1,000.00 1,000.00 9,973.00 12,000.00
* Q – Quarter (Estimated by the Management)

33
AML STEEL LIMITED

Deployment of funds pending utilisation


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

Deployment of funds till date

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

“In our opinion and to the best of our information and explanations given to us, we certify that till
28 February, 2006 the company has already spent Rs.19,63,36,667.00 (Rupees Nineteen Crores Sixty
Three Lakhs Thirty Six Thousand Six Hundred and Sixty Seven Only) as per the details mentioned
below:

Details of the deployment of the funds


PARTICULARS AMOUNT (in Rs.)
Investment in AMLSPL, our wholly owned subsidiary as share application 19,41,00,000.00
money.
Issue Expenses 22,36,667.00
TOTAL 19,63,36,667.00

The above expenditure has been met out of the funds received from the promoters of the Company
towards their contribution in the public issue and internal accruals.

Yours faithfully,
For K.P.Jain & Co.,
Chartered Accountants
Sd/-
Kishore Kumar P.Jain
(Proprietor)
Membership No:27236
Monitoring of utilisation of funds

The Board and the Monitoring Agency appointed by the Company will monitor the utilisation of the
proceeds of the Issue.

34
AML STEEL LIMITED

BASIC TERMS OF THE ISSUE

Public Issue of [●] Equity Shares of the face value of Rs. 10/- each, at a price of Rs. [•] for cash at a
premium of Rs. [●] per Equity Share aggregating Rs. 12,000 lakhs is being made through a 100% Book
Building Process.

Non-Institutional Retail Individual


Particulars QIBs
Bidders Bidders
Number of Equity Upto [●] Equity Shares or Minimum of [●] Equity Minimum of [●]
Shares* Net Issue less allocation Shares or Net Issue less Equity Shares or Net
to Non-Institutional allocation to QIB Bidders Issue less allocation
Bidders and Retail and Retail Individual to QIB Bidders and
Individual Bidders Bidders Non-Institutional
Bidders
Percentage of Issue 50% of Net Issue Minimum 15% of Net Minimum 35% of
Size available for Issue or Net Issue less Net Issue or Net
allocation allocation to QIB Bidders Issue less allocation
and Retail Individual to QIB Bidders and
Bidders. Non Institutional
Bidders.
Basis of Allocation Proportionate as follows: Proportionate Proportionate
if respective (a) Up to [●] Equity
category is Shares shall be allocated
oversubscribed on a proportionate basis to
Mutual Funds in the
Mutual Funds Portion;
(b) Balance Equity Shares
shall be allocated on a
proportionate basis to all
QIBs including Mutual
Funds receiving allocation
as per (a) above.
Minimum Bid Such number of Equity Such number of Equity [•] Equity Shares and
Shares that the Bid Shares that the Bid in multiples of [•]
Amount exceeds Amount exceeds Equity Share
Rs. 1,00,000/- and in Rs. 1,00,000/- and in thereafter.
multiples of [•] Equity multiples of [•] Equity
Shares thereafter. Shares thereafter.
Maximum Bid Such number of Equity Such number of Equity Such number of
Shares not exceeding the Shares not exceeding the Equity Shares
Net Issue, subject to Net Issue subject to whereby the Bid
applicable limits. applicable limits. Amount does not
exceed Rs. 1,00,000.
Mode of Allotment Compulsorily in Compulsorily in Compulsorily in
dematerialised form. dematerialised form. dematerialised form.
Bid/ Allotment Lot [•] Equity Shares and in [•] Equity Shares and in [•] Equity Shares and
multiples on [•] Equity multiples on [•] Equity in multiples on [•]
Shares Shares Equity Shares
Trading Lot One Equity Share One Equity Share One Equity Share
Who can Apply** Public financial NRIs, Resident Indian Individuals
institutions, as specified individuals, HUF (in the (including HUFs,
in Section 4A of the name of Karta), NRIs) applying for
Companies Act, companies, corporate Equity Shares such
Scheduled Commercial bodies, scientific that the Bid Amount
Banks, Mutual Funds, institutions societies and does not exceed Rs.
Foreign Institutional trusts. 1,00,000 in value.
Investors registered with
SEBI, multilateral and
bilateral Development

35
AML STEEL LIMITED

Non-Institutional Retail Individual


Particulars QIBs
Bidders Bidders
Financial Institutions, and
State Industrial
Development
Corporations, permitted
insurance companies
registered with the
Insurance Regulatory and
Development Authority,
provident funds with
minimum corpus of
Rs. 2500 lakhs and
pension funds with
minimum corpus of
Rs. 2500 lakhs in
accordance with
applicable law.
Terms of Payment Margin Amount Margin Amount Margin Amount
applicable to QIB Bidders applicable to Non- applicable to Retail
shall be payable at the Institutional Bidders at Individual Bidders at
time of submission of Bid the time of submission of the time of
cum Application Form to Bid cum Application submission of Bid
the BRLMs Form to the members of cum Application
the Syndicate Form to the members
of the Syndicate
Margin Amount Atleast 10% of the Bid 100% of the Bid Amount 100% of the Bid
Amount on bidding. on bidding Amount on bidding

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

36
AML STEEL LIMITED

BASIS FOR ISSUE PRICE

The Price Band for the Issue Price will be decided by us in consultation with the BRLMs and
advertised at least one day prior to the Bid Opening Date / Issue Opening Date in [●], a widely
circulated English language newspaper, [●], a Hindi language newspaper and [●], a Tamil newspaper.
The Issue Price will be determined by our Company in consultation with the BRLMs on the basis of
assessment of market demand for the offered Equity Shares by the Book Building Process. The face
value of the Equity Shares is Rs. 10/- and the Issue Price is [●] times the face value at the lower end of
the Price Band and [●] times the face value at the higher end of the Price Band.

Qualitative Factors:

• We are an existing profit making listed company having a consistent track record of paying
dividend.
• Our first steel plant was put up in Pondicherry where there is a distinct power cost advantage
over the competitors as a result of which the project was yielding returns to investors even
during such periods when steel prices were at rock bottom levels.
• The proposed Project for setting up an Integrated Steel Plant through our wholly owned
subsidiary, AMLSPL, in the state of Jharkhand has close proximity to the sources of main raw
materials viz., iron ore, coal and pig iron, which is expected to substantially bring down the
overall transportation costs. While the ore mines are situated about 100 kms, the coal mines are
around 150 kms away from the above project.
• AMLSPL has already been allotted a mining lease for a period of 20 years over 383.54 acres
vide letter no.5/8/2005-MIV dated 16 August, 2005 from the Ministry of Mines. The geological
report estimates that the iron ore reserves shall be to the tune of 25 million tonnes, assuring a
continuous supply on a long term basis.
• The Project is a backward integration to the existing operations of the group.
• The proposed captive power plant is expected to substantially bring down the overall power cost.
• We are managed by a qualified management team having several years of relevant experience in
this domain, steered by Mr.Ashok Agarwal, our Promoter who has been in the industry for the
past eight years.

Quantitative Factors:

1. Adjusted Earning Per Equity Share

Year Ended Earnings Per Share (Rs.) Weight


31.03.2003 1.47 1
31.03.2004 1.76 2
31.03.2005 9.85 3
Weighted Average 5.76

• The earning per share have been computed on the basis of the adjusted profits / losses for the
respective years as per the statement of profits and losses as restated.
• EPS calculations have been done in accordance with Accounting Standard 20-"Earnings per
Share" issued by the Institute of Chartered Accountants of India.

2. Price / Earning (P/E)* ratio in relation to the Issue Price of Rs [●]

a. Based on the year ended 31 March, 2005 Adjusted EPS of Rs.[●]


b. Based on weighted average EPS of Rs. [●]
c. Industry P/E
Highest 24.10
Lowest 0.60
Industry Composite 7.30
(Source: Capital Market (March 13- 26, 2006) Vol.XXI/01 Segment: Steel – Medium/Small)

37
AML STEEL LIMITED

3. Return on Networth

Year Ended RoNW % Weight


31.03.2003 3.51 1
31.03.2004 4.15 2
31.03.2005 19.48 3
Weighted Average 11.71

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

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

5. Net Asset Value per Share (NAV) after Issue and Comparison with the Issue price.

Adjusted NAV (Rs.)


As of 31 March, 2005 50.56
After the Issue [●]

6. Comparison with Industry Peers.


Company Year ended EPS (Rs.) P/E RoNW% Book Value
(Rs.)
Kalayani Steels 31.03.2005 9.70 15.10 18.10 58.30
Garg Furnace 31.03.2005 2.90 8.90 6.00 50.00
Hisar Metal Industries 31.03.2005 3.50 10.70 17.00 21.50
Stelco Strips 31.03.2005 4.60 4.20 20.00 28.20
Welcast Steels 31.03.2005 28.90 10.40 20.10 158.30
ISSUER COMPANY
AML Steel 31.03.2005 9.85 [●] 19.48 50.56

(Source: Capital Market ( March 13 – 26, 2006) Vol.XXI/01 Segment: Steel – Medium/ Small)

The BRLM believes that the issue price of [●] is justified in view of the above qualitative and
quantitative parameters. The investors may also want to peruse the risk factors and the financials
of the Company including important profitability and return ratios, as set out in the Auditors
Report in this DRHP to have a more informed view about the investment proposition.

38
AML STEEL LIMITED

STATEMENT OF TAX BENEFITS

The Company has been advised by M/s. K P.Jain & Co., Chartered Accountants Statutory Auditors of
the Company, vide their letter dated 24 February, 2006 that under the current provisions of the Income
Tax Act, 1961 and the existing laws for the time being in force, the following benefits, inter-alia, will
be available to the Company and the Members. The statement of tax benefits certificate from the
Statutory Auditors of the Company is reproduced below:

“We hereby report that the enclosed annexure states the possible tax benefits available to AML STEEL
LIMITED (the“Company”) and its shareholders under the current direct tax laws. Several of these
benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the
relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is
dependent upon fulfilling such conditions, which based on business imperatives the Company faces in
the future, the Company may or may not choose to fulfill. The benefits discussed herein are not
exhaustive.

This statement is only intended to provide general information to the investors and is neither designed
nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax
consequences and the changing tax laws, each investor is advised to consult his or her own tax
consultant with respect to the specific tax implications arising out of their participation in the issue.

We do not express any opinion or provide any assurance as to whether:


* The Company or its shareholders will continue to obtain these benefits in future; or
* The conditions prescribed for availing the benefit have been/ would be met with.

The contents of this annexure are based on information, explanations and representations obtained from
the Company and on the basis of our understanding of the business activities and operations of the
Company and the interpretation of current tax laws.”

For K P Jain & Co.,


Chartered Accountants
Sd/-
Kishore Kumar P. Jain
(Propreitor)
Membership Number 27236
Date: 24 February, 2006

Annexure to the Statement of Tax Benefits

AML Steel Limited (Formerly Ashok Magnetics Limited) herein after called as “The Company” has
been advised that under the current tax laws, the following tax benefits inter alia will be available to the
Company and its Shareholders.

1. Under the Income Tax Act, 1961

A. The Company

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

B. The Shareholders

I. RESIDENT INDIANS

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

39
AML STEEL LIMITED

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

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

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

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

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

II. Non-Resident Indians

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

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

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

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

III. Foreign Institutional Investors (FII)

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

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

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

40
AML STEEL LIMITED

4. Short-term capital gains on transfer of securities shall be chargeable @ 30%/10% (plus


applicable surcharge and education cess) as per clause (ii) to Section 115AD of the Income
Tax Act, 1961.

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

IV. VENTURE CAPITAL COMPANIES/FUNDS

In terms of section 10(23FB) of the Income Tax Act, 1961 all venture capital companies/funds
registered with Securities and Exchange Board of India, subject to the conditions specified, are eligible
for exemption from income tax on all their income, including income from sale of shares of the
company.

V. MUTUAL FUNDS

As per the provisions of section 10(23D) of the Income Tax Act, 1961 any income of Mutual funds
registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there
under or any other Mutual Funds set up by public sector banks or public financial institutions or
authorized by the Reserve Bank of India would be exempt from income tax.

2. Under the Wealth Tax Act, 1957

All assesses are entitled to exemption from wealth tax in respect of the shares of the company as
shares or securities are not included in the definition of asset u/s 2(ea) of the Wealth Tax Act, 1957.

3. Under Central Excise Tariff

In respect of the Capital goods and allied machinery being purchased for ongoing projects, the benefit
of Cenvat credit is available under Rule 4 of the Cenvat Credit Rules, 2004 subject to fulfillment of the
conditions specified.

4. Under Finance Act 1994-Service Tax

In respect of services availed for ongoing projects, the benefit of Cenvat-Service Tax is available under
Rule 4 of the Cenvat Credit Rules, 2004 subject to fulfillment of the conditions specified.

5. Under Export Import Policy

Import of Capital Goods under Export Promotion Capital Goods Scheme (EPCG scheme) at
concessional rate of duty subject to fulfillment of obligations.

Notes:

All the above benefits are as per the current tax laws and will be available only to the sole/first named
holder in case the Equity Shares are held by joint holders.

In respect of non-residents, taxability of capital gains mentioned above shall be further subject to any
benefits available under the Double Taxation Avoidance Agreement, if any between India and the
country in which the non-resident has fiscal domicile.

41
AML STEEL LIMITED

SECTION IV – ABOUT US

INDUSTRY OVERVIEW

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

1200 Apparent Consumption of Finished Steel per Capita in MMT

1000 978.8
947.2
917.3

819 809
800

599.8 601.3
600 575.8 575
562.8

400

206.8
179.1
200
144.2
119.9
97.8

25.9 26.5 27.5 29.2 30.7

0
2000 2001 2002 2003 2004
China India Japan South Korea

(Source: IISI)

42
AML STEEL LIMITED

Global Scenario

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

world steel (million metric tons)

1200
1000
800
600
400
200
0
90-91

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

03-04

04-05
(Source: IISI)

 In the year 2004-05 World Steel output was at 1057 million metric tonnes, which was
8.3% more than 2003-04 output of 969 million metric tonnes, which was 6.8% more than
2002-03 output.
 China remained the world’s largest Steel producer in 2004-05 also (272.5 million metric
tonnes) followed by Japan (112.7 million metric tonnes) and USA (98.9 million metric
tonnes). India occupied the 8th position (32.6 million metric tonnes with 2.5% increase
over previous year).
 Japan was the largest exporter followed by Russia and Ukraine with India occupying 16th
place.
The International Iron and Steel Institute (IISI) in its Short Range Outlook (October 2005) for Steel
Demand has forecasted the development of the Apparent Demand for Finished Steel Products until the
end of 2006.

According to IISI, Apparent Steel Demand is expected to grow to 1040-1053 million tonnes in 2006
from a total of 972 million tonnes in 2004. This is a growth of 4-5% over the two-year period.

(Source:IISI)

43
AML STEEL LIMITED

Monthly crude steel production (in thousands of metric tonnes)

Region September January-September


2005 2004 Mmt %Change 2005 2004 Mmt %Change
European Union (25) 15.0 16.4 -1.5 -8.8 138.8 144.8 -6.0 -4.2
Other Europe 2.5 2.3 +0.2 6.7 21.3 21.3 -0.1 -0.4
C.I.S 8.8 9.5 -0.7 -7.2 82.7 83.6 -0.9 -1.1
North America 10.5 11.3 -0.7 -6.6 94.6 99.7 -5.1 -5.1
South America 3.6 3.9 -0.3 -6.7 33.8 34.3 -0.5 -1.5
Africa 1.5 1.4 0 1.1 13.3 12.2 +1.1 8.9
Middle East 1.2 1.2 +0.1 7.4 10.9 10.1 +0.9 8.6
Asia/Oceania (Ex. 18.6 18.1 +0.5 2.7 168.3 168.8 +4.5 2.8
China)
(ROW) 61.8 64.2 -2.4 -3.7 563.7 569.8 -6.2 -1.1
China 30.4 24.8 +5.5 22.3 255.3 200.4 +54.9 27.4
World 92.1 89.0 3.1 3.5 818.9 770.2 48.7 6.3
(Source: IISI)
CRUDE STEEL PRODUCTION AS OF SEPTEMBER 2005

In Million Metric Tonnes Source: IISI

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

 World output is estimated at 92.1mmt, an increase of 3.1mmt or a 3.5% overall increase from
September 2004.
 China continues to improve production by 5.5 mmt each month, on an average. China’s latest
month production amounted to 30.4 mmt compared to 24.8 mmt last year or a 22.3% increase.
 Rest of the World's output declined by 2.4 mmt compared to same month last year with Europe
and the Americas cutting production by approximately 7 - 9%. Among the top 20 producing
countries, only 6 registered YTD production growth (China by 22.3%, India by 13.9%, Iran by
8.6%, South Korea by 3.7%, Mexico by 0.8% and Turkey by 0.6%) while the rest registered
productions cuts.

44
AML STEEL LIMITED

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

Asia 2004 Iron ore (million metric tons)


250000

Leading
200000
Exporter
150000

100000

50000

0
China India Japan South Korea Other Asia
Production 145749 120600 0 497 2004
Exports 0 62650 1 0 5337
Imports 208089 1019 134884 44225 24075
(Source: IISI)

Other significant recent developments in the global steel scenario as given by Ministry of Steel in
are as follows
 Under the auspices of the OECD the negotiations among the major steel producing countries
for a Steel Subsidy Agreement (SSA) continued. A number of meetings of the Disciplines
Study Group – a technical group constituted to examine issues relating to steel capacities and
marketing distorting measures, were held in 2003 with the objective to agree on a complete
negotiating text for the SSA by the middle of 2004
 The global economy witnessed a gradual recovery from late 2003 onwards. While, the
economies of USA, Japan and Europe continue on course towards economic recovery, the
growth in China has become one of the major factors currently driving the world economy.
With a projected GDP growth of more than double of the other world economies, China has
by far become the fastest growing global economy.
 USA has repealed the safeguard measures on import of steel w.e.f. 5 December, 2003 as a
result of a ruling by a WTO Dispute Resolution Panel which held these measures to be illegal
under the WTO regime.
Domestic Scenario

Delicensed in 1991 and decontrolled in 1992, the steel industry is on an upward swing due to strong
growth in demand propelled by high demand in China. The private sector is playing a dominant role in
augmenting steel, pig iron and sponge iron availability in the country.
Indian scenario - Highlights
 India is the 8th largest crude steel producer of steel in the world.
 Finished Carbon steel production during the year April to December, 2004 was at 28.3 million
tonnes and was up by 3.8% over the corresponding period of the previous year.
 India is the largest producer of sponge iron in the world. The estimated production during April
– December ’04 has been around 7.20 million tonnes.
 In 2004-05, production of finished carbon steel was 40.055 million tonnes (Prov).
 Pig Iron production in 2004-05 was 3.228 Million Tonnes (Prov).

45
AML STEEL LIMITED

The share of Main Producers (i.e. SAIL, RINL, TISCO) and secondary producers in the total
production of finished (Carbon) steel was 37.30% and 62.70% respectively during the period April-
November, 2005.
(Source: www.steel.nic.in, a website of Ministry of Steel, GoI)

Swot Anaylsis of Indian Steel Industry as Per Annual Review of Ministry of Steel

Strengths Weaknesses

1. Availability of iron ore and coal 1. Unscientific mining


2. Low labour wage rates 2. Coking coal import dependence
3. Abundance of labour 3. Low R&D investments
4. Mature production base 4. High cost of debt
5. Inadequate infrastructure
Opportunities Threats

1. Unexplored rural market 1. China becoming net exporter


2. Growing domestic demand 2. Protectionism in the West
3. Exports 3. Dumping by competitors
4. Consolidation

Development of Indian Steel Sector Since 1991

According to the Ministry of Steel since 1991 the economic reforms initiated by the Government have
added new dimensions to industrial growth in general and steel industry in particular.
 Licensing requirement for capacity creation has been abolished, except for certain Locational
restrictions.
 Steel industry has been removed from the list of industries reserved for the public sector.
 Foreign equity investment upto 100% is now available through automatic approval.
 From January 1992 price and distribution controls have been removed, with a view to make the steel
industry efficient and competitive.
 Restrictions on external trade, both in import and export have been removed
 Import duty rates have been drastically reduced.
 Other policy measures such as reduction in import duty of capital goods, convertibility of rupee on
trade account, permission to mobilize resources from overseas financial markets and rationalization
of existing tax structure for a period of time have also benefited the Indian Steel Industry.

Production of Iron & Steel

(a) Finished Carbon Steel Production

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

46
AML STEEL LIMITED

PRODUCTION OF FINISHED CARBON STEEL (IN MILLION


25
TONNES)

20

15

10

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

Main Producers Secondary Producers


(Source: Ministry of Steel)

(b) Pig Iron Production

As compared to 1.59 million tonnes in 1991-92, the total production of Pig Iron was 5.22 million
tonnes in 2003-04 registering an increase of 228.31 and decreased to a total production of 3.171 million
tonnes during the year 2004-05.

PRO DUCTIO N O F PIG IRO N (IN MILLIO N TO NNES)


4.5

3.5

2.5

1.5

0.5

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Main producers Secondary producers


(Source: Ministry of Steel)

47
AML STEEL LIMITED

(c) DRI Production

According to Ministry of steel the production of DRI has increased from 1.31 million tonnes in 1991-
92 to 10 million tonnes in 2004-05, registering an increase of nearly 7.63 times over the considered
period. India currently holds the top position in the production of DRI in the world.

12
DRI P RODUCTION ( IN MILLION TONNES)

10

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

(Source: Ministry of Steel)

Imports of Iron & Steel


Iron & Steel are freely importable as per the extant policy. According to Ministry of Steel, India has
been importing around 1.5 Million Tonnes of steel annually.

2500
IMPORT OF IRON AND STEEL ( IN 000 TONNES)

2000

1500

1000

500

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Pig Iron Steel Total (Carbon)

(Source: Ministry of Steel)

48
AML STEEL LIMITED

Exports of Iron & Steel

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

05-06 (Apr- Ma y)

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

0 1000 2000 3000 4000 5000 6000 7000

(Source: Ministry of Steel)

 Iron & Steel are freely exportable.


 Advance Licensing Scheme allows duty free import of raw materials for exports.
 Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this
scheme exporters on the basis of notified entitlement rates, are granted due credits which
would entitle them to import duty free goods. The DEPB scheme was temporarily suspended
from 27 March, 2004 to 12 July, 2004 for export of steel items. The Scheme has since been
restarted. The DEPB rates have also been substantially reduced.

Exports of finished carbon steel and pig iron during the last five years is as:

Year (Qty. in Million Tonnes)


Finished (Carbon) Steel Pig Iron
2000-2001 2.66 0.23
2001-2002 2.70 0.31
2002-2003 4.51 0.63
2003-2004 4.84 0.52
2004-2005 4.38 0.18
2005-2006 1.30 0.05
(April-July, 2005)
(Source: Ministry of Steel)

Apparent Consumption of Finished Carbon Steel

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

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

APPARENT CONSUMPTION OF THE FINISHED STEEL (CARBON)


(in million tonnes)

Year Apparent Consumption of Finished Steel

1991-92 14.84

1992-93 15.00

1993-94 15.32

1994-95 18.66

1995-96 21.43

1996-97 22.12

1997-98 22.63

1998-99 23.15

1999-2000 25.01

2000-01 26.87

2001-02 27.350

2002-03 28.897

2003-04 30.328

2004-05 33.354

2005-06 (Apr-May) 4.957


(Source: Ministry of Steel)

Additional Capacity Creation in Private Sector Since 1991

According to Ministry of Steel, following the de-licensing of Indian Iron and Steel Industry and the
steps taken for creation of additional capacity in the private sector, 19 projects involving a total
investment of Rs. 30,835 crores equivalent to a capacity of 13 million tonnes per annum (approx.)
have already been cleared by Financial Institutions and are in various stages of implementation.

Duties and levies on Iron & Steel:

GoI started SDF LEVY for funding modernization, expansion and development of steel sector for
supporting:
1) Capital expenditure for modernization, rehabilitation, diversification, renewal & replacement of
integrated steel plants.
2) Rebates to SSI Corporations
3) Research & Development
4) Expenditure on ERU of JPC
However, SDF LEVY was abolished on 21 April, 1994. Cabinet decided that corpus could be recycled
for loans to Main producers. Interest on loans to Main Producers be set aside for promotion of R&D on
steel etc. An Empowered Committee has been set up to guide the R & D effort in this sector.

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AML STEEL LIMITED

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

 During the last five years customs duty on the items falling under Chapter 72 has been
reduced sharply.
 The customs duty on non-alloy steel and alloy steel has been brought down to the level of 5%
and 15% respectively in 2004-05.
 In the Union Budget 2005-06 customs duty on alloy steel has been further brought down to
10%.
 Currently the customs duty on prime non-alloy steel and prime alloy steel is 5% and 10%
respectively.
 The peak rate of customs duty on Chapter 72 items was brought down from 40% to 20% w.e.f.
1 January, 2005, as a result the customs duty on seconds and defectives also stands reduced
from 40% to 20%. In the Union Budget 2003-04 customs duty on refractory and refractory
making raw materials have also been reduced to 10%.
Some of the other changes made during the last one year in the structure of customs duty on items
falling under Chapter 72 are as follows:

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

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

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

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

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AML STEEL LIMITED

Operating profits increased as a combined result of higher topline. However, operating margin
remained more or less steady. The rise in input costs mitigated any benefit arising out of higher
realizations. In the 9 months of 2004-05, average sponge iron prices rose by 47% over the average
prices of the corresponding period in 2003-04. Currently, sponge iron prices are ruling at around Rs
12,000 per tonne.

In first 9 months of 2004-05, average prices were almost 47% higher than the levels in the
corresponding period of 2003-04, due to high input costs and strong demand. However in June 2004,
prices slipped due to increase in supply and fall in scrap prices.

Sponge iron prices are linked to international scrap prices, as scrap is a close substitute to sponge iron.
Due to the explosion at Bhushan Steel & Strips Ltd in October 2004, the GoI issued a number of
directives to reduce the risk of hazardous metal scrap entering the country. The DGFT changed the
import policy of ferrous metals and the customs department has been authorised inspect 100%
shipments of metal scrap. Consequently, scrap imports fell, leading to acute scarcity of scrap in the
domestic market. At the same time, international scrap prices continued their uptrend. Thus, high
demand and increasing scrap prices resulted in the trends of sponge iron prices.

TRENDS IN SPONGE IRON AND SCRAP PRICES

(Source: CRIS INFAC)

In India, where sponge iron is available in sufficient quantity and scrap needs to be imported, domestic
sponge iron prices tend to move in line with the landed cost of scrap as is evident in the graph above.
India has abundant reserves of high quality iron ore, limestone and coal, which are the main raw
materials in the manufacture of steel. The cheap labour available in India provides Indian steel
companies with a major cost advantage. It is these advantages that have helped make TISCO the
second lowest cost producer of steel in the world. Indian steel has proved itself in terms of quality too.
But these advantages are not reflected in the bottomline of steel companies. One of the major reasons
for this is the huge interest cost that the companies have to bear. Another area of concern for the
domestic steel industry is the high cost of power in the country.

Keeping in view the above factors, researchers and planners do not expect indigenous availability of
scrap to exceed 4.0 to 4.5 million tonnes per year over the next few years.

Further, with increase in the production of Induction Furnace (IF) / Electric Arc Furnace (EAF) steel
and gradual decrease in the quantity of traded scrap, it is difficult to envisage more than 1.5 to 2.5
million tonnes being imported to India on regular basis in the near future.

Key future growth drivers

1. Higher infrastructure spending: It is an indisputable fact that the infrastructure situation in


India is poor. If the Indian economy has to maintain its growth rates, the infrastructure
situation has definitely got to improve. Spending on infrastructure will definitely lead to a
higher demand for steel.

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AML STEEL LIMITED

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

34.6
35
32.5
30.7
29.2
30 28
Manufacturing Others
25% 19%
25 Consumer
CAGR – 6.6%
durables
5%
Million tons

20

15 13

Construction
Infrastructure
10 19%
7.5 Automotive 25%
5.1 7%
5
2.4
1.1

0
India’s domestic steel demand
1950 1960 1970 1980 1990 2000 2001 2002 2003 2004
Sponge Iron

( Source: Ministry of Steel)

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

Key Features

• India has emerged as the largest producer of sponge iron in the world. Fresh capacity addition
in India through gas-based route will be restricted by gas availability.
• Sponge iron, a substitute for scrap, is the reduced form of iron ore with an iron content of 83-
92%. It can be prepared by using two alternative technologies viz. coal based and gas based.
• Coal based plants are of smaller size (typically 0.1mn tonnes), require low capital investment
and use iron ore lumps as raw materials. Its output is in granular or lump form called sponge
iron or direct reduced iron (DRI).
• Gas based plants are of large sizes (typically 1mn tonnes), require higher capital investment,
use iron ore and pellets blend as raw materials and natural gas as reductant. If the output is
briquetted, then it is called hot briquetted iron (HBI). Its output is of consistent and high
quality.

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

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AML STEEL LIMITED

(Source: CRIS INFAC)

According to CRIS INFAC, industry would remain healthy even after decline in industry margins.
However caution should be exercised while lending to new capacities, as the availability of raw
material may turn out to be a cause for concern for the new capacities. Procurement of raw material at
higher costs would hamper the profitability of the players.

The profitability of sponge iron manufacturers remains highly dependent on the availability and prices
of key input - Iron ore and coal

Sponge Iron demand – supply

The industry has witnessed significant growth in capacities in 2004-05. According to CRIS INFAC the
coal-based sponge iron capacity will grow by around 2.5 million tonnes in 2005-06 as the entry barriers
in the sponge iron industry are very low due to low capital requirement and low gestation period.

It is seen that the demand of Sponge iron is growing at around 20 percent. Sponge iron demand (for
coal based units) has increased at a CAGR of 21 percent. The drivers of demand for Sponge iron is
steel production through the induction furnace (IF)/electric arch furnace (EAF) route.
Steel manufacturers use sponge iron with scrap as a charge mix in IF/EAF. In EAF/IF the ideal mix of
sponge iron and scrap is in the ratio 60:40. But this ratio keeps changing as per the availability and
prices of scrap.

Factors driving the demand of sponge iron are

• Growth in steel production


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

• Continued substitution demand for scrap

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AML STEEL LIMITED

(Source: CRIS INFAC)

In addition to domestic industry fundamentals, buoyant scrap prices will also yield support to sponge
iron prices as sponge iron being a substitute to scrap, a strong linkage can be observed in scrap and
sponge iron prices.

The New Industrial Policy Regime


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

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AML STEEL LIMITED

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

Key Features

• Hot metal from blast furnace is cooled and solidified to make pig iron. Its quality is
determined by inter alia, percentage of impurities like phosphorus, sulphur etc.,
• Pig iron is mainly used for manufacturing iron castings i.e. the foundry industry (pumps, pipe
fittings, railway castings, gearbox, engine block, cylinder head, etc).
• Pig iron can partially replace scrap or sponge iron in the production of steel through electric
arc furnace (EAF) route. Many producers are using about 10% pig iron in the charge mix.
• With the recession in the automobile industry, the castings units started performing poorly.
Capacity addition also ran ahead of demand growth and integrated players like SAIL and
RINL continued to produce and sell pig iron. Players like Malavika Steel and Usha Ispat also
have been selling pig iron. Hence, the pig iron industry’s performance has been adversely
affected.
• With the collapse in world scrap prices, pig iron prices also declined, which further affected
the profitability and viability of a large number of plants. Presently many units are making
losses.
The Production figures for pig iron and finished carbon steel for the last 4 years is given below:

(in million tonnes)


Category 2001-02 2002-03 2003-04 2004-05 2005-06 (Prov.)
(Prov.) (April-July, 05)
Pig Iron 4.08 5.28 3.764 3.171 1.230
Finished Carbon Steel 30.63 33.67 36.957 38.385 12.575
(Source: JPC)

The business of the Company can be understood better by having a bird’s eye view on the
manufacturing processes and current trends followed by Industry at large. Selection of suitable
production process and the capacity of the production units form the nucleus around which the basic
concept of a plant is developed. The selection of the process takes into account factors like type of
product, availability of local raw material, process status, specific energy consumption, level of energy
required, environment, pollution etc.

Sponge Iron Manufacturing Process

Sponge iron is the product created when iron ore is reduced to metallic iron, usually with carbon (e.g.,
charcoal), at temperatures below the melting point of iron. This is also known as Direct Reduced Iron
(DRI), it is a quality metallic product. Hot Briquetted Iron (HBI) is a denser and compacted form of
DRI designed for ease of shipping, handling and storage. Sponge iron is a substitute of scrap upto 70%,
used in electric arc furnaces (EAF), induction furnaces and basic oxygen furnaces.

There are two alternative methodologies:

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

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

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AML STEEL LIMITED

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

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

The production of Sponge Iron units is

Category 2001-02 2002-03 2003-04 2004-05


Apr-Dec. ‘04
Total Reported 5443.00 6908.40 7287.30 6030.00
Total Estimated - - 798.10 1170.00
Grand Total 5443.00 6908.40 8085.40 7200.00
(Source: Ministry of Steel)

Benefits of Using DRI in EAFs

a) Use of DRI in the charge – mix


The use of DRI in the charge – mix in an EAF process brings about a remarkable reduction of
impurities such as sulphur and phosphorus. The dilution of the charge-mix decreases the refining
requirements, which result in the simplification of the metallurgical operation inside the furnace and in
crease the furnace productivity.

b) Continuous feeding of DRI


Continuous feeding of DRI results in achieving power level higher than 100% scrap charge with
similar electrical settings in the EAF. Due to the heterogeneous nature of scrap and continuously
varying arc length between the electrode and scrap leads to wide fluctuations in the melting scrap. Such
arc fluctuations reduce the effective power input.

c) Hot charging of DRI


Hot charging of DRI is an effective means of lowering the cost per metric tonne of liquid steel
produced because of the reduction of power and electrode consumption.
In addition to power consumption reduction and savings thereof, hot charging of DRI increases the
EAF productivity for a melt shop designed to charge cold DRI.

Other Benefits

(i) Lower Electrode Consumption


The use of DRI vis-à-vis scrap helps lower electrode consumption due to the following reasons:
• Scrap collapse results in increased breakage, which is much less in case of DRI charge.

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AML STEEL LIMITED

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

(ii) Lower Oxygen Consumption


• The need for oxygen in scrap cutting is obviated
• The oxygen input in DRI is associated with unreduced oxides
• The unreduced iron oxide in DRI is sufficient to provide the slag requirements for iron oxide.

(iii) Reduction in lime consumption by using lime or dolomite bonded pellets for DRI production, the
requirements for lime addition as a fluxing material can be reduced to large extent.

(iv) Lower refractory consumption maintaining a deep foamy slag during continuous feeding of DRI
can minimize arc radiation and the foamy slag also increase thermal efficiency as compared to all
scrap charges.

Balancing the feeding rate with power input and raising the bath temperature towards the end of the
melting stage with decreased feeding rate reduce the refractory consumption. Addition of MgO
improves the slag basicity control and reduces the intensity of slag line attack.

In the last 20 years coal-based sponge iron industry has made remarkable growth. At present there are
about 101 coal-based sponge iron plants operating in the country. In 2003-04, coal-based plants had a
share of about 50.8% in the total production of sponge iron in India. More than 55% of these plants are
mini sponge iron units having an annual capacity up to 30-35 tonnes per year.
Due to high price of natural gas and its inadequate supply, the gas-based projects are finding
difficulties to generate sufficient margin. Setting up of new gas – based projects has now become a
remote possibility.

Some of the key innovations in the coal-based technology are mentioned below:

(a) Capital requirement reduced

Up to 1998, nearly 80% of the equipment was being imported. Presently for a 120,000 tpy module,
100% indigenous equipment is available and for a 150,000 tpy module only the kiln tyres and support
roller are imported. After 1998 the capital expenses related cost has, thus, been reduced from Rs. 75.
crores to Rs. 40 crores for a 120,000 tpy module while the same for a 150,000 tpy module has come
down from Rs. 110 crores to Rs. 60 crores.

(b) Raw materials

The main raw materials required for a coal-based plant are iron ore, suitable coal, dolomite and power.

(i) Iron Ore – Iron ore with a Fe-content of 62-66% (hematite) is used. Earlier, the ore size was used at
5.20 mm and was washed in a scrubber. But at present 5-18 mm size ore are used as a feed for large
kiln without scrubbing and / or washing. This led to the reduction of DRI consumption from 1.6 to 1.5
Mt per tonne of hot metal.
Production and dispatches of iron ore

Year/Period Production Dispatches


Quantity Value Total For Internal For Exports
(MT) (Rs. in Crores) (MT) Consumption (MT)
(MT)
2002-2003 99.10 2964.86 102.60 56.60 46.00

2003- 120.60 3698.74 120.40 71.60 48.80


2004(P)
2004- 140.20 5379.56 136.20 79.60 56.60
2005(E)
(P): Provisional (E): Estimated (MT): Million Tonnes (Source: Ministry of Steel)

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AML STEEL LIMITED

(ii) Coal- Due to non-availability of ‘B’ grade coal from Coal India, presently ‘C’ and ‘D’ grades coal
are being used. The industry has successfully adopted measures to utilize these grades through better
process control and the cost has been reduced by about 20-30% as compared to ‘B’ grade coal used
earlier.

(iii) Dolomite – Earlier dolomite of 1-4 mm size was being used. At present, the use of 4-8 mm size
dolomite has reduced the consumption by about 50% by minimizing a significant loss of dolerite fines
through waste gases.

(iv) Power - Previously, the power consumption per tonne of sponge iron produced was about 110-130
units. But with the advent of dry gas cleaning system through electro-static precipitator, programmable
logic operator drivers and computer control, the power consumption has been reduced to 80-90 units
per tonne of sponge iron produced. All the above innovations have resulted in a better capacity
utilization from 85-90% to over 100% in the well-established plants.

Manufacturing Process of Steel Billets

 Raw Material Feeding System


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

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

 Furnace Feeding System and Melting of the raw material


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

 Hot Metal Handling System


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

 Continuous Casting
A refractory/cold board lined tundish, mounted on tundish car will be moved from the reserve
position to the casting position. Prior to the start of the casting operation, the dummy bars will be
introduced into the mould. The gap between the dummy bar head and mould walls will be sealed
with asbestos chords and small pieces of steel scraps will be placed over the dummy bar head for
chilling of initial metal. Water supply to mould, secondary cooling zone and machine cooling will
be switched on at this stage. When the liquid steel level in the tundish reaches a predetermined
level, the tundish nozzles will be opened. When the metal level in the mould reaches about 100-
150 mm from its top the drive of the mould oscillating mechanism as well as withdrawal and
straightening unit will be switched on. The withdrawal of dummy bar begins at the minimum
speed and is gradually increased to normal casting speed within a few minutes. The mould will be
lubricated with liquid lubricant. During casting operation, the metal level in the mould will be
maintained within predetermined limits by adjusting flow of metal into the mould or by the
withdrawal speed.

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

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AML STEEL LIMITED

spray nozzles. The solidified billets will be guided through withdrawal and straightening unit before
entering the gas cutting zone.

The dummy bar will be separated from the billet by gas cutting and will be stored till its introduction is
required for start of the next heat. The cast billet will be cut to the predetermined length by oxy-
acetylene gas cutting torches. The sized billets will be delivered to the cooling bed through run out
roller table and cross transfer mechanism.
The billets will be marked on cooling bed for identification/tracking.

The cast billets will be stored in the billet bay. The conditioning facilities have also been envisaged in
this bay. During an emergency, the casting operation can continue and the overflow of metal from the
tundish will be received into a slag box through the tundish spout and the overflow launder. In case the
casting operation has to be stopped, the ladle shall be lifted from the ladle stand and the liquid metal
inside shall be poured back into the induction furnace. For chemical analysis of liquid steel, the
samples will be taken from the ladle and sent to the laboratory. The samples will also be cut from cast
billets and sent to the laboratory for macro etching, sulphur prints and for determining other quality
parameters. After the liquid steel in the ladle is emptied, the ladle-handling crane will remove it. The
slag from the ladle will be poured into a slag pot kept at the ground level in the ladle handling bay and
the empty ladle will be sent to ladle preparation area. At the end of casting, the tundish will be shifted
to the reserve position for drainage of remaining slag and metal in it. The empty tundish will be lifted
by the crane and transferred to the tundish preparation area where necessary facilities for tundish
tilting, cooling, lining, drying etc., will be provided.

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AML STEEL LIMITED

BUSINESS OVERVIEW

Overview

We are one of the key players based in South India and derive our revenue from manufacturing and
trading in the steel intermediaries segment. Mr. Ashok Agarwal and his associates promoted our
Company on 16 April, 1993 in order to enter into the area of manufacturing and marketing of Video
Cassettes. We started with the acquisition of M/s. Trans-Asia Exports, which manufactured Video
Cassettes, in the year 1993. We ventured into production of PVC Pipes in the year 1995 by establishing
a PVC Pipe manufacturing unit at Sipcot Industrial Complex, Gummidipoondi, Tamil Nadu.

We diversified into the Steel Industry with the establishment of a Mild Steel Ingots manufacturing
factory at Pondicherry in the year 1998. The operational activities of manufacturing of the PVC Pipes
were in full swing till the year 2000; we later decided to concentrate fully in Mild Steel (MS). We not
only integrated backward trading in Mild Steel (MS) Scraps in the year 2000, but also acquired a
company called Maruti Steels Private Limited in Colombo, Sri Lanka in October 2002 facilitated with
MSI manufacturing plant with a re-rolling mill. Subsequently in the year 2004 we renamed it as Ashok
Steel Industries Private Limited (ASIPL).

We have acquired two Steel plants in Karaikal through our wholly owned subsidiary Ankit Ispat
Private Limited (AIPL), incorporated on 13 August, 2003 with the main objective of manufacturing
and trading in ferrous and non-ferrous metals. We are in continuous revival of both the technology and
management processes to reduce costs, increase productivity and remain globally competitive. Our
existing plants enjoy infrastructural advantages due to good inland and waterway connectivity and
access to power and water in abundance.

AML Steel Limited and its Subsidiaries

Name Year of Commercial Products Location Current Capacity


Operation
AML Steel Limited May 1998 MSI Pondicherry 45,000 TPA
Ankit Ispat Private August 2003 MSI Pondicherry 27,600 TPA
Limited
Ashok Steel Industries October 2002 MSI, Sri Lanka 60,000 TPA
Private Limited Wire Rods
AML Steel & Power Proposed in Sponge Iron Jharkhand Proposed capacity
Limited November 2006 and Steel 1,10,000 TPA of Sponge
Billets Iron & 42000 TPA of
Steel Billets

Our Key Business Strengths and Achievements

Track record of operating steel plants

We have an experience of over 8 years in production of steel products, operation and maintenance of
three steel plants with a total installed capacity of 1,32,600 TPA.

Long Term Mining Leases

The Ministry of Mines, GoI has agreed to the grant of iron ore-mining lease for the Project for a period
of 20 years. We have also made an application to Ministry of Coal with the support of Government of
Jharkhand for allotment of Coal mining lease.

Quality Assurance

We employ best manufacturing techniques so that quality is maintained right from the raw material
stage to processing to finished products. All finished products are tested through our Quality Assurance
lab and only when products go through our stringent quality norms they are dispatched to our valued
customers.

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AML STEEL LIMITED

Project Assessment

We have initiated the Rapid Environment Impact Assessment for Iron Ore Project and Environment
Management Plan for the Project.

Government support

Ministry of Steel is extending all possible support, as detailed below, for the development of Iron and
Steel Sector in the country:

a) The Ministry is providing linkage for raw materials, rail movement clearance etc. for new plants and
expansion of existing ones, wherever applied for.

There are two linkage committees, viz.,


- Linkage Committee for finalizing and reviewing the linkage of coal as well as iron ore supply to the
Sponge Iron Plants set up/being set up in the country; and
- Linkage Committee for finalizing and reviewing the linkage of coal as well as Iron Ore supply to the
Pig Iron plants, new steel plants and coke oven setup/ being set up in the country.

b) The Ministry has encouraged the setting up of "Institute for Steel Development and Growth
(INSDAG)" in Calcutta in August 1996. The leading steel producers in the country are members of this
Institute, which has been set up with the objective of promoting, developing and propagating the proper
and effective use of steel and increasing intensity of steel usage particularly in the construction sector
and in rural and semi urban areas.

c) In order to resolve the problems faced by existing & new steel plants & to assist major steel plants
being implemented, GoI has set up a Project Coordination Group under the Chairmanship of Steel
Minister

Competent and committed workforce


We have a highly competent and committed workforce. For a detailed profile of our key managerial
personnel, refer to the paragraph on Key Managerial Personnel in the section titled “Our Management”
on page no. [●] of the DRHP.

Our Strategy

We diversified into steel making in the year 1997 when the first steel project was conceived to be put
up in Pondicherry and since then steel has become the core business for the group. Pondicherry plant
was commissioned in the year 1998 and since then the business has been growing rapidly.

We capitalized on opportunities for expansion through acquisition of M/s Maruthi Steel Pvt. Ltd., Sri
Lanka in the year 2002 and two steel plants in Karaikal, India in the year 2003.

In line with the quest for growth we have embarked upon a Integrated Steel Project in Jharkhand
situated in Eastern part of India where there are enormous deposits of iron ore and coal, both of which
are essential raw materials for steel making. There is also a logistics advantage of setting up a steel
plant in Eastern part of India as against locations in the rest of the country as evident from the fact that
for every 1 tonne of steel produced there needs to be a movement of 3.5 tonnes of raw materials.

Keeping in view the importance of price stability in iron ore supplies, we have sought to procure an
iron ore mine situated fairly closer to the proposed Project site on a long-term lease. We have made an
application to Ministry of Coal with the support of Ministry of Jharkhand for allotment of captive
coalmine. To maximize the value chain we also plan to install a power plant for captive consumption.

We are constantly looking at various opportunities available for business expansion through the mode
of acquisitions. Having gained the experience of successful acquisition of steel plants we are open for
opportunities of acquiring similar plants in India and abroad.

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AML STEEL LIMITED

By capacity expansion

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

By further improvising the operating performance

We intend to improve the availability and plant load factor and reduce the operating costs by regular
maintenance and thereby increased efficiency. We further intend to implement advanced maintenance
practices. We believe that our focus on higher plant availability and maintenance will increase our
useful economic life and operating performance.

By securing raw material supply

The Ministry of Mines, GoI has agreed for the grant of an iron ore-mining lease for a period of 20 years
and we have also made an application to the Ministry of Coal for granting us coal-mining lease.

Our Business Operations

We are presently operating three steel plants with a total installed capacity of 1,32,600 TPA. Our main
focus is on mild steel ingots and wire rods. Mild steel ingots is intermediate product for steel re-rolling
mills, which produce various long products such as angles, channels, bars, rails, etc. which has got
applications in civil and engineering construction for housing as well as infrastructure sector.

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AML STEEL LIMITED

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

Note: The map herein above is solely for illustrative purposes and does not claim to have political or
geographical accuracy.

Our Operating Results: A Snapshot

The details of capacity utilization for our existing steel plants are as follows:

2002-03 2003-04 2004-05


PONDICHERRY PLANT
Licensed Capacity (Tonnes) 45000 45000 45000
Installed Capacity (Tonnes) 45000 45000 45000
Production (Tonnes) 20824 17363 16284
Capacity Utilisation (in %) 46.28 38.58 36.19

KARAIKAL PLANT
Licensed Capacity (Tonnes) 27600 27600 27600
Installed Capacity (Tonnes) 27600 27600 27600

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AML STEEL LIMITED

Production (Tonnes) - 5650 14247


Capacity Utilisation (in %) - 20.48 51.62

SRI LANKA PLANT


Licensed Capacity (Tonnes) 60,000 60,000 60,000
Installed Capacity (Tonnes) 60,000 60,000 60,000
Production (Tonnes) 3247 9438 12956
Capacity Utilisation (in %) 5.41 15.73 21.59

Manufacturing process at our existing plants

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

The basic raw material required for manufacture of steel ingots is Steel Scrap. Initially the Steel Scrap
is processed in the scrap yard for getting proper size. Then the processed scrap is melted in the
Induction Furnace for getting Liquid Steel. For getting the final product, the Steel is poured into the
Ingot Moulds and stripped after Cooling.

The plant and machineries that are being used in these plants are listed below:
S.no Machine type Quantity*
1 30 Tonne Electric Weigh Bridge 1
2 Scrap Storage and processing yard --
3 Induction Furnace with Twin Crucible 2
4 Capacitor Bank 2
5 Pouring Bay Crane of 10 tonne 1
capacity
6 Finishing Bay of 10 Tonne capacity 1
7 Mould Preparation Yard of 20m2 area --
8 Mould Cooling Yard of 20m2area --
9 Finishing Yard --
* Indicates the number installed in each of the two plants.

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AML STEEL LIMITED

Sri Lanka plant

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

In the plant, the finished product is Wire Rod meant for various construction activities. Initially Steel
Scraps after processing is fed into the Induction Furnace for making Liquid Steel. This liquid is poured
into Ingot Mould for obtaining Ingots. Thus produced Ingot is heated in the Reheating Furnace and
rolled in the Rolling Stands for obtaining the Wire Rods as the final product.

The plant and machineries that are being used for production in the Sri Lanka Plant are as follows:

For Steel Metal Shop


S.no Machine type Quantity
1 Scrap and processing yard --
2 Induction Furnace with Twin Crucibles 1
2 tonne capacity
3 Capacitor Bank --
4 Pouring Bay Crane 10 Tonne capacity 2
5 Mould Preparation Yard 20m2 area --
6 Mould Cooling Yard 20m2area --

For Steel Rolling Mills


S.no Machine type Quantity
1 Reheating Furnace 12 Tonnes capacity 1
2 300mm Roughing group of mills 1
3 Roughing Rolling Stands 4
4 200mm Finishing group of mills 1
5 Stands 4
6 Rotary Shear Machine 2
7 Cooling Yard --
8 Finishing & Despatching Area 4

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AML STEEL LIMITED

Raw materials

The main raw materials required for manufacturing MSI are Sponge Iron, Pig Iron, Scrap and Iron Ore;
these requirements are met by purchases from open market. Some of our suppliers who have been
regularly supplying us raw materials for the last few years are as follows:

India Overseas
Sponge Iron (I) Ltd Overseas Ventures Pte Ltd., Singapore
Ashirwad Steel SIMS Group Ltd., Australia
Kanishk Steel Ltd Hugo Neu Company, USA
Venkateswara Sponge Iron Ltd EMR Ltd., UK, YLS Steel, Singapore
HKT Mining, Sonal Vyapar Ltd Donold Trading Pvt Ltd., Singapore
Kamakshi Steels CMI Celrad Metal Industrial Ltd., Singapore
Goyal Ispat Ltd Beriak & Parnters, Australia

Long-term Power Arrangements

We have signed agreements with respective Electricity Boards where our plants are situated, as a result
of which there is a continued supply of power in requisite load.

Environmental Compliances

We conduct our business strictly in accordance with the environmental policy and save as otherwise
stated in the section titled “Licences and Approvals” on page no.[●] of the DRHP. All our steel plants
are currently in compliance with the applicable environmental regulations. Strict observations of
control measures in the plant are taken to avoid venomous effects on the environment.

Human Resources

Our philosophy of holistic human resource management has led to the combination of an efficient and
enterprising set of individuals with unified goals and a missionary zeal. We encourage qualification
enhancement and self-management and have focused in-house training facilities. We also provide
need-based skills development for the employees at reputed institutes. As a group we have a total
workforce of 1200 employees, out of which 60 are in Executive Cadre. Our plant employees are
covered by ESI and hence are entitled for medical coverage as per the rules of ESI. There are no labour
unions in any of our plants.

Trading Business

We are actively engaged in trading of steel products. The products, in which we trade, are:

1. T.M.T Bars
2. Tor Steel
3. M.S Rods
4. Steel Structurals
5. Steel Angles and Channels
6. H.R Plates
7. H.R & C.R Sheets

Steel prices are subject to price movements and we have positioned ourselves in the market to make the
best of the existing opportunity. We believe that we are enjoying a fairly good track record amongst our
customers and suppliers added with fairly comfortable financial position coupled with active support of
banks and other institutions.

For each consignment we sign specific sale-purchase contracts with the suppliers. The said sale-
purchase contracts inter alia specify the quantity, delivery terms, quality, price, payment schedule, etc.,
Price is denominated in INR with credit period of upto 180 days.

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AML STEEL LIMITED

The table below names a few of our major suppliers and customers.
Suppliers Customers
Tulsyan Nec Ltd O.P Steels Ltd
Vaibhav Mercantile Ltd. Prakash Steel Enterprises
Ponneri Steel Industries Sidharth Mercantile (P) Ltd
Shilp Priya Steels Bhagwan Das Metals Ltd
C.R Trading Company Sri Thirumala Steel Enterprises
Tulsyan Udyog Sri Agrasen Steel Industries
Balaji Drum Works Meenakshi Steel Corp

Proposed Integrated Steel Plant at Jharkhand

As a part of our expansion plan, we propose to set up an Integrated Steel Plant in the state of Jharkhand,
through our wholly owned subsidiary, AMLSPL. For this purpose, AMLSPL has signed an MoU dated 26
February, 2004 with the State Government of Jharkhand.

The Project is being set up near village Saldih in Saraikela District near Jamshedpur in Jharkhand state.
This gives the proximity to the sources of the main raw materials viz., Iron ore, Coal and Pig Iron. The Iron
ore mines are situated about 100 kms away and the coalmines are situated around 150 kms away from the
planned site.

The Ministry of Mines, GoI has agreed for the grant of an Iron Ore Mining Lease right in favour of
AMLSPL over an area of about 383.54 acres for a period of 20 years. An application has also been made to
the Ministry of Coal, with the support of Government of Jharkhand, for allotment of captive coal mining
blocks The Integrated Steel Plant will be facilitated with a power plant for captive consumption.

The proposed plant will have following production capacities:


Sl. No. Product Capacity
1 Sponge Iron 1,10,000 TPA
2 Steel Melt Shop producing Steel Billets 42,000 TPA
3 Captive power plant 9.6 MW
Steel billets manufacturing process is highly power intensive and in order to ensure the viability of the
Project, it is necessary to have cheap source of power. Also through the manufacturing process of sponge
iron a lot of waste heat is generated, which can in turn be used for generation of power. AMLSPL proposes
to generate 9.6 MW of power through this route. Average generation cost of power per unit (including
depreciation and interest cost) will be around Rs.1.25.

Locational advantages:

1. Nearness to Coal and Iron ore mines, which would reduce the operational cost.
2. Lignite and limestone are available in abundance in the Jharkand region
3. Nearness to the consumer, in case the end products are sold in market.
4. Availability of Excise benefit and Sales Tax benefit subject to fulfillment of the applicable conditions.

The proposed manufacturing process to be followed in Integrated Steel Plant can be depicted as follows:

1. Sponge Iron Lumps:

Iron Ore obtained from the mines is dressed to size by crushing and screening. This sized Iron is fed to
Sponge Iron Kiln along with Coal. The final product of this kiln is Sponge Iron Lumps.

2. Steel Making:

The Sponge Iron Lumps is charged into Induction Furnace and melted for getting Steel with various
additions as required.

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AML STEEL LIMITED

3. Billet Making:

The Steel melted in the Induction Furnace is poured in the continuous casters for getting the final product of
concast Billets.

4. Power Generation:

As a By-Product, gases generated in the Sponge Iron kilns are to be used for Electric Power Generation.
The power generated will be used in the Sponge Iron kilns, Induction Furnace etc. The power generated
will be utilized for captive consumption.

Captive Iron Ore Mine

The Ministry of Mines, GoI has agreed for grant of a mining lease to us over an area of 383.54 acres for
iron and manganese ore in Mauza district, West Singhbhum, Jharkhand for a period of 20 years

Coal Mining

As per the support extended by the Government of Jharkhand to recommend to the GoI for allotment of
suitable Coal Blocks for captive coal mining, as per existing provisions of the Mines & Minerals
(Development and Regulation) Act, in the MoU for the Integrated Steel Plant in Jharkhand, we have made
an application to Ministry of Coal on 12 September, 2005 for allotment of Captive Coal Mining Block.

Technical Know-How

AMLSPL has appointed M/s Popuri Engineering & Consultancy Services as a technical consultant for the
Sponge Iron project. The technical services required for the project includes know-how and basic
engineering, design, engineering and drawing, procurement assistance and inspection project monitoring,
etc. for the proposed project would be taken care by M/s Popuri Engineering & Consultancy Services.

The details of Performance guarantee are mentioned in “Brief Details of Other Agreements”. Please refer
page no. [●] of this DRHP.

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AML STEEL LIMITED

Advantages of sponge iron in steel making.

Technical Advantage

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

Advantages of sponge iron vis-à-vis ferrous scrap

• Enhanced cost control


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

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

• Shorter production time resulting in Increased productivity


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

• Simultaneous melting & refining with continuous charging


Sponge iron can be charged during refining due to its purity but scrap cannot be charged during
refining, as it requires removal of unwanted elements.

• Reduces power consumption


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

• Faster metallurgical reactions


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

• Uniform consumption of Electrodes


Electrode consumption while melting scrap is higher on two accounts.
o Due to frequent temperature variations due to different elements having different melting
temperatures in scrap.
o Due to breakage of electrodes due to uneven shape of scrap.
o Using sponge iron results in uniform consumption of Electrodes

• Due to less hot spots in the furnace less refractory consumption


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

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AML STEEL LIMITED

• More Precision of Steel composition


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

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

• High degree of Metallisation


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

Plant and Machinery


The details of the major plant and machinery required for the Integrated Steel Plant are given under the
section titled “Objects of the Issue”. Please refer page no.[●] of this DRHP.

Inputs for Production

Raw Materials

a. Raw Materials for sponge iron


Main raw materials required for producing sponge iron are iron ore, coal and dolomite. The consumption
norms of Raw Materials are given in the table below:

S. No. Raw Material Requirement Basis / Daily requirement (1) Total Requirement (2)
tonne of DRI
1. Iron Ore 1.6 tonne 502 176,000 TPA
2. Non-Coking Coal 1.2 tonne 377 132,000 TPA
3. Dolomite 30 kg 9.42 3,300 TPA
(Source: Company estimates)
Note:
(1) The daily quantities have been arrived at by considering 350 days yearly arrival and delivery of
raw materials
(2) Quantity includes moisture, sizing and handling losses.

i) Iron Ore
The iron ore to be used for making sponge iron should have high iron Fe contents (65%), low gangue and
phosphorous contents (below 0.04%) and good reducibility of the ore allowing the kiln operation at a relatively
lower temperature thereby reducing the instances of ring formation and improving the availability of the kiln
with better output rate. The ideal size of iron ore for making sponge iron is 5mm to 20mm. For producing one
tonne of sponge iron approximately 1.6 tonne of iron ore is required.
Ore transport and port costs accounts for 50% of the total costs of iron ore. Hence operationally, sponge iron
manufacturing units are located in places near iron ore mines. The rich recoverable iron ore are available in
abundance in the mines at Orissa and Jharkhand.

i) Non Coking Coal


Non Coking Coal (Coal) will be required for making sponge iron. The ash content in the coal should be
low. Also the moisture content should be low. In addition to these, care should be taken in selecting the
source of supply, the distance as well as continuous availability and transportation problem. Depending on
the source of procurement and the mode of transportation (rail or truck or both), transportation cost will
vary. For processing one tonne of sponge iron, approximately 1.2 tonne of non-coking coal is required and
the suitable size is 5mm to 20 mm.
Coal of desired quantity is indigenously available in abundance in the mines at Orissa and Jharkhand.

iii) Dolomite
The desirable dolomite for producing sponge iron should have high available base and low percentage loss.
The suitable size required for sponge iron production is 1mm to 4 mm and the requirement is about 30 kg
per tonne of sponge iron and is available in Jharkhand area in abundance.

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AML STEEL LIMITED

b. Raw Materials for Steel Metal Shop


The primary raw material required for the production of Steel metal shop is Sponge Iron and Pig Iron.

Raw Material Annual quantity


Sponge Iron (80% of charge mix) 39,070 TPA
Pig Iron (20% of charge mix) 8,750 TPA
(Source: Company estimates)

Availability of Raw Material


The requirement of Sponge Iron will be met in-house for the production of Steel Billets. The Ministry of
Mines, GoI has agreed for the grant of an iron ore-mining lease to us and we are also in the process of
acquiring coal-mining lease. Other raw material requirements for the production are to be met by purchases
from open market.

Manpower
Total manpower requirement for the proposed Project is estimated at 222 whose break-up is as given below.

Particulars Nos.
Managerial/Executives 11
Supervisor 37
Skilled 155
Semi-skilled 19
Total 222
(Source: Company estimates)

The recruitment program for the proposed project will be done depending on the progress made in
implementation of the Project. Recruitment of skilled/semiskilled manpower would be made locally and is
not expected to pose any problem since there are similar plants operating in the state. Engineers and
supervisors would also be recruited depending upon the requirement in the phases. The engineers, skilled
and semi-skilled workers may also be provided training by us if required.

Utilities

Power
The power consumption norm for sponge iron is 80 Kwh per tonne. The power consumption in steel melt
shop is 850 Kwh per tonne of steel. The waste heat generated in the sponge iron plant will be utilised for the
generation of power, as it would be more economical than the purchase of power from the State Electricity
Board. The entire power requirements would be met by the captive power plant of 9.6 MW capacity
envisaged in the project.

Water
The total water requirement for the Project is estimated as:

Sr. Project Plant make up Drinking and Total


No. water demand sanitation for plant (cu
(cu m/hr) personnel (cu m/hr) m/hr)
1 DR kiln 25 3 28
2 8MW Power plant 56 3 59
3 Others including green belt development, - 5 5
administration Building & colony
Total 92
(Source: Company estimates)
The water supply would be sourced from bore well and through intake well situated inside the plant
premises and from Saraikela River.

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AML STEEL LIMITED

Environmental Compliances
No objection certificate under section 25 and 26 of the Water (Prevention & Control of Pollution) Act, 1974
and under section 21 of the Air (Prevention & Control of Pollution) Act, 1981 from the Jharkhand State
Pollution Control Board have been received for the proposed project.

Details of Collaboration, performance guarantee or assistance in marketing


We have not entered into any technical collaboration agreements or any contracts for performance
guarantees and are not taking any assistance in marketing the products from any consultant or machine
supplier.

Proposed Capacity Utilization

Sponge iron
The proposed capacity utilization of sponge iron machinery is as follows:
(In Metric Tonnes)
Year 31 March, 2006 31 March, 2007 31 March, 2008 31 March, 2009
Installed Capacity 110000 110000 110000 110000
Capacity Utilization 70% 80% 90% 90%
Period Available 5 12 12 12
(Months)

Steel billets
The proposed capacity utilization of steel billets machinery is as follows:
(In Metric Tonnes)
Year 31 March, 2006 31 March, 2007 31 March, 2008 31 March, 2009
Installed Capacity 42000 42000 42000 42000
Capacity Utilization 70% 80% 90% 90%
Period Available 5 12 12 12
(Months)
(Source: SBI Caps Financial Appraisal Report)

Assumption:

Capacity utilization has been assumed on the basis of expected consumption/ demand of our existing plants,
which are within the standard utilization pattern of the industry.

Marketing and Selling Arrangement

We are setting up the Project for sponge iron and steel billets as a measure of backward integration for our
activities of manufacturing steel products. AMLSPL is expected to utilize 35% of manufactured sponge
iron for captive consumption, remaining would be sold in open market.

Sales and Marketing Strategy

Indian economy is quite robust and growing at a rapid pace. Consequent to upsurge in economic growth,
housing sector and infrastructure development like construction of roads, bridges & ports are bound to
expand leaps and bounds.

Since the general trend for domestic economy is quite upbeat in the medium term the domestic steel prices
are bound to be stable, if not increase further. In any case entire steel industry operates on spot prices and
therefore we are quite comfortable working with that kind of ruling spot prices.

We have been in the industry for the last 8 years and have built a broad network of customer base as a result
of which marketing and selling the production from the existing operations or from new project will be at
ease.

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AML STEEL LIMITED

Marketing Strategy for products of the Project

There are about 100 to 150 Steel Melting Units and about 200 Rolling mills in Jharkhand, Orissa,
Chattisgarh and West Bengal each of which on an average consume anywhere between 20,000 MTs to
40,000 MTs of sponge iron and 10,000 MTs to 30,000 MTs of steel billets per annum respectively.

This works out to less than 2% of the total regional demand, our production is negligible compared to the
level of demand in that region. Further, currently most of the players in the industry sell their products
based on prices prevailing on ‘Spot’ basis. We also propose to use it for captive consumption at our existing
plants.

Some of the companies who participate in the same market are as follows:

Source: CRIS INFAC

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AML STEEL LIMITED

Insurance

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

Name of Class of insurance Amount Description of Validity


Entity property
AMLSL
Standard Fire And Special Rs. 440.00 lakhs Building, plant and 26 November, 2006
Perils Policy machinery and stock.
Office Shield Policy Rs. 280.60 lakhs Fire & Allied Perils, 1 December, 2006
Burglary, Plate Glass
Extension, Electronic
Equipment, Employee
Dishonesty, Money in
Transit and in safe.
AIPL
Standard Fire And Special Rs. 320.00 lakhs Building, plant and 26 November, 2006
Perils Policy machinery and stock
ASIPL
Fire insurance SL Rs. 600.00 Stock – in – trade, 21 November, 2006
lakhs tools & equoments,
machinery & utensils,
electrical equipments,
transformer, building
including permanent
fixtures and fittings.
Burglary & Housebreaking SL Rs.100.00 Stock – in - trade 21 November, 2006
lakhs

Green Belts

The ongoing plantation and development of green belt in the existing steel plants and mines area and
plantation of trees in the industrial area undertaken by itself proves the commitment and contribution
towards maintaining a clean environment, protecting wild life and forestry. Green belts are being developed
around the mines of the AMLSPL. Besides above, intensive afforestation drive is proposed over reclaimed
mining areas with soil treatment measures. Plantation will also be carried out along roads, around waste
pumps, in township and steel plant, which will suppress dust and gaseous emissions from propagation to
surroundings.

Corporate Social Responsibility

We strongly believe that we are here to serve the society and therefore all efforts shall be taken that we
enrich the lives of the people by producing quality goods relevant to their every day lives and taking all
precautions so that we shall be law abiding corporate citizens but also ensure that we do not infringe or
harm the society in anyway while pursuing our business goals.

Property

Except as stated below, there are no properties proposed to be purchased or acquired, which are to be paid
for wholly out of the proceeds of the Issue offered for subscription by the Prospectus or the purchase or
acquisition of which has not been completed at the date of issue of the Prospectus, other than properties:

(i) the contract for the purchase or acquisition whereof was entered into in the ordinary course of the Issuer
Company’s business, the contract not being made in contemplation of the issue nor the issue in
consequence of the contract; or
(ii) as respects which the amount of the purchase money is not material

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AML STEEL LIMITED

Details of the freehold/leasehold property purchased/ taken on lease by AMLSPL in Saraikela


District, Jharkhand.

Freehold property

S. Date of Sale Seller Address of Seller Occupation Consideration Land Stamp


No. Deed of Vendor / (In Rs.) Area Value
Seller (In (In Rs.)
Acres)
1. 13.06.2005 S.K. Basir Village Baliposi, Cultivation. 31,200 0.26 1,900
within P.S. Seraikela,
District Seraikela –
Kharsawan.

2. 16.06.2005 Marium Bibi Village Masleva, Cultivation. 2,35,200 1.96 14,120


and others within P.S. Seraikela,
District Seraikela –
Kharsawan.

3. 27.09.2005 Gulshan Village Masleva, Household 6,000 0.05 1,080


Begum within P.S. Seraikela, Affairs
District Seraikela –
Kharsawan.
4. 27.09.2005 Yusuf Village Saldih, within Cultivation. 159600 1.33 9,600
P.S. Seraikela,
District Seraikela –
Kharsawan.
5. 16.06.2005 Guleshan Village Masleva, Not 4,83,600 4.03 29,150
Khatoon and within P.S. Seraikela, Mentioned.
others District Seraikela –
Kharsawan.

6. 06.09.2005 Smt. Mugari Village Masleva, Cultivation. 2,65,000 1.51 10,600


Ho and others within P.S. Seraikela,
District Seraikela –
Kharsawan.
7. 31.08.2005 Chakra Ho and Village Masleva, Cultivation. 1,67,400 0.93 6,700
others within P.S. Seraikela,
District Seraikela –
Kharsawan.
8. 29.08.2005 Nikhil Sardar Village Masleva, Cultivation. 3,13,000 1.80 12,520
and others within P.S. Seraikela,
District Seraikela –
Kharsawan.
9. 29.08.2005 Sanatan Singh Village Masleva, Cultivation 3,83,360 2.15 15,350
Paharia within P.S. Seraikela,
District Seraikela –
Kharsawan.
10. 30.08.2005 Sunita Ho and Village Masleva, Cultivation. 88,200 0.49 3,530
others within P.S. Seraikela,
District Seraikela –
Kharsawan.
11. 30.08.2005 Ramesh Village Masleva, Cultivation. 1,52,000 0.87 6,080
Melgandi within P.S. Seraikela,
District Seraikela –
Kharsawan.

12. 15.04.2005 Sheikh Nazir Village Masleva, Cultivation. 36,000 0.30 2,160
and others within P.S. Seraikela,

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AML STEEL LIMITED

District Seraikela –
Kharsawan.
13. 15.04.2005 Pada Lochan Village Ram Cultivation. 1,66,800 1.39 10,010
Mahato Jeevanpur, within
P.S. Seraikela,
District Seraikela –
Kharsawan.
14. 07.01.2005 Bipin Mahato Village Masleva, Cultivation. 3,31,200 2.76 16,560
and others within P.S. Seraikela,
District Seraikela –
Kharsawan.
15. 07.01.2005 Majendra Village Kolabria, Cultivation. 92,400 0.77 4,620
Mahato within P.S. Seraikela,
District Seraikela –
Kharsawan.
16. 07.01.2005 Mahabir Village Masleva, Cultivation. 69,600 0.58 3,500
Mahato within P.S. Seraikela,
District Seraikela –
Kharsawan.
17. 07.01.2005 Mochi Mahato Village Masleva, Cultivation. 3,79,200 3.16 19,030
within P.S. Seraikela,
District Seraikela –
Kharsawan.
18. 12.01.2005 Sushen Kumar Village Masleva, Cultivation 4,10,400 3.42 20,520
Mahato and within P.S. Seraikela,
Another District Seraikela –
Kharsawan.
19. 07.03.2005 Majendra Village Masleva, Cultivation. 94,800 0.79 4,750
Mahato within P.S. Seraikela,
District Seraikela –
Kharsawan.
20. 07.03.2005 Shishir Village Masleva, Cultivation. 1,06,800 0.89 5,350
Mahato and within P.S. Seraikela,
others District Seraikela –
Kharsawan.
21. 14.01.2005 Nirmal Village Masleva, Cultivation. 5,89,200 4.91 29,460
Mahato within P.S. Seraikela,
District Seraikela –
Kharsawan.
22. 19.04.2005 Smt. Dingala Village Masleva, Cultivation 1,20,000 1.00 6,800
Mahato within P.S. Seraikela,
District Seraikela –
Kharsawan.
23. 15.04.2005 Sheikh Habib Village Masleva, Cultivation. 2,66,400 2.22 16,000
and others within P.S. Seraikela,
District Seraikela –
Kharsawan.
24. 15.04.2005 Budeswar Village Masleva, Cultivation. 4,34,400 3.62 24,450
Mahato and within P.S. Seraikela,
others District Seraikela –
Kharsawan.
25. 13.04.2005 Zakir Hussain Village Masleva, Cultivation. 2,60,400 2.17 14,960
and others within P.S. Seraikela,
District Seraikela –
Kharsawan.
26. 13.05.2005 Madhu Village Masleva, Cultivation. 6,10,800 5.09 34,450
Mahato and within P.S. Seraikela,
others District Seraikela –
Kharsawan.

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AML STEEL LIMITED

27. 07.01.2005 Shahochari Village Masleva, Not 1,26,000 1.05 6,180


Tanti and within P.S. Seraikela, mentioned
others District Seraikela –
Kharsawan.
28. 07.03.2005 Smt. Kandari Village Masleva, Cultivation. 1,92,000 1.60 9,500
Mahato and within P.S. Seraikela,
others District Seraikela –
Kharsawan.
29. 07.01.2005 Anil Kumar Village Masleva, Cultivation. 6,38,400 5.32 31,600
Mahato and within P.S. Seraikela,
others District Seraikela –
Kharsawan.
30. 21.12.2005 Sona Ram HO Village Masleva, P.S. Cultivation. 5,38,200 2.99 21,530
and others. Seraikela, District:
Seraikela –
Kharsawan.
Total freehold 59.41
land
purchased
31. 07.07.2005 Government Village Masleva, P.S. Not Annual rent of 1.30 Nil
Lease Seraikela, District: applicable Rs. 13,572 and
Seraikela – Rs. 2,75,040
Kharsawan towards
security
deposit
Total Area 60.71 3,92,060
Total Sale 80,36,172
Consideration

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AML STEEL LIMITED

REGULATIONS AND POLICIES

There are several legislations, which apply to companies engaged in the steel industry in India and Sri
Lanka and to mining operations in India.

Under the provisions of various Central Government and State Government statutes / legislations, our
Company is required to obtain and regularly renew certain licences / registrations and / or to seek statutory
permissions to conduct our business and operations in India and Sri Lanka.

The various statutes under which material registrations/licences/consents/permissions are required to be


obtained by us are set out below:

1. Mines and Minerals (Development and Regulation) Act, 1957 and the rules framed thereunder.
2. The Mines Act, 1952 and the rules framed thereunder.
3. The Cess and Other Taxes on Minerals (Validation) Act, 1992.
4. Offshore Areas Mineral (Development and Regulation) Act, 2002.
5. Public Liability Insurance Act.
6. The Companies Act, 1956.
7. The Income-Tax Act, 1961.
8. The Central Excise Act, 1944.
9. The Customs and Excise Act, 1962.
10. The Central Sales Tax Act, 1956.
11. The Air (Prevention and Control of Pollution) Act, 1981.
12. The Water (Prevention and Control of Pollution) Act, 1974.
13. Environment (Protection) Act, 1986.
14. The Electricity Act, 2003.
15. The Industries Development and Regulations Act, 1951.
16. Contract Labour (Regulation) Act, 1970.
17. National Steel Policy issued by the Government of India in 2004.
18. The Employees Provident Fund Act, 1948.
19. Employees State Insurance Act, 1948.

The list set out above is by way of an illustration and is not an exhaustive list of all statutes applicable to the
Company’s operations.

In addition to the above, our Company is required to comply with various labour laws and the rules framed
thereunder.

The following regulations are applicable to the operations of ASIPL in Sri Lanka.

i) Employee Provident Act.


ii) Value Added Tax Act.
iii) Employee Trust Fund Act.
iv) Industries Promotion Act.
v) National Environmental Act.

Employee Provident Fund Act, Sri Lanka

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

All the contributions deposited in favour of Government with Central Bank of Sri Lanka as above shall
carry interest rate as prescribed by Government from time to time.

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AML STEEL LIMITED

If the total number of employees is less than 50 then Form C Return shall be filed at monthly intervals with
Government and if the total no of employees are more than 50 then Form C Return shall be filed with
Government once in six months.

Value Added Tax Act, Sri Lanka

All companies carrying on the business of either trading or manufacturing of any goods covered under this
Act after 1 August, 2002 shall be required to register under this Act.

The following are the rates of VAT applicable as on date:

Scrap --- 15%

Steel Products --- 15%

As per the above law all VAT paid on inputs for manufacture of final products are eligible to be offset
while paying VAT payable on the final products resulting in payment of net taxes only to the extent of
value addition by the manufacturer concerned.

In order to claim rebate on input taxes the manufacturer has to produce original VAT tax paid invoice and if
it is imported inputs then the manufacturer has to produce Custom Declaration Form as well as relevant
import invoices.

Necessary returns have to be filed quarterly giving details of input credits and final payment of taxes to the
revenue authorities of Government of Sri Lanka.

Employee Trust Fund Act, Sri Lanka

This is an Act passed by the Government to create compulsory savings on account of employees which can
be used at the age of retirement from employment.

As per the above law all employers are liable to pay 3% of the gross earnings of the employer towards
Employee Trust Fund, which is administered and monitored by a semi government body known as
Employee Trust Fund Board.

Every month a monthly return has to be filed confirming that necessary payment is made with Government
with full facts and figures.

Industry Promotion Act 1990, Sri Lanka

The above Act has been enacted to regulate industrial development. The main purpose of this Act is to
regulate capacities for production in various sectors. Before addition of new production facilities, the
government assesses whether the sector is already having enough capacity to meet the expected demand
both domestic and overseas.

As per the above Act all the new manufacturing undertakings have to register with Ministry of Industrial
Development and obtain a certificate before initiating further process to put up a capacity to produce the
relevant goods.

Any further additions to the existing capacities or any modifications to final product line shall be duly
intimated to the above Ministry and necessary modification be obtained by the manufacturers in time.

National Environment Act, 1980:

As per the above Act all the manufacturing undertakings have to make an application to Central
Environmental Agency based on which they shall be awarded a licence to manufacture indended goods
subject to certain conditions imposed on them.

The above agency shall, depending upon the nature of the manufacturing process involved, impose
conditions and limits up to which the noise levels, burning of solid wastes, disposing of solid waste in water

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AML STEEL LIMITED

bodies, efficiency of furnace, limit for emissions, limit for liquid effluent, etc., shall be maintained failing
which it shall be a violation of the licence conditions attracting penalties or even closure of plants.

No goods other than licenced under this Act can be manufactured in the licenced location. In addition to
that any expansions or installation of new machinery shall also have to permitted by the above Government
agency before commencement of new manufacturing process or through installation of expanded capacities.

For details of the aforementioned / registrations see the section titled ‘Licences and Approvals’ in this
DRHP beginning on page no.[●].

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AML STEEL LIMITED

HISTORY AND CERTAIN CORPORATE MATTERS

Overview

Our Company was incorporated on 16 April, 1993 under the Companies Act, 1956 as Ashok Magnetics
Limited and obtained a certificate of commencement of business on 24 May, 1993. The registered office of
our Company then situated at Raheja Complex, 834, Mount Road, Madras – 600 002 was shifted to the
present address at B –73, Sipcot Industrial Complex, Gummidipoondi – 601 201 with effect from 11
December, 1995. The name of the company was changed to AML Steel Limited on 1 August, 2005.

Promoted by Mr. Ashok Agarwal and his associates, we commenced our business operations in
manufacturing and marketing of video cassettes by acquiring the business of Trans-Asia Exports, in the
year 1993 and ventured into the production of PVC pipes in the year 1995.

We came out with a public issue of 7,60,000 Equity shares of Rs.10/- each at par aggregating to
Rs.76,00,000/- in the November 1995 and the Equity Shares of the Company are listed at MSE, DSE and
ASE.

We commenced operations in the Steel sector by setting up a Mild Steel (MS) Ingots manufacturing facility
at Pondicherry in the year 1998. Manufacturing of the PVC Pipes were in operation till the year 2000, when
it was considered to concentrate fully in MS Ingots. Our company disassociated with the business of
dealing with video cassettes and magnetic tapes in the year 2002 to have a better focus on steel business. As
part of our expansion plans, we acquired Maruti Steels Private Limited. Colombo, Sri Lanka, in October
2002 and subsequently renamed it as ‘Ashok Steel Industries Pvt. Ltd.’, (ASIPL). We also acquired two
steel manufacturing facilities in Karaikal, Tamil Nadu through our wholly owned subsidiary, Ankit Ispat
Private Limited (AIPL), which was incorporated in the year 2003.

We proposed to execute the Project for setting up of an Integrated Steel Plant through our subsidiary,
AMLSPL, incorporated in the year 2004.

Key events:

YEAR MAJOR MILESTONES


1993 • Entered into the Business of manufacturing and marketing of video cassettes by
acquiring the business of M/s. Trans Asia Exports.
1995 • Ventured into the production of PVC pipes by establishing a factory at Gummidipoondi,
Tamil Nadu.
• Came out with an Initial Public Offer of Equity Shares.
• Registered Office of the Company was shifted from Madras to Gummidipoondi.
1998 • Ventured into Steel by commissioning the first steel plant in Pondicherry for the
manufacturing of MS Ingots.
2002 • Acquired 100% stake in Maruthi Steel Private Ltd., Sri Lanka.
2003 • Incorporated Ankit Ispat Private Limited (AIPL), a wholly owned subsidiary.
• Ankit Ispat Private limited acquired assets of Elango Industries Limited and EGPK
Steels Limited.
2004. • AML Steel & Power Limited (AMLSPL) was incorporated.
• AMLSPL entered into a MoU with the State of Jharkhand for Integrated Steel Plant.
• The name of Maruthi Steel Private Limited was changed to Ashok Steel Industries
Private Limited (ASIPL).
2005 • Ministry of Mines, GoI agreed to the grant of a mining lease to AMLSPL a for iron and
manganese ore mines for a 20-year lease period.
• The name of the Company was changed to AML Steel Limited (AMLSL).

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AML STEEL LIMITED

Main Objects of the Company

The main objects contained in our Memorandum of Association are:

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

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AML STEEL LIMITED

The main objects clause, the objects incidental or ancillary to the main objects of our Memorandum of
Association enable us to undertake our existing activities and the activities for which the funds are being
raised through this Issue.

Since incorporation of the Company, the following changes have been made to the authorised capital:

Increase in authorised capital Date of Amendment


The authorized share Capital of the Company was increased from Rs. 50 lakhs 21 April, 1995
divided into 5,00,000 Equity Shares of Rs.10/- each to Rs. 3 crores divided into
30,00,000 Equity Shares of Rs. 10/- each.
The authorized share Capital of the Company was increased from Rs. 3 crores 15 June, 1995
divided into 30,00,000 Equity Shares of Rs.10/- each to Rs. 3.25 crores divided
into 32,50,000 Equity Shares of Rs. 10/- each.
The authorized share Capital of the Company was increased from Rs. 3.25 19 July, 2005
crores divided into 32,50,000 Equity Shares of Rs.10/- each to Rs. 30 crores
divided into 3,00,00,000 Equity Shares of Rs. 10/- each.

Apart from the above-mentioned alterations in the authorised capital of the Company, the following
alterations have been made in the object clauses of its Memorandum of Association

Amendment Date of Shareholders


Resolution
Alteration of the object Clause of the Memorandum of Association of the 02 September, 1994
Company by incorporating the Sub clauses 10, 11and 12 after sub clause 9 in
Item No. III C – other object Clause of the memorandum of Association.

10 To carry, on the business of manufacturers, dealers, importers, exporters,


and traders in rigid PVC Pipes, GI pipes, MS pipes, steel pipe, seamless pipes,
SAW pipes, copper pipes, brass pipe, cast iron pipe & Tubes and fittings of
PVC, Steel, Brass, Copper, cast iron rubber, polythene, aluminum stainless
steel and other materials, and machinery equipments, tools and tackles for the
manufactures of such items.
11. To carry on the business of manufacturers, buying and selling, export,
import and market in al kinds of plastic raw materials, plastics, plastic goods &
plastic scrape including plastic liners, fabrics and sacks of high density
polyethylene, polypropylene, low density polyethylene, synthetic resins and
compounds, ancillary and auxiliary materials and derivatives, intermediates
and compounds, ancillary and auxiliary materials and derivatives,
intermediates and compositions.
12. To undertake and execute any contracts, supply erection designing,
fabrication of any kinds of pump, pipes, pipe work, fittings, tubular structures,
pipe work systems and supply of engineering know how in relation to any of
the aforesaid objects and to carry on any ancillary or other work comprised in
such contracts.

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AML STEEL LIMITED

Alteration of the object Clause of the Memorandum of Association of the 15 June, 1995
Company by incorporating the Sub clauses 13 to 30 after sub clause 12 in Item
No. III C – other object Clause of the memorandum of Association.

13. To carry on the business as manufacturers, producers, dealers, stockist,


distributor, importer and exporter of Sponge Iron and Pig Iron and all other kind
of ferrous as well as non-ferrous metals, their alloys including iron and steel,
aluminium, brass, tin, nickel, raw steel, mild steel, special steel and stainless
steel, ferroualloy, nickel alloy, silicon alloy and to set up steel, furnaces and
continuous casting and hot and cold rolling mill plants for producing ferrous
and non-ferrous metals, alloy steels, ingots, billets, and all kinds and all sizes of
iron steel rerolled section i.e., Flats, Angles, Rounds, Squares, Rails, Joist,
Channels, Slabs Strips, Sheets, Plates, deformed bars, plan in and cold twisted
bars and shiftings.
14. To carry on all or any of the business of manufacturers, assemblers, fitters,
engineers, erectors, founders, smelters, refiners, maker, drawer, sinkers,
repairers, hire-purchase, dealers, import & export agents, representatives,
contractors and dealers of and in forgoing casting of steel, stainless and special
steel, alloys, coke and implements, dies jigs, steel pipe and tube fittings.
15. To carry on the business of hire purchase, finance or leasing of all consumer
durables, industrial and commercials properties, vehicles, machinery,
equipment, tool, instruments and other assets of any and all description.
16. To act as Merchant Bankers, Managers to Issue of Capital, Registrars and
Transfer Agents/Consultants for Shares, Debentures, Bonds, Fixed Deposits,
and other instruments and Securities and to carry on all activities related thereto.
17. To carry on the business of foreign exchange dealing, money changing
operations in foreign currency and such other activities as may be permitted
subject to Foreign Exchange Regulations Act, 1973 and any other applicable
laws and subject to Reserve Bank of India directives, if any, issued from time to
time.
18.To act as investment advisers to individuals or Company/Companies and to
provide advice on portfolio management or otherwise to corporations,
companies or individuals.
19. To carry on the business of travel agency and to act as tour agents and
contractors to facilitate traveling, and to provide conveniences of all kinds to
tourists and travelers.
20. To carry on the business of financing whether by way of making loans or
advances of factoring or securitising or otherwise to individuals and/or
industrial enterprises, and/or such other persons and such terms and conditions
as the Board may deem fit and expedient.
21. To carry on the business of investment and financial consultants, share and
finance brokers, giving guarantees, dealing in commercial paper, providing
custodial services, portfolio management, fund syndication, credit rating of
financial instruments and other similar activities in the nature of financial
intermediation or otherwise.
22. To carry on the business of manufacturers and/or sellers and/or dealers,
importers and exporters of various type of plastic materials, goods, pipe articles,
equipments, appliances, Tanks, Domestic as well as industrial,
made/manufactured from various molding powders and materials like polymers
and copolymers, shellac, resins (Synthetic and natural), polypropylene,
polyethylene, polyamides, polystyrene, polyvinyl, acrylic, acetate and alcohol
cellulose acetate and their similar thermo setting and thermoplastic, polymers
by process of moulding, thermoplastic, insulating extruding, calendaring,
laminating or producing by any other methods like vacuum forming, coating,
blowing spreading to make plastics articles, thermoplastic, thermoware,
insulated ware, including inter alia goods, articles, equipments, appliances and
thinks made in combination with all or any of the aforesaid and/or man-made
substance and whether can be used and/or applied in the form in which the same
is manufactured and/or electrically and/or by any other power.
23. To design, manufacture, sell, alter, import/export all types of equipments

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AML STEEL LIMITED

products and renewal energy devices connected with the generation and
distribution of power and energy through conventional and or non conventional
energy sources including the utilisation of solar and wind power besides other
natural resources.
24. To carry on business as traders, dealers, wholesalers, retailers, makers,
designers, combers, scourers, spinners, weavers, finishers, dyers and
manufacturers of readymade garments, yarn and fabrics of wool, cotton, jute,
silk, rayon, nylon, terylene and other natural, synthetic and/or fibrous
substances and/or manufacturers or materials from the waste realized from the
above mentioned products either on its own account or on commission and to
carry on business as drapers and dealers of furnishing fabrics in all its branches
as costumers, readymade dress and mantle makers, silk mercers, makers and
suppliers of clothing lingerie and trimmings of every kind, furriers, drapers,
haberdashers, milliners, hosiers, glovers, lace makers, feather dressers, felt
makers, dealers, in and manufacturers of yarn, fabrics and also to manufacture,
deal in or process natural starch and other sizing materials, substances of all
kinds and compounds and other substances, either basic or intermediate
required for the above mentioned product or products.
25. To carry on business as manufacturers or grinders, crushers, buyers, sellers,
distributors, importers exporters and makers, refiners, processors of cement and
minerals used for and in connection with cements.
26. To carry on business of spinning & weaving mills and of spinners, weavers,
bleachers, dyers, printers and Finishers of Cotton, Silk, Wool, Rayon, natural
and synthetic fibres and fibre substance of all kinds.
27. To buy, take on lease, or under a licence, concession, grant, or otherwise
acquire, in mines, in mining rights any land or other places and metalliferous
land and explore, work, export, develop turn to account the same to crush, win,
get, quarry, smelt, calcine, refine, dress, amalgamate, manipulate and mineral
substance of all kinds, and to carry on any other metallurgical operation which
may seem conductive to any of the objects of the Company.
28. To carry on business of manufacturers, suppliers, buyers, sellers, importers,
exporter, commission and consignment agent and dealers in Drip Irrigation
System, Sprinkler System & Green Houses.
29. To carry on the business of manufacturers, suppliers, importers, exporters
and dealers of Manual, Mechanical, Electrical and Electronic Toys and all
other type of Toys.
30. To carry on the business of farmers, growers, manufacturers, dealers,
brokers, traders, exporter, importer, stockiest, distributors, agents of any of any
of all of produce of agriculture including Teak Plantation, Floriculture, Agro-
forestry, tissue culture, bio-technology, horticulture, including all products and
things which are produced on grown, on earth, water, or in air either naturally or
otherwise.
Alteration of the name clause of the memorandum of Association of the 19 July, 2005
Company by changing the name from Ashok Magnetics limited to AML Steel
Limited. (Certificate of Change of name was issued by the RoC on 1 August,
2005)
Alteration of the object Clause of the Memorandum of Association of the 31 December, 2005
Company by incorporating the sub clauses 4 to 9 after the sub clause 3 in Item
No.111 A – Main object clause of the Memorandum of Association. (Resolution
passed through postal ballot process)

4. To carry on in India or elsewhere in any country or state or part of the world


the business of manufacturing, producing, altering, converting, processing,
treating, improving, manipulating, extruding, milling, slitting, cutting, casting,
forging, rolling and re-rolling of all shapes, sizes, varieties, specifications,
dimensions, descriptions and strength of iron and steel products including
sponge iron, pig iron, malleable iron, S.G.iron, iron ore, steel, and non ferrous
articles such as copper, brass gun metals, bell metals, aluminum bronzes, anti-
friction metals, zinc, lead, tin, plastic malleables, glass or any other ferrous

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AML STEEL LIMITED

articles, now in vogue or hereafter to be invented or discovered, hot rolled coil,


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

Subsidiary Companies
Our existing corporate structure is as under:

AML Steel Limited

Ankit Ispat AML Steel & Power Ashok Steel Industries


Private Limited Limited Private Limited
(100%) (100%) (100%)

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AML STEEL LIMITED

1. Ankit Ispat Private Limited (AIPL)

Incorporated as a private limited company on 13 August, 2003, AIPL is engaged in the business of
manufacturing, buying, selling, importing, exporting or otherwise dealing in iron, steel and non ferrous
articles. It has got two units for manufacturing mild steel ingots with a total installed capacity of 27,600
TPA.

Board of Directors

Mr. Ashok Agarwal, Mrs. Anita Agarwal, Mr. Poonam Chand Jangir, Mr.Ajay Agarwal, Mr. Ankit
Agarwal and Mr.Vinay Kishore Kasat constitute the Board of AIPL.

Financial Highlights
(Rs. in lakhs)
Particulars For the period For the year For the year
ended ended ended
31.12.2005 31.03.2005 31.03.2004
Total Income 2883.12 3037.69 993.90
Profit/Loss After Tax 175.92 87.69 10.66
EPS (Rs.) 14.32 5.35 0.65
Paid up Share Capital 163.84 163.84 163.84
Reserves and Surplus 10.65 98.35 10.65
NAV (Rs.) 26.65 15.90 10.54

Shareholding Pattern

AMLSL is holding 100% of the paid up capital of AIPL. The Shareholding Pattern of AIPL is as follows:

S No Name No. of Equity %


Shares
1. AML Steel Limited 16,38,385 100
2. Mr. Ashok Agarwal (nominee of AMLSL)* 1 --
3. Mrs. Anita Agarwal (nominee of AMLSL)* 1 --
4. Mr. Poonam Chand Jangir (nominee of AMLSL)* 1 --
5. Mr.Ajay Agarwal (nominee of AMLSL)* 1 --
Total 16,38,389 100

*The beneficial interest in and under such shares belongs exclusively to the Company.

2. AML Steel & Power Limited (AMLSPL)

AMLSPL was incorporated as a public limited company on 30 January, 2004 and obtained the certificate of
commencement of business on 12 February, 2004. The main object of AMLSPL is to engage in the
business of manufacturing and trading of iron and steel, generation, distribution and transmission of the
electrical power and mining of iron ore, coal and other minerals and metals.

Board of Directors

Mr. Ashok Agarwal, Mrs. Anita Agarwal, Mr. Poonam Chand Jangir and Mr.Ajay Agarwal constitute the
Board of AMLSPL.

Financial Highlights
(Rs. in lakhs)
Particulars For the For the year
period ended ended
31.12.2005 31.03.2005
Total Income -- --
Profit/Loss After Tax -- --
EPS (Rs.) -- --

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AML STEEL LIMITED

Paid up Share Capital 5.00 5.00


Reserves and Surplus 1.58 --
NAV (Rs.) 2907.50 106.82

Share Application money pending allotment as on 31 March, 2005 was Rs. 66.62 lakhs and as on
31 December, 2005 was Rs. 1522.72 lakhs.

Shareholding Pattern

AMLSL is holding 100% of the paid up capital of AMLSPL. The Shareholding Pattern of AMLSPL is as
follows:

S No Name No. of Equity %


Shares
1. AML Steel Limited 49,940 99.88
2. Mr. Ashok Agarwal (nominee of AMLSL)* 10 0.02
3. Mrs. Anita Agarwal (nominee of AMLSL)* 10 0.02
4. Mr. Poonam Chand Jangir (nominee of AMLSL)* 10 0.02
5. Mr.Ajay Agarwal (nominee of AMLSL)* 10 0.02
6. Mr. Kamal Kishore Bihani (nominee of AMLSL)* 10 0.02
7. Mr. Manoj Kumar (nominee of AMLSL)* 10 0.02
Total 50,000 100.00

*The beneficial interest in and under such shares belongs exclusively to the Company.

3. Ashok Steel Industries Private Limited, Sri Lanka (ASIPL)

ASIPL, originally incorporated on 25 June, 2001 as Maruthi Steel Private Limited, in Colombo, Sri Lanka,
was acquired by the AMLSL with effect from 10 October, 2002. ASIPL is a wholly owned subsidiary of
AMLSL. The name of the Company was changed to ASIPL with effect from 19 January, 2004. ASIPL has
a mild steel ingots plant and re-rolling mill with a total steel making capacity of 60,000 TPA.

Board of Directors

Mr. Ashok Agarwal, Mrs. Anita Agarwal and Mr. Sai Anantha Rama Krishna constitute the Board of
ASIPL.

Financial Highlights
(Rs. in lakhs)
Particulars For the For the year For the year For the period
period ended ended ended ended
31.12.2005 31.03.2005 31.03.2004 31.03.2003
Total Income 2360.29 1929.33 611.98 110.04
Profit/Loss After Tax 157.83 119.57 38.89 (50.45)
EPS (Rs.) 4.01 2.28 0.74 1.99
Paid up Share Capital 233.33 233.33 238.64 118.03
Reserves and Surplus 176.16 18.33 (102.04) (144.21)
NAV (Rs.) 7.29 4.28 2.08 2.84
* Share Application Money as on 31 March, 2003 is Rs.126.16 lakhs.

Shareholding Pattern

AMLSL holds 100% of the share capital of ASIPL.

Shareholders Agreements

There are no shareholders agreements entered into by the Company with any of its shareholders.

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AML STEEL LIMITED

Brief Details of Other Agreements

1. MoU between the Government of Jharkhand and AMLSPL dated 26 February, 2004.

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

• Sponge Iron – 15,40,000 TPA (15,40,000 TPA for captive consumption)


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

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

2. Agreements for Technical Know-How between AMLSPL and M/s. Popuri Engineering &
Consultancy Services dated 24 February, 2005 and 8 June, 2005.

AMLSPL has entered into agreements dated 21 February, 2005 (for first phase of 1 X 100 TPD Kiln)
and 8 June 2005 (for first phase of second kiln X 100 TPD Kiln) for the technical know how for the
purpose of installing plant and machineries necessary for the manufacture of Sponge Iron and allied
products.

Consumption Norms capacity utilization: The Specific consumption of raw material for one tonne of
sponge Iron (90% + 2% metallization) product will be 1.55 Tonnes of Iron Ore (Fe more than 65%) 1.2
Tonnes of Coal (FC > 45%) and 30 Kg of lime stone (CaO + MgO > 50%) is required. Above
consumption norms shall be achieved once after stabilizing the process.

Performance Guarantee: After stabilizing the process at 100% of the capacity utilization shall be shown
continuously for three days at 90% +/- 2% metallization.

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

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

90
AML STEEL LIMITED

OUR MANAGEMENT

Board of Directors

As per our Articles of Association we cannot have less than 3 Directors or more than 12 Directors.
Presently we have six Directors managing the day-to-day affairs of our Company under the overall
supervision and control of Mr. Ashok Agarwal, Managing Director.

The following table sets forth current details regarding our Board of Directors:

Name, Designation, Fathers name, Nationality Age Other Directorship


Address, Occupation and Term
Mr. Ruli Ram Agarwal Indian 65 1. Jindal Industries Limited
Chairman – Non-Executive. 2. Ashok Memory India Private
S/o. Mr.K.R.Agarwal Limited.
“Sunil Bhawan”, Delhi Road, 3. Corbin Trades Investments
Model Town, Hisar – 125 005 Limited.
Industrialist 4. Suban Industries Limited
Term: Liable to retire by rotation.
Mr.Ashok Agarwal Indian 45 1. Ankit Ispat Private Limited
Managing Director 2. AML Steel & Power Limited
S/o. Mr. Ruli Ram Agarwal 3. Ashok Steel Industries Private
145, Devdarshan Apartments, 1, Burnaby Limited, Sri Lanka.
Road, Kilpauk, Chennai - 600 010 4. Ashok Memory India Private
Industrialist Limited.
Term: For a period of five years from 22 5. Corbin Trades Investments
August, 2005 (Up to 22 August, 2010) Limited.
6. Skywell Assets Limited.
Mr. Poonam Chand Jangir Indian 39 1. Ankit Ispat Private Limited
Non – Executive Director 2. AML Steel & Power Limited
S/o. Sohanlal Jangir,
AE 5, Ist Floor, 7th Street, 10th Main Road,
Anna Nagar, Chennai – 600 040
Business
Term: Liable to retire by rotation.
Mr.Ajay Agarwal Indian 31 1. Ankit Ispat Private Limited
Non – Executive Director 2. AML Steel & Power Limited
S/o. Mr. Gauri Shankar Agarwal
S – 13, 3rd Floor, Flat No.7,
Golden Turn View Apartment,
Anna Nagar, Chennai – 600 040
Business
Term: Liable to retire by rotation.
Mr. S. Kolandai Raj Indian 64 Nil
Independent Director
S/o. Mr. Stanilas
82/83, Friends Nagar, Cuddalore – 607 001.
Service
Term: Liable to retire by rotation.
Mr. Vinay Kishore Kasat Indian 69 1. Ankit Ispat Private Limited
Independent Director
S/o.Late J L Kasat
30, Nilaya Street,
Shanmugapuram,
Pondicherry – 605 009
Business
Term: Liable to retire by rotation.

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AML STEEL LIMITED

Brief profile of the Directors

Mr.Ashok Agarwal is the Promoter cum Managing Director of the Company. His profile is mentioned
under the head ‘Our Promoters’. Please refer to page no. [•] of this DRHP for further details.

Mr. Ruli Ram Agarwal aged 65 years is the Non-Executive Chairman and has more than 40 years of
experience in business, industry and trade. He is a commerce graduate and is also a Director of Jindal
Industries Ltd.

Mr. Poonam Chand Jangir aged 39 years is a Non-Executive Director of the Company. He is a commerce
graduate and has more than 15 years of industrial experience most of which has been with our group.

Mr.Ajay Agarwal aged 31 years is a Non-Executive Director of the Company. He is a commerce graduate
and has more than 10 years of rich experience in various businesses.

Mr. S. Kolandai Raj aged 64 years is a Non –Executive Independent Director of the Company. He is a
Mechanical Engineer from Madras University. He has an experience of more than 40 years in the steel
industry. He has undergone training in management as well as production technology from reputed
institutes in India as well as overseas. He started his career as a junior engineer in Bokaro Steel Plant and
resigned as the Executive Director (Works).

Mr. Vinay Kishore Kasat aged 69 years is a Non –Executive Independent Director of the Company. He is a
graduate in commerce and having an experience in different industries. He is practicing as an industrial
consultant from the year 1998. He is also involved in the social activities.

Borrowing Powers of the Board

The Shareholders of the Company pursuant to 293 (1) (d) of the Companies Act, 1956, at the EGM held on
19 July, 2005 authorised the Board of Directors to borrow a maximum of Rs.200 crores. The section titled
“Main provisions of the Articles of Association” on page no. [●] in this DRHP sets out the borrowing
powers of the Directors of the Company.

Details of appointment of the Managing Director and the compensation payable

Mr. Ashok Agarwal was appointed as Managing Director of the Company for a period of five years with
effect from 22 August, 2005. The appointment was made pursuant to Sections 198, 269, 297, 299, 300, 309
of the Companies Act, 1956 read with the provisions of Parts I, II & III of Schedule XIII of the Companies
Act, 1956. He is not drawing any remuneration from the Company.

Compensation of Our Directors

No compensation is being paid to any of the Directors by way of salary and perquisites or sitting fees.

Property acquired by our Promoters and/or Directors within two years

Our Company has not acquired any Property in last two years from the Promoters and/or Directors of our
Company or from any company in which they are directly and/or indirectly related.

Corporate Governance

Our Company stands committed to good Corporate Governance practices based on the principles such as
accountability, transparency in dealings with our stakeholders, emphasis on communication and transparent
reporting. These vital initiatives extend beyond mandatory corporate governance requirements and are in
accordance with our aim of establishing voluntary best practices for good corporate governance.

The SEBI Guidelines issued in respect of Corporate Governance are already applicable to us. We are
currently complying with the SEBI Guidelines on Corporate Governance.

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AML STEEL LIMITED

Composition of the Board

The Board has six Directors, of which two are independent in accordance with the requirements of clause
49 of the listing agreement entered into with the Stock Exchanges. The Chairman of the Board is a Non-
Executive Director. The Constitution is as follows:

Sl No Name of the Director Designation Catagory


1 Mr.Ruli Ram Agarwal Chairman Non – Executive
2 Mr.Ashok Agarwal Managing Director Executive
3 Mr.Ajay Agarwal Director Non – Executive
4 Mr.Poonam Chand Jangir Director Non – Executive
5 Mr.S. Kolandai Raj Director Non – Executive and Independent
6 Mr.Vinay Kishore Kasat Director Non – Executive and Independent

Committees of the Board have been constituted in order to look into the matters in respect of audit and
shareholders / Investors Grievance Redressal Committee and Share Transfer Committee. We have not
formed a remuneration committee. Our Board of Directors decides the remuneration of our Directors,
subject to the approval of our Directors, if required.

Audit Committee

Constitution of Committee

The Board of Directors of the Company reconstituted the Audit Committee on 30 December, 2005 with the
following Directors as the Members.

Sl No Name of the Director Designation Catgory


1 Mr.S Kolandai Raj Chairman Non – Executive and Independent
2 Mr.Vinay Kishore Kasat Member Non – Executive and Independent
3 Mr.Poonam Chand Jangir Member Non – Executive

The Company Secretary of AMLSL is the Secretary of the Committee.

Powers of Audit Committee:

The Audit Committee can:

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

Role of Audit Committee:

The Audit Committee will:

1. examine, inter-alia, the entire financial reporting process;


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

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AML STEEL LIMITED

a) Matters required to be included in the Director’s Responsibility Statement to be included in the


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

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

Review of information by Audit Committee:

The Audit Committee will also review:

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

Investor Grievance Committee

The Investor Grievance Committee has been reconstituted under the chairmanship of a Non –Executive
Director on 30 December, 2005 with the following Directors as Members.

Sl. No. Name of Director Designation Category


1 Mr.Ajay Agarwal Chairman Non-Executive
2 Mr.Vinay Kishore Kasat Member Non-Executive and Independent

The Company Secretary of AMLSL is the Secretary of the Committee.

The committee has been constituted to look into the redressal of shareholders and investors’ complaints like
non-receipt of share certificates sent for transfer, non receipt of balance sheets, non receipt of declared
dividends etc. The committee also approves issue of duplicate share certificates and oversees the matters
connected with the transfer of securities.

Share Transfer Committee

The Share Transfer Committee has been reconstituted under the chairmanship of a Non –Executive Director
on 30 December, 2005 with the following Directors as Members.

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AML STEEL LIMITED

Sl. No. Name of Director Designation Category


1 Mr. Ajay Agarwal Chairman Non-Executive
2 Mr. Poonam Chand Jangir Member Non-Executive

The Company Secretary of AMLSL is the Secretary of the Committee.

The committee approves issue of duplicate share certificates and oversees the matters connected with the
transfer of securities.

Shareholding of the Directors in our Company

% of
Names No. of Shares held
shareholding
Mr. Ruli Ram Agarwal 11,250 0.15
Mr.Ashok Agarwal 15,01,000 20.01
Mr. Poonam Chand Jangir 7,250 0.09
Mr.Ajay Agarwal 14,000 0.19
Mr. S. Kolandai Raj Nil Nil
Mr. Vinay Kishore Kasat Nil Nil

Interest of Promoters and / or Directors

All the Directors of our Company may be deemed to be interested to the extent of sitting fees and/or other
remuneration if any, payable to them for attending meetings of the Board or a committee thereof as well as
to the extent of reimbursement of expenses if any payable to them under our Articles of Association. The
Managing Director will be interested to the extent of remuneration, if any, paid to him for services rendered
by him as an officer or employee of the Company.

All our Directors may also be deemed to be interested in the Equity Shares in our Company, if any, held by
them, their relatives or by the companies and firms in which they are interested as directors / members /
partners or that may be subscribed for and allotted to them, out of the present Issue in terms of the DRHP
and also to the extent of any dividend payable to them and other distributions in respect of the said Equity
Shares.

For further information on transactions which our Company has entered into with companies in which our
Promoters and / or Directors are interested please refer to ‘Related Party Transactions’ of section titled on
‘Financial Information’ on page no. [•] in this DRHP.

All the Directors may be deemed to be interested in the contracts, agreements/arrangements entered into or
to be entered into by us with any company in which they have direct /indirect interest or any partnership
firm in which they are partners.

Changes in the Board of Directors during the last three years

The changes in our Board of Directors during the last three years are as follows:

Name Change With effect from Reason for change


(Ceased/Appointed)
Mr. S Kolandai Raj Appointed 4 November, 2005 Strengthen the Board
Mrs.Anita Agarwal Ceased 30 December, 2005 Resigned
Mr. Vinay Kishore Kasat Appointed 30 December, 2005 Strengthen the Board

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AML STEEL LIMITED

Management Organization Structure

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AML STEEL LIMITED

Key Managerial Personnel

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

Industry
Designation & Date of
S. No Name Age Qualification Experience
Functional area joining
(years)
1. Mr. Viswanathan P. 43 Chief Financial Officer A.C.A. 20 6 June, 2005
General Manager Chartered
2. Mr. Ajay Agarwal 31 7 6 June, 2005
(Accounts) Accountant
B.A. (Economics. 10 February,
3. Mr. Rajesh Agrawal 32 Company Secretary 8
Hons.,), A.C.S. 2006
General Manager
4. Mr.Bishen Singh 60 B. E. (Metallurgy) 36 1 June, 2003
Factory

Brief Details of the Key Managerial Personnel

Mr. Viswanathan. P aged about 43 years, a Chartered Accountant, is the Chief Financial Officer of the
Company. He has also qualified as a Company Secretary and a Cost Accountant. He joined the Company
on 6 June, 2005 and has an in depth experience of over 20 years in various facets of finance functions
holding senior positions in diverse industries with companies of repute, both domestic and overseas,
including Hindustan Lever limited. Prior to the current assignment, he was Vice President, Internal Audit
(Overseas Operations) for Ispat Steel Group.

Mr. Ajay Agarwal, aged about 31 years, has qualified as a Chartered Accountant and has an overall
experience of 7 years in accounts and finance related matters. He joined as General Manager (Accounts) on
6 June, 2005. Previously he was employed with Uniply Industries Limited as Manager Accounts and
Finance.

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AML STEEL LIMITED

Mr. Rajesh Agrawal, aged about 32 years, joined the Company on 10 February, 2006 as the Company
Secretary. He is in charge of the Secretarial Department of the Company. He is having an experience of 8
years to his credit with companies of repute. Previously he was working with Iljin Automotive Private Ltd.,
an ancillary unit of Hyundai Motor India Limited as Assistant Finance Manager cum Company Secretary.

Mr. Bishen Singh, aged about 60 years a seasoned man of steel with rich experience in the industry of
around 36 years. He joined the Company on 1 June, 2006 as General Manager - Factory. He is the complete
in charge of the smooth functioning of the factory as a whole. Previously he was working with Sumangalam
Steel Private Ltd., as Manager Factory.

All the persons whose name appear as Key Managerial Personnel are on the permanent rolls of the
Company and are not employed by any of our Group Concerns. Further, none of the key personnel
mentioned above are related to the Promoters/Directors of the Company. None of the above has been
selected pursuant to any arrangement/understanding with major shareholders/customers/suppliers.

Changes in Key Managerial Personnel during last three years of AMLSL

S. Name Designation Date of joining Date of Reason


No Resignation
1 Mr. Balasubramaniam Manager - Accounts 18 April, 1997 25 May, 2005 Resigned
2. Mr.Venkatesh Company Secretary 15 May, 2001 22 August, 2005 Resigned
3. Mr.Rajendra Kumar Company Secretary 17 June, 2005 1 December, 2005 Resigned
V.P. (Finance) &
4. Mr Soundarajan 1 September, 2005 14 February, 2006 Resigned
Company Secretary

Key Managerial Personnel of AMLSPL

The following Key Managerial Personnel are employed with and are on the payrolls of the AMLSPL.

S. Designation & Exp


Name Age Qualification Date of joining
No Functional area (years)
B.Sc (Phy, Chem, Maths),
Mr. Narendra Deo B.E. (Mech.), MBA (Prod.
1 54 General Manager 32 12 June, 2005
Mishra Mkt. Mgmt), PGDMM
(IIMM, Bangalore)
2 Mr. Om Prakash Jangir 31 Project Manager M.Com 13 28 March, 2003
3 Mr. Manoj Kumar 36 V.P. Commercial B. E. (Machanical) 16 2 March, 2003

Brief Details of the Key Managerial Personnel

Mr. Narendra Deo Mishra joined AMLSPL as General Manager. A Mechanical Engineer from
Gorakhpur University, he holds a MBA degree in Production Marketing Management from Nagpur
University and a Post Graduate Diploma in Materials Management (PGDMM) from the Indian Institute of
Materials Management (IIMM), Bangalore. He has an experience of 32 years handling projects in Cement
Plant, Integrated Plants and in Sponge Iron plant. Previously he was working with Nav Bharath Steel Co.
Ltd., as Vice President (Projects).

Mr. Om Prakash Jangir, a holder of Masters Degree in Commerce from the University of Ajmer joined
the Company as Project Manager on 28 March, 2003. He has an overall 13 years of experience in managing
projects with companies of repute. Previously he was working with Poly Pipes (P) Ltd as Manager (Sales).

Shri Manoj Kumar, aged about 36 years is a BE (Mechanical) joined the Company on 2 March, 2003. He
is the VP (Commercial) and is responsible for the commercial function of the Company. He is having rich
experience in various positions with companies of repute. Previously he was working with Tele Flow
Industrial Valves (P) Ltd as Manager Marketing.

Shareholding of Key Managerial Personnel in our Company

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AML STEEL LIMITED

S. No. Name No. of shares % of shareholding


1. Mr.Manoj Kumar 26,750 0.36

Bonus or Profit Sharing Plan for the Key Managerial Personnel

There is no Bonus or Profit Sharing Plan for the Key Managerial Personnel

Employees

We believe that a motivated and empowered employee base is key to our competitive advantage. AMLSL
has employed directly 120 Employees as detailed below:

Description Number
Managers, Junior Managers and above 10
Office Staff Members 20
Plant Workers 90
Total 120

Disclosures regarding the Employee Stock Option Scheme

There is no Employee Stock Option Scheme as on date in the Company.

Payment or benefit to officers of the Company

There is no payment or benefit to given to the officers of the Company other than salary.

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AML STEEL LIMITED

OUR PROMOTERS

The Promoters of our Company are Mr. Ashok Agarwal and M/s. Ashok Memory India Private Limited.

The details of our Promoters are as follows:

Mr.Ashok Agarwal

Voter ID Number Not Available


PAN ACWPA3685M
Passport Number E8564771
Driving License Number R/TN/001/013767/2001
Bank Account Number Central Bank of India – HSS - 15591

Mr. Ashok Agarwal aged, 45 years is the Managing Director & the brain behind the organizational growth.
He is a Mechanical Engineer from Regional Engineering College, Kurukshetra with about 23 years of
experience in setting up plants, commissioning it and successfully turning around sick units. His contacts
and personal rapport with the indigenous and overseas business enterprises has enabled the group to
establish a permanent place in the global steel market. As a result of his excellent business acumen the
group was able to embark on various projects and has led not only to the successful acquisitions of steel
units in India and abroad but also turning them around in record time. Over a period of time, he has gained
in-depth knowledge and experience in steel making as well as international sourcing and marketing.

The permanent account number, bank account number and passport number of Mr. Ashok Agarwal will be
submitted to the Stock Exchanges at the time of filing of this DRHP.

Ashok Memory India Private Limited

Originally incorporated on 4 June, 1993 as a public limited company, Ashok Memory India Limited was
converted into a private limited company on 22 November, 1995. AMIPL was promoted by Mr.Ashok
Agarwal to engage in the business of manufacturing and trading of electronic goods, computer floppy disks,
video and audio cassettes etc., The registered office is situated in Raheja Complex, No.834, Anna Salai,
Chennai - 600 002.

Date of Incorporation 04 June, 1993


Registration Number 18-25712 of 1993
PAN AACCA7380E
Bank Account Number Central Bank of India - 102384
Address of the ROC The Registrar of Companies, Chennai, Block 6,
IInd Floor, Shastri Bhavan, 26,
Haddows Road, Chennai - 600 006.

Board of Directors

The Board of Directors of AMIPL comprises of Mr.Ashok Agarwal, Mr. Ruli Ram Agarwal and Mrs.
Anita Agarwal.

Shareholding Pattern

The Shareholding Pattern of AMIPL is as follows:

S No Name No. of Shares % of Total


1 Mr. Ashok Agarwal 239600 93.52
2 Mrs. Anita Agarwal 15600 6.09
3 Mr. Ajay Agarwal 100 0.04
4 Mr. Shyam Sundar Agarwal 100 0.04

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AML STEEL LIMITED

5 Mr. Poonam Chand Jangir 100 0.04


6 Mr. K. Balasubramoni 100 0.04
7 Mr. Sai Anantha Rama Krishna 100 0.04
8 Mr. Ruli Ram Agarwal 500 0.20
Total 256200 100.00

Financial Highlights
(Rs. in lakhs)
For the Year ended 31.03.2005 31.03.2004 31.03.2003
Total Income 14.95 16.02 13.73
Profit/Loss After Tax 12.33 13.73 6.29
EPS (Rs.) 4.81 5.36 2.45
Share Capital 25.62 25.62 25.62
Reserves and Surplus 115.31 102.97 89.24
NAV (Rs.) 55.01 50.18 44.80

AMIPL is an unlisted company and it has not made any public or rights issue in the preceeding three years.
It has not become a sick company under the meaning of SICA and it is not under winding up.

The permanent account number, bank account number, registration number and the address of the
concerned RoC of AMIPL will be submitted to the Stock Exchanges at the time of filing of this DRHP.

Common Pursuits

Our Promoters do not have interest in any venture that is involved in any activities similar to those
conducted by our Company or any of its subsidiaries.

Interest of Promoters

The Promoters may be deemed to be interested to the extent of shares held by them, their friends or
relatives, and benefits arising from their holding directorship, in the company. The Promoters do not have
any interest in any property acquired by the Company within two years of the date of this DRHP or
proposed to be acquired by it.

Payment or benefit to Promoters of the Company

There are no payments or benefits payable to our Promoters.

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AML STEEL LIMITED

CURRENCY OF PRESENTATION

In this DRHP all references to “Rupees” and “Rs” and “Indian Rupees” are to the legal currency of the
Republic of India, “SL Rs” to the legal currency of the Sri Lanka and “USD” to the legal currency of the
United State of America.

RELATED PARTY TRANSACTIONS

For related party transactions, please refer to paragraph titled ‘Related Party Transactions’ under the section
titled ‘Financial Information’ on page no. [●].

DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and approved by
our shareholders. Declaration of dividend will also depend on a number of factors, including but not limited
to our Company’s earnings, capital requirements and overall financial condition. Our Company has no
stated dividend policy. We have have declared equity dividend in the last five years.

The details of the dividend paid by our Company during the last last five financial years is presented below;
(Rs. in lakhs)
Financial Year
Particulars
2004 – 2005 2003 – 2004 2002 – 2003 2001 – 2002 2000 - 2001
Equity Share Capital 300.00 300.00 300.00 300.00 300.00
Face Value (Rs.) 10.00 10.00 10.00 10.00 10.00
No. of Shares 30.00 30.00 30.00 30.00 30.00
Rate of Dividend (%) 15.00 12.00 12.00 10.00 15.00
Amount of Dividend 45.00 36.00 36.00 30.00 45.00
Corporate Dividend Tax 6.31 4.50 4.50 2.70 4.50

The amounts paid as dividends in the past are not necessarily indicative of the Company’s dividend policy
in the future.

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AML STEEL LIMITED

SECTION V - FINANCIAL INFORMATION

Particulars Page No

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

• Auditors Report and restated financial Statements of Ankit Ispat Private [●]
Limited.

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

• Auditors Report and restated financial Statements of AML Steel & Power [●]
Limited.

• Auditors Report and consolidated restated financial statements of AML Steel [●]
Limited and its subsidiaries.

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AML STEEL LIMITED

AUDITORS REPORT AND UNCONSOLIDATED RESTATED FINANCIAL STATEMENTS OF


AML STEEL LIMITED (FORMERLY KNOWN AS ASHOK MAGNETICS LIMITED)

AUDITORS REPORT

Date: 24.02.2006

The Board of Directors


AML Steel Limited,
(Formerly Ashok Magnetics Limited)
B-73, Sipcot Industrial Complex,
Gummidipoondi - 601 201

Dear Sir

We have examined annexed financial information of M/s. AML Steel Limited (formerly Ashok Magnetics
Limited), for the years ended 31st March, 2001, 2002, 2003, 2004, 2005 and for the nine months period
ended 31st December 2005, being the last date up to which the accounts have been made up and audited by
us. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these accounts based on our audit. These accounts were approved by the Board of
Directors of the Company for the purpose of disclosure in the Offer Document being issued by the
Company in connection with the Public Issue of its Equity Shares.

In accordance with the requirements of:


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

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

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

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

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

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

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

4. Statement showing breakup of Other Income as per Annexure V.

5. Statement showing breakup of Unsecured Loans as per Annexure VI.

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

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

8. Capitalisation Statement as per Annexure IX.

9. Tax Shelter Statement as per Annexure X.

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AML STEEL LIMITED

10. There was no Contingent Liability as on 31.03.2005 and 31.12.2005.

11. Statement of Investment in Subsidiaries as per Annexure XI.

12. Statement showing Market Value of the Quoted Investment as on 31.03.2005 and 31.12.2005 as
per Annexure XII.

13. Accounting Ratios as appearing in Annexure XIII to this Report.

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

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

16. Statement showing distribution of dividend on Equity Shares for the above mentioned period as
per Annexure XV.

17. Details of transaction with the related parties (Related parties with in the meaning of AS 18 issued
by ICAI) enclosed as per Annexure XVI.

In our opinion the financial information of the Company as stated above read with significant accounting
policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as
considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the
SEBI guidelines.

This report is intended solely for your information and for inclusion in the offer document in connection
with the specific Public Offer of the Company and is not be used, referred to or distributed for any other
purpose without our prior written consent.

For K. P. JAIN & CO.,


Chartered Accountants
Sd/-
KISHORE P. JAIN
(Proprietor)
Membership No: 27236
Place: Chennai

ANNEXURE I

STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT

(Rs. in lakhs)
PERIOD ENDED ON 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
INCOME
Sales:
Of Products manufactured by the
Company 3,455.72 4,539.91 2,616.09 2,791.29 3,469.84 3,585.99
Of Products traded by the Company 484.51 622.38 - 228.60 2,250.65 7,072.56
Other Income 30.25 35.38 46.12 15.27 34.48 415.46
Increase / (Decrease) in Inventory (8.57) 3.88 2.90 3.14 0.83 25.15
Total Income 3,961.91 5,201.55 2,665.11 3,038.30 5,755.80 11,099.16

EXPENDITURE
Raw Materials & Goods Consumed 2,553.53 3,715.92 1,618.49 1,916.36 4,021.89 8,730.01
Staff Costs 17.91 17.19 21.38 16.30 11.83 14.30
Other Manufacturing Expenses 967.26 1,186.55 862.00 920.64 1,178.01 1,133.85

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AML STEEL LIMITED

Selling & Distribution Expenses 51.72 51.37 67.62 51.93 42.75 91.28
Interest 36.26 26.57 15.63 30.34 36.83 42.75
Depreciation 29.58 29.70 25.85 27.85 31.22 24.29
Miscellaneous Expenditure w/o 1.25 1.25 1.25 1.25 1.25 -
Total Expenditure 3,657.51 5,028.55 2,612.22 2,964.67 5,323.78 10,036.48

Net Profit before Tax & before


Extraordinary items 304.40 173.00 52.89 73.63 432.02 1,062.68

Provision for Taxation 26.82 13.52 4.06 19.19 134.50 180.93


Provision for Deferred Taxation - 26.33 4.81 1.72 2.07 -

Net Profit after Tax & before


Extraordinary items 277.58 133.15 44.02 52.72 295.45 881.75

Extraordinary Items (net of tax) - - - - - -

Net Profit after Extraordinary Items 277.58 133.15 44.02 52.72 295.45 881.75

Earlier year Adjustments - - - 2.59 - -

APPROPRIATIONS
Transfer to General Reserve 10.00 10.00 5.42 7.50 15.00 -
Proposed Dividend 45.00 30.00 36.00 36.00 45.00 -
Tax on Proposed Dividend 4.50 - 7.20 4.50 6.31 -
Balance Carried to Balance Sheet 218.08 93.15 (4.60) 4.72 229.14 881.75

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

ANNEXURE II
STATEMENT OF RESTATED ASSETS AND LIABILITIES

(Rs. in lakhs)
AS AT 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
A Assets
Fixed Assets - Gross Block 752.81 751.53 716.29 712.85 762.05 765.28
Less: Depreciation 108.65 135.99 159.48 183.57 208.23 232.52
Net Block 644.16 615.54 556.81 529.28 553.82 532.76
Less: Revaluation Reserve - - - - - -
Net Block after adjustment for
Revaluation Reserve 644.16 615.54 556.81 529.28 553.82 532.76

B Investments 10.00 85.00 324.66 437.28 450.42 463.17

C Current Assets, Loans & Advances


Inventories 237.91 1,016.44 558.59 718.89 1,007.73 1,919.58
Receivables 213.76 468.29 151.82 334.41 1,761.06 1,480.28
Cash & Bank Balances 453.24 513.91 280.35 353.41 207.65 229.75
Other Current Assets 85.05 172.32 87.88 104.18 152.10 285.54
Loans & Advances 121.68 52.82 52.91 51.06 118.42 1,860.84

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AML STEEL LIMITED

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

D Liabilities and Provisions


Loan Funds
Secured Loans 225.63 312.74 274.46 458.32 318.71 356.15
Unsecured Loans 3.04 24.18 22.64 21.65 42.64
139.15

Current Liabilities & Provisions


Sundry Liability 285.52 1,237.86 382.10 684.51 2,147.77 2,154.56
Provisions (Including Deferred Tax) 76.32 69.85 78.39 92.55 225.20 354.83

E Net Worth
Represented by
Shareholders Funds
Share Capital 300.00 300.00 300.00 300.00 300.00 750.00
Share Application Money - - - - -
1,368.61
Reserves & Surplus 885.41 988.56 963.05 977.85 1,222.00 1,653.74
Less: Revaluation Reserve - - - - - -
Reserves (Net of Revaluation
Reserve) 885.41 988.56 963.05 977.85 1,222.00 1,653.74
Less: Miscellaneous Expenditure not
written off 10.12 8.87 7.62 6.37 5.12 5.12

Total Net Worth 1,175.29 1,279.69 1,255.43 1,271.48 1,516.88 3,767.23

Total of Liabilities and Provisions 1,765.80 2,924.32 2,013.02 2,528.51 4,251.20 6,771.92

ANNEXURE III
STATEMENT OF RESTATED CASH FLOW
(Rs. in lakhs)
Cash Flow Statement for the year/period
ending 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05

A Cash Flow from Operating Activities

Net Profit before Taxation and


Extra Ordinary Items 304.40 173.01 52.89 73.62 432.03 1,062.68
Adjustments for:
Depreciation 29.58 29.70 25.86 27.86 31.22 24.29
(Profit) / Loss on Sale of Assets 4.48 1.77 28.76 4.61 4.33 -
Interest Expenses 36.26 26.57 15.64 30.34 36.83 42.75
Interest / Dividend Received (30.25) (35.39) (46.12) (15.27) (21.25) (11.81)
Miscellaneous Expenditure Written off 1.25 1.25 1.25 1.25 1.25 -
(Profit) / Loss on Sale of Investments - - - - (13.23) (403.65)
Operating Profit before
Working Capital Changes 345.72 196.92 78.28 122.40 471.18 714.26
Movements in Working Capital
Adjustments for:
(Increase)/Decrease in Debtors and other
Receivables (234.12) (275.10) 400.81 (197.03) (1,541.94) (1,595.08)
(Increase)/Decrease in Inventories 13.24 (778.53) 457.84 (160.29) (288.84) (911.85)

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AML STEEL LIMITED

Increase/(Decrease) in Liabilities 143.13 973.16 (855.76) 302.42 1,463.25 6.79


Cash Generated from Operations 267.97 116.45 81.17 67.50 103.66 (1,785.88)
Direct Taxes Paid - 26.82 13.52 4.05 14.73 -
Extra Ordinary Items - - - - - -

Net Cash from Operating Activities 267.97 89.63 67.65 63.45 88.93 (1,785.88)

B Cash Flow from Investing Activities

Purchase of Fixed Assets (194.27) (7.04) (11.35) (6.74) (64.46) (3.23)


Sale of Fixed Assets - 4.18 15.45 1.81 4.37 -
Purchase of Investments - (75.00) (239.66) (112.62) (13.14) (38.14)
Sale of Investments - - - - 13.23 429.04
Interest Paid (36.26) (26.57) (15.64) (30.34) (36.83) (42.75)
Interest Received 30.25 35.39 46.12 15.27 21.25 11.81

Net Cash from Investing Activities (200.28) (69.04) (205.07) (132.63) (75.58) 356.73

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital - - - - - -


Proceeds from Share Application - - - - - 1,368.61
Proceeds from Long Term Borrowings (5.58) 89.58 (66.14) 182.85 (118.61) 133.95
Dividends Paid (54.00) (49.50) (30.00) (40.61) (40.50) (51.31)

Net Cash from Financing Activities (59.58) 40.08 (96.14) 142.24 (159.11) 1,451.25

Net Increase in Cash and Cash


Equivalents (A+B+C) 8.11 60.67 (233.56) 73.06 (145.76) 22.10

Opening Cash and Cash Equivalents 445.13 453.24 513.91 280.35 353.41 207.65
Closing Cash and Cash Equivalents 453.24 513.91 280.35 353.41 207.65 229.75
8.11 60.67 (233.56) 73.06 (145.76) 22.10

ANNEXURE IV

NOTES TO THE ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES:

1. Significant Accounting Policies:

i. System of Accounting:

The financial statements are prepared under the historical cost convention and accrual concept.

ii. Sales:

Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and
excluding sales tax is accounted for as sales.

iii. Fixed Assets and Depreciation:

All fixed assets are stated at cost inclusive of all installation expenses incurred relating to acquisition.
Depreciation is provided on straight-line method at the rates specified in Schedule XIV of the Companies

108
AML STEEL LIMITED

Act, 1956. Depreciation is charged on pro rata basis on addition to assets taken into account the date of
additions.

iv. Foreign Currency Transactions:

Transactions in foreign currencies to the extent not covered by forward contracts are accounted at prevailing
rates. Current Assets and Current Liabilities in foreign currencies are translated at the rates of exchange
ruling. Fluctuations in exchange rates are accounted for in the profit and loss account.

v. Inventories

Stock-in-trade is valued at cost or net realizable value whichever is lower.

v. Marketing Expenditure

Expenditure incurred on marketing and market related activities are charged off in the year in which it is
incurred.

vii. Investment

Investments are stated at cost.

2. Secured Loans from Central Bank of India is primarily secured by first charge on the entire block of
assets of the Company along with personal guarantee of Mr R R Agrawal, Mr Ashok Agrawal, Mr Ajay
Agrawal and Mr Poonam Chand Jangir Directors of the Company and third party personal guarantee of Mrs
Anita Agarwal .

Interest Free Sales Tax (IFST) Loan is secured by residual charges on all fixed assets of PVC unit of the
Company.

3. The previous year figures have been regrouped / recasted wherever necessary.

4. The balances in Sundry Debtors, Sundry Creditors, Loans & Advances and Unsecured loans are subject
to confirmation.

5. All Loans & Advances are unsecured but considered good.

6. Director’s Remuneration
(Amount in Rs.)
Year 2000-01 2001-02 2002-03 2003-04 2004-05 31.12.2005
Salary 138,000.00 120,000.00 40,000.00 Nil Nil Nil

7. Auditor’s Remuneration
(Amount in Rs.)
Particulars 2000-01 2001-02 2002-03 2003-04 2004-05
Statutory Audit Fees 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Tax Audit Fees 5,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Service Tax 750.00 1,000.00 1,600.00 1,600.00 2,040.00
Total 15,750.00 21,000.00 21,600.00 21,600.00 22,040.00

8. No amount is outstanding for more than 30 days as at the date of balance sheet payable to Small Scale
Industrial undertaking.

9. Segment Reporting as per Accounting Standard 17 is not applicable.

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AML STEEL LIMITED

10. Capacity and Production

Licensed Capacity
Product Unit 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
MS Ingots Tonnne 45,000 45,000 45,000 45,000 45,000 45,000
Rigid PCV Pipes Tonnne NA NA NA NA NA NA
Installed Capacity
MS Ingots Tonnne 30,000 45,000 45,000 45,000 45,000 45,000
Rigid PCV Pipes Tonnne 2,100 2,100 2,100 2,100 2,100 2,100
Production
MS Ingots Tonnne 28,978 38,881 20,824 17,363 16,284 18,375.08
Rigid PCV Pipes Tonnne - - - - - -

ANNEXURE V

DETAILS OF OTHER INCOME


(Rs. in lakhs)
PERIOD ENDED ON 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
Other Income 30.25 35.38 46.12 15.27 34.48 415.46
20 % of PBT 60.88 34.60 10.58 14.73 86.40 212.54
10 % of Total Income 396.19 520.16 266.51 303.83 575.58 1,109.92
Applicability NA Yes Yes Yes NA Yes
Details of Other Income

Interest on Bank Deposits * NA 28.29 38.02 9.25 NA 9.22


Interest on Others ** NA 2.70 - 1.74 NA -
Dividend Income ** NA 4.39 8.10 4.18 NA -
Profit on Sale of Shares ** NA - - - NA 403.65
Others NA - - 0.10 NA 2.59

Total - 35.38 46.12 15.27 - 415.46


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

ANNEXURE VI

BREAK UP OF UNSECURED LOANS


(Rs. in lakhs)
Particulars 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
Amount Due to Affiliates / Group
Companies or those related to
Promoters / Directors in any way 3.04 24.18 22.64 21.65 42.64 139.15
Others - - - - - -
Total 3.04 24.18 22.64 21.65 42.64 139.15

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

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AML STEEL LIMITED

ANNEXURE VII

AGE WISE ANALYSIS OF SUNDRY DEBTORS


(Rs. in lakhs)
Agewise Break-up 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
Less than six months 20.03 20.03 16.88 26.24 1,734.95 1,457.05
More than six months 193.73 448.26 134.94 308.17 26.11 23.23
Total 213.76 468.29 151.82 334.41 1,761.06 1,480.28
Amount Due from Affiliates / Group
Companies or those related to - - -
Promoters / Directors in any way 198.76 385.31 90.12

ANNEXURE VIII

BREAK UP OF LOANS AND ADVANCES


(Rs. in lakhs)
Particulars 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
Amount Due to Affiliates / Group
Companies or those related to - - - - 66.62 1,522.72
Promoters / Directors in any way
Others 121.68 52.82 52.91 51.06 51.80 338.12
Total 121.68 52.82 52.91 51.06 118.42 1,860.84

ANNEXURE IX

CAPITALIZATION STATEMENT
(Rs. in lakhs)
Borrowing Statement 31.03.05 31.12.05 Post Issue *
Short Term Debt ** 277.59 356.15
Long Term Debt 83.76 139.15
Total Debt (A) 361.35 495.30

Shareholders Funds
Share Capital
-Equity 300.00 750.00
Less Calls in Arrears - -
-Preference - -
Share Application - 1,368.61
Reserves & Surplus 1,222.00 1,653.74
Less: Misc Exp not w/o 5.12 5.12
Total Shareholders Funds (B) 1,516.88 3,767.23
Long Term Debt / Equity Ratio (A/B) 0.06 0.04

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

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AML STEEL LIMITED

ANNEXURE X

TAX SHELTER STATEMENT


(Rs. in lakhs)
31.03.01 31.03.02 31.03.03 31.03.04 31.03.05
Profit Before Tax as per Books (A) 305.65 174.26 54.14 74.87 433.28

Tax Rate (%) (B) 39.55 35.70 36.75 35.88 36.59

Tax at actual rate on Book Profits 120.88 62.21 19.90 26.86 158.54

Adjustments

Permanent Differences

U/s 80IB 273.52 143.04 58.30 21.40 96.05


Other Adjustments - - - 4.18 -

Total Permanent Differences (C ) 273.52 143.04 58.30 25.58 96.05

Timing Differences
Diff Between Tax Depreciation &
32.13 31.27 13.09 4.80 8.99
Book Depreciation
Other Adjustments - - - - -

Total Timing Differences (D) 32.13 31.27 13.09 4.80 8.99

Net Adjustments (C+D=E) 305.65 174.31 71.39 30.38 105.04

Tax Savings thereon (E*B) 120.88 62.23 26.24 10.90 38.43

Disallowances (F) - 0.05 29.39 4.62 5.25

Profit as per Income Tax Return


- - 12.14 49.11 333.49
(A-C-D+F)

Tax as per Income Tax Return - - 4.46 17.62 122.02


Tax as per Income Tax Return (MAT) 26.82 12.99 - - -

ANNEXURE XI
DETAILS OF UNQUOTED INVESTMENTS IN SUBSIDIARIES
(Rs. in lakhs)
31.03.05 31.12.05
No of Amount in No of Amount in
Name of the Company Rate Rate
Shares Rs. Shares Rs.

Ashok Steel Industries (P) Ltd


(Face Value of Sl Rs. 10.00) 52,50,000 5.04 2,64,43,675.00 52,50,000 5.04 2,64,43,675.00
Ankit Ispat (P) Ltd
(Face Value of Rs. 10.00) 16,08,389 10.00 1,60,83,890.00 16,38,389 10.00 1,63,83,890.00
AML Steel & Power Ltd
(Face Value of Rs. 10.00) 20,000 10.00 2,00,000.00 50,000 10.00 5,00,000.00
Total 68,78,389 4,27,27,565.00 69,38,389 4,33,27,565.00

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AML STEEL LIMITED

ANNEXURE XII

AGGREGATE MARKET VALUE OF THE QUOTED INVESTMENTS ON 31.03.2005

Total Cost Market Rate Total Market Diminution


No of Cost per
Details of Investment (Rs. in per Share in Value in Value
Shares Shares in Rs.
lakhs) Rs. (Rs. in lakhs) (Rs. in lakhs)
21st Century Limited 25,000 6.04 1.51 271.00 67.75 -
Brahamanand Ltd 37,500 8.32 3.12 128.60 48.23 -
Emrald Commercial Ltd 11,000 21.73 2.39 307.85 33.86 -
Khubsurat Ltd 21.88 5.47 315.45 78.86 -
25,000
Quest Financial Ltd 2.64 0.66 15.10 3.78 3.12
25,000
Total 13.15 232.48 3.12

AGGREGATE MARKET VALUE OF THE QUOTED INVESTMENTS ON 31.12.2005

Cost per Total Market Total Market Diminution


No of
Details of Investment Shares in Cost Rate per Value in Value
Shares
Rs. (Rs. in lakhs) Share in Rs. (Rs. in lakhs) (Rs. in lakhs)
Emrald Commercial Ltd 4,000 21.75 0.87 465.00 18.60 -
Khubsurat Ltd 11,000 21.91 2.41 490.50 53.96 -
Quest Financial Ltd 25,000 2.64 0.66 57.00 14.25 -
Lotus Homes Ltd 9,000 29.56 2.66 179.70 16.17 -
Radiant Financial Services Ltd 65,700 20.24 13.30 149.50 98.22 -
Total 19.90 201.20 -

ANNEXURE XIII

ACCOUNTING RATIOS

PERIOD ENDED ON 31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05 *

Earning Per Share (EPS) (Rs.) 9.25 4.44 1.47 1.76 9.85 23.51
Cash Earning Per Share (Rs.) 10.39 5.49 3.29 2.84 11.03 24.16
Return on Net Worth (%) 23.62 10.40 3.51 4.15 19.48 31.21
Net Asset Value Per Share (Rs.) 39.18 42.66 41.85 42.38 50.56 50.23
* Annualised

Workings
A No of Shares at the Beginning of the Year 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000
No of Shares at the End of the Year 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 75,00,000
Weighted Average Number of Equity Shares 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000 50,00,000
Cash Earnings (Rs.in lakhs)
B PAT 277.58 133.15 44.02 52.72 295.45 881.75
Depreciation 29.58 29.70 25.85 27.85 31.22 24.29
Loss on Sale of Assets 4.48 1.77 28.76 4.61 4.33 -
C Total 311.64 164.62 98.63 85.18 331.00 906.04
D Net Worth 1,175.29 1,279.69 1,255.43 1,271.48 1,516.88 3,767.23

Notes

A. The ratios have been computed as below;

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AML STEEL LIMITED

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

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

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

4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares
Outstanding during the Year

B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years
as per the statement of Restated Profit and Losses Account.

C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered
Accountants of India.

ANNEXURE XIV

SECURED LOANS
(Rs. in lakhs)
31.03.01 31.03.02 31.03.03 31.03.04 31.03.05 31.12.05
From Central Bank of India
Cash Credit 87.80 221.62 183.34 242.93 277.59 315.03
Term Loan 46.71 - - 124.27 - -
From Government of Tamil Nadu
(Interest Free Sales Tax Loan IFST) 91.12 91.12 91.12 91.12 41.12 41.12
Total 225.63 312.74 274.46 458.32 318.71 356.15

Details of Secured Loans outstanding as on 31.12.2005

Securities offered with Particulars Financial Nature of Sanctioned Amount Rate of


Repayment Terms of Loan Institution Loan Amount Outstanding Interest p.a.

2% over
Central
Secured by hypothecation of Short Term Rs. 250.00 Rs. 315.03 BPLR
Cash Credit Bank of
Stocks and Book Debts Loan lakhs lakhs Presently
India
11%

Secured by Residual Charge of the State Govt


Demand Rs. 91.11 Rs. 41.12
Fixed Assets of the PVC unit of the Term Loan of Tamil Interest Free
Loan lakhs lakhs
Company. Nadu

Repayment Terms :

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

114
AML STEEL LIMITED

ANNEXURE XV

STATEMENT OF DIVIDEND
(Rs. in lakhs)
31.03.01 31.03.02 31.03.03 31.03.04 31.03.05
Paid Up Capital 300.00 300.00 300.00 300.00 300.00
% of Dividend Declared 15.00 10.00 12.00 12.00 15.00
Amount of Dividend Paid 45.00 30.00 36.00 36.00 45.00

ANNEXURE XVI

RELATED PARTY INFORMATION

Year ended 2000 – 2001

1. List of Related parties

Mr Ashok Agarwal Managing Director Key Management Personnel


Mrs Anita Agarwal Director Related to Mr.Ashok Agarwal
Mr R R Agarwal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above.

Mr. Ashok Agarwal (Managing Director) – Rs.1,38,000 (Directors Remuneration)

Year ended 2001 – 2002

1. List of Related parties

Mr Ashok Agarwal Managing Director Key Management Personnel


Mrs Anita Agarwal Director Related to Mr.Ashok Agarwal
Mr R R Agarwal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above.

Mr. Ashok Agarwal (Managing Director) – Rs.1,20,000 (Directors Remuneration)

Year ended 2002 – 2003

1. List of Related parties

Mr Ashok Agarwal Managing Director Key Management Personnel


Mrs Anita Agarwal Director Related to Mr.Ashok Agarwal
Mr R R Agarwal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal

2. Transactions with the Related Parties as mentioned above.

Mr. Ashok Agarwal (Managing Director) – Rs.40,000 (Directors Remuneration)

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AML STEEL LIMITED

Year ended 2003 – 2004

1. List of Related parties

Mr Ashok Agrawal Director Key Management Personnel


Mrs Anita Agrawal Director Related to Mr.Ashok Agarwal
Mr R R Agrawal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal
M/s. Ankit Ispat Pvt Ltd Subsidiary Company
M/s. Ashok Steel Industries Pvt Ltd Subsidiary Company

2. Transactions with the Related Parties as mentioned above.

Sales to Ankit Ispat (P) Ltd - Rs. 228.59 lakhs

Year ended 2004 – 2005

1. List of Related parties

Mr Ashok Agrawal Director Key Management Personnel


Mrs Anita Agrawal Director Related to Mr.Ashok Agarwal
Mr R R Agrawal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal
M/s. Ankit Ispat Pvt Ltd Subsidiary Company
M/s. Ashok Steel Industries Pvt Ltd Subsidiary Company

2. Transactions with the Related Parties as mentioned above.

Sales to Ankit Ispat (P) Ltd - Rs. 822.25 lakhs


Purchases from Ashok Steel Industries Pvt Limited - Rs.64.04 lakhs

Period ended 31.12.2005

1. List of Related parties

Mr Ashok Agrawal Managing Director Key Management Personnel


Mrs Anita Agrawal Director Related to Mr.Ashok Agarwal
Mr R R Agrawal Chairman Related to Mr.Ashok Agarwal
M/s. Ashok Memory (India) Pvt. Ltd Associates Concern
M/s. Efficient Agencies Sole Proprietor Firm of Mr.Ashok Agarwal
M/s. Ankit Ispat Pvt Ltd Subsidiary Company
M/s. Ashok Steel Industries Pvt Ltd Subsidiary Company

2. Transactions with the Related Parties as mentioned above.

Sales to Ankit Ispat (P) Ltd - Rs. 90.13 lakhs


Sales to Ashok Steel Industries Pvt Ltd - Rs. 293.99 lakhs

116
AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF ANKIT ISPAT


PRIVATE LIMITED.

AUDITORS REPORT
Date: 24.02.2006

The Board of Directors


Ankit Ispat Private Limited
Raheja Complex
834 Mount Road
Chennai – 600 002

Dear Sir,

We have examined the annexed financial information of M/s. Ankit Ispat Private Limited, for the period
from 13th August 2003 to 31st March 2004, year ended 31st March 2005 and for the nine months period
ended 31st December 2005, being the last date up to which the accounts have been made up and audited by
us. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these accounts based on our audit. These accounts were approved by the Board of
Directors of the Company for the purpose of disclosure in the Offer Document to be issued by AML Steel
Limited the Holding Company in connection with the Public Issue of Equity Shares in the Holding
Company (referred to as “the issue”).

In accordance with the requirements of:

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

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

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

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

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

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

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

4. Statement showing breakup of Other Income as per Annexure V


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

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

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

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AML STEEL LIMITED

8. Capitalisation Statement as per Annexure VIII.

9. Tax Shelter Statement as per Annexure IX.

10. There was no Contingent Liability as on 31.03.2005 and 31.12.2005.

11. Accounting Ratios as appearing in Annexure X to this Report.

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

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

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

In our opinion the financial information of the Company as stated above read with significant accounting
policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as
considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the
SEBI guidelines.

This report is intended solely for your information and for inclusion in the offer document in connection
with the specific Public Offer of the AML Steel Ltd and is not be used, referred to or distributed for any
other purpose without our prior written consent.

For K. P. JAIN & CO.,


Chartered Accountants

Sd/-
KISHORE P. JAIN
(Proprietor)
Membership No: 27236
Place: Chennai

ANNEXURE I

STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT


(Rs. in lakhs)
PERIOD ENDED ON 31.03.04 31.03.05 31.12.05

INCOME

Sales:
Of Products manufactured by the Company 983.21 3,037.15 2,871.28
Of Products traded by the Company - - -
Other Income 0.07 0.53 0.29
Increase / (Decrease) in Inventory 10.62 0.01 11.55
Total Income 993.90 3,037.69 2,883.12

EXPENDITURE
Raw Materials & Goods Consumed 653.43 1,730.10 1,598.59
Staff Costs 1.93 8.59 12.22
Other Manufacturing Expenses 297.70 1,101.98 951.89
Selling & Distribution Expenses 2.52 8.38 17.49
Interest 13.04 34.58 23.46
Depreciation 5.94 17.81 14.29
Miscellaneous Expenditure w/o 0.20 0.20 -

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AML STEEL LIMITED

Total Expenditure 974.76 2,901.64 2,617.94

Net Profit before Tax & before Extraordinary items 19.14 136.05 265.18

Provision for Taxation 1.61 29.40 79.31


Provision for Deferred Taxation 6.87 18.96 9.95

Net Profit after Tax & before Extraordinary items 10.66 87.69 175.92

Extraordinary Items (net of tax) - - -

Net Profit after Extraordinary Items 10.66 87.69 175.92

Earlier year Adjustments - - -

APPROPRIATIONS
Transfer to General Reserve 2.00 10.00 -
Proposed Dividend - - -
Tax on Proposed Dividend - - -
Balance Carried to Balance Sheet 8.66 77.69 175.92

ANNEXURE II

STATEMENT OF RESTATED ASSETS AND LIABILITIES


(Rs. in lakhs)
AS AT 31.03.04 31.03.05 31.12.05

A Assets
Fixed Assets - Gross Block 357.79 387.71 408.50
Less: Depreciation 5.94 23.71 38.00
Net Block 351.85 364.00 370.50
Less: Revaluation Reserve - - -
Net Block after adjustment for Revaluation
351.85 364.00 370.50
Reserve

B Investments - - -

C Current Assets, Loans & Advances


Inventories 57.02 577.60 892.72
Receivables 177.64 139.63 106.42
Cash & Bank Balances 53.64 22.23 26.68
Other Current Assets 1.19 71.78 50.83
Loans & Advances 110.90 107.81 107.81

Total Assets 752.24 1,283.05 1,554.96

D Liabilities and Provisions


Loan Funds
Secured Loans 304.45 222.79 364.66
Unsecured Loans - - -

Current Liabilities & Provisions

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AML STEEL LIMITED

Sundry Liability 266.69 744.51 609.22


Provisions (Including Deferred Tax) 8.48 55.22 144.48

E Net Worth
Represented by
Shareholders Funds
Share Capital 163.84 163.84 163.84
Share Application Money - - -
Reserves & Surplus 10.65 98.35 274.27
Less: Revaluation Reserve - - -
Reserves (Net of Revaluation Reserve) 10.65 98.35 274.27
Less: Miscellaneous Expenditure not written off 1.87 1.66 1.51

Total Net Worth 172.62 260.53 436.60


Total of Liabilities and Provisions 752.24 1,283.05 1,554.96

ANNEXURE III

STATEMENT OF RESTATED CASHFLOW


(Rs. in lakhs)
Cash Flow Statement for the year/period ending 31.03.04 31.03.05 31.12.05

A Cash Flow from Operating Activities

Net Profit before Taxation and Extra Ordinary Items 19.14 136.05 265.18
Adjustments for:
Depreciation 5.94 17.81 14.29
(Profit) / Loss on Sale of Assets - - -
Interest Expenses 13.04 34.58 23.46
Interest / Dividend Received (0.07) (0.53) (0.29)
Miscellaneous Expenditure Written off 0.20 0.20 0.15
(Profit) / Loss on Sale of Investments - - -
Operating Profit before Working Capital Changes 38.25 188.11 302.79
Movements in Working Capital
Adjustments for:
(Increase)/Decrease in Sundry Debtors and other Receivables (289.74) (29.49) 54.16
(Increase)/Decrease in Inventories (57.02) (520.59) (315.12)
Increase/(Decrease) in Liabilities 266.69 477.82 (135.29)
Cash Generated from Operations (41.82) 115.85 (93.46)
Direct Taxes Paid - 1.61 -
Extra Ordinary Items - - -

Net Cash from Operating Activities (41.82) 114.24 (93.46)

B Cash Flow from Investing Activities

Purchase of Fixed Assets (357.79) (29.95) (20.79)


Preliminary Expenses (2.07) - -
Purchase of Investments - - -
Sale of Investments - - -

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AML STEEL LIMITED

Interest Paid (13.04) (34.58) (23.46)


Interest Received 0.07 0.53 0.29

Net Cash from Investing Activities (372.83) (64.00) (43.96)

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital 163.84 - -


Proceeds from Long Term Borrowings 304.45 (81.65) 141.87
Dividends Paid - - -

Net Cash from Financing Activities 468.29 (81.65) 141.87

Net Increase in Cash and Cash Equivalents (A+B+C) 53.64 (31.41) 4.45

Opening Cash and Cash Equivalents - 53.64 22.23


Closing Cash and Cash Equivalents 53.64 22.23 26.68
53.64 (31.41) 4.45

ANNEXURE IV

Notes to the Accounts and Significant Accounting Policies:

1. Significant Accounting Policies

i. System of Accounting:

The Financial Statements are prepared under the historical cost convention and accrual concept.

ii. Sales:

Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and
excluding sales tax is accounted for as sales.

iii. Fixed Assets and Depreciation:

All Fixed Assets are stated at cost inclusive of all installation expenses incurred relating to acquisition.
Depreciation is provided on straight-line method at the rates specified in Schedule XIV of the Companies
Act 1956. Depreciation is charged on pro rata basis on additions to Assets taken into account the date of
additions.

iv. Foreign Currency Transactions:

Transactions in foreign currencies to the extent not covered by forward contracts are accounted at prevailing
rates. Current Assets and Liabilities in foreign currency are translated at the rates of exchange ruling.
Fluctuations in exchange rates are accounted for in the profit and loss account.

v. Inventories:

Stock in trade is valued at cost or net realizable value which ever is lower.

vi. Marketing Expenditure:

1. Expenditure incurred on marketing and market related activities is charged off in the year in which it is
incurred.

121
AML STEEL LIMITED

2. Secured Loans from Central Bank of India is primarily secured by first charge on the entire block of
assets of the Company along with personal guarantee of Mr Ashok Agrawal, Mrs Anita Agrawal, Mr Ajay
Agrawal and Mr Poonam Chand Jangir Directors of the Company. Further secured by the Corporate
Guarantee given by AML Steel Limited (formerly Ashok Magnetics Limited), the holding Company.

3. The balances in Sundry Debtors, Sundry Creditors, Loans and Advances are subject to confirmation.

4. All Loans, Deposits and Advances are unsecured but considered good.

5. Directors Remuneration:
2004 – 2005 2003 – 2004 31.12.2005
Salary Rs. Nil Rs. Nil Rs. Nil

6. Auditors Remuneration:
2004 – 2005 2003 – 2004

Statutory Audit Rs. 10,000.00 Rs. 10,000.00


Tax Audit Rs. 10,000.00 Rs. 10,000.00
Service Tax Rs. 2,040.00 Rs. 1,600.00
Rs. 22,040.00 Rs. 21,600.00

7. No amount is outstanding for more than 30 days as at the date of Balance Sheet payable to Small Scale
Undertaking.

8. Previous figures have been regrouped wherever necessary to confirm to current year’s classification.

9. Capacity and Production

Production Unit Licensed Capacity Installed Capacity Production


31.12.05 04-05 03-04 31.12.05 04-05 03-04 31.12.05 04-05 03-04
MS Ingots Tonnes 27,600 27,600 27,600 27,600 27,600 27,600 18029.17 14,247 5,650

ANNEXURE V

DETAILS OF OTHER INCOME


(Rs. in lakhs)
Period ended on 31.03.04 31.03.05 31.12.05
Other Income 0.07 0.53 11.55
20 % of PBT 3.83 27.21 53.04
10 % of Total Income 99.39 303.77 288.31
Applicability NA NA NA

ANNEXURE VI

AGEWISE ANALYSIS OF SUNDRY DEBTORS


(Rs. in lakhs)
Period ended on 31.03.04 31.03.05 31.12.05
Less than Six Months 177.64 138.44 106.42
More than Six Months - 1.19 -
Total 177.64 139.63 106.42
Amount Due from Affiliates / Group
Companies or those related to Promoters / NIL NIL NIL
Directors in any way

122
AML STEEL LIMITED

ANNEXURE VII

LOANS AND ADVANCES


(Rs. in lakhs)
Period ended on 31.03.04 31.03.05 31.12.05
Loans and Advances given to Affiliates /
Group Companies or those related to 4.09 - -
Promoters / Directors in any way
Others than Affiliates etc. 106.81 107.81 107.81
Total 110.90 107.81 107.81

ANNEXURE VIII

CAPITALIZATION STATEMENT
(Rs. in lakhs)
Period ended on 31.03.04 31.03.05 31.12.05
Borrowing Statement
Short Term Debt 102.49 58.09 227.28
Long Term Debt 201.96 164.70 137.38
Total Debt 304.45 222.79 364.66

Shareholders Funds
Share Capital
-Equity 163.84 163.84 163.84
Less Calls in Arrears - - -
-Preference - - -
Share Premium - - -
Reserves & Surplus 10.65 98.35 274.27
Less: Misc Exp not w/o 1.87 1.66 1.51
Total Shareholders Funds 172.62 260.53 436.60

Long Term Debt / Equity Ratio 1.17 0.63 0.31


Notes: Short term debts represents debts which are due within one year

ANNEXURE IX

TAX SHELTER STATEMENT

(Rs. in lakhs)
Period ended on 31.03.2004 31.03.2005
Profit Before Tax as per Books (A) 19.14 136.05

Tax Rate (%) (B) 35.88 36.59

Tax at actual rate on Book Profits 6.87 49.78

Adjustments

Diff Between Tax Depreciation & Book Depreciation 30.38 52.27


Other Adjustments 10.96 11.25

Total Adjustments (C) 41.34 63.52

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AML STEEL LIMITED

Tax Savings thereon (C*B) 14.83 23.24

Disallowances (F) - 0.83

Profit as per Income Tax Return (A-C+F) - 73.36

Tax as per Income Tax Return - 26.84


Tax as per Income Tax Return (MAT) 1.47

ANNEXURE X

MANDATORY ACCOUNTING RATIOS

PERIOD ENDED ON 31.03.04 31.03.05 31.12.05 *

Earning Per Share (EPS) (Rs) 0.65 5.35 14.32


Cash Earning Per Share (Rs) 1.29 6.70 15.48
Return on Net Worth (%) 6.18 33.66 53.72
Net Asset Value Per Share (Rs) 10.54 15.90 26.65
* Annualised

Workings
A No of Shares 16,38,389 16,38,389 16,38,389
Cash Earnings (Rs in lakhs)
B PAT (Including Deferred Tax) 10.66 87.69 175.92
Depreciation 5.94 17.81 14.29
Loss on Sale of Assets 4.61 4.33 -
C Total 21.21 109.83 190.21
D Net Worth 172.62 260.53 436.60

Notes

A. The ratios have been computed as below;

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

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

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

4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares
Outstanding during the Year

B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years
as per the statement of Restated Profit and Losses Account.

C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered
Accountants of India.

124
AML STEEL LIMITED

ANNEXURE XI

SECURED LOANS
(Rs. in lakhs)
Period ended 31.03.04 31.03.05 31.12.05
From Central Bank of India
Cash Credit 102.49 58.08 136.93
Term Loan 201.96 164.71 137.38
Demand Loan - - 90.35
Total 304.45 222.79 364.66

Details of the Secured Loans outstanding as on 31.12.2005

Sanctioned Amount
Securities offered with Particulars Financial Nature of Rate of
Amount Outstanding
Repayment Terms of Loan Institution Loan Interest p.a.
(Rs. in lakhs) (Rs. in lakhs)
2% over
Secured by Central Short
BPLR
hypothecation of Stocks Cash Credit Bank Term 100.00 136.93
Presently
and Book Debts of India Loan
11%
Equitable Mortgage of 2% over
Central
Factory Land and Demand BPLR
Term Loan Bank 200.00 137.38
Building and Plant and Loan Presently
of India
Machinery 11%
Central
Secured by lien on Demand Demand
Bank 90.35 90.35 5.50%
Fixed Deposit Receipt Loan Loan
of India

Repayment Terms

For Cash Credit from Central Bank of India Bullet at the end of one year
For Term Loan from Central Bank of India Equal monthly installment of Rs. 4.50 lakhs
For Demand Loan from Central Bank of India Already been paid during the month of January 2006

125
AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF ASHOK STEEL


INDUSTRIES PRIVATE LIMITED, SRI LANKA.

AUDITORS REPORT

The Board of Directors


M/s. Ashok Steel Industries Private Limited
8th Floor, IBM Building
No 48 Nawam Mawatha
Colombo, Srilanka - 02

Dear Sirs

We have examined the annexed financial information of M/s. Ashok Steel Industries Private Limited, for
the period 10.10.2002 to 31.03.2003 and years ended 31st March, 2004, 2005 and for the nine months period
ended 31st December 2005, being the last date up to which the accounts have been made up and audited by
us. These financial statements are the responsibility of the Company’s Management. Our responsibility is to
express an opinion on these accounts based on our audit. These accounts were approved by the Board of
Directors of the Company for the purpose of disclosure in the Offer Document being issued by AML Steel
Limited the Holding Company in connection with the Public Issue of Equity Shares of the Holding
Company

The Accounts of the Company are maintained in Sri Lankan Rupees and those are converted into Indian
Rupees at the rate of Rs. 2.15 for the year ended 31st March 2003, at the rate of Rs. 2.20 for the year ended
31st March 2004, and at the rate of Rs. 2.25 for the year ended 31st March 2005 and for the nine months
period ended 31st December 2005.

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

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

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

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

4. There was no Contingent Liability as on 31.03.2005 and 31.12.2005.

5. Accounting Ratios as appearing in Annexure V to this Report.

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

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

8. Statement showing breakup of Unsecured Loans as per Annexure VI.

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

126
AML STEEL LIMITED

In our opinion the financial information of the Company as stated above read with significant accounting
policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as
considered appropriate.

This report is intended solely for your information and for inclusion in the offer document in connection
with the specific Public Offer of the AML Steel Limited and is not be used, referred to or distributed for
any other purpose without our prior written consent.

JAWAAMIL ASSOCIATES
Chartered Accountants

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

Colombo
Date: 24.02.2006

ANNEXURE I

STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNT


(Rs in lakhs)
10.10.02 –
PERIOD ENDED ON 31.03.04 31.03.05 31.12.05
31.03.03

INCOME
Sales:
Of Products manufactured by the Company 110.04 556.86 1,903.52 2,2220.85
Of Products traded by the Company - 14.56 17.32 11.78
Other Income - 1.14 0.06 -
Increase / (Decrease) in Inventory - 39.42 8.43
127.66
Total Income 110.04 611.98 1,929.33 2,360.29

EXPENDITURE
Raw Materials & Goods Consumed 60.90 248.52 1,175.80 1,616.41
Staff Costs 4.97 19.01 24.92 31.07
Other Manufacturing Expenses 87.78 263.77 550.71 442.96
Selling & Distribution Expenses 6.44 24.08 17.77 80.59
Interest 0.40 1.91 2.63 4.55
Depreciation - 15.80 37.93 26.88
Miscellaneous Expenditure w/o - - - -
Total Expenditure 160.49 573.09 1,809.76 2,202.46

Net Profit before Tax & before Extraordinary


items (50.45) 38.89 119.57 157.83

Provision for Taxation - - - -

Net Profit after Tax & before Extraordinary


items (50.45) 38.89 119.57 157.83

Extraordinary Items (net of tax) - - - -

127
AML STEEL LIMITED

Net Profit after Extraordinary Items (50.45) 38.89 119.57 157.83

Earlier year Adjustments - - - -

APPROPRIATIONS
Transfer to General Reserve - - - -
Proposed Dividend - - - -
Tax on Proposed Dividend - - - -
Deferred Tax Adjustment - - - -
Balance Carried to Balance Sheet (50.45) 38.89 119.57 157.83

ANNEXURE II

STATEMENT OF RESTATED ASSETS AND LIABILITIES


(Rs. in lakhs)
10.10.02 -
AS AT 31.03.04 31.03.05 31.12.05
31.03.03
A Assets
Fixed Assets - Gross Block 217.53 417.33 477.62 575.94
Less: Depreciation 8.38 23.99 61.38 94.09
Net Block 209.15 393.34 416.24 481.85
Less: Revaluation Reserve - - - -
Net Block after adjustment for
Revaluation Reserve 209.15 393.34 416.24 481.85

B Investments - - - -

C Current Assets, Loans & Advances


Inventories 34.78 278.74 363.65 503.93
Receivables - - 17.22 -
Cash & Bank Balances 53.87 36.40 49.61 49.08
Other Current Assets - 0.46 9.10 35.04
Loans & Advances 3.59 48.50 28.75 30.54

Total Assets 301.40 757.44 884.57 1,100.44

D Liabilities and Provisions


Loan Funds
Secured Loans - - - -
Unsecured Loans 31.28 512.09 506.94 506.94

Current Liabilities & Provisions


Sundry Liability 198.13 136.28 129.79 188.50
- - 23.10 22.43
Provisions

E Net Worth
Represented by
Shareholders Funds
Share Capital 118.03 238.64 233.33 233.33
Share Application Money 126.16 - - -
Reserves & Surplus (144.21) (102.04) 18.33 176.16

128
AML STEEL LIMITED

Less: Revaluation Reserve - - - -


Reserves (Net of Revaluation Reserve) (144.21) (102.04) 18.33 176.16
Less: Miscellaneous Expenditure not
written off 27.99 27.53 26.92 26.92

Total of Net Worth 71.99 109.07 224.74 382.57

Total of Liabilities and Provisions 301.40 757.44 884.57 1,100.44

ANNEXURE III
RESTATED CASH FLOW STATEMENT
(Rs. in lakhs)
Cash Flow Statement for the year ending 31.03.03 31.03.04 31.03.05 31.12.05

A Cash Flow from Operating Activities


Net Profit before Taxation and Extra Ordinary Items (50.45) 38.89 119.57 157.83
Adjustments for:
Depreciation - 15.80 37.93 26.88
(Profit) / Loss on Sale of Assets - - -
Interest Expenses 0.40 1.91 2.63 4.55
Interest / Dividend Received - - - -
Miscellaneous Expenditure Written off - - 0.61 -
(Profit) / Loss on Sale of Investments - - - -
Operating Profit before Working Capital Changes (50.05) 56.60 160.74 189.26
Movements in Working Capital
Adjustments for:
(Increase)/Decrease in Sundry Debtors and other Receivables (3.59) (45.37) (6.11) (10.51)
(Increase)/Decrease in Inventories (34.78) (243.96) (84.91) (140.28)
Increase/(Decrease) in Liabilities 198.13 (61.85) 16.61 58.04
Cash Generated from Operations 109.71 (294.58) 86.33 96.51
Direct Taxes Paid - - - -
Extra Ordinary Items - - - -
Net Cash from Operating Activities 109.71 (294.58) 86.33 96.51

B Cash Flow from Investing Activities

Purchase of Fixed Assets (209.16) (201.79) (60.03) (92.49)


Misc Expenses (27.99) - - -
Purchase of Investments - - - -
Sale of Investments - - - -
Interest Paid (0.40) (1.91) (2.63) (4.55)
Interest Received - - - -
Net Cash from Investing Activities (237.55) (203.70) (62.66) (97.04)

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital 24.27 - (5.31) -


Proceeds from Long Term Borrowings 157.44 480.81 (5.15) -
Dividends Paid - - -

Net Cash from Financing Activities 181.71 480.81 (10.46) -

129
AML STEEL LIMITED

Net Increase in Cash and Cash Equivalents (A+B+C) 53.87 (17.47) 13.21 (0.53)

Opening Cash and Cash Equivalents - 53.87 36.40 49.61


Closing Cash and Cash Equivalents 53.87 36.40 49.61 49.08
53.87 (17.47) 13.21 (0.53)

ANNEXURE IV

SIGNIFICANT ACCOUNTING POLICIES

1. FUNDAMENTAL ACCOUNTING ASSUMPTIONS

Going Concern

These Financial Statements are prepared on the assumption that the company is a going concern i.e. as
continuing in operation for the foreseeable future. It is therefore assumed that the company has neither the
intention nor the necessity of liquidation or of curtailing materially the scale of its operations.

GENERAL POLICIES

2.1 The financial Statements are prepared under the historical cost convention in accordance with generally
accepted accounting principals and the accounting standards laid down by the Institute of Chartered
Accountants of Sri Lanka. No adjustment is made for inflationary factors affecting these accounts other
than for revaluation of Land and Buildings.

2.2 Previous year’s figures and phrases have been re-arranged wherever necessary to conform to the current
presentation.

2.3 Conversion of Foreign Currencies

All foreign exchange transactions are converted at the rates of exchange prevailing at the time the
transactions were effected. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date. The resulting gains and losses are
accounted for in the Income Statement, if any.

2.4 Post Balance Sheet Events

All material events occurring after the Balance Sheet date are considered and where necessary, adjustments
made in these financial statements.

2.5 Taxation

The provision for income tax is based on the elements of income and expenditure as reported in the
Financial Statements and computed in accordance with the provision of the Inland Revenue Act.

2.6 Borrowing Costs

Borrowing costs are recognized as an expense in the period in which they are incurred.

VALUATION OF ASSETS

3.1 INVENTORIES

Inventories are valued at the lower of cost and estimated net realizable value, after making due allowances
for obsolete and slow moving items. Net realizable value is the price at which Inventories can be sold in
the normal course of business after allowing for cost of realization.

130
AML STEEL LIMITED

3.2 Debtors

Debtors are stated at the amounts they are estimated to realize inclusive of provisions for bad & doubtful
debts.

3.3 Property, Plant and Equipments

3.3 1. Cost Valuation

Properties, Plant & Equipment are recorded at cost less accumulated depreciation, which is provided for on
the bases specified below.

The cost of Property, Plant and Equipment is the cost of purchase together with any incidental expenses
thereon. Interest costs incurred during the construction periods are also capitalized.

The revalued amount is the current market value of the assets determined by a qualified valuer on the date
of valuation.

3.3.2 Depreciation

Provision of depreciation calculated on the cost of all Property, Plant & Equipment other than Free hold
land in order to write-off such amounts over the estimated useful lives by equal installments as follows,

Office Equipments 15%


Plant & Machinery 10%
Motor Vehicle 25%

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

LIABILITIES & PROVISIONS

4.1 Retirement Benefits

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

INCOME STATEMENTS

5.1 Turnover

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

5.2 Revenue and Expenses

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

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

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

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

131
AML STEEL LIMITED

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

ANNEXURE V

MANDATORY ACCOUNTING RATIOS

10.10.02 -
PERIOD ENDED ON 31.03.04 31.03.05 31.12.05*
31.03.03
Earning Per Share (EPS) (Rs) (1.99) 0.74 2.28 4.01
Cash Earning Per Share (Rs) (1.99) 2.16 3.00 4.69
Return on Net Worth (%) (70.09) 35.66 53.20 55.01
Net Asset Value Per Share (Rs) 2.84 2.08 4.28 7.29
* Annualised
Workings
No of Shares at the Beginning of the Year 25,37,503 25,37,503 52,50,000 52,50,000
No of Shares at the End of the Year 25,37,503 52,50,000 52,50,000 52,50,000
A Weighted Average Number of Equity Shares 25,37,503 52,50,000 52,50,000 52,50,000
Cash Earnings
B PAT (50.45) 38.89 119.57 157.83
Depreciation - 15.80 37.93 26.88
Loss on Sale of Assets - - - -
C Total (50.45) 54.69 157.50 184.71
D Net Worth 71.99 109.07 224.74 382.57

Notes
A. The ratios have been computed as below
1. Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average Number
of Equity Shares Outstanding during the Year
2. Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders / Weighted Average
Number of Equity Shares Outstanding during the Year.
3. Return on Net Worth (%) = Profit After Tax / Net Worth
4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares Outstanding
during the Year
B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as
per the statement of Restated Profit and Loss Account.

ANNEXURE VI

BREAK UP OF UNSECURED LOANS


(Rs in lakhs)
10.10.02 -
Particulars 31.03.04 31.03.05 31.12.05
31.03.03
Amount Due to Affiliates / Group
Companies or those related to Promoters / - - - -
Directors in any way.
Others 31.28 512.09 506.94 506.94
Total 31.28 512.09 506.94 506.94

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

132
AML STEEL LIMITED

ANNEXURE VII

BREAK UP OF LOANS AND ADVANCES


(Rs. in lakhs)
10.10.02 -
Particulars 31.03.2004 31.03.2005 31.12.05
31.03.03
Amount Due to Affiliates / Group
Companies or those related to - - - -
Promoters / Directors in any way
Others 3.59 48.50 28.75 30.54
Total 3.59 48.50 28.75 30.54

133
AML STEEL LIMITED

AUDITORS REPORT AND RESTATED FINANCIAL STATEMENTS OF AML STEEL &


POWER LIMITED.
AUDITORS REPORT
Date: 24.02.2006

The Board of Directors


AML Steel & Power Limited
Raheja Complex
834 Mount Road
Chennai – 600 002

Dear Sir

We have examined the annexed financial information of M/s. AML Steel & Power Limited, for the period
from 30th January, 2004 to 31st March, 2005 and for the nine months period ended 31st December 2005,
being the last date up to which the accounts have been made up and audited by us. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these accounts based on our audit. These accounts were approved by the Board of Directors of the
Company for the purpose of disclosure in the Offer Document being issued by the AML Steel Ltd., the
Holding Company in connection with the Public Issue of Equity Shares.

In accordance with the requirements of:


1. Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 (“the Act”).
2. The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000
(“the SEBI Guidelines”) issued by Securities and Exchange Board of India Act, 1992 and related
amendments and
3. Our terms of reference with the Company dated 20.01.2006 requesting us to carry out work in
connection with the Offer Document as aforesaid.

We have examined the following financial information relating to the Company proposed to be included in
the Offer Document, to be issued by AML Steel Ltd as approved by you and annexed to this report:
1. The Restated Assets and Liabilities of the Company for the above mentioned periods are as set out
in Annexure I to this report after making such adjustments/restatements and regrouping as in our
opinion are appropriate and subject to the accounting policies and notes thereon appearing in
Annexure III to this report.
2. Statement of Restated Cash Flow enclosed as Annexure II to this report.
3. Statement showing breakup of Loans and Advances as per Annexure IV.
4. Statement showing breakup Unsecured Loans as per Annexure V.

Since the company has not started its business the Restated Profit and Loss Account of the company for the
above mentioned period is not applicable.

In our opinion the financial information of the Company as stated above read with significant accounting
policies attached in Annexure III to this report, after making adjustments/statements and regroupings as
considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the
SEBI guidelines.

This report is intended solely for your information and for inclusion in the offer document in connection
with the specific Public Offer of the AML Steel Limited and is not be used, referred to or distributed for
any other purpose without our prior written consent.

For K. P. JAIN & CO.,


Chartered Accountants

Sd/-
KISHORE P. JAIN
(Proprietor)
Membership No: 27236
Place: Chennai

134
AML STEEL LIMITED

ANNEXURE I

STATEMENT OF RESTATED ASSETS AND LIABILITIES


(Rs. in lakhs)
AS AT 31.03.05 31.12.05
A Assets
Fixed Assets - Gross Block 40.91 869.88
Less: Depreciation - -
Net Block 40.91 869.88
Less: Revaluation Reserve - -
Net Block after adjustment for Revaluation Reserve 40.91 869.88

B Investments - -

C Current Assets, Loans & Advances


Inventories - -
Receivables - -
Cash & Bank Balances 12.20 532.69
Other Current Assets - -
Loans & Advances 25.75 152.27

Total Assets 78.86 1,555.44

D Liabilities and Provisions


Loan Funds
Secured Loans - -
Unsecured Loans 25.00 -

Current Liabilities & Provisions


Sundry Liability 0.45 101.59
Provisions - -

E Net Worth
Represented by
Shareholders Funds
Share Capital 5.00 5.00
Share Application Money 66.62 1,522.72
Reserves & Surplus - 1.58
Less: Revaluation Reserve - -
Reserves (Net of Revaluation Reserve) - 1.58
Less: Miscellaneous Expenditure not written off 18.21 75.55

Total Net Worth 53.41 1,453.75

Total Liabilities and Provisions 78.86 1,555.34

135
AML STEEL LIMITED

ANNEXURE II
STATEMENT OF RESTATED CASH FLOW
(Rs. in lakhs)
Cash Flow Statement for the period ending 31.03.05 31.12.05
A Cash Flow from Operating Activities

Net Profit before Taxation and Extra Ordinary Items - -


Adjustments for:
Depreciation - -
(Profit) / Loss on Sale of Assets - -
Interest Expenses - -
Interest / Dividend Received - 1.58
Miscellaneous Expenditure Written off - -
(Profit) / Loss on Sale of Investments - -
Operating Profit before Working Capital Changes - 1.58
Movements in Working Capital
Adjustments for:
(Increase)/Decrease in Sundry Debtors and other Receivables (25.75) (127.02)
(Increase)/Decrease in Inventories - -
Increase/(Decrease) in Liabilities 0.45 101.14
Cash Generated from Operations (25.30) (24.30)
Direct Taxes Paid - -
Extra Ordinary Items - -

Net Cash from Operating Activities (25.30) (24.30)

B Cash Flow from Investing Activities

Purchase of Fixed Assets (40.91) (828.97)


Preliminary Expenses (18.21) (57.34)
Purchase of Investments - -
Sale of Investments - -
Interest Paid - -
Interest Received - -

Net Cash from Investing Activities (59.12) (886.31)

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital 5.00 -


Proceeds from Share Application 66.62 1,456.10
Proceeds from Long Term Borrowings 25.00 (25.00)
Dividends Paid - -

Net Cash from Financing Activities 96.62 1,431.10

Net Increase in Cash and Cash Equivalents (A+B+C) 12.20 520.49

Opening Cash and Cash Equivalents - 12.20


Closing Cash and Cash Equivalents 12.20 532.69
12.20 520.49

136
AML STEEL LIMITED

ANNEXURE III

Notes to the Accounts and Significant Accounting Policies:

1. Significant Accounting Policies

i. System of Accounting:

The Financial Statements are prepared under the historical cost convention and accrual concept.

ii. Fixed Assets and Depreciation:

All Fixed Assets are stated at cost inclusive of all installation expenses incurred relating to acquisition.
Depreciation has not been provided in the books of accounts as the company has not commenced its
business.

2. Auditors Remuneration:
31.03.2005
Statutory Audit Rs. 5,000.00
Service Tax Rs. 510.00
Rs. 5,510.00

3. Directors Remuneration:
31.03.2005
NIL

4. Reserves and Surplus of Rs. 1.58 lacs for the nine months period ending 31.12.2005 represents interest
earned on FDR with Bank.

ANNEXURE IV

Loans and Advances


(Rs in lakhs)
Period ended 31.03.2005 31.12.05
Loans and Advances given to Affiliates / Group
Companies or those related to Promoters / Directors - -
in any way
Others than Affiliates etc. 25.75 152.77
Total 25.75 152.77

ANNEXURE V

Break up of Unsecured Loans


(Rs in lakhs)
Period ended 31.03.2005 31.12.2005
Amount Due to Affiliates / Group Companies or those related to
25.00 -
Promoters / Directors in any way
Others - -
Total 25.00 25.00

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

137
AML STEEL LIMITED

AUDITORS REPORT AND CONSOLIDATED RESTATED FINANCIAL STATEMENTS OF AML


STEEL LIMITED AND ITS SUBSIDIARIES.

AUDITORS REPORT

Date:24.02.2006

The Board of Directors


AML Steel Limited,
(Formerly Ashok Magnetics Limited)
B-73, Sipcot Industrial Complex,
Gummidipoondi - 601 201

Dear Sir

We have examined annexed Consolidated Financial Information of M/s. AML Steel Limited and its
Subsidiary Companies M/s. Ankit Ispat Private Limited, M/s. AML Steel & Power Ltd and M/s. Ashok
Steel Industries Private Limited., collectively referred to as “the Group” for the years ended 31st March,
2003, 2004, 2005 and for the nine months period ended 31st December 2005, being the last date up to which
the accounts have been made up and audited by us.

The annexed Consolidated Financial Information includes the accounts of the following Companies:
1. For AML Steel Limited: for the years ended 31st March, 2003, 2004, 2005 and for the nine months
period ended 31st December 2005.
2. For Ankit Ispat Private Limited: for the period from 13th August, 2003 to 31st March 2004, year
ended 31st March, 2005 and for the nine months period ended 31st December 2005.
3. For Ashok Steel Industries Private Limited: for the period from 10th October 2002 to 31st March
2003, for the years ended 31st March, 2004, 2005 and for the nine months period ended 31st
December 2005.
4. For AML Steel & Power Limited: for the nine months period ended 31st December 2005.

The information is based on the accounts audited by us of M/s. AML Steel Limited and its Subsidiary
Companies M/s. Ankit Ispat Private Limited and M/s. AML Steel & Power Ltd for the above mentioned
periods.

However, we have not audited the financial statements of one of the subsidiary company, M/s Ashok Steel
Industries Private Limited, for the above-mentioned periods. These Financial Statements have been audited
by JAWAAMIL ASSOCIATES Chartered Accountants No: 96 2/7 Consistory Building, Malwatta Road,
Colombo 11 Srilanka, whose report have been furnished to us, and our opinion, in so far as it relates to the
amounts included in respect of the subsidiaries, is based solely on the report of the other auditor.

These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these accounts based on our audit. These accounts were approved by the Board of
Directors of the Company for the purpose of disclosure in the Offer Document being issued by the
Company in connection with the Public Issue of Equity Shares in the Company (referred to as “the issue”).

In accordance with the requirements of:

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

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

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

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

138
AML STEEL LIMITED

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

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

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

4. Accounting Ratios as appearing in Annexure V to this Report.

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

We report that the summarized restated consolidated financial statements have been prepared by the
Company’s Management in accordance with the requirements of the Accounting Standards (AS) 21 –
Consolidated Financial Statements issued by the Institute of Chartered Accountants of India.

In our opinion the financial information of the Company as stated above read with significant accounting
policies attached in Annexure IV to this report, after making adjustments/statements and regroupings as
considered appropriate and has been prepared in accordance with Part II of schedule II of the Act and the
SEBI guidelines.

This report is intended solely for your information and for inclusion in the offer document in connection
with the specific Public Offer of the Company and is not be used, referred to or distributed for any other
purpose without our prior written consent.

For K. P. JAIN & CO.,


Chartered Accountants

Sd/-
KISHORE P. JAIN
(Proprietor)
Membership No: 27236
Place: Chennai

ANNEXURE I

STATEMENT OF RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT


(Rs. in lakhs)
PERIOD ENDED ON 31.03.03 31.03.04 31.03.05 31.12.05
INCOME

Sales:
Of Products manufactured by the Company 2,726.13 4,331.36 8,410.51 8,678.12
Of Products traded by the Company - 243.16 2,267.97 7,084.34
Other Income 46.12 16.48 35.07 417.33
Increase / (Decrease) in Inventory 2.90 53.18 9.27 164.36
Total Income 2,775.15 4,644.18 10,722.82 16,344.15

EXPENDITURE
Raw Materials & Goods Consumed 1,679.39 2,818.31 6,927.79 11,945.01
Staff Costs 26.35 37.24 45.34 57.59
Other Manufacturing Expenses 949.78 1,482.11 2,830.70 2,528.70

139
AML STEEL LIMITED

Selling & Distribution Expenses 74.06 78.53 68.90 189.36


Interest 16.03 45.29 74.04 70.76
Depreciation 25.85 49.59 86.96 65.46
Miscellaneous Expenditure w/o 1.25 1.45 1.45 -

Total Expenditure 2,772.71 4,512.52 10,035.18 14,856.88

Net Profit before Tax & before


Extraordinary items 2.44 131.66 687.64 1,487.27

Provision for Taxation 4.06 20.80 163.90 260.24


Provision for Deferred Taxation 4.81 8.59 21.03 9.95

Net Profit after Tax & before Extraordinary


items (6.43) 102.27 502.71 1,217.08

Extraordinary Items (net of tax) - - - -

Net Profit after Extraordinary Items (6.43) 102.27 502.71 1,217.08

Earlier year Adjustments - - - -

APPROPRIATIONS
Transfer to General Reserve 5.42 9.50 25.00 -
Proposed Dividend 36.00 36.00 45.00 -
Tax on Proposed Dividend 7.20 4.50 6.31 -
Balance Carried to Balance Sheet (55.05) 52.27 426.40 1,217.08

ANNEXURE II

STATEMENT OF RESTATED CONSOLIDATED ASSETS AND LIABILITIES


(Rs. in lakhs)
AS AT 31.03.03 31.03.04 31.03.05 31.12.05

A Assets
Fixed Assets – Gross Block 933.82 1,487.97 1,627.38 2,619.60
Less: Depreciation 167.86 213.50 293.32 364.61
Net Block 765.96 1,274.47 1,334.06 2,254.99
Less: Revaluation Reserve - - - -
Net Block after adjustment for
Revaluation Reserve 765.96 1,274.47 1,334.06 2,254.99

B Good Will 20.26 25.80 31.11 31.11

C Investments 60.22 12.00 25.14 29.89

D Current Assets, Loans & Advances


Inventories 593.37 1,054.65 1,948.98 3,316.23
Receivables 151.82 512.05 1,515.29 1,496.58
Cash & Bank Balances 334.22 443.45 279.49 838.20
Other Current Assets 87.88 105.83 232.98 371.41

140
AML STEEL LIMITED

Loans & Advances 56.50 210.46 254.98 629.24

Total Assets 2,070.24 3,638.71 5,622.03 8,967.65

E Liabilities and Provisions


Loan Funds
Secured Loans 274.46 762.77 541.50 720.81
Unsecured Loans 53.92 533.74 549.58 646.09

Current Liabilities & Provisions


Sundry Liability 580.23 1,087.48 2,619.45 2,963.75
Provisions (Including Deferred Tax) 78.39 101.03 303.52 521.74

F Net Worth
Represented by
Shareholders Funds
Share Capital 300.00 303.00 303.00 750.00
Share Application Money - - - 1,368.61
Reserves & Surplus 818.84 886.46 1,338.68 2,105.75
Less: Revaluation Reserve - - - -
Reserves (Net of Revaluation Reserve) 818.84 886.46 1,338.68 2,105.75
Less: Miscellaneous Expenditure not
written off 35.61 35.77 33.70 109.10

Total Net Worth 1,083.23 1,153.69 1,607.98 4,115.26

Total of Liabilities and Provisions 2,070.23 3,638.71 5,622.03 8,967.65

ANNEXURE III
STATEMENT OF RESTATED CONSOLIDATED CASH FLOW
(Rs. in lakhs)
Cash Flow Statement for the year/period ending 31.03.03 31.03.04 31.03.05 31.12.05

A Cash Flow from Operating Activities

Net Profit before Taxation and Extra Ordinary Items 2.44 131.65 687.65 1,485.69
Adjustments for:
Depreciation 25.86 49.60 86.96 65.46
(Profit) / Loss on Sale of Assets 28.76 4.61 4.33 -
Interest Expenses 16.04 45.29 74.04 70.76

Interest / Dividend Received (46.12) (15.34) (21.78) (10.52)


Miscellaneous Expenditure Written off 1.25 1.45 2.06 0.15
(Profit) / Loss on Sale of Investments - - (13.23) (403.65)
Operating Profit before Working Capital Changes 28.23 217.25 820.03 1,207.89
Movements in Working Capital
Adjustments for:
(Increase)/Decrease in Debtors and other Receivables 397.22 (532.14) (1,577.54) (65.61)
(Increase)/Decrease in Inventories 423.06 (461.27) (894.34) (1,367.25)
Increase/(Decrease) in Liabilities (657.63) 507.26 1,957.68 (59.44)

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AML STEEL LIMITED

Cash Generated from Operations 190.88 (268.90) 305.84 (284.41)


Direct Taxes Paid 13.52 4.05 16.34 -
Extra Ordinary Items - - - -

Net Cash from Operating Activities 177.36 (272.95) 289.50 (284.41)

B Cash Flow from Investing Activities

Purchase of Fixed Assets (220.51) (566.32) (154.44) (945.48)


Sale of Fixed Assets (12.54) 1.81 4.37 (57.34)
Purchase of Investments (239.66) (112.62) (13.14) (38.14)
Sale of Investments - - 13.23 429.04
Interest Paid (16.04) (45.29) (74.04) (70.76)
Interest Received 46.12 15.34 21.78 12.10
Preliminary Expenses - (2.07) - -

Net Cash from Investing Activities (442.62) (709.16) (202.24) (670.58)

C Cash Flow from Financing Activities

Proceeds from Issue of Share Capital (41.87) 163.84 (5.31) -


- - - 1,301.99
Proceeds from Long Term Borrowings 127.44 968.11 (205.41) 250.82
Dividends Paid - (40.61) (40.50) (51.31)

Net Cash from Financing Activities 85.57 1,091.34 (251.22) 1,501.50

Net Increase in Cash and Cash Equivalents (A+B+C) (179.69) 109.23 (163.96) 546.51

Opening Cash and Cash Equivalents 513.91 334.22 443.45 291.69


Closing Cash and Cash Equivalents 334.22 443.45 279.49 838.20
(179.69) 109.23 (163.96) 546.51

ANNEXURE IV

NOTES TO THE ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES:

1. Basis for preparation of consolidated accounts:

i. The financial statements of the subsidiaries used in the consolidation are drawn up to the same reporting
date as that of the Parent Company.

ii. The consolidated financial statements have been prepared under the historical cost convention and on the
accrual basis of accounting. The accounts of the group have been prepared in accordance with the
Accounting Standards issued by the Institute of Chartered Accounts of India, and generally accepted
accounting principles.

iii. The consolidated financial statements related to AML Steel Limited and its Subsidiary Companies. The
consolidated financial statements have been prepared on the following basis.

• The financial statements of the Company and its Subsidiary Companies have been combined on
a line by line basis by adding together book values of like items of assets, liabilities, income and

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AML STEEL LIMITED

expenses, after fully eliminating intra-group balances and intra-group transactions resulting in
unrealized profits and losses.
• The excess of cost of the Company of its investment in the Subsidiary over the Company’s portion
of equity of the Subsidiary is recognized in the financial statements ad Goodwill.

iv. The subsidiary Companies considered in the consolidated financial statements are:

Country of Incorporation % voting power held


As at 31st December 2005
Ankit Ispat (P) Ltd India 100
Ashok Steel Industries (P) Ltd Sri Lanka 100
AML Steel & Power Ltd India 100

2. Revenue Recognition

Sales are invoiced on delivery of goods to the customers. Invoiced value of sales including excise duty and
excluding sales tax is accounted for sales.

3. Fixed Assets:

Fixed Assets are recorded at historical cost of purchase and do not reflect current values. Cost includes
interest and other financial charges attributable to the acquisition of fixed assets. Foreign exchange
differences relating to the acquisition of fixed assets are adjusted to the cost of the asset.

When an asset is disposed off, the cost and related depreciation are removed from the books of account
and the resultant profit (including capital profit) or loss is reflected in the profit and loss account.

4. Investments

Investments are stated at cost.

5. Inventories

Inventories are stated at cost or net realizable value, which ever is lower.

6. Transaction of Foreign Currency

All assets and liabilities are translated at the relevant rates of exchange prevailing at the year-end.

7. Previous figures have been regrouped wherever necessary to confirm to current year’s classification.

ANNEXURE V

MANDATORY ACCOUNTING RATIOS

PERIOD ENDED ON 31.03.03 31.03.04 31.03.05 31.12.05 *


Earning Per Share (EPS) (Rs) (0.21) 3.39 16.59 32.46
Cash Earning Per Share (Rs) 0.65 5.19 19.60 34.20
Return on Net Worth (%) (0.59) 8.86 31.26 39.43
Net Asset Value Per Share (Rs) 36.11 38.23 53.07 82.31
* Annualised

Workings
No of Shares at the Beginning of the Year 30,00,000 30,00,000 30,30,000 30,30,000
No of Shares at the End of the Year 30,00,000 30,30,000 30,30,000 75,00,000
A Weighted Average Number of Equity Shares 30,00,000 30,17,500 30,30,000 50,00,000
Cash Earnings (Rs. in lakhs)
B PAT (Including Deferred Tax) (6.43) 102.27 502.71
1,217.08

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AML STEEL LIMITED

Depreciation 25.85 49.59 86.96 65.46


Loss on Sale of Assets - 4.61 4.33 -
C Total 19.42 156.47 594.00 1,282.54
D Net Worth 1,083.23 1,153.69 1,607.98 4,115.26

Notes:

A. The ratios have been computed as below

1. Earnings per Share (Rs.) = Net Profit Attributable to Equity Share Holders / Weighted Average
Number of Equity Shares Outstanding during the Year.
2. Cash Earnings per Share (Rs.) = Cash Earnings Attributable to Equity Share Holders/ Weighted
Average Number of Equity Shares Outstanding during the Year.
3. Return on Net Worth (%) = Profit After Tax / Net Worth.
4. Net Assets Value per Share (Rs.) = Net Worth / Weighted Average Number of Equity Shares
Outstanding during the Year.

B. The above ratios have been computed on the basis of the adjusted profit/losses for the respective years as
per the statement of Restated Profit and Losses Account.

C. EPS is computed in accordance with the Accounting Standard 20 issued by the Institute of Chartered
Accountants of India.

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AML STEEL LIMITED

FINANCIAL INFORMATION OF GROUP COMPANIES / VENTURES PROMOTED BY THE


PROMOTERS.

1. Corbin Trades Investments Limited

Incorporated on 3 August, 1990, it is an investment company formed for the purpose of investing in shares
of companies. The main source of income of Corbin Trades Investments Limited is dividend and there are
no significant expenses. The Registered office of the Company is situated in 834, Raheja Complex, Mount
Road, Chennai – 600 002.

Board of Directors
The Board of Directors of Corbin Trades Investments Limited consists of Mr.Ashok Agarwal, Mr. Ruli
Ram Agarwal, Mrs. Anita Agarwal.

Financial Highlights (Rs. in lakhs)


For the Year ended 31.03.2005 31.03.2004 31.03.2003
Total Income 1.79 2.19 1.74
Profit/Loss After Tax 1.13 1.55 0.57
EPS (Rs.) 1.08 1.49 0.55
Share Capital 10.40 10.40 10.40
Reserves and Surplus 10.86 9.73 8.18
NAV (Rs.) 20.92 19.36 17.86
* Share Application Money pending as on 31 March, 2005 was Rs.0.50 lakhs.

Shareholding Pattern
The Shareholding Pattern of Corbin Tades Investments Limited is as follows:

S No Name No. of Equity % of Total


Shares
1. Mr.Ashok Agarwal 1,000 0.96
2. Mr.Ruli Ram Agarwal 1,000 0.96
3. Mrs.Anita Agarwal 1,000 0.96
4. Others 1,01,000 98.08
Total 1,04,000 100.00

2. Skywell Assets Limited

Incorporated on 18 March, 2005 in the Brtish Virgin Islands, Skywell Assets Limited is an investment
company with the main object of arranging finance and investing in the debt/equity capital of other
companies. The Registered Office of Skywell Assets Limited is situated at the offices of Offshore
Incorporations Limited, P.O. Box 957, Off Shore Corporations Centre, Road Town, Tortola, British Virgin
Islands.

Board of Directors
The Board of Directors of Skywell Assets Limited are ENSOL (SINGAPORE) PTE LTD and Mr.Ashok
Agarwal

Financial Highlights (In USD)


For the Year ended 31.12.2005
Total Income Nil
Profit/Loss After Tax (4,224.71)
EPS (Rs.) --
Share Capital* 10,000.00
Reserves and Surplus (4,224.71)
NAV (Rs.) 0.58
* Face Value per share is USD 1.00

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AML STEEL LIMITED

Shareholding Pattern
The Shareholding Pattern of Skywell Assets Limited is as follows:

S No Name No. of Equity % of Total


Shares
1. M/s.Ensol (Singapore) Private 4,900
Limited 49.00
2. Mr.Ashok Agarwal 5,100 51.00
Total 10,000 100.00

3. Elango Steels Private Limited

Incorporated on 31 May, 1999 Elango Steel Private Limited is a company whose main object is to carry on
the business of steel. The entire share capital of Elango Steel Private Limited was acquired by the present
shareholders from the original promoters and the then shareholders, on 8 November, 2003. The Registered
office is situated at 57/2, Nainikattalai Road, Polagam Village, T. R Pattinam, Karaikal – 609 609.

Shareholding Pattern
The Shareholding Pattern of Elango Steel Private Limited is as follows:

S No Name No. of Equity Shares % of Total


1 M/s.Ashok Memory India Private Limited 930 46.97
2 Mr.Ajay Agarwal 140 7.07
3 Mr.P.C.Jangir 90 4.55
4 M/s.Corbin Trades Investments Limited 820 41.41
Total 1980 100.00

Board of Directors
The Board of Directors of Elango Steel Private Limited consists of Mr.K.Rajesh and Mr. B.Babu.

Financial Highlights
(Rs. in lakhs)
For the Year ended 31.03.2005 31.03.2004 31.03.2003
Total Income - 2.81 0.21
Profit/(Loss) After Tax - (0.26) (1.24)
EPS (Rs.)* - - -
Share Capital 1.98 1.98 1.98
Reserves and Surplus - - -
NAV (Rs.)* 23.99 23.99 -

* Face Value per share is Rs.100/-

4. Efficient Agencies (Sole Proprietorship)

Efficient Agencies was started by Mr.Ashok Agarwal in August 1987 as a proprietary firm for the purpose
of trading in video and audio cassettes and television tubes. It also entered manufacture of video and audio
cassette subsequently. When there was a technology shift towards compact discs (CD), Efficient Agencies
exited the cassettes business. Now, it functions as a merchant exporter of various engineering and electrical
products to Sri Lanka.

Financial Highlights
(Rs. in lakhs)
For the Year ended 31.03.2005 31.03.2004 31.03.2003
Total Income 227.74 232.59 125.34
Net Profit 1.58 1.31 0.19
Proprietors Capital 49.59 48.01 44.69

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AML STEEL LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND


RESULTS OF OPERATIONS

Please read the following discussion of our financial conditions and results of operations together with our
audited financial statements for the year ended 31 March, 2003, 2004, 2005 and for the nine months period
ended 31 December, 2005, including the notes thereto and the reports thereon, which is appearing under the
head ‘Financial Information’ on page no.[●] in this DRHP. These financial statements are prepared in
accordance with Indian GAAP, the Companies Act and the SEBI Guidelines and restated as described in
the Auditor’s Report of M/s. K.P Jain & Co., Chartered Accountants in the section titled “Financial
Information”.

Business Overview

Promoted by Mr. Ashok Agarwal and his associates, our Group consists of AML Steel Limited (formerly
known as Ashok Magnetics Limited), and its three subsidiaries viz., Ankit Ispat Private Limited, AML
Steel & Power Limited and Ashok Steel Industries Private Limited.

We diversified into Steel in the year 1998 by commencing operations in Pondicherry Plant. We are
manufacturing Mild Steel Ingots from Mild Steel Scrap using the Induction Furnace route; the group’s
value added products include Mild Steel Ingots and Wire Rods. The business operations of the group has
expanded in progression by setting up of manufacturing facilities in Pondicherry, Karaikal, the proposed
Integrated Steel Plant at Jharkhand in India and Colombo in Sri Lanka. The proposed project at Jharkhand
envisages manufacturing Sponge Iron and Steel Billets. The group has an experience of over eight years in
the steel manufacturing and has earned its name in the market for quality production of steel products.

Details of the Existing Plants Owned By the Group

Name Products Location Installed Capacity


AMLSL MSI Pondicherry 45,000 TPA
AIPL MSI Karaikal 27,600 TPA
ASIPL MSI, Wire Rods Sri Lanka 60,000 TPA

Our proposed project through our wholly owned subsidiary, AMLSPL, to set up a facility with an installed
capacity to manufacture 1,10,000 TPA of sponge iron and 42,000 TPA of steel billets, is a step towards
backward integration for the entire group for its existing operations. For this purpose, the Ministry of
Mines, GoI has agreed for the grant of a mining lease to us over 383.54 acres on a long-term lease for a
period of 20 years in the State of Jharkhand. We also propose to set up a 9.6 MW captive power plant to
meet our power requirements. The entire production of sponge iron will be available for captive
consumption for manufacture of other steel products such as steel billets and also for sale in the open
market.

We are also actively engaged in trading of steel products such as T.M.T Bars, Tor Steel, M.S Rods, Steel
Structurals, Steel Angles and Channels, H.R Plates, H. R & C.R Sheets etc., With an experience of around 8
years in the industry, we have been able to exploit the opportunities in the trading segment, which
contributes significantly to our total income.

Capital Issues, Networth Addition

We have issued bonus shares in the ratio of 1.5:1 on 23 August, 2005 increasing the paid up share capital to
7,500.00 lakhs. The networth of the Company as on 31 December, 2005 was Rs.3,767.23 lakhs against
Rs.1,516.88 lakhs as on 31 March, 2005. The increase in networth has been due to the infusion of funds by
the Promoters in the form of share application money. The profit generated out of the operations, after
being added to reserves, has also resulted in an increase in the networth.

Capacity Addition, Capacity Utilization, Production

Our plant at Pondicherry is manufacturing Mild Steel Ingots from Mild Steel Scrap. The licensed capacity,
installed capacity, production and capacity utilisation of the plant for the last three years are given below:

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AML STEEL LIMITED

31.12.2005 31.03.2005 31.03.2004 31.03.2003


Licensed Capacity (TPA) 45000 45000 45000 45000
Installed Capacity (TPA) 45000 45000 45000 45000
Production (TPA) 18375 16284 17363 20824
Capacity utilization 54.44%* 36.19% 38.58% 46.28%
* Annualised

The licensed and installed capacity remained unchanged during the last three years and for the nine month
period ended 31 December, 2005. The capacity utilization came down during the last two years because of
frequent power interruption, which was largely attended to by the Government in the year 2005. Thus,
continuous supply of power coupled with debottlenecking done by the Company has helped it to achieve
54.44% capacity utlisation during the nine months period ended 31 December, 2005.

Dividend Paid

Our Company is having the track record of paying dividend consistently. The details of the dividend paid
by us during the last five years is as under:

Financial Year
Particulars
2004 – 2005 2003 – 2004 2002 – 2003 2001 – 2002 2000 – 2001
Rate of Dividend (%) 15.00 12.00 12.00 10.00 15.00
Amount of Dividend
45.00 36.00 36.00 30.00 45.00
(Rs. in lakhs)

Liquidity and Capital Resources

Liquidity

Both internal and external sources augment our liquidity to fund the working capital and capital
requirements. We have funded our working capital requirements and capital expenditures from internally
generated funds and debt financing. In respect of the debt funding of working capital, we make use of cash
credit limits from banks and for capital expenditure debt financing, we generally enter into long-term
borrowings in the form of Term Loans. As of 31 December, 2005 we had cash and cash equivalents of
Rs.229.75 lakhs, which represented an increase of Rs. 22.10 lakhs over cash and cash equivalents as on
31 March, 2005. As of 31 March, 2005 we had cash and cash equivalents of Rs.207.65 lakhs which
represented a decrease of Rs. 145.76 lakhs from the cash and cash equivalents as on 31 March, 2004.

Cash Flow

Following table summarises our restated cash flow statements in the last three financial years and the nine-
month period ended 31 December, 2005.

Cash Flow (Rs. in lakhs) 31.03.2003 31.03.2004 31.03.2005 30.12.2005


Net cash from operating activities 67.65 63.45 88.93 (1785.88)
Net cash from Investing activities (205.07) (132.63) (75.58) 356.73
Net cash from Financing activities (96.14) 142.24 (159.11) 1451.25
Opening cash and cash equivalents 513.91 280.35 353.41 207.65
Closing cash and cash equivalents 280.35 353.41 207.65 229.75
Net increase in cash and cash equivalents (233.56) 73.06 (145.76) 22.10

Net Cash from Operating Activities

Our net cash outflow from operating activities was Rs. 1,785.88 lakhs during the nine-month period ending
31 December, 2005. We had net profits before extraordinary items and tax of Rs. 1,062.68 lakhs. Our net
cash from operating activities excludes non-cash items of depreciation of Rs. 24.29 lakhs, interest expenses
of Rs. 42.75 lakhs, interest/ dividend received Rs. 11.81 lakhs and profit on sale of investments Rs. 403.65
lakhs. Further, adjustments for increase in debtors and receivables to the extent of Rs.1,595.08 lakhs,

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AML STEEL LIMITED

increase in inventories to the extent of Rs. 911.85 lakhs and increase in liabilities to the extent of Rs.6.79
lakhs, have been made.

Our net cash inflow from operating activities was Rs. 88.93 lakhs in financial year ended 31 March, 2005.
We had net profits before extraordinary items and tax of Rs.432.03 lakhs. Our net cash from operating
activities excludes non-cash items of depreciation of Rs. 31.22 lakhs, net interest expenses of Rs.36.83
lakhs, loss on sales of assets of Rs. 4.33 lakhs, interest/dividend received Rs.21.25 lakhs, miscellaneous
expenses written off Rs. 1.25 lakhs and profit on sale of investments Rs. 13.23 lakhs. Further, adjustments
for increase in debtors and receivables to the extent of Rs.1,541.94 lakhs, increase in inventories to the
extent of Rs. 288.84 lakhs, increase in other liabilities to the extent of Rs. 1,463.25 lakhs, have been made.
The Income Tax paid for the period was Rs.14.73 lakhs.

Net Cash from Investing Activities

The net cash inflow from our investment activities during the nine-month period ended 31 December, 2005
was Rs.356.73 lakhs. During the period there was an inflow of Rs. 429.04 lakhs due to sale of investments
and Rs. 11.81 lakhs from the receipt of interest. There was an outflow of Rs.3.23 lakhs for the purchase of
assets, Rs. 38.14 lakhs for the purchase of investments and Rs. 42.75 lakhs for the payment of the interest.
The net cash outflow from our investment activities in financial year ended 31 March, 2005 was Rs. 75.58
lakhs. This was because there was an outflow of Rs. 64.46 lakhs towards purchase of fixed assets, Rs.13.14
lakhs towards purchase of investments and the Rs.36.83 lakhs for payment of interest. There was an inflow
of Rs. 4.37 lakhs from the Sale of fixed assets and Rs.13.23 lakhs from the sale of investments. We have
received Rs.21.25 lakhs as interest in this period.

Net Cash from Financing Activities

The net cash inflow from the financing activities during the nine-month period ended 31 December, 2005
was Rs.1,451.25 lakhs. This inflow included proceeds from long-term borrowings of Rs. 133.95 lakhs and
share application money of Rs.1,368.61 lakhs. There was a Cash outflow of Rs.51.31 lakhs for the payment
of the dividends. The net cash outflow from our financing activities in FY 2005 was Rs. 159.11 lakhs.
These Cash outflows were dividends to the extent of Rs. 40.50 lakhs and the repayment of long-term
borrowings of Rs. 118.61 lakhs.

INDEBTEDNESS

We have both Secured and Unsecured loans borrowings.

Major portion of our external financing has been from the Banks in India and other agencies. The details
our secured loan position as on 31 December, 2005 is given in the following table:

Name of the lender Outstanding Rate of interest Security


(Rs. in lakhs)
Central Bank of India 315.03 2% over BPLR Secured by hypothecation of the stocks
- Cash Credit presently 11% and book debts
Government of Tamil Nadu 41.12 Interest Free Secured by the residual charge on the
(Interest Free Sales Tax Loan) Fixed Assets of the PVC Unit of the
Company

Our unsecured loan of Rs. 139.15 lakhs as on 31 December, 2005 was from affiliates / group companies or
those related to Promoters or Directors in any way. The amount due is repayable on demand and carries no
interest.

Capital Expenditure

We have been expanding our business operations through our wholly owned subsidiaries in the form of
equity investments and by pursuing strategic acquisitions of other steel plants. We now propose to set up an
Integrated Steel Plant in the State of Jharkhand, through AMLSPL, our wholly owned subsidiary. For
further details on our expansion plans please see the “Objects of the Issue” on page no. [●] of this DRHP.
Our Capital expenditure is subject to modification as a result of variety of factors, including but not limited
to the availability of funds, changes in expansion plans and other such factors.

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AML STEEL LIMITED

Significant Developments Subsequent to the Last Financial Year

There are no significant developments subsequent to last financial year except for the issue of bonus shares.

Discussion on Results of Operations

The following discussion on the financial operations and performance should be read in conjunction with
the audited unconsolidated financial results of the Company for the years ended 31 March, 2003, 2004 and
2005 and for the nine month period ended 31 December, 2005.

Key Factors Affecting the Results of Our Operations

• Early commencement of mining operations.


• Non-receipt of pending approvals for the proposed project.
• Fluctuations in the prices of raw materials, both in domestic and international markets.
• General economic and business conditions particularly in the steel sector.
• Company’s ability to successfully implement its strategy and its growth and expansion plans.
• Fluctuations in exchange rates and interest rates.
• Government policies and regulations regarding duties, levies and taxes.

A summary of past financial results based on the restated statement of accounts is as under:
(Rs. in lakhs)
Period ended on 31.03.2003 31.03.2004 31.03.2005 31.12.2005
Income
Sales:
Of Products manufactured by the Company 2616.09 2,791.29 3,469.84 3585.99
% increase in sales -- 6.70 24.31 *37.80
Of Products traded by the Company -- 228.60 2,250.65 7072.56
% increase in sales -- 100 884.54 *319.00
Total sales 2616.09 3019.89 5720.49 10658.55
% increase in total sales -- 15.44 89.43 *148.43
Other Income 46.12 15.27 34.48 415.46
Increase / (Decrease) in Inventory 2.90 3.14 0.83 25.15
Total Income 2,665.11 3,038.30 5,755.80 11099.16
Expenditure
Raw Materials & Goods Consumed 1,618.49 1,916.36 4,021.89 8730.01
Staff Costs 21.38 16.30 11.83 14.30
Other Manufacturing Expenses 862.00 920.64 1,178.01 1133.85
Selling & Distribution Expenses 67.62 51.93 42.75 91.28
Interest 15.63 30.34 36.83 42.75
Depreciation 25.85 27.85 31.22 24.29
Miscellaneous Expenditure w/o 1.25 1.25 1.25 --
Total Expenditure 2,612.22 2,964.67 5,323.78 10036.48
Net Profit before Tax & before
Extraordinary items 52.89 73.63 432.02 1062.68
Provision for Taxation 4.06 19.19 134.50 180.93
Provision for Deferred Taxation 4.81 1.72 2.07 --
PAT 44.02 52.72 295.45 881.75
PAT as a % of Sales 1.68 1.75 5.16 8.27
* Annualised.

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AML STEEL LIMITED

We commenced our trading operations in full swing during the year 2004-05. A detailed break up of our
manufacturing and trading operations are given below:
(Rs. in lakhs)
PARTICULARS 31.03.2003 31.03.2004 31.03.2005 31.12.2005
M M T M T M T
Sales 2616.09 2791.29 228.60 3469.84 2250.65 3585.99 7072.56
% of Total sales (M+T) 100 92.43 7.57 60.66 39.34 33.64 66.36
Raw Material Consumed 1,618.49 1690.03 226.33 1858.56 2163.33 1794.11 6935.90
Raw Material as a % of Sales 61.87 60.55 99.01 53.56 96.12 50.03 98.07
Other Manufacturing Expenses 862.00 920.64 0.00 1178.01 0.00 1133.85 0.00
Other Manufacturing Expenses
as % of Sales 32.95 32.98 0.00 33.95 0.00 31.62 0.00
Selling & Distribution
Expenses 67.62 51.93 0.00 41.85 0.90 88.53 2.75
Selling & Distribution
Expenses as % of Sales 2.58 1.86 0.00 1.21 0.04 2.47 0.04
Staff Costs 21.38 16.30 0.00 10.98 0.85 12.05 2.25
Staff Costs as % of Sales 0.82 0.58 0.00 0.32 0.04 0.34 0.03
Interest 15.63 30.34 0.00 36.83 0.00 42.75 0.00
Interest as % of Sales 0.60 1.09 0.00 1.06 0.00 1.19 0.00
Depreciation 25.85 27.85 0.00 31.22 0.00 24.29 0.00
Depreciation as % of Sales 0.99 1.00 0.00 0.90 0.00 0.68 0.00
PAT 44.02 51.27 1.46 241.19 54.26 794.41 87.34
PAT as % of Sales 1.68 1.84 0.64 6.95 2.41 22.15 1.23
M -Manufacturing activity.
T – Trading activity.

Performance for the nine-month period ended 31 December, 2005.


Sales Revenues

Our operating income primarily consists of sale of manufactured goods and the goods traded by us. The
Company has reported an impressive performance for the nine-month period ended 31 December, 2005 and
has achieved a total sales revenue of Rs. 10658.55 lakhs as against Rs.5720.49 lakhs for the year ended
31 March, 2005.

The income from manufacturing activity for the period ended 31 December, 2005 was Rs.3585.99 lakhs as
against Rs.3469.84 lakhs for the financial year 2004-05 attributable to better and higher capacity utilisation
(54.44% for the period ended 31 December, 2005 as against 30.19% for the year ended 31 March, 2005).

The income from trading activity stood at Rs.7072.56 lakhs for the period ended 31 December, 2005 as
against Rs.2250.65 for the year ended 31 March, 2005. With an experience of about 8 years in this industry,
we have been able to tap the market and build and widen our customer base, which in turn has contributed
in the form of increased sales in the trading activity.

Raw Material Consumed

The Raw material consumed, for the manufacturing activity, as a percentage of sales, for this period is
50.03% as against 53.56% for the year ended 31 March, 2005, due to a drop in the prices of the raw
materials.

The Raw material consumed, for the trading activity, as a percentage of sales for this period is 98.07% as
against 96.12% for the year ended 31 March, 2005. We are working on the model of high volume low
margin strategy resulting in an increase in the cost of consumption.

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AML STEEL LIMITED

Manufacturing Expenses

Manufacturing expenses as a percentage of sales for this period reduced to 31.62% from 33.95% for the
year ended 31 March, 2005 as a result of higher capacity utilisation (54.44%) in this period.

Selling & Distribution Expenses

For the manufacturing activity, the Selling & Distribution expenses is 2.47% of the sales recorded for the
period ended 31 December, 2005 compared to 1.21% for the year ended 31 March, 2005, due to the
increased efforts taken by us to expand the market for the goods manufactured by the Company.

For the trading activity, the Selling & Distribution expenses, as a percentage to sales, has remained at
0.04% for both the nine-month period and the previous financial year.

Staff Costs

The staff costs for the period ended 31 December, 2005, as a percentage of the sales figure, for
manufacturing activity has marginally increased to 0.34% from 0.32% in the financial year 2004-05.

But for the trading activity there was a marginal decrease of 0.01% in the staff cost as a percentage of the
sales for the period ended 31 December, 2005.

Interest Cost and Depreciation

Interest expense has increased from 1.06% for the financial year 2004-05 to 1.19% during the nine-month
period ending 31 December, 2005 due to an increase in the cash credit availed by us to meet our working
capital requirement.

Depreciation as a percentage to sales has reduced from 0.90% in financial year 2005 to 0.68% during the
period ended 31 December, 2005.

Profit After Tax (PAT)

PAT for the nine-month period ending 31 December, 2005 was Rs. 881.75 Lakhs (8.27% of the total sales)
as compared to Rs.295.45 lakhs (5.16% of the total sales) for the financial year 2004 –05.

For the manufacturing activity, profit after tax, as a percentage of sales, was 22.15% as against 6.95% for
the year ended 31 March, 2005 as a result of increase in sales volume due to better capacity utilisation.

For the trading activity, profit after tax, as a percentage of sales, was 1.23% as against 2.41% for the year
ended 31 March, 2005. We work on the strategy of high volume low margins, therefore, though there has
been an increase in the volume of sales, the margins were under pressure resulting in a low profit after tax.

Comparison of Performance and Analysis for the Financial Year ended 31 March, 2005 vis-à-vis
31 March, 2004

Sales Revenues

We reported total sales revenue of Rs.5720.49 lakhs for the year ended 31 March, 2005 as against
Rs.3019.89 lakhs for the year ended 31 March, 2004.

The income from manufacturing activity for the year ended 31 March, 2005 was Rs.3469.84 lakhs as
against Rs.2791.29 lakhs for the year ended 31 March, 2004 attributable to higher price realisation.

The income from trading activity stood at Rs.2250.65 lakhs for the year ended 31 March, 2005 as against
Rs.228.60 for the year ended 31 March, 2004. We were able to capitalise on the market oppurtunities in the
trading segment resulting in an increase in our trading volume.

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AML STEEL LIMITED

Raw Material Consumed

The Raw material consumed, for the manufacturing activity, as a percentage of sales, for this period is
53.56% as against 60.55% for the year ended 31 March, 2004. Though the cost of consumption was higher
in the year 2005 over the year 2004, higher price realisation negated the effect of increased cost.

The Raw material consumed, for the trading activity, as a percentage of sales for this period is 96.12% as
against 99.01% for the year ended 31 March, 2004 due to increased trading volume.

Manufacturing Expenses

Manufacturing expenses as a percentage of sales for this period is 33.95% as compared to 32.98% for the
year ended 31 March, 2004, a marginal increase recorded due to the increase in power and fuel expenses.

Selling & Distribution Expenses

For the manufacturing activity, the Selling & Distribution expenses is 1.21% of the sales recorded for the
for the year ended 31 March, 2005 compared to 1.86% for the year ended 31 March, 2004 due to cost
cutting techniques adopted by us.

Staff Costs

The staff costs for the for the year ended 31 March, 2005, as a percentage of the sales figure, for the
manufacturing activity has reduced from 0.58% to 0.32% for the year ended 31 March, 2004 due to
effective utilisation of manpower.

We incurred an amount of Rs.0.85 lakhs due to deployment of workforce in the trading activity.

Interest Cost and Depreciation

Interest expense has decreased marginally from 1.09% for the financial year 2003-04 to 1.06% during the
year ended 31 March, 2005 as a result of a low leverage maintained by us.

Depreciation as a percentage to sales has also reduced marginally from 1.00% in financial year 2003-04 to
0.90% for the year ended 31 March, 2005.

Profit After Tax (PAT)

PAT for the year ended 31 March, 2005 was Rs.295.45 lakhs (5.16% of the total sales) as compared to
Rs.52.72 lakhs (1.75% of the total sales) for the financial year 2003 –04.

For the manufacturing activity, profit after tax, as a percentage of sales, was 6.95% as against 1.84% for the
year ended 31 March, 2005 as a result of higher price realisation.

For the trading activity, profit after tax, as a percentage of sales, was 2.41% as against 0.64% for the year
ended 31 March, 2005 due to an increase in the volume of sales recorded.

Comparison of Performance and Analysis for the Financial Year ended 31 March 2004 vis-à-vis
31 March, 2003

Sales Revenues

We reported a total sales revenue of Rs.3019.89 lakhs for the year ended 31 March, 2004 as against
Rs.2616.09 lakhs for the year ended 31 March, 2003.

The income from manufacturing activity for the year ended 31 March, 2004 was Rs.2791.29 lakhs, a
marginal increase from Rs.2616.09 lakhs for the year ended 31 March, 2003 due to better price realisation.
We commenced trading in steel products like TMT bars, Structural angles, Steel Structurals, Steel Angles
and Channels etc, which yielded an income of Rs.228.60 lakhs.

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AML STEEL LIMITED

Raw Material Consumed

The Raw material consumed, for the manufacturing activity, as a percentage of sales, for the year 31 March,
2004 is 60.55% as against 61.87% for the year ended 31 March, 2003. Though the cost of consumption
went up marginally due to increase in prices, its ratio to sales has decreased due to better price realisation.

The Raw material consumed, for the trading activity, for this year stood at Rs.226.33 lakhs.

Manufacturing Expenses

Manufacturing expenses as a percentage of sales has almost remained the same during both the years.

Selling & Distribution Expenses

For the manufacturing activity, the Selling & Distribution expenses is 1.86% of the sales recorded for the
for the year ended 31 March, 2004 compared to 2.58% for the year ended 31 March, 2003.

Staff Costs

The staff costs for the for the year ended 31 March, 2004, as a percentage of the sales figure, for the
manufacturing activity has reduced to 0.58% from 0.82% for the year ended 31 March, 2003 due to
effective utilisation of manpower.

Interest Cost and Depreciation

Interest expense has increased from 0.60% for the financial year 2002-03 to 1.09% during the year ended
31 March, 2004 due to an increase in our secured loan component availed for the business.

Depreciation has almost remained the same during both the years.

Profit After Tax (PAT)

PAT for the year ended 31 March, 2003 was Rs.44.02 lakhs (1.68% of the total sales) as compared to
Rs.52.72 lakhs (1.74% of the total sales) for the financial year 2003 – 04. The increase in profit is
attributable to higher price realisation and the commencement of trading activity, which contributed to the
extent of Rs.1.46 lakhs.

Information Required As Per Clause 6.10.5.5 of SEBI Guidelines

Unusual or Infrequent Events or Transactions

There are no unusual or infrequent events or transactions that have significantly affected the business of the
Company.

Significant Economic Changes that Materially Affected or Are Likely to Affect Income from
Continuing Operations

With an overall upsurge in the Indian economy, the demand of iron and steel is at an all time high. This
increase has resulted into demand of iron and steel products and the Company is suitably placed to benefit
out of this situation as the demand for the products is from the construction, infrastructure, auto – auto
ancillary industry. The proposal to allow 100% Foreign Direct Investment in the construction sector will
provide an impetus to the industry. Government’s thrust on infrastructural development will lead to an
increased demand for the products manufactured by the Company. Opening of futures trading in steel in
the Multi Commodity Exchange Market helps for a better price discovery, hedging opportunities and
benefits through standardized contracts thus providing more stability to prices. The National Steel Policy
(NSP) of the Government seeks to adopt a multi-pronged strategy to move towards the long-term goal.
This envisages an increase in production of steel to over 100 million tonnes annually by 2019 – 20 from
the 2004 – 05 level of 38 million tonnes annually giving a compounded growth rate of 7.3 % till 2019 – 20.

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AML STEEL LIMITED

Known Trends Or Uncertainties That Have Had or Are Expected to Have a Material Adverse Impact
On Sales, Revenue or Income From Continuing Operations.

There is an uncertainty existing over the availability and price of raw materials namely Mild Steel Scrap,
Iron Ore, Coal etc. and prices of finished products viz. Mild Steel Ingots, Wire Rods, Sponge Iron and Steel
Billets etc. The risk on account of the above price fluctuation is reduced to a great extent considering the
fact that a rise in the price of the basic raw material will be passed on in the form of increased price of the
finished product. Other than as described elsewhere in the DRHP, to our knowledge, there are no known
trends or uncertainties that have or had or are expected to have a material adverse impact on revenue or
income of the Company from continuing operations.

Future Relationship Between Costs And Income

Import duty on steel, the basic raw material for the Company, excise duty and introduction of VAT are the
three important factors, which would materially affect cost as a percentage of revenue. The risk on account
of the price fluctuation is reduced to a significant extent considering the fact that a rise in the price of basic
raw material is passed on in the form of increased prices of the finished products.

Reasons For Material Increase in Net Sales or Revenue

Our venturing into the trading activity, contributed significantly to our total sales revenue in the year
2004-05 and for the period ended 31 December, 2005. Our experience in the steel industry coupled with a
good customer and supplier base helped us to work the oppurtunities in trading to our advantage.

New Products or Business Segments

Presently our group is manufacturing Mild Steel Ingots and Wire rods. With a view to produce Sponge Iron
and Steel Billets the Group is setting up an Integrated Steel Plant at Jharkhand. The Ministry of Mines, GoI
has agreed for the grant of a mining license to us for 383.54 acres of land in the Jharkhand for the mining of
Iron ore. Major portion of this iron ore will be captively used for the manufacturing of sponge iron. Excess
if any will be sold in the market.

Seasonality of Business

The business of the Company is not seasonal.

Dependence on Single or Few Suppliers/Customers

For our manufacturing and trading activities, the % of contribution of our customers and suppliers vis – a
vis the total sales and purchases, in the last three years and for the period ended 31 December, 2005 is given
below:

Manufacturing Activity

Customer Contribution:

FY ended 31 December, 2005 31March, 2005 31March, 2004 31March, 2003


Top 3 contribution 45% 47% 40% 53%
Top 5 contribution 63% 70% 57% 69%
Top 10 contribution 87% 96% 84% 85%
All percentages are rounded off to the nearest percentage point.

Our pricing strategy to offer a competitive price to our customers depends on the market demand and
supply conditions coupled with the pricing scenario in the industry. We have been able to retain and
maintain a good rapport with our top ten customers who have been associated with us for the last couple of
years and have significantly contributed to our revenue stream.

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AML STEEL LIMITED

Supplier Contribution:

FY ended 31 December, 2005 31March, 2005 31March, 2004 31March, 2003


Top 3 contribution 40% 21% 45% 39%
Top 5 contribution 46% 31% 56% 49%
Top 10 contribution 65% 53% 75% 66%
All percentages are rounded off to the nearest percentage point.

As our prices are based on ruling spot prices, we source our raw materials from suppliers who offer the best
price. Hence, we are not under any threat from excessive dependence on any single supplier.

Trading Activity

We have been able to capitalize on the advantage of our presence in this industry for the last eight years and
depending on the market opportunities we have been able to build a diversified customer and supplier base.
Thus, we are not under any threat from excessive dependence on any single customer or supplier.

Customer Contribution:

FY ended 31 December, 2005 31March, 2005


Top 3 contribution 53% 85%
Top 5 contribution 56% 93%
All percentages are rounded off to the nearest percentage point.

Supplier Contribution:

FY ended 31 December, 2005 31March, 2005


Top 3 contribution 34% 88%
Top 5 contribution 45% 96%
All percentages are rounded off to the nearest percentage point.

Competitive Conditions

For details of competitive conditions please refer to section titled ‘Business Overview’ on page no. [●] of
this DRHP.

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AML STEEL LIMITED

SECTION VI - LEGAL AND REGULATORY INFORMATION

OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS

1. Outstanding Litigations

1. Save as detailed herein:

a. neither the Company, nor any director or Promoter of our Company is party to any
ongoing litigation/proceedings for economic offences or statutory regulations or
alleging criminal/civil offence (including past cases, if found guilty) before any
statutory or regulatory authority/ court/ tribunal, nor are any show cause notices
pending against any of them;

b. neither our Company, nor any director of our Company was party to any past
proceedings where any penalty was imposed;

c. there have been/are no defaults to financial institutions/ banks, non-payment of


statutory dues and dues towards instrument holders like debenture holders, fixed
deposits, and arrears on cumulative preference shares by the Promoters of our
Company and the companies/ firms promoted by the Promoters of our Company;

d. our Company has not failed to pay any statutory dues;

e. no disciplinary action has been taken against the Promoters of our Company by the
Securities and Exchange Board of India or any Stock Exchange in India; and

f. none of the names of the directors of our Company have appeared on the RBI's
defaulters list.

g. There are no outstanding litigations, defaults, etc., pertaining to matters likely to


affect operations and finances of the Issuer company and its subsidiaries , including
disputed tax liabilities, prosecution under any enactment in respect of Schedule XIII
to the Companies Act, 1956 (1 of 1956) etc..

h. There are no cases of pending litigations, defaults, etc. in respect of companies/


firms/ ventures with which the Promoters were associated in the past but are no
longer associated;

i. There are no pending proceedings initiated for economic offences against the
Promoters, companies and firms promoted by the Promoters;

j. There are no past cases in which penalties were imposed by the concerned
authorities.

k. There are no pending litigations, defaults, non payment of statutory dues,


proceedings initiated for economic offences/ civil offences (including the past cases,
if found guilty), any disciplinary action taken by the Board/ stock exchanges against
the Promoters and their other business ventures (irrespective of the fact whether they
are companies under the same management with the issuer company as per section
370 (1B) of the Companies Act, 1956)

2. There are no small scale creditors to whom our Company owes a sum exceeding Rupees one
lakh which is outstanding for more than thirty days.

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AML STEEL LIMITED

The details of the relevant proceedings have been classified as follows:

The list provided below indicates the current position of the legal matters related to the
company/group companies outstanding before the various courts/juridical authorities. No case has
been filed by the Company and the Group companies except as under:

Court /Department Reference Background Current Status


A AGAINST THE COMPANY
1. Delhi Stock DSE has imposed a penalty The Company has paid the
Exchange of Rs.20,000 /- on the aforesaid sums to DSE on
Limited Company for non- 17th January 2006.
submission of proof of
publication of notices of
Board Meetings of the
Company for the years
2003 and 2005. DSE has
also imposed a penalty of
Rs.5,000/- on the Company
for non-compliance of
Clause 24(f) of the listing
agreement with DSE.

2 Refer to B below Refer to B Refer to B below Refer to B below


below
B BY THE COMPANY
1. AML STEEL LIMITED

High Court of Writ Petition The total liability arising


Madras against No. 20275 of The subject matter of the out of the instant case is
the Customs, 2005 instant case is that the 21,66,687/- (Differential
Excise and Company had imported duty Rs. 13,66,687 +
Service Tax three consignments of Redemption fine Rs.
Appellate heavy melting scrap in the 6,00,000 + Penalty Rs.
Tribunal and form of old rusted pipes 2,00,000). While the
others from Middle East. During differential duty has already
the clearance of the goods, been adjusted against the
the custom authorities deposit made by the
considered the melting Company during
scrap are usable pipes and investigation, the Company
therefore, held that the had provided a Bank
same cannot be treated as Guarantee for the amount
melting scrap and of the penalty and fine. The
subsequently levied Company has filed Writ
differential duty on AML. Petition No. 20275 of 2005
in the High Court of
Madras against the
Commissioner of Customs
and others. The Company
has got an interim order in
its favour, staying the
operation of order passed
by the Tribunal, after
furnishing a bank guarantee
for a sum of Rs. 15 Lakhs
from the High Court. The
case is still subjudice.

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AML STEEL LIMITED

2. AML STEEL LIMITED


High Court of Writ Petition Nos.
Madras against the 5257 and 5258 of TN Taxation Special The Company has initiated
TN Taxation Special 2004 Tribunal rejecting the Writ Petitions in the
Tribunal and others claim of the company Madras High Court being
claiming benefits under 5257 and 5258 of 2004
Interest Free Sales Tax against the orders of the TN
Deferral for its unit situate Taxation Special Tribunal
at Gummidipoondi and others including
expansion unit. seeking stay on the
demands made against it
and recovery proceedings
initiated against the
Company. The High Court
has granted an interim order
in the Company’s favour
staying the demands made
and recovery proceedings
against the Company, on
the the Company paying a
sum of Rs. 50 Lakhs to the
Commercial Tax Officer,
Pooneri (the 1st Respondent
in the Petitions), which has
been paid by the
Company.The High Court
has also restrained the
Company from alienating,
encumbering or dealing
with the properties of the
Company until further
orders of the Court. The
case is still subjudice

Search and Seizure Operation by Income Tax Authorities


As per information received from the Company there are no search and seizure operations conducted by the
Income Tax Authorities.
Outstanding Litigation Involving Our Directors and Our Subsidiaries
There are no contingent liabilities, which require provisioning in the accounts, outstanding litigation,
disputes, non-payment of statutory dues, overdues to banks/financial institutions or proceedings initiated for
any economic/civil/criminal/any other offences against any of our Directors and our subsidiaries.

2. Material Developments

In the opinion of the Board of Directors, there has not arisen, since the date of the last financial statements
disclosed in this DRHP, any circumstance that materially or adversely affect or are likely to affect the
profitability of the Company and its subsidiaries taken as a whole or the value of their consolidated assets or
their ability to pay their material liabilities within the next twelve months.

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AML STEEL LIMITED

LICENCES AND APPROVALS

Subject to the renewals of approvals and licences as listed below, we can undertake this Issue as well as our
current business activities and no further major approvals are required from any Government authority for
us to continue our activities.
Approvals Received:

1. AML Steel Limited (Formerly Ashok Magnetics Limited), Pondicherry.

1. Central Sales Tax Registration Certificate No. 10611 dated 27.07.1995.


2. Pondicherry Sales Tax Registration Certificate No. D1/103959/95-96.
3. Permanent Registration Certificate as a Small Scale Unit, No. 590306083 dated 02.04.1998 by the
Director of Industries, Government of Pondicherry.
4. Factory License No. PNC-052 valid till 31.12.2005. We have applied for renewal of the same vide
our application dated 16 December, 2005.
5. Acknowledgement receipt from Electricity Department, Government of Pondicherry dated
22.11.2005 for receipt of security deposit of Rs. 2, 41,700.00 from Ashok Magnetics Limited.
6. Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No. 43-356/98-
Lic./Net-CP, dated 11.02.1998 granted by the Office of the Commissioner, Nettapakkam
Commune Panchayat, Nettapakkam, Pondicherry. The licence has been renewed till 31.03.2006.
7. Air Consent (Renewal) Order by the Department of Science, Technology and Environment,
Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/NCP/JE-II/2004/2115 dated
29.07.2004.We have applied for renewal of the same by our application dated 09.09.2005, which is
pending approval.
8. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry
dated 13.11.1995 for receipt of Industrial Entrepreneur Memorandum in favour of Ashok
Magnetics Limited. We have applied for change in the name of the Company from Ashok
Magnetics Limited to AML Steel Limited and increase in the capacity of production from 30000
TPA to 45000 TPA vide our application dated 11.02.2006.
9. Certificate of Incorporation No. L30007TN1993PLC024842, from the Registrar of Companies and
subsequent change of name to AML Steel Limited on 01.08.2005.
10. Permanent Account Number (‘PAN”) AAACA4304Q dated 16.04.1993/Tax Deduction Account
Number (‘TAN”) No. CHEA01359B.
11. Certificate of Employer Registration Certificate under the Employees Provident Fund Act No.
TN/PC/923 dated 14.09.1999.
12. Certificate of ESI Registration dated 13.02.2002 vide Code No. 55-21743-56.
13. Central Excise Registration certificate dated 30.12.2003 vide Registration No.
AAACA4304QXM002.
14. IE Code Certificate dated 20.10.1993 and IE Code No. 0493018344 has been allotted. We have
made an application for issuance of a new certificate in the present name of the Company
(pursuant to its change in name), on 30 01.2006.
15. Service Tax Registration Certificate No. GTA/334/2005/PONDY dated 25.05.2005.
16. Permission from Pondicherry Planning Authority dated 17.07.1996 under Pondicherry Building
Bye-Laws and Zoning Regulations 1972 to erect industrial building.

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AML STEEL LIMITED

17. Certificate of stability dated 07.12. 2004 for factory building.


18. Letters dated 29.11.2002, 16.12.2002 and 23.10.2003 bearing reference numbers Ref. No.
EC.CO.OID 2805/19.01.328/ 2002-2003, Ref. No. EC.CO.OID 3176/19.01.331/ 2002-2003 and
Ref. No. EC.CO.OID 2744/19.01.328/ 2003-2004 by the Reserve Bank of India, Exchage Control
Department, Central Office, Overseas Division in favour of AML Steel Limited noting the
investment of AML Steel Limited of a sum of US $5,45,000 in its Wholly Owned Subsidiary
ASIPL (previuosly known as Maruti Steels Private Limited) in Sri Lanka under the Automatic
Route and allotting Identification No. MAWAZ20020303 to the said investment.

2. Ankit Ispat Private Limited, Karaikal, Pondicherry

AIPL has two (2) units, both co-located, however the two (2) units were previously EGPK Steels Limited
and Elango Industries Limited (erstwhile Elango Steels Limited) respectively and their assets were
subsequently taken over by AIPL.
1. Approval letter from Directorate of Industries & Commerce, Government of Pondicherry dated
21.10.2003 to Ankit Ispat Private Limited for purchase and take over of assets of EGPK Steel
Limited.
2. Approval letter from Directorate of Industries & Commerce, Government of Pondicherry dated
19.01.2004 to Ankit Ispat Private Limited for purchase and take over of assets of Elango Industries
Limited.
3. Central Sales Tax Registration Certificate No. 1999/KRC dated 11.11.2003 for Ankit Ispat (P)
Limited (Unit II) and Certificate No. 2036/KRC dated 5.03.2004 for Ankit Ispat Private Limited
(Unit I).
4. Pondicherry Sales Tax Registration Certificate No. 403275 dated 11.11.2003 for Ankit Ispat
Limited (Unit II) and Certificate No. 403320 dated 5.03.2004 for Ankit Ispat Private Limited (Unit
I).
5. Permanent Registration Certificate as a Small Scale Unit, No. 590101663 dated 27.07.1998 by the
Director of Industries, Government of Pondicherry in favour of EGPK Steels Limited and
subsequently endorsed by the Director of Industries & Commerce, for change in name to Ankit
Ispat Private Limited (Unit –II).
6. Certificate from Industries Department, Government of Pondicherry dated 6.01.2000 exempting
EGPK Steels Limited from payment of sales tax for a period of ten years i.e. till 27.07.2008,
exemption from payment of earnest money and security deposit in respect of tenders called for by
Government Departments, Pondicherry and price preference of 15% for supply of stores to
Government Departments.
7. Permanent Registration Certificate as a Small Scale Unit, No. 590101566 dated 11.11.1994 by the
Director of Industries, Government of Pondicherry in favour of Elango Steels Limited and
subsequently endorsed by the Director of Industries & Commerce, for change in name to Elango
Industries Limited and subsequently to Ankit Ispat Private Limited (Unit –I).
8. Certificate from Industries Department, Government of Pondicherry dated 24.05.1995 exempting
Elango Steels Limited from payment of sales tax for a period of ten years i.e. till 11.11.2004,
exemption from payment of earnest money and security deposit in respect of tenders called for by
Government Departments, Pondicherry and price preference of 15% for supply of stores to
Government Departments.

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AML STEEL LIMITED

9. Factory License No. FA 7331 in favour of Elango Industries Limited, transferred in favour of
Ankit Ispat Private Limited (Unit – I)
10. Factory License No. FA 7481 in favour of EGPK Steels Limited transferred in favour of Ankit
Ispat Private Limited (Unit – II).
11. Letter from Electricity Department, Government of Pondicherry dated 04.08.2004 acknowledging
change of name from Elango Industries Limited to Ankit Ispat Private Limited (Unit-I).
12. Letter from Electricity Department, Government of Pondicherry dated 20.07.2004 acknowledging
change of name from EGPK Steels Limited to Ankit Ispat Private Limited (Unit-II).
13. Acknowledgement receipt from Electricity Department, Government of Pondicherry dated
2.08.2004 for receipt of security deposit of Rs. 5,66,000/- from Ankit Ispat Private Limited (Unit-
I).
14. Acknowledgement receipt from Electricity Department, Government of Pondicherry dated
12.04.2004 for receipt of security deposit of Rs. 7, 35,000/- from Ankit Ispat Private Limited
(Unit-II).
15. Letter from Office of Superintendent of Central Excise, Karaikal dated 30.10.2003 certifying
installation of 3 tonne induction furnace by Ankit Ispat Private Limited (Unit-II) having central
excise registration certificate No. AAECA3639EXM001.
16. Letter from Office of Superintendent of Central Excise, Karaikal dated 23.06.2004 certifying
installation of 3 tonne induction furnace by Ankit Ispat Private Limited (Unit-I) having central
excise registration certificate No. AAECA3639EXM002.
17. Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No. TRP-
CP/A4/16/94, dated 22.11.1994 granted by the Office of the Commissioner, T.R. Pattinam
Commune Panchayat, T.R. Pattinam in favour of Ankit Ispat Private Limited (Unit – I).
18. Licence under the Pondicherry Village and Commune Panchayats Act, 1973, No.TRP-
Cp/A4/26/99, dated 1.12.1999 granted by the Office of the Commissioner, T.R. Pattinam
Commune Panchayat, T.R. Pattinam in favour of Ankit Ispat Private Limited (Unit – II).
19. Air Consent (Renewal) Order by the Department of Science, Technology and Environment,
Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/KKL/JEII/2005/2699 dated
20.09.2005 in favour of Ankit Ispat Private Limited (Unit –II). We have applied for renewal of the
same.
20. Water Consent (Renewal) Order by the Department of Science, Technology and Environment,
Pondicherry Pollution Control Committee, No. PPCC/CON/WTR/JEII/KKL/2005/2698 dated
20.09.2005 in favour of Ankit Ispat Private Limited (Unit –II). We have applied for renewal of the
same.
21. Air Consent (Renewal) Order by the Department of Science, Technology and Environment,
Pondicherry Pollution Control Committee, No. PPCC/CON/AIR/KKL/JEII/2005/2697 dated
20.09.2005 in favour of Ankit Ispat Private Limited (Unit-I). We have applied for renewal of the
same.
22. Water Consent (Renewal) Order by the Department of Science, Technology and Environment,
Pondicherry Pollution Control Committee, No. PPCC/CON/WTR/JEII/KKL/2005/2696
20.09.2005 in favour of Ankit Ispat Private Limited (Unit-I). We have applied for renewal of the
same.

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AML STEEL LIMITED

23. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry
dated 23.04.2004 for receipt of Industrial Entrepreneur Memorandum for manufacture of mild
steel ingots in favour of Ankit Ispat Private Limited (Unit-I).
24. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry
dated 16.12.2003 for receipt of Industrial Entrepreneur Memorandum for manufacture of mild
steel ingots in favour of Ankit Ispat Private Limited (Unit-II).
25. Letter from Department of Science, Technology and Environment, Pondicherry Pollution Control
Committee dated 02.12.2003 certifying amendment of name of EGPK Steels Limited to Ankit
Ispat Private Limited (Unit-II).
26. Letter from Department of Science, Technology and Environment, Pondicherry Pollution Control
Committee dated 11.03.2004 certifying amendment of name of Elango Industries Limited to Ankit
Ispat Private Limited (Unit-I).
27. Permanent Account Number (‘PAN’) AAECA3639E and TAN No. CHEA08972F.
28. Registrations under the Employees Provident Fund Act vide Code No. TN/PC/1363.
29. Registration with the Employee’s State Insurance Corporation vide code no. 55-21525-67.
30. IE Code Certificate dated 23October, 2003 and IE Code allotted is 0403019087.
31. Certificate of stability dated 31 December, 2004 for factory buildings of Ankit Ispat Private
Limited (Unit-I).
32. Certificate of stability dated 31 December, 2004 for factory buildings of Ankit Ispat Private
Limited (Unit-II).
33. Central Excise Registration Certificate No. AAECA3639EXM002 dated 06.01.2004 for Ankit
Ispat Private Limited (Unit-I).
34. Central Excise Registration Certificate No. AAECA3639EXM001 dated 28.10.2003 for Ankit
Ispat Private Limited (Unit-II).
35. Certificate of Registration (No. AAECA3639EST 002) for Ankit Ispat Private Limited (Unit-I)
under Section 69 of the Finance Act, 1994 granted by Office of the Assistant Commissioner of
Central Excise dated 26.05.2005.
36. Certificate of Registration (No. AAECA3639EST 001) for Ankit Ispat Private Limited (Unit-I)
under Section 69 of the Finance Act, 1994 granted by Office of the Assistant Commissioner of
Central Excise dated 26.05.2005.

3. Ashok Steel Industries Private Limited, Colombo, Sri Lanka

1. Certificate of Incorporation No. 28684, dated 25.06.2001 from the Registrar of Companies, Sri
Lanka for Maruthi Steel Private Limited.
2. Approval by the Board of Investment of Sri Lanka dated 19.09.2002, for sale and transfer of
Maruthi Steel Private Limited to Ashok Magnetics Limited, Chennai, India.
3. Environmental Licence No. 00920 (RO), dated 25.04.2003 from Director General, Central
Environmental Authority, Sri Lanka in favour of Maruthi Steel Private Limited. The license is
valid till 24.04.2006.
4. Taxpayer Identification Number (‘TIN’) Certificate No. 114286842 dated 08.04.2004 from the
Commissioner General of Inland Revenue in favour of Ashok Steel Industries Private Limited.

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AML STEEL LIMITED

5. Certificate of VAT registration No. 114286842-7000 dated 08.04.2004 from the Deputy
Commissioner (VAT) in favour of Ashok Steel Industries Private Limited.
6. Certificate of Employer Registration Certificate under the Employees Provident Fund Act, 1958,
No. 11499-IJ dated 05.10.2001 from the Assistant Commissioner of Labour in favour of Maruthi
Steels Private Limited.
7. Certificate of Change of Name from Maruthi Steel Private Limited to Ashok Steel Industries
Private Limited dated 19.01.2004 from the Registrar of Companies, Sri Lanka.

4. AML Steel & Power Limited, Saraikela - Kharsawan, Jharkhand

1. Approval for plant and factory layout by Inspector of Factories, Jharkhand dated 24.10.2005.
2. Sanction letter for 200 KVA for factory by Jharkhand State Electricity Board, Chaibasa Electrical
Circle dated 22.09.2005.
3. Acknowledgement receipt from Jharkhand State Electricity Board dated 08.10.2005 for receipt of
Rs. 1,50,000/- as security deposit.
4. No Objection Certificate from Jharkhand State Pollution Control Board (Ref. No. N-403) dated
27.06.2005 for the sponge iron unit of the Project and No Objection Certificate from Jharkhand
State Pollution Control Board (Ref. No. N-566) dated 17.12.2005 for the iron ore mining
operations in connection with the Project.
5. Licence from the Government of Jharkhand under the Factories Act 1948, which was valid till
31.12.2005. The company has applied for renewal of this licence.
6. Registration under the Bihar Finance Act, 1981 for Commercial Tax. Certificate No.2/2005-06 and
the same is valid from 20.09.2005 to 19.02.2006.
7. Central Excise Registration Certificate No. AAECA6090PXM001 dated 7.04.2005.
8. Central Sales Tax Registration Certificate No. CB-1536 dated 16.09.2005.
9. Certificate of Registration under the Bihar Finance Act, for Sales Tax. Registration No. CB 1179
dated 16.09.2005.
10. Acknowledgement from the Secretariat of Industrial Assistance, Ministry of Commerce & Industry
dated 22.08.2005 for receipt of Industrial Entrepreneur Memorandum for manufacture of direct
reduced iron and other spongy ferrous products in primary forms other than in the Integrated Steel
Plants in favour of AML Steel & Power Limited.
11. Approval from Government of India, Ministry of Mines dated 16.08.2005 for grant of mining lease
vide reference no. 5/8/2005-MIV.
12. Permanent Account Number (‘PAN”) AAECA6090P dated 14.01.2004.
13. Registration No. 69887/SBM dated 26.12.2005 from the Department of Labour and Employment,
Government of Jharkhand.

Apart from the above AMLSPL has also made application for the following licences / approvals which are
pending ;
1. Application dated 06.01.2006 to the Ministry of Environment and Forest for the clearance for
operation of mines in an area of 383.54 acres in Jharkhand .
2. Application dated 20.09.2005 to the Ministry of Coal for the grant of captive Coal mining blocks.

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AML STEEL LIMITED

AMLSPL is yet to apply for the following licences/ registrations from the Government of Jharkhand /
Central Government for the Project:

(i) Consent to operate under the Water (Prevention & Control of Pollution) Act, 1974 and Air
(Prevention & Control of Pollution) Act, 1981.
(ii) Tax Deduction Account Number (‘TAN”).
(iii) Service tax registration.
(iv) Registration under the Employees Provident Fund Act, 1948.
(v) Registration with the Employee’s State Insurance Corporation.

AMLSPL shall be applying for the above-mentioned approvals/licences as the work at the Project site
progresses.

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AML STEEL LIMITED

OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

The current Issue has been authorised by shareholders vide a special resolution adopted pursuant to Section
81(1A) of the Companies Act, passed at the Annual General Meeting held on 19 July, 2005.

Prohibition by SEBI

Our Company, Directors, Promoters, other companies / entities promoted by our Promoters, and
companies/entities with which our Directors are associated with as directors, have not been prohibited from
accessing the capital markets under any order or direction passed by SEBI. None of the Directors of our
Company or the persons in control of the Promoter Company have been prohibited from accessing the
capital markets or restrained from buying/selling/dealing in securities under any order or direction passed
by SEBI.

Eligibility for the Issue

As per Clause 2.3.1 of the SEBI Guidelines, a listed company may make a public issue of equity shares
provided that:

1. the aggregate of the proposed issue and all previous issues in the same financial year in terms of size
(i.e. offer through offer document + firm allotment + promoters contribution through the offer
document) issue size does not exceed 5 times its pre- issue net worth as per the audited balance
sheet of the last financial year;
2. if there is a change in the name of the issuer company within the last one year (reckoned from the
date of filing the offer document) the revenue accounted for by the activity suggested by the new
name is not less than 50% of its total revenue in the preceding 1 full- year period.

Our Company is eligible to access the capital market through Public issue of Equity Shares as explained
below:

1. The aggregate of the proposed issue in terms of the size shall not exceed five times the pre – issue
networth.

Particulars Amount (Rs. in lakhs)


Pre issue Networth (as per the audited balance sheet as on 31 December, 2005) 3,767.23
Five times the pre issue networth 18,836.15
Proposed Issue Size 12,000.00

There have been no previous issues in the Financial Year 2005 – 06. Since the size of the proposed issue
does not exceed five times the pre –issue networth of the Company, the Company is eligible to make this
issue.

2. The Company’s main objects as suggested by its new name AML Steel Limited (changed on 1 August,
2005), accounts for more than 50% of its total revenue in the preceding one full year.

DISCLAIMER CLAUSE

AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN


SUBMITTED TO SEBI.

IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED


HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR
CONSTRUED TO MEAN THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI.
SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS
OF ANY SCHEME OR THE PROJECT FOR WHICH THIS ISSUE IS PROPOSED TO BE MADE
OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN
THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGERS,

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AML STEEL LIMITED

KARVY INVESTOR SERVICES LIMITED AND CENTRUM CAPITAL LIMITED HAVE


CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS
ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR
DISCLOSURE AND INVESTOR PROTECTION AS FOR THE TIME BEING IN FORCE. THIS
REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR
MAKING AN INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS


PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF
ALL RELEVANT INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK
RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE
THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS
BEHALF AND TOWARDS THIS PURPOSE, BOOK RUNNING LEAD MANAGERS VIZ. KARVY
INVESTOR SERVICES LIMITED AND CENTRUM CAPITAL LIMITED HAVE FURNISHED
TO SEBI, A DUE DILIGENCE CERTIFICATE DATED 24 MARCH, 2006 IN ACCORDANCE
WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READS AS
FOLLOWS:-

1. “WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO


LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, AND DISPUTES
WITH COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE
FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE
SAID ISSUE.
2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE
COMPANY, IT’S DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES,
INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS
OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE
CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER
PAPERS FURNISHED BY THE COMPANY.

WE CONFIRM THAT:

a) THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY


WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THIS ISSUE;
b) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY
OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED
WITH;
c) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE,
FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED
DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE.
(d) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN
THE DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT
TILL DATE SUCH REGISTRATIONS ARE VALID AND
(e) WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH
OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS.
THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER,
ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 AND SECTION 68
OF THE ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND
OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED
OFFER. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME,
WITH THE BOOK RUNNING LEAD MANAGERS, ANY IRREGULARITIES OR LAPSES IN
THE DRAFT RED HERRING PROSPECTUS

DISCLAIMER BY THE COMPANY:

The Issuer accepts full responsibility for the accuracy for the information given in this DRHP and confirms
that to the best of their knowledge and belief, there are no other facts, their omission of which makes any
statement in this DRHP misleading and they further confirm that they have made all reasonable inquiries to

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AML STEEL LIMITED

ascertain such facts. The Issuer further declares that the Stock Exchanges to which an application for
official quotation is proposed to be made do not take any responsibility for the financial soundness of this

issue or for the price at which the equity shares are offered or for the correctness of the statement made or
opinions expressed in this DRHP. The Promoters/directors declare and confirm that no information/material
likely to have a bearing on the decision of investors in respect of the shares offered in terms of the DRHP
has been suppressed, withheld and/or incorporated in the manner that would amount to mis-statement,
misrepresentation and in the event of it’s transpiring at any point of time till allotment/refund, as the case
may be, that any information/material has been suppressed /withheld and/or amounts to a mis-statement/
mis-representation, the Promoters/Directors undertake to refund the entire application monies to all the
subscribers within 7 days thereafter without prejudice to the provisions of Section 63 of the Companies Act.

Caution

Our Company and the BRLM accept no responsibility for statements made other than in this DRHP or in
the advertisements or any other material issued by or at instance of the above, mentioned entitles and
anyone placing reliance on any other source of information, including our Company’s website
www.amlsteel.com, would be doing so at his or her own risk.

The BRLM accepts no responsibility, save to the limited extent as provided in the Underwriting Agreement
to be entered into between the Underwriters and the Company and the MoU between the BRLM and the
Company.

The Company and the BRLM shall make all information available to the public and investors at large and
no selective or additional information would be available for a section of the investors in any manner
whatsoever including at road show presentations, in research or sales reports or at bidding centres etc.

The BRLM have issued a fresh due diligence certificate dated [●] that reiterates the statements made in the
above referred certificate and states that all observations made by SEBI vide letter no. [●] dated [●], have
been incorporated in the DRHP.

We shall not be liable to the bidders for any failure in downloading the Bids due to faults in any software /
hardware systems or otherwise.

Disclaimer in Respect of Jurisdiction

This Issue is being made in India to persons resident in India (including Indian nationals resident in India
who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in
India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial
institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), Trusts
registered under the Societies Registration Act, 1860, as amended from time to time, or any other Trust law
and who are authorized under the constitution to hold and invest in shares) and to NRIs, FIIs and Foreign
Venture Capital Funds Registered with SEBI. This DRHP does not, however, constitute an invitation to
subscribe to shares issued hereby in any other jurisdiction to any person to whom it is unlawful to make an
issue or invitation in such jurisdiction. Any person into whose possession this DRHP comes is required to
inform himself or her self and to observe any such restrictions. Any dispute arising out of this issue will be
subject to the jurisdiction of appropriate court(s) in Chennai only.

No action has been or will be taken to permit a public issuing in any jurisdiction where action would be
required for that purpose, except that this DRHP has been filed with SEBI for observation and SEBI has
given its observations and this DRHP has been filed with RoC as per the provisions of the Companies Act.
Accordingly, the Equity Shares, represented thereby may not be issued or sold, directly or indirectly, and
this DRHP may not be distributed, in any jurisdiction, except in accordance with the legal requirement
applicable in such jurisdiction. Neither the delivery of this DRHP nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in the affairs of the Company from the
date hereof or that the information contained herein is correct as of any time subsequent to this date.

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AML STEEL LIMITED

Disclaimer Clause of BSE (Designated Stock Exchange)

As required, a copy of this DRHP has been submitted to BSE. The BSE has given vide its letter dated [●]
given permission to this Company to use the BSE’s name in the DRHP as one of the stock exchange on

which this Company’s securities are proposed to be listed. The BSE has scrutinized this DRHP for its
limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company.

The BSE does not in any manner:

• Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP;
• Warrant that this Company’s securities will be listed or will continue to be listed on the BSE; or
• Take any responsibility for the financial or other soundness of this Company, its Promoters, its
management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the
BSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do
so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the BSE
whatsoever by reason of any loss which may be suffered by such person consequent to or in connection
with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or
for any other reason whatsoever.

Disclaimer Clause of NSE

As required, a copy of the DRHP has been submitted to NSE. NSE has given vide its letter dated [●] given
its permission to the Company to use the NSE’s name in this DRHP as one of the stock exchanges on which
this Company’s securities are proposed to be listed subject to the Company fulfilling the various criteria for
listing including the one related to paid up capital and market capitalization (i.e. the paid up capital shall not
be less than Rs. 1000 lakhs and market capitalization shall not be less that Rs.2,500 lakhs at the time of
listing). The NSE has scrutinized the DRHP for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company. It is to be distinctly understood that the aforesaid
permission given by NSE should not in any way be deemed or construed that the DRHP has been cleared or
approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of
any of the contents of this DRHP nor does it warrant that this Company’s securities will be listed or will
continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of
this Company, its Promoters, its management or any scheme or project of this Company.

Every person who desires to apply for or otherwise acquires any securities of the Company may do so
pursuant to independent inquiry, investigation and analysis and shall not have any claim against the NSE
whatsoever by reason of any loss which may be suffered by such person consequent to or in connection
with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or
any other reason whatsoever.

Disclaimer Clause of MSE

As required, a copy of this DRHP has been submitted to MSE. The MSE has given vide its letter dated [●]
given permission to this Company to use the MSE’s name in the DRHP as one of the stock exchange on
which this Company’s securities are proposed to be listed. The MSE has scrutinized this DRHP for its
limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company.

The MSE does not in any manner:

• Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP;
• Warrant that this Company’s securities will be listed or will continue to be listed on the MSE; or
• Take any responsibility for the financial or other soundness of this Company, its Promoters, its
management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the
MSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do

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AML STEEL LIMITED

so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the MSE
whatsoever by reason of any loss which may be suffered by such person consequent to or in connection
with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or
for any other reason whatsoever.

Disclaimer Clause of DSE

As required, a copy of this DRHP has been submitted to DSE. The DSE has given vide its letter dated [●]
given permission to this Company to use the DSE’s name in the DRHP as one of the stock exchange on
which this Company’s securities are proposed to be listed. The DSE has scrutinized this DRHP for its
limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company.

The DSE does not in any manner:

• Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP;
• Warrant that this Company’s securities will be listed or will continue to be listed on the DSE; or
• Take any responsibility for the financial or other soundness of this Company, its Promoters, its
management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the
DSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do
so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the DSE
whatsoever by reason of any loss which may be suffered by such person consequent to or in connection
with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or
for any other reason whatsoever.

Disclaimer Clause of ASE

As required, a copy of this DRHP has been submitted to ASE. The ASE has given vide its letter dated [●]
given permission to this Company to use the ASE’s name in the DRHP as one of the stock exchange on
which this Company’s securities are proposed to be listed. The ASE has scrutinized this DRHP for its
limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company.

The ASE does not in any manner:

• Warrant, certify or endorse the correctness or completeness of any of the contents of the DRHP;
• Warrant that this Company’s securities will be listed or will continue to be listed on the ASE; or
• Take any responsibility for the financial or other soundness of this Company, its Promoters, its
management or any scheme or project of this Company.

It should not for any reason be deemed or construed that this DRHP has been cleared or approved by the
ASE. Every person who desires to apply for or otherwise acquires any securities of this Company may do
so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the ASE
whatsoever by reason of any loss which may be suffered by such person consequent to or in connection
with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or
for any other reason whatsoever.

Filing

A copy of the DRHP, along with the documents required to be filed under Section 60B of the Companies
Act, would be delivered to the RoC, Chennai at Tamil Nadu. A copy of the DRHP has been filed with the
Corporate Finance Department of SEBI at Ground Floor, Mittal Court, A Wing, Nariman Point, Mumbai –
400 021.

Listing

Applications have been made to the BSE, NSE, MSE, DSE and ASE for permission to deal in and for an
official quotation of our Equity Shares. BSE shall be the Designated Stock Exchange with which the basis
of allocation will be finalized for non-institutional portion and retail portion.

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AML STEEL LIMITED

If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the
Stock Exchanges mentioned above, our Company will forthwith repay, without interest, all moneys

received from the applicants in pursuance of this DRHP. If such money is not repaid within eight days after
our Company become liable to repay it from the date of refusal or within 70 days from the Bid / Issue
Closing Date, whichever is earlier, then the Company, and every Director of the Company who is an officer
in default shall, on and from such expiry of eight days, be liable to repay the money, with interest at the rate
of 15% per annum on application money, as prescribed under Section 73 of the Companies Act.

Our Company shall ensure that all steps for the completion of the necessary formalities for listing and
commencement of trading at the Stock Exchanges mentioned above are taken within 7 working days of
finalization and adoption of the Basis of Allotment for this issue.

Impersonation

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of
the Companies Act, which is reproduced below:

“Any person who:

(a) Makes in a fictitious name, an application to the company for acquiring or subscribing for,
any shares therein, or
(b) Otherwise induces a company to allot, or register any transfer of shares therein to him, or
any other person in a fictitious name, shall be punishable with imprisonment for term which
may extend to five years.”

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

Withdrawal of this Issue

The Company, in consultation with the BRLM, reserves the right not to proceed with this Issue anytime
after the Bid / Issue Opening Date without assigning any reason thereof.

Consents

Consents in writing of: (a) the Directors, the Company Secretary, the Auditors, Legal Advisor, Tax Auditor,
Bankers to the Company, Escrow Collection Banks and Bankers to the Issue; and (b) Book Running Lead
Managers to the Issue, Syndicate Members and Registrars to the Issue, to act in their respective capacities,
have been obtained and shall be filed along with a copy of the DRHP with the RoC at Chennai, Tamil Nadu
as required under Section 60 and 60B of the Companies Act and such consents have not been withdrawn up
to the time of delivery of the DRHP for registration.

M/s.K.P Jain & Co., Chartered Accountants, the statutory auditors of the Company have given their written
consent to the inclusion of their report in the form and context in which it appears in the DRHP and such
consent and report has not been withdrawn up to the time of delivery of the DRHP for registration to the
RoC, at Chennai, Tamil Nadu.

M/s K.P Jain & Co., Chartered Accountants, the statutory auditors have given their written consent to the
inclusion of the statement of tax benefits accruing to the Company and its members in the form and context
in which it appears in the DRHP and have not withdrawn the same up to the time of delivery of the DRHP
for registration to the RoC at Chennai, Tamil Nadu.

Expert Opinion

Save as stated elsewhere in the DRHP, the Company has not obtained any expert opinions.

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AML STEEL LIMITED

Expenses of the Issue

The expenses of the Issue payable by our Company inclusive of brokerage, fees payable to the Book
Running Lead Managers to the Issue, Registrar to the Issue, Legal Advisors, stamp duty, printing,
publication, advertising and distribution expenses, bank charges, listing fees and other miscellaneous
expenses are estimated as follows:

Details of Fees Payable


(Rs. in lakhs)
Particulars Amount % of total issue expenses % of total issue size
Issue Management [●] [●] [●]
Registrars fees [●] [●] [●]
Printing of Stationery [●] [●] [●]
Advertising and marketing [●] [●] [●]
expenses
Underwriting, Brokerage and [●] [●] [●]
Selling commission
Other expenses [●] [●] [●]
Total [●] [●] [●]
Will be incorporated after finalisation of issue price.

Fees payable to the Book Running Lead Managers

The total fees payable by us to the Book Running Lead Managers (including underwriting commission and
selling commission) will be as per Engagement Letters both dated 21 October, 2005 a copy of which is
available for inspection at our registered office.

Fees payable to the Registrar to the Issue

The fees payable by us to the Registrar to the Issue for processing of Application, data entry, printing of
CAN/ refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as
per the MoU signed with our Company dated 1 March, 2006. The Registrar to the Issue will be reimbursed
for all out-of-pocket expenses including cost of stationery, postage, stamp duty and communication
expenses. Adequate funds will be provided by us to the Registrar to the Issue to enable them to send refund
orders or Allotment advice by registered post/ speed post/ under certificate of posting.

Underwriting Commission, Brokerage and Selling Commission

The underwriting commission and selling commission for the Issue is as set out in the Syndicate Agreement
amongst our Company, the BRLM and Syndicate Members. The underwriting commission shall be paid as
set out in the Syndicate Agreement based on the Issue Price and amount underwritten in the manner
mentioned in the DRHP.

Previous rights and public issues

The Company had come out with a public issue in November 1995. The Company has not had a rights issue
since its incorporation.

Previous issues of shares otherwise than for cash

Save as stated in the section titled “Capital Structure” on page no. [●] of this DRHP, the Company has not
issued any equity shares for consideration otherwise than for cash.

Commission and Brokerage on Previous Issue

There has been only one public issue by the Company in the past in the year 1995 and we have paid an
amount of Rs.1.66 lakhs towards Commission and Brokerage.

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AML STEEL LIMITED

Companies under the Same Management

There are no listed companies under the same management within the meaning of Section 370 (1B) of the
Companies Act, 1956, which have made any capital issue during the last three years.

Promise vis-a-vis Performance

The Company has made an IPO in November, 1995 for 7,60,000 Equity Shares of Rs. 10/- each for cash at
par aggregating Rs.76 lakhs. The main object of the Issue was to finance the expansion of the production of
Rigid PVC pipes. The total cost of project was estimated to be Rs. 408.51 lakhs. In the offer document for
the purpose of the said issue, following projections were made gainst which the actual performance is given
below:
(Rs. in lakhs)
Particulars 1995 – 1996 1996 – 1997 1997-1998
Expected Actual Variance Expected Actual Variance Expected Actual Variance
Sales 833.00 720.82 -112.18 1229.90 1022.32 -207.58 1333.45 911.48 -421.97
Cost of Production 640.89 502.76 -138.13 923.21 768.20 -155.01 1035.13 736.98 -298.15
Gross Profit 192.11 218.06 25.95 306.69 254.12 -52.57 348.32 174.50 -173.82
Administrative and
selling Expenses 42.84 48.45 5.61 63.93 57.97 -5.96 70.94 55.14 -15.80
PBIDT 149.28 169.61 20.33 242.75 196.15 -46.6 277.39 119.36 -158.03
Interest 24.77 18.35 -6.42 61.16 29.13 -32.03 65.85 19.83 -46.02
Depreciation 4.72 6.50 1.78 4.72 8.98 4.26 4.72 9.41 4.69
Misc. Expenses written
off 1.53 0.00 -1.53 1.53 0.00 -1.53 1.53 0.00 -1.53
PBT 118.27 144.76 26.49 175.34 158.04 -17.30 205.29 90.12 -115.17
Provision for Tax 14.52 0.26 -14.26 39.99 0.00 -39.99 51.60 0.00 -51.60
PAT 103.75 144.50 40.75 135.35 158.04 22.69 153.69 90.12 -63.57
Proposed Dividend 26.87 21.79 -5.08 45.00 45.00 0.00 54.00 33.00 -21.00
Proposed Dividend (%) 12.00 12.00 0.00 15.00 15.00 0.00 18.00 10.00 -8.00
Share capital 300.00 300.00 0.00 300.00 300.00 0.00 300.00 300.00 0.00
Reserves and Surplus 116.39 155.30 38.91 206.74 273.61 66.87 306.43 330.74 24.31
EPS 4.33 8.00 3.67 4.51 5.27 0.76 5.12 3.00 -2.12
Book value 13.42 14.76 1.34 16.48 19.10 2.62 19.86 21.03 1.17

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

Outstanding Debenture or Bond offers

As of date, the Company does not have any outstanding debenture or bond offers.

Outstanding Preference Shares

As of date, the Company does not have any outstanding preference shares.

Listed ventures of the Group Companies

There are no listed ventures in the Company’s group companies

Stock Market Data for the Equity Shares of the Company

No trading in the shares has been recorded on MSE, DSE and ASE in the last three years.

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AML STEEL LIMITED

Mechanism Evolved for redressal of investor grievance

The agreement between the Registrar to this Issue and us will provide for retention of records with the
Registrar to this Issue for a period of at least one year from the last date of dispatch of the letters of
allotment, demat credit and refund orders to enable the investors to approach the Registrar to this Issue for
redressal of their grievances.

All grievances relating to this Issue may be addressed to the Registrar to this Issue, giving full details such
as name, address of the applicant, number of Equity Shares applied for, amount paid on application and the
bank branch or collection center where the application was submitted.

We estimate that the average time required by us or the Registrar to this Issue for the redressal of routine
investor grievances will be seven business days from the date of receipt of the complaint. In case of
non-routine complaints and complaints where external agencies are involved, we will seek to redress these
complaints as expeditiously as possible.

Our Company has appointed Mr. Rajesh Agrawal as the Compliance Officer and he may be contacted at:

AML Steel Limited,


Raheja Complex, New no 68 (834),
Anna Salai, Chennai, Tamil Nadu – 600 002.
Tel: + 91 44 2858 3182 Fax: +91 44 2841 9443,
e-mail:corporate@amlsteel.com, website:www.amlsteel.com

Changes in Auditors in the last three years and the reasons thereof

There has been no change in the statutory auditors of the Company in the last three years.

Capitalisation of reserves or profits

Our Company has not capitalized its reserves or profits at any time except as stated in the Section titled
“Capital Structure” on page no.[●] of this DRHP.

Revaluation of assets

Our Company has not revalued its assets since inception.

Classes of Shares

The Company’s authorised capital is Rs. 30,00,00,000/- which is divided into 3,00,00,000 Equity Shares of
Rs. 10/- each.

Payment or Benefit to Promoters or Officers of the Company

Other than as disclosed in the DRHP there have been no payments or benefits to the Promoters or officers of
the Company.

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AML STEEL LIMITED

SECTION VII - ISSUE RELATED INFORMATION

TERMS OF THE ISSUE

The Equity Shares being offered are subject to the provisions of the are subject to the provisions of the Act,
the Constitutional Documents, the terms of this DRHP, Bid-cum-Application Form, the Revision Form,
CAN and other terms and conditions as may be incorporated in the Allotment Advice, and other
documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject
to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and
trading of securities issued from time to time by SEBI, the Government, Stock Exchanges, RBI, and/or
other authorities, as in force on the date of the Issue and to the extent applicable.

Ranking of Equity Shares

The Equity Shares being offered shall be subject to the provisions of the Constitutional Documents and
shall rank pari passu in all respects with the existing Equity Shares of the Company including rights in
respect of dividend. The persons in receipt of allotment will be entitled to dividend or other benefits, if any,
declared by our Company after the date of allotment.

Mode of payment of dividend

The declaration and payment of dividends will be recommended by our Board of Directors and our
shareholders, in their discretion, and will depend on a number of factors, including but not limited to our
earnings, capital requirements and overall financial condition.

Face Value and Issue Price

The Equity Shares with a face value of Rs. 10/- each are being offered in terms of this DRHP at a total price
of Rs. [•] per Equity Share. At any given point of time there shall be only one denomination for the Equity
Shares.

The face value of the shares is Rs. 10/- and the Floor Price is [•] times of the face value and the Cap Price is
[•] times of the face value.

Compliance with SEBI Guidelines

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

Rights of the Equity Shareholder

Subject to applicable laws, the Equity Shareholders shall have the following rights:
• Right to receive dividend, if declared. However the declaration of dividend of the Company is
subject to certain restrictions. Please refer to the restrictions on the payment of dividend in the
section titled “Dividend Policy” on page no.[•] of this DRHP;
• Right to attend general meetings and exercise voting powers, unless prohibited by law.
• Right to vote on a poll either in person or by proxy
• Right to receive offer for rights shares and be allotted bonus shares, if announced
• Right of free transferability
• Right to receive surplus on liquidation
• Such other rights, as may be available to a shareholder of a listed Company under the Companies
Act and Memorandum and Articles of Association of the Company

For a detailed description of the main provisions of our Articles of Association dealing, among other things,
with voting rights, dividend, forfeiture and lien, transfer and transmission see the section titled “Main
Provisions of the Articles of Association” on page no. [●] of this DRHP.

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Market Lot and Trading Lot

In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialized
form. As per the existing SEBI Guidelines, the trading in the Equity Shares shall only be in dematerialized
form for all investors. Since trading of our Equity Shares is in dematerialized form, the tradable lot is one
Equity Share. Allotment through this Issue will be done only in electronic form in multiples of one Equity
Share subject to a minimum Allotment of [•] Equity Shares to the successful Bidders.

Jurisdiction of Courts

Any dispute arising out of this issue will be subject to the jurisdiction of appropriate court (s) in Chennai,
India only.

Nomination Facility to the Investor

In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidder
may nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, in
the event of death of all the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A
person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original
holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to
which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the
nominee is minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to
become entitled to Equity Share(s) in the event of his/her death during the minority. A nomination shall stand
rescinded upon a sale/transfer/alienation of Equity Share(s) by the person nominating. A buyer will be entitled
to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed
form available on request at the Registered Office of the Company and the Registrars and transfer agents of
the Company.

In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be
required by the Board, elect either; -

a) To register himself or herself as the holder of the Equity Shares; or


b) To make such transfer of the Equity Shares, as the deceased holder could have made.

Further, the Board may at any time give notice requiring any nominee to elect/choose either to register
himself or herself or to transfer the Equity Shares, and if the notice is not complied within a period of ninety
days, the Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect
of the Equity Shares, until the requirements of the notice have been complied with.

Since the allotment/transfer of Equity Shares in the Issue will be made only in dematerialized mode,
there is no need to make a separate nomination with the Company. Nominations registered with the
respective depository participant of the applicant would prevail. If the investors require changing the
nomination, they are requested to inform their respective depository participant

Impersonation

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of
the Companies Act, which is reproduced below:

“Any person who:

(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any
shares therein, or
(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or
any other person in a fictitious name,

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

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Minimum Subscription

If the Company does not receive the minimum subscription of 90% of the net issue to public including
devolvement of Underwriters within 60 days from the date of closure of the issue, the company shall
forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the
company becomes liable to pay the amount, the Company shall pay interest prescribed under Section 73 of
the Companies Act, 1956.

Application to the Issue

Equity Shares being issued through this DRHP can be applied for in the dematerialized form only.

Withdrawal of the Issue

Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue anytime
after the Bid/ Issue Opening Date without assigning any reason thereof.

Arrangements for Disposal of Odd Lots

The Company’s shares will be traded in dematerialized form only and therefore the marketable lot is one
share. Therefore there is no possibility of odd lots.

Letters of Allotment or Refund Orders

The Company shall give credit to the beneficiary account with depository participants within 2 working
days of finalization of the basis of allotment of Equity Shares by the Designated Stock Exchange. The
Company shall dispatch refund orders above Rs.1,500, if any, by registered post or speed post at the sole or
first bidder’s sole risk within 15 days of the Bid/Issue Closing Date. In accordance with the Companies Act,
the requirements of the Stock Exchanges and the SEBI Guidelines, the Company further undertakes that:

• Allotment of Equity Shares will be made only in dematerialized form within 15 days from the Bid/Issue
Closing Date;
• Dispatch of refund orders will be done within 15 days from the Bid/Issue Closing Date;
• The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as
mentioned above), if allotment is not made, refund orders are not dispatched and/or demat credits are not
made to investors within the 15 day prescribed time period as mentioned above.

The Company will provide adequate funds required for dispatch of refund orders or allotment advice to the
Registrar to the Issue. Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank
appointed by the Company, as an Escrow Collection Bank and payable at par at places where Bids are
received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres
will be payable by the Bidders.

Restriction on Transfer and Transmission of Shares

Nothing contained in the Articles of Association of the Company shall prejudice any power of the Company
to refuse to register the transfer of any share.

No fee shall be charged for sub-division and consolidation of share certificates (physical form), debenture
certificates and detachable warrants and for sub-division of letters of allotment and split, consideration,
renewal and pucca transfer receipts into denomination corresponding to the market units of trading.

Application by Non Residents/NRIs/FIIs/ Foreign Venture Capital Funds registered with SEBI

There is no reservation for Non Residents, NRIs, FIIs and Foreign Venture Capital Funds and all Non
Residents, NRI, FII and Foreign Venture Capital Fund applicants will be treated on the same basis as other
categories for the purpose of allocation.

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AML STEEL LIMITED

The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws in the United States and may not be offered or
sold within the United States or to, or for the account of benefit of, "U.S. Persons" (as defined in the
Regulations of the Securities Act), except pursuant to any exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.

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AML STEEL LIMITED

ISSUE PROCEDURE

Book Building Procedure


The Issue is being made through the 100% Book Building Process wherein upto 50% of the Net Issue to the
public shall be allotted on a proportionate basis to QIB’s, of which 5% are reserved for Mutual Funds and
the balance will be available for all QIBs including Mutual Funds. Further, not less than 15% of the net
issue to the public shall be available for allotment on a proportionate basis to Non-Institutional Bidders and
not less than 35% of the net issue to the public, shall be available for allotment on a proportionate basis to
the Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price.
Bidders are required to submit their Bids through the members of the Syndicate. The Syndicate Members
have the right to reject a Bid received from QIBs at the time of receipt of the Bids. However, the Syndicate
Members shall disclose the reasons for not accepting the Bid to the Bidder. In case of Non-Institutional
Bidders and Retail Individual Bidders, our Company would have a right to reject the Bids only on technical
grounds.
Investors should note that Equity Shares would be allotted to all successful allottees only in the
dematerialised form. Bidders will not have the option of allotment of Equity Shares in physical form.
The Equity Shares, on allotment, shall be traded only in the dematerialised segment of the Stock
Exchanges.
Bid-cum-Application Form
Bidders shall only use the specified Bid-cum-Application Form bearing the stamp of a member of the
Syndicate for the purpose of making a Bid in terms of this DRHP. The Bidder shall have the option to make
a maximum of three Bids in the Bid-cum-Application Form and such options shall not be considered as
multiple bids. Upon the allotment of Equity Shares, dispatch of CAN, and filing of the Prospectus with the
RoC, the Bid-cum-Application Form shall be considered as the Application Form. Upon completing and
submitting the Bid-cum-Application Form to a member of the Syndicate, the Bidder is deemed to have
authorised the Company to make the necessary changes in this DRHP and the Bid-cum-Application Form
as would be required for filing the Prospectus with the RoC and as would be required by RoC after such
filing, without prior or subsequent notice of such changes to the Bidder.

The prescribed colour of the Bid-cum-Application Form for various categories is as follows:

Category Colour of Bid Cum Application Form


Indian Public or NRIs applying on a non- White
repatriation basis
Eligible Non residents, NRIs or FIIs applying on a Blue
repatriation basis

Who can Bid?

1. Indian nationals resident in India who are major, in single or joint names (not more than three);
2. Hindu Undivided Families or HUFs in the individual name of the Karta. The Bidder should specify
that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows:
“Name of Sole or First bidder: ABC Hindu Undivided Family applying through ABC, where ABC
is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals;
3. Companies, corporate bodies and societies registered under the applicable laws in India and
authorised to invest in the Equity Shares;
4. Indian Mutual Funds registered with SEBI;
5. Indian Financial Institutions, scheduled commercial banks, commercial banks, regional rural
banks, co-operative banks (subject to RBI regulations, as applicable); as defined in Section 4A of
Companies Act;
6. Venture Capital Funds registered with SEBI;
7. Foreign Venture Capital Investors registered with SEBI;

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AML STEEL LIMITED

8. State Industrial Development Corporations;


9. Trust/ society registered under the Societies Registration Act, 1860, as amended, or under any
other law relating to Trusts/ Societies and who are authorised under their constitution to hold and
invest in Equity Shares;
10. Eligible non-residents including NRIs and FIIs on a repatriation basis or a non- repatriation basis
subject to applicable laws;
11. Scientific and/ or Industrial Research Organisations authorised to invest in Equity Shares.
12. Insurance companies registered with the Insurance Regulatory and Development Authority;
13. Provident funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their
constitution to hold and invest in Equity Shares;
14. Pension funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their
constitution to hold and invest in Equity Shares;
15. Multilateral and bilateral development financial institutions; and

Pursuant to the existing regulations, OCBs are not eligible to participate in the Issue.

Note: The BRLMs, Syndicate Members and any associate of the members of the BRLMs and Syndicate
Members (except asset management companies on behalf of mutual funds, Indian financial institutions and
public sector banks) cannot participate in that portion of the Issue where allocation is proportionate.
Further, the BRLMs shall not be entitled to subscribe to this Issue in any manner except towards fulfilling
their underwriting obligation.

In terms of the Regulation 15A (1) of the Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995, the Foreign Institutional Investor or sub-account (“FIIs) may issue, deal in or
hold, off-shore derivative instruments such as Participatory Notes, Equity Linked Notes or any other similar
instruments against underlying securities being allocated to such FIIs.

Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under the relevant regulations or
statutory guidelines.

Application by Mutual Funds

As per the current regulations, the following restrictions are applicable for investments by mutual
funds:

No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity
related instruments of any company provided that the limit of 10% shall not be applicable for investments
in index funds or sector or industry specific funds.

No mutual fund under its scheme should own more than 10% of any company’s paid-up capital carrying
voting rights. These limits would have to be adhered to by the Mutual Funds for investment in the Equity
Shares.

In case of a Mutual Fund, a separate bid can be made in respect of each scheme of the Mutual Fund
registered with SEBI and such bids in respect of more than one scheme of the Mutual Fund will not be
treated as multiple bids provided that the bids clearly indicate the scheme concerned for which the bid has
been made.

Application by NRIs

Bid cum Application forms have been made available for NRIs at the corporate office of the Company.

NRI applicants may please note that only such applications as are accompanied by payment in free foreign
exchange shall be considered for allotment under the NRI category. The NRIs who intend to make payment

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AML STEEL LIMITED

through Non-Resident Ordinary (NRO) Account shall use the form meant for Resident Indians (white in
colour.).

Application by FIIs

As per current regulations, the following restrictions are applicable for investment by FIIs:

No single FII can hold more than 10% of the post-issue paid-up capital of the Company. In respect of an
FII investing in the Equity Shares of the Company on behalf of its sub-accounts, the investment on behalf
of each sub-account shall not exceed 10% of the total issued capital or 5% of the total issued capital of the
Company in case such sub-account is a foreign corporate or an individual.

As of now, the aggregate FII holding in the Company cannot exceed 24% of the total issued capital of the
Company. With the approval of the Board of Directors and the shareholders by way of a special resolution,
the aggregate FII holding can go up to 100%. However, as on this date no such resolution has been
recommended to the shareholders of the Company for adoption.

Bids by NRIs or FIIs on Repatriation Basis

Bids and revision to bids must be made:

• On the bid cum application form or Revision Form, as applicable, (Blue in colour), and completed
in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.

• In a single or joint names (not more than three).

• Bids by NRIs for a Bid amount of up to less than Rs 1,00,000 would be considered under the
Retail Individual Bidders Portion for the purposes of allocation and Bids for a Bid amount of more
than or equal to Rs. 1,00,000 would be considered under Non-Institutional Bidder Portion for the
purposes of allocation; by FIIs or Foreign Venture Capital Fund, Multilateral and Bilateral
Development Financial Institutions for a minimum of such number of Equity shares and in
multiples of [●] Equity Shares thereafter so that the Bid amount exceeds Rs. 1,00,000. For further
details please refer to the sub-section titled “Maximum and Minimum Bid size”.

• In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital
Fund, Multilateral and Bilateral Financial Institutions but not in the names minors, firms or
partnerships, foreign nationals or their nominees or OCBs.

• Refunds, dividends and other distributions, if any, will be payable in India Rupees only and net of
bank charges and / or commission, in case of Bidders who remit money payable upon submission
of the Bid cum Application Form or Revision form through INR drafts purchased abroad, such
payments in INR will be converted into USD or any other freely convertible currency as may be
permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be
dispatched by the space provided for this purpose in the Bid Cum Application Form. The
Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion
of foreign currency.

As per the current regulations, the following restrictions are applicable for SEBI registered Venture
Capital Funds and Foreign Venture Capital Investors:

The SEBI (Venture Capital Funds) Regulations, 1996 and the SEBI (Foreign Venture Capital Investors)
Regulations 2000, prescribe investment restrictions on venture capital funds and foreign venture capital
investors registered with SEBI. Accordingly, the holding by any individual venture capital fund or foreign
venture capital investor registered with SEBI should not exceed 25 % of the Company’s paid-up capital.
The aggregate holdings of venture capital funds and foreign venture capital investors registered with SEBI
could, however, go up to 100 % of the Company’s paid-up equity capital.

The above information is given for the benefit of the Bidders. The Company and the BRLMs are not
liable for any amendments or modifications or changes in applicable laws or regulations, which may
happen after the date of this DRHP. Bidders are advised to make their independent investigations

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AML STEEL LIMITED

and ensure that the number of Equity Shares bid for do not exceed the applicable limits under laws
or regulations.

Maximum and Minimum Bid Size

For Retail Individual Bidders

The Bid must be for a minimum of [] Equity Shares and in multiples of [] Equity Shares thereafter,
subject to maximum Bid amount of Rs. 1,00,000/-. In case of revision of Bids, the Retails bidders have to
ensure that the Bid amount does not exceed Rs. 1,00,000/-. In case the maximum Bid amount is more than
Rs. 1,00,000/- due to revision of the Bid or revision of the Price Band or on exercise of the option, then the
same would be considered for allocation under the Non-Institutional Bidders category. The cut-off option
is an option available only to the Retail Individual Bidders indicating their agreement to bid and purchase
the Equity Shares at the final issue price as determined at the end of the Book Building process.

For Non-Institutional Bidders and QIBs Bidders

The Bid must be for a minimum of such number of Equity Shares, so as to ensure that the minimum Bid
amount exceeds Rs.1,00,000/-. Above this minimum Bid Amount, the Bid should be in multiples of []
Equity Shares. A Bid cannot be submitted for more than the size of the Issue. However, the maximum Bid
by a QIB should not exceed the investment limits prescribed for them by the regulatory or statutory
authorities governing them. Under SEBI existing guidelines a QIB Bidder cannot withdraw its Bid after the
Bid/Issue Closing Date.

In case of revision in Bids, the Non-Institutional Bidders who are individuals have to ensure that the Bid
Amount is greater than Rs. 1,00,000/-. In case the Bid Amount reduces to Rs 1,00,000/- or less due to a
revision in Bids or revision of the Price Band, the same would be considered for allocation under Retail
portion.

Non-Institutional Bidders and QIB Bidders are not allowed to Bid at Cut-Off Price. A QIB Bidder cannot
withdraw its Bid after the Bid/Issue Closing Date.

Right to Reject Bids

In case of QIB bidders, our Company, in consultation with the BRLM’s/Syndicate Members may reject
bids at the time of submission of the bid provided that the reasons for rejecting the same shall be provided
for such bidder in writing. In case of Non Institutional Bidders and Retail Individual Bidders who bid, the
Company has the right to reject bids on technical grounds. Consequent reference shall be made by cheque
or pay order or draft and will be sent to the bidders address at the bidder’s risk.

Information for the Bidders

(a) Our Company will file the RHP with the RoC at least three days before the Bid/ Issue Opening Date.

(b) The members of the Syndicate will circulate copies of the RHP along with the Bid-cum-Application
Form to potential investors.

(c) Any investor (who is eligible to invest in the Equity Shares of the Company) who would like to obtain
the RHP and/ or the Bid-cum-Application Form can obtain the same from the corporate office of the
Company or from any of the BRLMs or Syndicate Members.

(d) The Bids should be submitted on the prescribed Bid-cum-Application Form only. Bid-cum-Application
Forms should bear the stamp of the members of the Syndicate. Bid-cum-Application Forms, which do not
bear the stamp of the members of the Syndicate, will be rejected.

(e) Investors who are interested in subscribing to our Company’s Equity Shares should approach the
BRLMs or Syndicate Members or their authorised agent(s) to register their Bid.

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AML STEEL LIMITED

Method & Process of Bidding

a) The Company and the BRLMs shall declare the Bid/Issue Opening Date, Bid/Issue Closing Date at
the time of filing the RHP with RoC and publish the same in two widely circulated newspapers
(one each in English and Hindi) and a regional language newspaper circulated at the place where
the registered office of the Company is situated. This advertisement shall be in the format and
contain the disclosures specified in Part A of Schedule XX-A of the SEBI Guidelines. The BRLMs
and Syndicate Members shall accept Bids from the Bidders during the Issue Period in accordance
with the terms of the Syndicate Agreement.

b) Investors who are interested in subscribing for our Company’s Equity Shares should approach any
of the BRLMs, or Syndicate Member or their authorised agent(s) to register their Bid.

c) The Bidding Period shall be open for atleast 3 working days and not more than 7 working days. In
case the price band is revised, the revised price band will be published in two widely circulated
newspapers (one each in English and Hindi) and a regional language newspaper circulated at the
place where the registered office of the Company is situated and the Bidding period will be
extended for a further period of three working days, subject to the total Bidding period not
exceeding 10 working days. During the bidding period, the Bidders may approach the Syndicate to
submit their Bid. Every Member of the Syndicate shall accept Bids from all clients/investors who
place orders through them and shall have the right to vet the bids.

d) Each Bid-cum-Application Form will give the Bidder the choice to bid for up to three optional
prices (for details refer to the paragraph entitled “Bids at Different Price Levels” on page no. [●] of
this DRHP) and specify the demand (i.e. the number of Equity Shares bid for) in each option. The
price and demand options submitted by the Bidder in the Bid-cum-Application Form will be
treated as optional demands from the Bidder and will not be cumulated. After determination of the
Issue Price, the maximum number of Equity Shares bid for by a Bidder at or above the Issue Price
will be considered for allocation and the rest of the Bid(s), irrespective of the Bid Price, will
become automatically invalid.

e) The Bidder cannot bid on another Bid-cum-Application Form after his or her Bids on one Bid-
cum-Application Form have been submitted to any member of the Syndicate. Submission of a
second Bid-cum-Application Form to either the same or to another member of the Syndicate will
be treated as multiple bids and is liable to be rejected either before entering the Bid into the
electronic bidding system, or at any point of time prior to the allocation or allotment of Equity
Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the
procedure for which is detailed under the paragraph “Build up of the Book and Revision of Bids”
on page no.[●] of this DRHP.

f) The BRLM’s, and Syndicate Members will enter each bid option into the electronic bidding
system as a separate Bid and generate a Transaction Registration Slip, (“TRS”), for each price and
demand option and give the same to the Bidder. Bidders should make sure that they ask for a copy
of the computerized TRS for every Bid Option from the Syndicate Member. Therefore, a Bidder
can receive up to three TRSs for each Bid-cum-Application Form.

g) During the Bidding Period, Bidders may approach the members of the Syndicate to submit their
Bid. Every member of the Syndicate shall accept Bids from all clients / investors who place orders
through them and shall have the right to vet the Bids.

h) Along with the Bid-cum-Application Form, all Bidders will make payment in the manner
described under the paragraph “Terms of Payment and Payment into the Escrow Collection
Account” on page no. [●] of this DRHP.

Bids at Different Price Levels

a) The Price Band and the minimum bid size shall be advertised atleast one day prior to the Bid
Opening Date / Issue Opening Date in [●], a widely circulated English language newspaper, [●] a
Hindi language newspaper and [●], a Tamil newspaper as appearing on the cover page. The
Bidders can bid at any price within the Price Band, in multiples of Re 1/-

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b) In accordance with SEBI Guidelines, the Company, in consultation with the BRLMs, can revise
the Price Band during the Bidding period, in which case the Issue will be kept open for a period of
three working days after the revision of the Price Band, subject to the total Bidding Period not
exceeding ten working days. The Price Band can be revised during the Bidding Period in which
case the maximum revisions on either side of the Price Band shall not exceed 20% fixed initially
and as disclosed in this DRHP. In addition to this, the cap on the Price Band should not be more
than 20% of the floor of the Price Band.

c) In case of revision in the Price Band, the Issue Period will be extended for three additional
working days after revision of Price Band subject to a maximum of ten working days. Any revision
in the Price Band and the revised Bidding / Issue Period, if applicable, will be widely disseminated
by notification to BSE and NSE, by issuing a public notice in two national newspapers (one each
in English and Hindi) and one regional language newspaper, and also by indicating the change on
the websites of the BRLMs and at the terminals of the Syndicate Members and the Bidding Period
shall be extended for a further period of three days, subject to the total bidding period not
exceeding 10 days.

d) The Company in consultation with the BRLMs can finalise the Issue Price within the Price Band in
accordance with this clause, without the prior approval of, or intimation, to the Bidders.

e) The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired
number of Equity Shares at a specific price. Retail Individual Bidders may bid at “Cut off”.
However, bidding at “Cut-off” is prohibited for QIB or Non Institutional Bidders and such Bids
from QIBs and Non Institutional Bidders shall be rejected.

f) Retail Individual Bidders who bid at the Cut-Off agree that they shall purchase the Equity Shares
at any price within the Price Band. Retail Individual Bidders bidding at Cut-Off shall deposit the
Bid Amount based on the Cap Price in the Escrow Account. In the event the Bid Amount is higher
than the subscription amount payable by the Retail Individual Bidders (i.e. the total number of
Equity Shares allocated in the Issue multiplied by the Issue Price), Retail Individual Bidders who
bid at cut-off price shall receive the refund of the excess amounts from the Escrow Account/
refund account(s).

g) In case of an upward revision in the Price Band announced as above, the Retail Bidders or who had
bid at Cut-off Price could either (i) revise their Bid or (ii) make additional payment based on the
higher end of the Revised Price Band (such that the total amount i.e., original Bid Price plus
additional payment does not exceed Rs. 1,00,000/- for Retail Bidders or, if the Bidder wants to
continue to bid at Cut-off Price), with the Syndicate Member to whom the original bid was
submitted. In case the total amount (i.e., original Bid Price plus additional payment) exceeds
Rs. 1,00,000 for retail Bidders the Bid will be considered for allocation under the Non-Institutional
portion in terms of this DRHP. If, however, the Bidder does not either revise the Bid or make
additional payment and the Issue Price is higher than the higher end of the Price Band prior to
revision, the number of Equity Shares bid for shall be adjusted downwards for the purpose of
allotment, such that the no additional payment would be required from the Bidder and the Bidder is
deemed to have approved such revised Bid at Cut-off Price.

h) In case of downward revision in the Price Band announced as above, Retail Bidders who have bid
at Cut-Off Price could either revise their Bid or the excess amount at the time of bidding would be
refunded from the Escrow Account/ refund account(s)

i) In the event of any revision in the Price Band, whether upwards or downwards, the Minimum
Application shall remain [●] Equity Shares irrespective of whether the Bid Amount payable on
such Minimum Application is not in the range of Rs.5,000/- to Rs.7,000/-.

Option to subscribe

Equity Shares being issued through this DRHP can be applied for in the dematerialized form only. Bidders
will not have the option of getting Allotment in physical form. The Equity Shares, on Allotment, shall be
traded only in the dematerialized segment of the Stock Exchanges.

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Escrow Mechanism

Escrow Account for the Issue

Our Company shall open Escrow Accounts with one or more Escrow Collection Banks in whose favour the
Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the bid.
Cheques or demand drafts received for the full Bid amount from Bidders in a certain category would be
deposited in the Escrow Account for the Issue. The Escrow Collection Banks will act in terms of this DRHP
and an Escrow Agreement. The monies in the Escrow Account for the Issue shall be maintained by the
Escrow Collection Bank(s) for and on behalf of the Bidders. The Escrow Collection Bank(s) shall not
exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for
the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the monies from the
Escrow Account to the Public Issue Account with the Bankers to the Issue as per the terms of the Escrow
Agreement with the Company. Payments of refunds to the Bidders shall also be made from the Escrow
collection Banks are per the terms of the Escrow Agreement with the Company and this DRHP.

The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as
an arrangement between the Escrow Collection Bank(s), our Company, the Registrar to the Issue and
BRLMs, and Syndicate Members to facilitate collection from the Bidders.

Terms of Payment and Payment into the Escrow Collection Account

In case of Non-institutional Bidders and Retails Individual Bidders, each Bidder shall, with the submission
of the Bid cum Application Form draw a cheque or demand draft for the maximum amount of his Bid in
favour of the Escrow Account of the Escrow Collection Bank (for details refer to the paragraph “Payment
Instructions on page no.[●] of this DRHP) and submit the same to the members of the Syndicate with whom
the Bid is being deposited. Bid cum Application Forms accompanied by cash and Stock invest shall not be
accepted. The maximum bid price has to be paid at the time of submission of the Bid cum Application Form
based on the highest bidding option of the Bidder.

The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection
Bank(s), which will hold the monies for the benefit of the Bidders till such time as the Designated Date. On
the Designated Date, the Escrow Collection Bank(s) shall transfer the funds from the Escrow Account, as
per the terms of the Escrow Agreement, into the Public Issue Account or Refund Account with the Bankers
to the Issue, as applicable. The balance amount after transfer to the Issue Account shall be held for the
benefit of the Bidders who are entitled to refunds on the Designated Date, and not later than 15 days from
the Bid Closing Date / Issue Closing Date, the Escrow Collection Bank(s) shall refund all monies to
unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for Allotment to
the Bidders.

In case of QIBs, each QIB shall, with the submission of the bid cum application form draw a cheque or
demand draft for 10% of the maximum amount of his bid in favour of the Escrow account of the Escrow
collection bank. The balance amount shall be payable for the allocated Equity Shares not later than the date
specified in the CAN, which shall be subject to a minimum period of two days from date of communication
of the allocation list to the members of the Syndicate by the BRLMs. If the payment is not made favouring
the Escrow Account within the time stipulated above, the application of the Bidder is liable to be rejected
and the margin amount will be refunded.

Where the Bidder has been allocated lesser number of Equity Shares than he or she had bid for, the excess
amount paid on bidding, if any, after adjustment for allocation, will be refunded to such Bidder within
15 days from the Bid/Issue Closing Date, failing which and the Company shall pay interest at 15% per
annum for any delay beyond the periods as mentioned above.

Electronic Registration of Bids

(a) The members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE.
There will be at least one on-line connectivity to each city where the Bids are accepted.

(b) NSE and BSE will offer a screen-based facility for registering Bids for the Issue. This facility will
be available on the terminals of the members of the Syndicate and their authorised agents during

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the Bidding Period. Members of the Syndicate can also set up facilities for off-line electronic
registration of Bids subject to the condition that they will subsequently download the off-line data
file into the on-line facilities for book building on a regular basis. On the Bid Closing Date, the
Syndicate shall upload the Bids till such time as may be permitted by the Stock Exchanges.

(c) Aggregate demand and price for bids registered on the electronic facilities of NSE and BSE will be
downloaded on a regular basis, consolidated and displayed on-line at all bidding centres. A
graphical representation of consolidated demand and price would be made available at the bidding
centres during the bidding period.

(d) At the time of registering each Bid, the members of the Syndicate shall enter the following details
of the investor in the online system:

• Name of the investor (Investors should ensure that the name given in the Bid cum
Application form is exactly the same as the Name in which the Depository Account is
held. In case, the Bid cum Application Form is submitted in joint names, investors should
ensure that the Depository Account is also held in the same joint names and are in the
same sequence in which they appear in the Bid cum Application Form).

• Investor Category –, Individual, Corporate, NRI, FII, or Mutual Fund, etc.

• Numbers of Equity Shares bid for

• Bid price

• Bid-cum-Application Form number

• Whether payment is made upon submission of Bid-cum-Application Form

• Depository Participant Identification No. and Client Identification No. of the Demat
Account of the Bidder

(e) A system generated TRS will be given to the Bidder as a proof of the registration of each of the
bidding options. It is the Bidder’s responsibility to obtain the TRS from the members of the
Syndicate. The registration of the Bid by the member of the Syndicate does not guarantee that the
Equity Shares shall be allocated either by the members of the Syndicate or the Company.

(f) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

(g) The members of the Syndicate have the right to review the Bid. The Syndicate Members have
right to reject a bid received from a QIB at the time of receipt of Bids. However, Syndicate
Members shall disclose the reason for not accepting the Bid to the Bidder.In case of Non-
Institutional Bidders, Bids under the Retail Individual Bidders, Bids shall not be rejected except on
the technical grounds listed on page no. [●] in this DRHP.

(h) It is to be distinctly understood that the permission given by NSE and BSE to use their network and
software of the online IPO system should not in any way be deemed or construed to mean that the
compliance with various statutory and other requirements by the Company, and BRLMs are
cleared or approved by NSE and BSE; nor does it in any manner warrant, certify or endorse the
correctness or completeness of any of the compliance with the statutory and other requirements nor
does it take any responsibility for the financial or other soundness of the Company, its Promoters,
its management or any scheme or project of the Company.

(i) It is also to be distinctly understood that the approval given by NSE and BSE should not in any
way be deemed or construed that this DRHP has been cleared or approved by the NSE and BSE;
nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the
contents of this DRHP; nor does it warrant that the Equity Shares will be listed or will continue to
be listed on the NSE and BSE.

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Build Up of the Book and Revision of Bids

(a) Bids registered by various Bidders through the members of the Syndicate shall be electronically
transmitted to the NSE or BSE mainframe on an on-line basis. Data would be uploaded on a
regular basis.

(b) The Price Band can be revised during the Bidding Period, in which case the Bidding Period shall
be extended further for a period of three days, subject to the total Bidding Period not exceeding ten
working days. The cap on the Price Band should not be more than 20% of the floor of the Price
Band. Subject to compliance with the immediately preceding sentence, the floor of Price Band can
move up or down to the extent of 20% of the floor of the Price Band disclosed in this DRHP.

(c) Any revision in the Price Band will be widely disseminated by informing the stock exchanges, by
issuing a public notice in two national newspapers (one each in English and Hindi) and one
regional newspaper and also indicating the change on the relevant websites and the terminals of the
members of the Syndicate.

(d) The book gets built up at various price levels. This information will be available with the BRLMs
on a regular basis.

(e) During the Bidding Period, any Bidder who has registered his or her interest in the Equity Shares
at a particular price level is free to revise his or her Bid within the price band using the printed
Revision Form, which is a part of the Bid-cum- Application Form.

(f) Revisions can be made in both the desired number of Equity Shares and the bid price by using the
Revision Form. The Bidder must complete his or her Bid cum Application Form, the details of all
the options in his or her Bid cum Application Form or earlier Revision Form and revisions for all
the options as per his Bid cum Application Form or earlier Revision Form. For example, if a
Bidder has bid for three options in the Bid cum Application Form and he is changing only one of
the options in the Revision Form, he must still fill the details of the other two options in the
Revision Form unchanged. Incomplete or inaccurate Revision Forms will not be accepted by the
members of the Syndicate.

(g) The Bidder can make this revision any number of times during the Bidding Period. However, for
any revision(s) in the Bid, the Bidders will have to use the services of the same member of the
Syndicate through whom he or she had placed the original Bid. Bidders are advised to retain copies
of the blank Revision Form and the revised Bid must only be made on that Revision Form.

(h) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft
for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The
excess amount, if any, resulting from downward revision of the Bid would be returned to the
Bidder at the time of refund in accordance with the terms of this DRHP.

(i) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised
TRS from the members of the Syndicate. It is the responsibility of the Bidder to request for and
obtain the revised TRS, which will act as proof of his or her having revised the previous Bid.

(j) In case of discrepancy of data between NSE or BSE and the members of the Syndicate, the
decision of the BRLMs based on the physical book shall be final and binding to all concerned.

Price Discovery and Allocation / Allotment

a. After the Bid/Issue Closing Date, the BRLMs will analyse the demand generated at various price
levels and discuss pricing strategy with our Company.

b. Our Company in consultation with the BRLMs shall finalise the “Issue Price”, the number of
Equity Shares to be allotted and the allocation to successful QIB Bidders. The allocation will be
decided based on the quality of the Bidder determined broadly based by the size, price and time of
the Bid.

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c. The allocation for QIBs would be upto 50%, of Net Issue of which 5% shall be reserved for
Mutual Funds on a proportionate basis. The allocation to Non-Institutional Bidders would be not
less than 15% of the Issue Size and allocation for Retail Individual Bidders will be not less than
35% of the Issue Size on proportionate basis, subject to valid Bids being received at or above the
Issue Price.

d. Under subscription, if any, in the Non-Institutional Portion and / or Retail Portion, would be
allowed to be met with spill over of demand from any of the other categories, at the sole discretion
of the Company and BRLMs. However, if the aggregate demand by Mutual Funds is less than [●]
Equity Shares, the balance Equity Shares available for allocation in the Mutual Fund Portion will
first be added to the QIB Portion and be allocated proportionately to the QIB Bidders. In the event
that the aggregate demand in the QIB Portion has been met, under-subscription, if any, would be
allowed to be met with spill-over from any other category or combination of categories at the
discretion of our Company, in consultation with the BRLMs and the Designated Stock Exchange.

e. Allocation to QIBs, Non-Residents, FIIs and NRIs applying on repatriation basis will be subject to
the terms and conditions stipulated by the RBI while granting permission for Allotment of Equity
Shares to them.

f The BRLMs, in consultation with the Company, shall notify the members of the Syndicate of the
Issue Price and allocations to their respective Bidders, where the full Bid Amount has not been
collected from the Bidders

g. The Company reserves the right to cancel the Issue any time after the Bid/Issue Opening Date
without assigning any reasons whatsoever. In terms of the SEBI Guidelines, QIB Bidders shall not
be allowed to withdraw their Bid after the Bid/Issue Closing Date.

h. The allotment details shall be put on the website of the Registrar to the issue

Signing of Underwriting Agreement and RoC Filing

(a) The Company, the BRLMs and the Syndicate Members shall enter into an underwriting agreement
on finalisation of the Issue Price and allocation(s) to the Bidders

(b) After signing the Underwriting Agreement, the company will update and file the Prospectus with
RoC, which then would be termed ‘Prospectus’. The Prospectus would have details of the Issue
Price, Issue Size, underwriting arrangements and would be complete in all material respects

Filing of the Prospectus with the RoC

The Company will file a copy of the Prospectus with the RoC, Chennai, Tamil Nadu,in terms of Section 56,
Section 60 and Section 60B of the Companies Act, 1956

Announcement of Pre-Issue Advertisement

Subject to Section 66 of the Companies Act, the Company shall after receiving final observations, if any, on
this DRHP from SEBI, publish an advertisement, in the form prescribed by the SEBI Guidelines in an
English National Daily with wide circulation, one Hindi National Newspaper and a regional language
Newspaper with wide circulation in Chennai.

Advertisement regarding Issue price and Prospectus

The Company will issue a statutory advertisement after the filing of the Prospectus with the RoC in two
widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated
at the place where the registered office of the Company is situated. This advertisement, in addition to the
information (in the format and containing the disclosures specified in Part A of Schedule XX-A of the SEBI
Guidelines), that has to be set out in the statutory advertisement shall indicate the Issue Price along with a
table showing the number of Equity Shares. Any material updates between the date of RHP and the date of
Prospectus will be included in such statutory advertisement.

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Issuance of Confirmation of Allocation Note (CAN)

(a) The BRLMs or Registrar to the Issue shall send to the members of the Syndicate a list of their
Bidders who have been allocated Equity Shares in the Issue.

(b) The BRLMs or Syndicate Members would then send the CAN to their Bidders who have been
allocated Equity Shares in the Issue. The despatch of a CAN shall be deemed to be valid, binding
and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares
allocated to such Bidder. Those Bidders who have not paid into the Escrow Account of the
Company at the time of bidding shall pay in full the amount payable into the Escrow Account of
the Company by the Pay-in Date specified in the CAN.

(c) Bidders who have been allocated Equity Shares and who have already paid into the Escrow
Account of the Company at the time of bidding shall directly receive the CAN from the Registrar
to the Issue subject, however, to realisation of their cheque or demand draft paid into the Escrow
Account of the Company. The despatch of a CAN shall be deemed to be a valid, binding and
irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares to be
allotted to such Bidder.

Designated Date and Allotment of Equity Shares

(a) All allottees will receive credit for the Equity Shares directly in their depository account. Equity
Shares will be offered only in the dematerialised form to the allottees. Allottees will have the
option to re-materialise the Equity Shares so allotted, if they so desire, as per the provisions of the
Companies Act and the Depositories Act.

(b) After the funds are transferred from the Escrow Account to the Public issue Account on the
Designated Date, the Company would allot the Equity Shares to the allottees. The Company
would ensure the allotment of Equity Shares within 15 days of Bid / Issue Closing Date and give
instructions to credit to the allottees’ depository accounts within two working days from the date of
finalisation of basis of allotment. In case the Company fails to make allotment within 15 days of
the Bid/Issue Closing Date, interest would be paid to the investors at the rate of 15% per annum.

(c) Investors are advised to instruct their Depository Participant to accept the Equity Shares that may
be allocated to them pursuant to this Issue.

GENERAL INSTRUCTIONS

Do’s:
a. Check if you are eligible to apply;
b. Read all the instructions carefully and complete the Resident Bid-cum-Application Form
(white in colour) or Non-Resident Bid-cum-Application Form (blue in colour), as the case
may be;
c. Ensure that the Bid is only within the Price Band;
d. Ensure that the details about Depository Participant and Beneficiary Account are correct as
Equity Shares will be transferred in the dematerialized form only;
e. Ensure that the DP account is activated;
f. Investors must ensure that the name given in the bid cum application form is exactly the same
as the Name in which the Depository Account is held. In case, the Bid cum Application Form
is submitted in joint names, investors should ensure that the Depository Account is also held
in the same joint names and are in the same sequence in which they appear in the Bid cum
Application Form;
g. Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a
member of the Syndicate;
h. Ensure that you have been given a TRS for all your Bid options;

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i. Submit Revised Bids to the same member of the Syndicate through whom the Original Bid
was placed and obtain a revised TRS;
j. Ensure that the Demographic Details (as defined herein below) are updated, true and correct in
all respects; and
k. Ensure that you mention your Permanent Account Number (PAN) allotted under the Income
Tax Act, 1961 where the maximum Bid for Equity Shares by a Bidder is for a total value of
Rs. 50,000 or more and attach a copy of the PAN Card and also submit a photocopy PAN
Card(s) or a communication from the Income Tax authority indicating allotment of PAN along
with the application for the purpose of verification of the number, with the Bid-cum-
Application Form. In case you do not have a PAN, ensure that you provide a declaration in
Form 60 prescribed under the I.T. Act along with the application.

Dont’s:
• Do not Bid for lower than the minimum Bid size;
• Do not Bid/ revise Bid to a price that is less than the Floor of the Price Band or higher than the Cap
of the Price Band;
• Do not Bid on another Bid-cum-Application Form after you have submitted a Bid to the members
of the Syndicate;
• Do not pay the Bid amount in cash;
• Do not send Bid cum Application Forms by post; instead hand them over to a member of the
Syndicate only;
• Do not bid at Cut-off price for Non-institutional and QIB Bidders;
• A Bid from any investor should not exceed the investment limit or maximum number of Equity
Shares that can be held by a Bidder under the applicable laws or regulations;
• Submit Bids accompanied by Stockinvest;
• Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this
ground.

Instructions for Completing the Bid-cum-Application Form

Bidders can obtain Bid-cum-Application Forms and / or Revision Forms from the BRLMs, or Syndicate
Members.

Bids and Revisions of Bids

Bids and revisions to Bids must be:

a. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white
colour for Resident Indians and blue colour for NRI or FII or Foreign Venture Capital Fund,
Multilateral and Bilateral Development Financial Institutions applying on repatriation basis.)

b. Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions
contained herein, the Bid cum Application Form and Revision Form. Incomplete Bid cum
Application Forms or Revision Forms are liable to be rejected.

c. For Retail Individual Bidders, the Bids must be for a minimum of [•] Equity Shares and in
multiples of [•] thereafter subject to a maximum Bid Amount of Rs. 1,00,000.

d. For Non Institutional and QIB Bidders, Bids must be for a minimum of such number of Equity
Shares that the Bid Amount exceeds Rs. 1,00,000 and in multiples of [•] Equity Shares thereafter.
Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single Bid
from them should not exceed the investment limits or maximum number of shares that can be held
by them under the applicable laws or regulations.

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e. In single name or in joint names (not more than three).

f. In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital
Fund, Multilateral and Bilateral Development Financial Institutions but not in the names of minors,
firms or partnerships, foreign nationals (excluding NRIs) or their nominees or OCBs.

g. Thumb impressions and signatures other than in the languages specified in the Eight Schedule in
the Constitution of India must be attested by a Magistrate or a Notary Public or a Special
Executive Magistrate under his or her official seal.

Bidders Depository Account Details

IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN


DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT’S IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS
MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS
EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN
CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD
BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT
NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM
APPLICATION FORM.

Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant’s Identification number and Beneficiary Account Number provided by them in the Bid cum
Application Form, the Registrar to the Issue will obtain from the Depository demographic details of the
Bidders such as address, bank account details for printing on refund orders and occupation (herein after
referred to as Demographic Details). Hence, Bidders should carefully fill in their Depository Account
details in the Bid-cum-Application Form.

These Demographic Details would be used for all correspondence with the Bidders including mailing of the
refund orders/ CANs/Allocation Advice and printing of Bank particulars on the refund order and the
Demographic Details given by Bidders in the Bid -cum application Form would not be used for these
purposes by the Registrar.

Hence, Bidders are advised to update their Demographic Details as provided to their Depository
Participants.

By signing the Bid-cum-Application Form, Bidder would have deemed to authorize the depositories to
provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its
records.

Refund orders/Allocation Advice/CANs would be mailed at the address of the Bidder as per the
Demographic Details received from the Depositories. Bidders may note that delivery of refund
orders/allocation advice/CANs may get delayed if the same once sent to the address obtained from the
depositories are returned undelivered. In such an event, the address and other details given by the Bidder in
the Bid cum Application Form would be used only to ensure dispatch of refund orders. Please note that any
such delay shall be at the Bidders sole risk and neither the Bank nor the BRLMs shall be liable to
compensate the Bidder for any losses caused to the Bidder due to any such delay or is liable to pay any
interest for such delay.

In case no corresponding record is available with the Depositories that match three parameters, namely,
names of the Bidders (including the order of names of joint holders), the Depositary Participant’s identity
(DP ID) and the beneficiary’s identity, then such Bids are liable to be rejected.

Bids under Power of Attorney

In case of Bids made pursuant to a Power of Attorney or by limited companies, corporate bodies, registered
societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may
be, along with a certified copy of the Memorandum and Articles of Association and/or Bye Laws must be

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lodged along with the Bid-cum-Application Form. Failing this, the Company reserves the right to accept or
reject any Bid in whole or in part, in either case, without assigning any reason thereof.

In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the Power of Attorney or
the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI
registration certificate must be lodged along with the Bid-cum-Application Form. Failing this, our
Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning
any reason thereof.

In case of Bids made by Insurance Companies registered with the Insurance Regulatory and Development
Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development
Authority must be lodged along with the Bid-cum-Application Form. Failing this, our Company reserves
the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof.

In case of Bids made by provident funds with minimum corpus of Rs.2500 lakhs and pension funds with
minimum corpus of Rs.2500 lakhs, a certified copy of certificate from a chartered accountant certifying the
corpus of the provident fund/ pension fund must be lodged along with the Bid-cum-Application Form.
Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case,
without assigning any reason thereof.

In case of Bids made by mutual fund registered with SEBI, Venture Capital Fund registered with SEBI and
Foreign Venture Capital investor registered with SEBI, a certified copy of their SEBI registration certificate
must be submitted with the Bid cum Application Form. Failing this, the Company reserves the right to
accept or reject any Bid in whole or in part, in either case without assigning any reason thereof.

The Company in its absolute discretion, reserves the right to relax the above condition of simultaneous
lodging of the Power of Attorney along with the Bid cum Application form, subject to such terms that we
may deem fit, in consultation with the BRLMs.

Bids by NRIs, FIIs, Foreign Venture Capital Funds registered with SEBI on a repatriation basis

• NRI, FIIs and Foreign Venture Capital funds Bidders to comply with the following: Individual
NRI Bidders can obtain the Bid cum Application Forms from our Corporate Office or from
members of the Syndicate or the Registrar to the Issue.

• NRI Bidders may please note that only such Bids as are accompanied by payment in free foreign
exchange through approved banking channels shall be considered for allotment.

• NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall use the
Bid Cum Application form meant for Resident Indians (white in colour).

Bids and revision to Bids must be made:

• On the Bid-cum-Application Form or the Revision Form, as applicable, (blue in colour), and
completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions
contained therein.

• In a single name or joint names (not more than three).

• By NRIs – For a minimum of [●] Equity Shares and in multiples of [●] thereafter subject to a
maximum Bid amount of Rs.1,00,000 for the Bid to be considered as part of the Retail Portion.
Bids for Bid Amount more than Rs.1,00,000 would be considered under Non Institutional
Category for the purposes of allocation. For further details see “Maximum and Minimum Bid
Size” on page no. [●].

• By FIIs – for a minimum of such number of Equity Shares and in multiples of [•] that the Bid
Amount exceeds Rs. 1,00,000. For further details see section titled “Maximum and Minimum Bid
Size” on page no. [●]

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• In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital
Fund, Multilateral and Bilateral Development Financial Institutions but not in the names of minors,
firms or partnerships, foreign nationals (excluding NRIs) or their nominees or OCBs.

• Refunds, dividends and other distributions, if any, will be payable in INRs only and net of bank
charges and / or commission. In case of Bidders who remit money payable upon submission of the
Bid cum Application Form or Revision Form through INR drafts purchased abroad, such payments
in INRs will be converted into USD or any other freely convertible currency as may be permitted
by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by
registered post/speed post or if the Bidders so desire, will be credited to their NRE accounts,
details of which should be furnished in the space provided for this purpose in the Bid cum
Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on
account of conversion of foreign currency.

The Company does not require approvals from FIPB or RBI for the transfer of Equity Shares in this Issue to
eligible NRIs, FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral
institutions. As per the RBI regulations, OCBs are not permitted to participate in the Issue.

There is no reservation for Non-Residents, NRIs, FIIs and foreign venture capital funds and all Non-
Residents, NRIs, FIIs and foreign venture capital funds applicants will be treated on the same basis with
other categories for the purpose of allocation.

The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws in the United States and may not be offered or
sold within the United States or to, or for the account of benefit of, "U.S. Persons" (as defined in the
Regulation S of the Securities Act), except pursuant to any exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act. Accordingly, the Equity Shares may be offered and
sold only (i) in United States to ‘qualified institutional buyers’ as defined in Rule 144A of the Securities
Act, and (ii) outside the United States in compliance with Regulations and the applicable laws of the
jurisdiction where those offers and sales occur.

PAYMENT INSTRUCTIONS

The Company shall open an Escrow Account(s) with the Escrow Collection Bank(s) for the collection of
the Bid Amounts payable upon submission of the Bid-cum-Application Form and for amounts payable
pursuant to allocation in the Issue.

Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as
per the following terms:

Payment into Escrow Account to the Issue:

(i) The Bidders for whom the applicable margin is equal to 100% shall, with the submission of the
Bid cum Application Form draw a payment instrument for the Bid Amount in favour of the
Escrow Account of the Company and submit the same to the members of the Syndicate.

(ii). In case no Margin Amount has been paid by the Bidders during the Bidding Period, on receipt of
the CAN, an amount equal to the Issue Price multiplied by the Equity Shares allocated to the
Bidder or the balance amount, in case the Margin Amount is less than the Issue Price multiplied by
the Equity Shares allocated to the Bidder, shall be paid by the Bidders into the Escrow Account
within the period specified in the CAN which shall be subject to a minimum period of two days
from the date of communication of the allocation list to the members of the Syndicate by the
BRLMs.

(iii). The payment instruments for payment into the Escrow Account of the Company should be drawn
in favour of:

• In case of Resident Bidders: “Escrow Account – AML Steel Public Issue”

• In case of Non Resident Bidders: “Escrow Account – AML Steel Public Issue -NR”

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• In case of QIB’s: “Escrow Account – AML Steel Public Issue - QIB”

• In case of Bids by NRIs applying on repatriation basis, the payments must be made
through INR Drafts purchased abroad or cheques or bank drafts, for the amount payable
on application remitted through normal banking channels or out of funds held in Non-
Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts,
maintained with banks authorised to deal in foreign exchange in India, along with
documentary evidence in support of the remittance. Payment will not be accepted out of
Non-Resident Ordinary (NRO) Account of Non-Resident bidder bidding on a repatriation
basis. Payment by drafts should be accompanied by Bank Certificate confirming that the
draft has been issued by debiting to NRE or FCNR Account.

• In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee
Account along with documentary evidence in support of the remittance. Payment by
drafts should be accompanied by Bank Certificate confirming that the draft has been
issued by debiting to Special Rupee Account.

(iv). Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for,
the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable
on the Equity Shares allocated, will be refunded to the Bidder from the Escrow Account of the
Company.

(v). The monies deposited in the Escrow Account of the Company will be held for the benefit of the
Bidders until Designated Date.

(vi). On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow
Account of the Company as per the terms of the Escrow Agreement into the Issue Account with
the Bankers to the Issue.

(vii). On the Designated Date and no later than 15 days from the Bid/Issue Closing Date, the Escrow
Collection Bank shall also refund all amounts payable to unsuccessful bidders and also the excess
amount paid on Bidding, if any, after adjusting for allocation to the Bidders

Payments should be made by cheque or demand draft drawn on any Bank (including a Co-Operative
Bank), which is situated at, and is a member of or sub-member of the banker’s clearing house located
at the centre where the Bid-cum-Application Form is submitted. Outstation cheques /bank drafts
drawn on banks not participating in the clearing process will not be accepted and applications
accompanied by such cheques or bank drafts are liable to be rejected. Cash/ Stockinvest/ Money
Orders/Postal Orders will not be accepted.

Payment by Stockinvest

In terms of Reserve Bank of India Circular No. DBOD No. FSC BC 42/24.47.00/2003-04 dated November
5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through
stockinvest would not be accepted in this Issue.

Submission of Bid-cum-Application Form

All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee
cheques or drafts shall be submitted to the BRLMs or Syndicate Member at the time of submitting the Bid.
The BRLMs/ members of the Syndicate may at their discretion waive the requirement of payment at the
time of submission of the Bid cum Application Form and Revision Form except that for QIB bidders, the
Synidicate Member shall collect the QIB margin and and deposit the same in the the specified Escrow
account
No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form
or Revision Form. However, the collection centre of the BRLMs or Syndicate Member will acknowledge
the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder
the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum
Application Form for the records of the Bidder.

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Other Instructions

Joint Bids in the case of Individuals

Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will
be made out in favour of the Bidder whose name appears first in the Bid-cum-Application Form or Revision
Form (“First Bidder”). All communications will be addressed to the First Bidder and will be despatched to
his or her address.

Multiple Bids

A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares
required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the
same. The Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or
all portion

Procedure for Application by Mutual Funds

In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund
registered with SEBI and such Bids in respect of more than one scheme of the mutual fund will not be
treated as multiple bids provided that the Bids clearly indicate the name of scheme concerned for which the
Bid has been made. The application made by the AMCs or custodians of a mutual fund shall clearly
indicate the name of the concerned scheme for which application is being made.

The Company reserves the right to reject, in our absolute discretion, all or any multiple Bids in any or all
categories.

PAN

Where Bid(s) is/are for Rs.50,000 or more, the Bidder or in the case of a Bid in joint names, each of the
Bidders, should mention his/her Permanent Account Number (PAN) allotted under the I.T.Act. The copy of
the PAN card or PAN allotment letter is required to be submitted with the application form. Applications
without this information and documents will be considered incomplete and are liable to be rejected. It is to
be specifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is
liable to be rejected on this ground. In case the Sole/First Bidder and Joint Bidder(s) is/are not required to
obtain PAN, each of the Bidder(s) shall mention “Not Applicable” and in the event that the sole Bidder
and/or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s)
should mention “Applied for” in the Bid cum Application Form. Further, where the Bidder(s) has
mentioned “Applied for” or “Not Applicable”, the Sole/First Bidder and each of the Joint Bidder(s), as the
case may be, would be required to submit Form 60(Form of declaration to be filed by a person of
declaration to be filed by a person who does not have a permanent account number and who enters into any
transaction specified in rule 114B), or, Form 61 (form of declaration to be filed by a person who has
agricultural income and is not in receipt of any other income chargeable to income tax in respect of
transactions specified in rule 114B), as may be applicable, duly filled along with a copy of any one of the
following documents in support of the address: (a)Ration Card (b) Passport (c) Driving License (d) Identity
Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address
(f) Any document or communication issued by any authority of the Central Government, State Government
or local bodies showing residential address (g)Any other documentary evidence in support of address given
in the declaration. It may be noted that Form 60 and Form 61 have been amended vide a notification issued
on December 1, 2004 by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes.
All Bidders are requested to furnish, where applicable, the revised Form 60 or 61 as the case may be.

UNIQUE IDENTIFICATION NUMBER – MAPIN

With effect from 1 July, 2005, SEBI has decided to suspend all fresh registrations for obtaining Unique
Identification Number (UIN) and the requirement to contain/ quote UIN under the SEBI (Central Database
of Market Participants) Regulations, 2003 and circular issued in connection thereto by its circular bearing
number MAPIN/Cir-13/2005.

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AML STEEL LIMITED

Company’s Right to Reject Bids

The Syndicate Members have right to reject a Bid received from QIB at the receipt of the Bids. However,
the Syndicate Members shall disclose the reasons for not accepting the Bid to the Bidder. In case of Non-
Institutional Bidders and Retail Individual Bidders, The Company & BRLMs have a right to reject bids
based on technical grounds. Consequent refunds shall be made by cheque or pay order or draft and will be
sent to the bidder’s address at the Bidder’s risk.

Grounds for Technical Rejections

Bidders are advised to note that Bids are liable to be rejected on among others, the following technical
grounds:

a. Amount paid doesn’t tally with the highest number of Equity Shares bid for;

b. Age of First Bidder not given;

c. Bids by Persons not competent to contract under the Indian Contract Act, 1872, including minors,
insane Persons;

d. PAN not given if Bid is for Rs. 50,000 or more or Copy of Form 60 or Form 61 as required not
given;

e. Bids for lower number of Equity Shares than specified for that category of investors;

f. Bids at a price less than lower end of the Price Band;

g. Bids at a price more than the higher end of the Price Band;

h. Bids at cut-off price by Non-Institutional and QIB Bidders;

i. Bids for number of Equity Shares which are not in multiples of [●];

j. Category not ticked;

k. Multiple bids as defined in this DRHP;

l. In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant
documents are not submitted;

m. Bid-cum-Application Form does not have the stamp of the BRLMs, or Syndicate Members;

n. Bid-cum-Application Form does not have Bidder’s depository account details;

o. Bid-cum-Application Forms are not delivered by the Bidders within the time prescribed as per the
Bid-cum-Application Form, Bid/Issue Opening Date advertisement and this DRHP and as per the
instructions in this DRHP and the Bid cum-Application Form

p. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations.

q. Bids accompanied by money order/postal order/cash /Stockinvests;

r. Signature of sole and / or joint bidders missing;

s. Bids by OCBs;

t. In case no corresponding record is available with the Depositories that matches the parameters
namely, names of the Bidders (including the sequence of names of joint holders), the depositary
participant’s identity (DP ID).

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u. Bids by U.S residents or US persons other than “qualified institutional buyers” as defined in Rule
144A of the U.S. Securities Act of 1933.

v. In case of bids under Power of Attorney or by limited Companies, Corporate, trust etc. relevant
documents are not submitted.

w. Bank account details (for refund) are not given

Equity Shares in Dematerialised Form with NSDL or CDSL

As per the provisions of Section 68B of the Companies Act, the Equity Shares in this Issue shall be allotted
only in a de-materialised form, (i.e. not in the form of physical certificates but be fungible and be
represented by the statement issued through the electronic mode). In this context, two tripartite agreements
have been signed between the Company and the Depositories:

• An agreement dated 9 July, 2002 with NSDL, the Company and Registrars to the Issue;

• An agreement dated 7 August, 2002 with CDSL, the Company and Registrars to the Issue;

All bidders can seek allotment only in dematerialised mode. Bids from any investor without relevant
details of his or her depository account are liable to be rejected.

a. A Bidder applying for Equity Shares must have at least one beneficiary account with either of the
Depository Participants of either NSDL or CDSL prior to making the Bid.

b. The Bidder must necessarily fill in the details (including the Beneficiary Account Number and
Depository Participant’s Identification number) appearing in the Bid-cum-Application Form or
Revision Form.

c. Equity Shares allotted to a successful Bidder will be credited in electronic form directly to the
beneficiary account (with the Depository Participant) of the Bidder.

d. Names in the Bid-cum-Application Form or Revision Form should be identical to those appearing
in the account details in the Depository. In case of joint holders, the names should necessarily be in
the same sequence as they appear in the account details in the Depository.

e. Non-transferable allotment advice or refund orders will be directly sent to the Bidder by the
Registrar to this Issue.

f. If incomplete or incorrect details are given under the heading ‘Request for Equity Shares in
electronic form’ in the Bid-cum-Application Form or Revision Form, it is liable to be rejected.

g. The Bidder is responsible for the correctness of his or her demographic details given in the Bid-
cum-Application Form vis-à-vis those with his or her Depository Participant.

h. It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges
having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where our Equity
Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.

i. The trading of the Equity Shares of the Company would be in dematerialised form only for all
investors.

Communications

All future communications in connection with Bids made in this Issue should be addressed to the Registrar
to the Issue quoting the full name of the sole or First Bidder, Bid-cum-Application Form number, number
of Equity Shares applied for, date, bank and branch where the Bid was submitted and cheque/ draft number
and issuing bank thereof.

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AML STEEL LIMITED

The Company has appointed Mr.Rajesh Agrawal, Company Secretary, as Compliance Officer. He can be
contacted at the Corporate Office of the Company.

The Investors can contact the Compliance Officer in case of any pre-issue or post-issue related
problems such as non-receipt of letters of allotment, credit of allotted shares in the respective
beneficiary account, refund orders, etc.

Procedure and Time Schedule for Allotment of Equity Shares and Disposal of Applications and
Application Money

The Company reserves, at their absolute and uncontrolled discretion and without assigning any reason
thereof, the right to accept or reject any Bid in whole or in part. In case a Bid is rejected in full, the whole of
the Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. In case a Bid
is rejected in part, the excess Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue
Closing Date. The Company will ensure the allotment of the Equity Shares within 15 days from the
Bid/Issue Closing Date. The Company shall pay interest at the rate of 15% per annum (for any delay
beyond the periods as mentioned above), if allotment is not made, refund orders are not despatched and/ or
dematerialized credits are not made to investors within two working days from the date of allotment.

DISPOSAL OF APPLICATIONS AND APPLICATION MONEY

The Company shall ensure dispatch of allotment advice, transfer advice or refund orders and give benefit to
the beneficiary account with Depository Participants and submit the documents pertaining to the allotment
to the Stock Exchanges within two working days of date of finalisation of allotment of Equity Shares. The
Company shall dispatch refund above Rs. 1,500/-, if any, by registered post or speed post at the sole or first
Bidder’s sole risk, except for Bidders who have opted to receive refunds through the ECS facility or RTGS
or Direct Credit.

The Company shall use best efforts to ensure that all steps for completion of the necessary formalities for
allotment and trading at all the Stock Exchanges where the Equity Shares are proposed to be listed, are
taken within seven working days of finalisation of the basis of allotment.

In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, the
Company further undertakes that:
• allotment of Equity Shares shall be made only in dematerialised form within 15 working days of
the Bid/Issue Closing Date;
• refund orders, except for Bidders who have opted to receive refunds through the ECS facility,
within 15 working days of the Bid/Issue Closing Date would be ensured; and
• Interest in case of delay in dispatch of Allotment Letters/ Refund Orders in case of public
issues – we shall pay interest at 15% per annum (for any delay beyond the 15 day time period as
mentioned above), if allotment is not made and refund orders are not dispatched and/or demat
credits are not made to investors within the 15 working day time prescribed above.

The Company will provide adequate funds required for dispatch of refund orders or allotment advice
to the Registrar to the Issue.

No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form
or Revision Form. However, the collection centre of the Syndicate Member will acknowledge the receipt of
the Bid-cum-Application Forms or Revision Forms by stamping and returning to the Bidder the
acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application
Form for the records of the Bidder.

Mode of making refunds

Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum
Application Form, the Registrar to the Issue will obtain from the Depository the Bidders bank account
details including nine digit MICR code. Hence, Bidders are advised to immediately update their bank
account details asappearing on the records of the depository participant. Please note that failure to do so
could result in delays in credit of refunds to Bidders at the Bidders sole risk and neither the BRLMs nor the
Bank shall have any responsibility and undertake any liability for the same.

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The payment of refund, if any, would be done through various modes in the following order of preference

I. Direct Credit – For investors having their Bank Account with the Escrow Bankers, the refund amount
would be credited directly to their Bank Account with the Escrow Banker.

II. RTGS – Investors desirous of taking direct credit of refund through RTGS, will have to provide the IFSC
code in the Bid cum Application form.

III. ECS - Payment of refund would be done through ECS for applicants residing at one of the 15 centres,
namely Ahmedabad, Bangalore, Bhuvaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad,
Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram, where clearing houses for
ECS are managed by RBI. This would be subject to availability of complete Bank Account Details
including MICR code from the depository.

For all the other applicants except for whom payment of refund is possible through I, II and III, the
refund orders would be dispatched “Under Certificate of Posting” for refund orders less than
Rs. 1500/- and through Speed Post/Registered Post for refund orders exceeding Rs. 1500/-.

Interest on refund of excess Bid Amount

The Company shall pay interest at the rate of 15% per annum on the excess Bid Amount received if refund
orders are not dispatched within 15 working days from the Bid/Issue Closing Date as per the Guidelines
issued by the GoI, Ministry of Finance pursuant to their letter No.F/8/S/79 dated July 31, 1983, as amended
by their letter No. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further
modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.

Basis of allotment or allocation

A. For Retail Bidders

• Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped
together to determine the total demand under this category. The allotment to all the successful
Retail Individual Bidders will be made at the Issue Price.

• The Issue size, less allotment to Non Institutional Bidders, QIB Bidders shall be available for
allotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to or greater
than the Issue Price.

• If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the
Issue Price, full allotment shall be made to the Retail Individual Bidders to the extent of their
demand.

• If the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue
Price, the allotment shall be made on a proportionate basis subject to minimum allocation being
equal to the minimum bid/application size of (•) Equity Shares. For the method of proportionate
basis of allotment, please refer to “method of proportionate basis of allotment” on page no.[●]- of
the DRHP.

B. For Non Institutional Bidders

• Bids received from Non institutional Bidders at or above the Issue Price shall be grouped together
to determine the total demand under this category. The allotment to all successful Non Institutional
Bidders will be made at the Issue Price.

• The Issue size, less allotment to QIBs Bidders, Retail Individual Bidders shall be available for
allotment to Non Institutional Bidders who have bid in the Issue at a price that is equal to or
greater than the Issue Price.

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• If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the
Issue Price, full allotment shall be made to Non Institutional Bidders to the extent of their demand.

In case the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price,
allotment shall be made on a proportionate basis subject to minimum allocation being equal to the minimum
bid/application size of [●] Equity Shares. For the method of proportionate basis of allotment please refer to
“method of proportionate basis of allotment” on page no.[●] of the DRHP.

C. For QIBs

• Upto 50% of the Net Issue to the Public i.e. [●] Equity shares shall be allotted to QIBs of which
5% is reserved for Mutual Funds i.e [●] Equtiy Shares and balance shares will be available for
allocation to all QIBs including Mutual Funds on proportionate basis.

• Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to
determine the total demand under this category. The allotment to all the QIBs will be made at the
Issue Price.

• The Issue size, less allotment to Non Institutional Bidders, Retail Individual Bidders, shall be
available for allotment to QIBs who have bid in the Issue at a price that is equal to or greater than
the Issue Price.

• Allotment shall be undertaken in the following manner

(a) In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be
determined as follows:
(i) In the event that Bids from Mutual Fund exceeds 5% of the QIB Portion, allocation to
Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion.

(ii) In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB
Portion, then all Mutual Funds shall get full allotment to the extent of valid bids received
above the Issue Price.

(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be
available to all QIB Bidders as set out in (b) below;

(b) In the second instance allocation to all QIBs shall be determined as follows:

(i). The number of Equity Shares available for this category shall be the QIB Portion less
allocation only to Mutual Funds as calculated in (a) above.

(ii). The subscription level for this category shall be determined based on the overall
subscription in the QIB Portion less allocation only to Mutual Funds as calculated in (a)
above.

(iii). Based on the above, the level of the subscription shall be determined and
proportionate allocation to all QIBs including Mutual Funds in this category shall be
made.

(iv) The aggregate allotment to QIB Bidders shall not be less than [●] Equity Shares

Procedure and Time Schedule for Allotment of Equity Shares

The Syndicate Members have the right to reject the Bid received from QIB at the time of receipt of the
Bids. However, the Syndicate Members shall disclose the reasons for not accepting the Bid to the Bidder. In
case of Non- Institutional Bidders and Retail Individual Bidders, the Company has a right to reject bids
based on technical grounds. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded
to the Bidder within 15 days of the Bid/Issue Closing Date. In case a Bid is rejected in part, the excess Bid
Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. The Company will
ensure allotment of the Equity Shares within 15 days from the Bid/Issue Closing Date, and the Company
shall pay interest at the rate of 15% per annum (for any delay beyond the periods as mentioned above), if

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Equity Shares are not allotted, refund orders are not dispatched and/ or demat credits are not made to
investors within two working days from the date of finalisation of the basis of allotment.

Method of proportionate basis of allocation in the QIB, Retail, Non-Institutional Portions

In the event of the Issue being over-subscribed, we shall finalize the basis of allotment in consultation with
the Designated Stock Exchange. The Executive Director (or any other senior official nominated by them) of
the Designated Stock Exchange along with the BRLMs and the Registrar to the Issue shall be responsible
for ensuring that the basis of allotment is finalized in a fair and proper manner.

The allotment shall be made in multiples of one share, on a proportionate basis as explained below:

(a) Bidders will be categorized according to the number of Equity Shares applied for by them.

(b) The total number of Equity Shares to be allotted to each portion as a whole shall be arrived at on a
proportionate basis, being the total number of Equity Shares applied for in that portion (number of
Bidders in the portion multiplied by the number of Equity Shares applied for) multiplied by the
inverse of the over-subscription ratio.

(c) Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a
proportionate basis, being the total number of Equity Shares applied for by each Bidder in that
portion multiplied by the inverse of the over-subscription ratio.

(d) If the proportionate Allotment to a Bidder is a number that is more than [●] but is not a multiple of
one (which is the market lot), the decimal would be rounded off to the higher whole number if that
decimal is 0.5 or higher. If that number is lower than 0.5, it would be rounded off to the lower
whole number. Allotment to all Bidders in such categories would be arrived at after such rounding
off.

(e) In all Bids where the proportionate Allotment is less than [●] Equity Shares per Bidder, the
Allotment shall be made as follows:
• Each successful Bidder shall be Allotted a minimum of [●] Equity Shares; and
• The successful Bidders out of the total Bidders for a portion shall be determined by draw of lots
in a manner such that the total number of Equity Shares Allotted in that portion is equal to the
number of Equity Shares calculated in accordance with (b) above; and
• Each successful Bidder shall be Allotted a minimum of [●] Equity Shares.

(f) If the Equity Shares allocated on a proportionate basis to any portion are more than the Equity
Shares allotted to the Bidders in that portion, the remaining Equity Shares available for Allotment
shall be first adjusted against any other portion, where the Equity Shares are not sufficient for
proportionate Allotment to the successful Bidders in that portion. The balance Equity Shares, if
any, remaining after such adjustment will be added to the portion comprising Bidders applying for
minimum number of Equity Shares.

Letters of Allotment or Refund Orders

The Company shall give credit to the beneficiary account with depository participants within 2 working
days of finalization of the basis of allotment of Equity Shares. In accordance with the Companies Act, the
requirements of the Stock Exchanges and the SEBI Guidelines, the Company further undertakes that:

• Allotment of Equity Shares will be made only in dematerialized form within 15 days from the
Bid/Issue Closing Date;
• Dispatch of refund orders will be done within 15 days from the Bid/Issue Closing Date;

• The Company shall pay interest at 15% per annum (for any delay beyond the 15 day time period as
mentioned above), if allotment is not made, refund orders are not dispatched and/or demat credits
are not made to investors within the 15 day prescribed time period as mentioned above (or if, in a
case where the refund or portion thereof is made in electronic manner, the refund instructions have
not been given to the clearing system in the disclosed manner) within 15 days from the date of the
closure of the issue.

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Interest in case of delay in Despatch of Allotment Letters/Refund Orders in case of Public Issues

The Company agrees that allotment of securities offered to the public shall be made not later than 15 days
after the closure of the public issue. The Company further agrees that it shall pay interest at rate of 15% per
annum if the allotment letters/refund orders have not been dispatched to the applicants within 15 days from
the date of closure of the Issue.

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional
days after revision of Price Band. Any revision in the Price Band and the revised Bid/Issue Period, if
applicable, will be widely disseminated by notification to NSE and BSE , by issuing a press release,
and also by indicating the change on the web site of the BRLMs and at the terminals of the Syndicate.
Undertakings by the Company
The Company undertakes as follows:
• that the complaints received in respect of this Issue shall be attended to expeditiously and
satisfactorily;
• that all steps will be taken for the completion of the necessary formalities for listing and
commencement of trading at all the stock exchanges where the Equity Shares are proposed to be
listed within seven working days of finalisation of the basis of allotment;
• that the funds required for despatch of refund orders or allotment advice by registered post or
speed post shall be made available to the Registrar to the Issue;
• that where refunds are made through electronic transfer of funds, a suitable communication shall
be sent to the applicant within 15 working days of closure of the issue, giving details of the bank
where refunds shall be credited along with amount and expected date of electronic credit of refund.
• that the refund orders or allotment advice to the NRIs or FIIs shall be dispatched within the
specified time; and
• that no further issue of Equity Shares shall be made till the Equity Shares issued through this
DRHP are listed or until the bid monies are refunded on account of non-listing, under-subscription
etc.
Utilisation of Issue proceeds
The Board of Directors of the Company certify that:
• all monies received out of this Issue shall be transferred to a separate bank account other than the
bank account referred to in sub-section (3) of Section 73 of the Companies Act;
• details of all monies utilized out of this Issue referred above shall be disclosed under an
appropriate separate head in the balance sheet of the Company indicating the purpose for which
such monies have been utilised; and
• details of all unutilised monies out of this Issue, if any, shall be disclosed under an appropriate
separate head in the balance sheet of the Company indicating the form in which such unutilized
monies have been invested.
• utilisation of monies received under Promoter’s contribution shall be disclosed under an
appropriate head in the balance sheet of the Company indicating the purpose for which such
monies have been utilised; and
• details of all unutilised monies out of the funds received under Promoter’s contribution, shall be
disclosed under a separate head in the balance sheet of the Company indicating the form in which
such unutilised monies have been invested.
The Company shall not have recourse to the Issue proceeds until approval for trading of Equity Shares from
all the stock exchanges where listing is sought is received.
Pending utilisation of net proceeds of this Issue as specified under the section “Objects of the Issue” the net
proceeds will be invested by the Company in high quality interest / dividend bearing short term / long term
liquid instruments including deposits with banks for the necessary duration.
Restrictions on Foreign Ownership of Indian Securities

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Foreign investment in Indian securities is regulated through the industrial policy of GoI (“The Industrial
Policy”) and FEMA. While the Industrial Policy prescribes the limits and the conditions subject to which
foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise
manner in which such investment may be made. Under the Industrial Policy, unless specifically restricted,
foreign investment is freely permitted in all sectors of Indian economy to any extent and without any prior
approvals, but the foreign investor is required to follow certain prescribed procedures for making such
investment. The government bodies responsible for granting foreign investment approvals are the Foreign

Investment Promotion Board of the Government of India (“FIPB”) and the RBI. Under present regulations,
the maximum permissible FII investment in our Company is restricted to 24% of our total issued capital.
This can be raised to 100% by adoption of a Board resolution and special resolution by our shareholders;
however, as of the date hereof, no such resolution has been recommended to our Board or our shareholders
for adoption.

By way of Circular No. 53 dated 17 December, 2003, the RBI has permitted FIIs to subscribe to shares of
an Indian company in a public Issue without prior RBI approval, so long as the price of Equity Shares to be
issued is not less than the price at which Equity Shares are issued to residents.

The transfer of Equity Shares of NRIs, FIIs, and Foreign Venture Capital Investors registered with SEBI
and Multilateral and Bilateral Development Financial institutions shall be subject to the conditions as may
be prescribed by the Government of India or RBI while granting such approvals.

Foreign Investment

Foreign investment in India is regulated by the Foreign Exchange Management Act, 1999 (FEMA), the
regulations framed by the Reserve Bank of India (RBI) and policy guidelines issued by the Ministry of
Industry (through various Press Notes issued from time to time). Foreign investment in companies involved
in the manufacture of steel is under the automatic route (i.e., prior approval of the Foreign Investment
Promotion Board (FIPB) is not required).

Foreign investment by way of subscription to equity shares in companies in the above sector currently does
not require the prior approval of the RBI or the FIPB, except for a post subscription filing with the RBI in
Form FC-GPR within 30 days from the issue of shares by the Company. GoI has indicated that in all cases
where foreign direct investment is allowed on an automatic basis without FIPB approval, the RBI would
continue to be the primary agency for the purposes of monitoring and regulating foreign investment.

TRANSFERS OF EQUITY SHARES PREVIOUSLY REQUIRED THE PRIOR APPROVAL OF


THE FIPB. HOWEVER, VIDE A RBI CIRCULAR DATED 4 OCTOBER, 2004 ISSUED BY THE
RBI, THE TRANSFER OF SHARES BETWEEN AN INDIAN RESIDENT AND A NON
RESIDENT DOES NOT REQUIRE THE PRIOR APPROVAL OF THE FIPB OR THE RBI,
PROVIDED THAT (I) THE ACTIVITIES OF THE INVESTEE COMPANY ARE UNDER THE
AUTOMATIC ROUTE UNDER THE FOREIGN DIRECT INVESTMENT (FDI) POLICY AND
TRANSFER DOES NOT ATTRACT THE PROVISIONS OF THE SEBI (SUBSTANTIAL
ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 (II) THE NON-
RESIDENT SHAREHOLDING IS WITHIN THE SECTORAL LIMITS UNDER THE FDI
POLICY, AND (III) THE PRICING IS IN ACCORDANCE WITH THE GUIDELINES
PRESCRIBED BY THE SEBI/RBI.

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SECTION VIII- DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF


ASSOCIATION

RIGHTS OF MEMBERS

Rights of members regarding voting, dividend, lien on shares and the process of modification of such rights
and forfeiture of shares are contained in the Articles of Association of the Company and as per the
provisions of the Companies Act 1956.

MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION

The salient features of the Articles of Association of the Company are as under:

Article 1 provides as under:

1. The regulations contained in Table A, Schedule I, to the Companies, 1956, shall not apply to the
company except so far as the same are reproduced or contained in or expressly made applicable by these
Articles or the Act. The regulations for the management for the Company and for the observance of the
Members thereof and their representatives shall, subject to any exercise of the Company’s power to modify,
alter or add to its regulations, be such as are contained in these Articles.

Article 3 provides as under:

1. Save as permitted by section 77 of the Act, the funds of the Company shall not be employed in the
purchase of or lent on the security of, shares of the Company and the Company shall not give, directly or
indirectly, any financial assistance, whether by way of loan, guarantee, the provision of security or
otherwise, or the purpose of or in connection with any purchase of or subscription for shares in the
company or any company of which it may, for the time being, be a subsidiary.

2. This Article shall not be deemed to effect or restrict the power of the company to enforce repayment of
loan to members or to exercise a lien conferred by Article 28.

Article 4 provides as under:

Increase in the share capital

4. 2. (a) The Company shall have power to increase or reduce the capital of the company and to alter,
convert, classify into several classes of stock of shares, divide or sub-divide and consolidate the same with
power to attach thereto respectively such preferential, deferred or special rights, privileges or conditions or
restrictions as may be determined by, or in accordance with the regulations of this Company, from time to
time, subject to provisions of the Companies Act, 1956.

(b) Subject to the provisions of Section 81 of the Act and these Articles any unclassified shares (whether
forming part of the original share capital or of any increased share capital of the company may be issued by
the Board either with the sanctions of the Company in General Meeting and upon such terms and
conditions and with such rights and privileges annexed thereto as the General Meeting sanctioning the issue
of such shares may direct, and if no such direction be given and in all other cases, as the Board shall
determine, and in particular, with such rights and privileges to participate in the distribution of the Assets of
the Company.

Issue of preference shares

3 Subject to the provisions of the Articles, the Company shall have power to issue preference shares
carrying right to redemption out of profits which would otherwise be available for dividend, or out of the
proceeds of a fresh issue of shares made for the purposes of such redemption, or liable to be redeemed at
the option of the Company and the Board may subject to the provisions of Section 80 of the Act exercise
such power in such manner as in it thinks fit.

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Issue of debentures

4 Any debentures, debenture-stock or other Securities may be issued at a discount, premium or otherwise
and may be issued on condition that they shall be convertible into shares of any denomination and with any
privileges and conditions as to redemption, surrender, drawing, allotment of shares, attending (but not
voting) at the General meeting, Appointment of Directors and otherwise Debentures with the right to
conversion into or allotment of shares shall be issued only with the consent of the Company in the General
meeting by a Special Resolution.

Article 5 provides as under

Shares at disposal of the Directors

5 1) Subject to the provisions of the Articles and to section 81 of the Act, the shares shall be under the
control of the Board who may allot or otherwise dispose of the same to such person, on such terms and
conditions, at such times, either at par or at a premium, or subject to Section 79 of the Act, at a discount,
and for such consideration as the Board thinks fit, provided that option or right to call of shares shall not be
given to any person without the sanction of the Company in General Meeting.

Article 7 provides as under

7. 1. The money (if any) which the Board shall on allotment of any shares being made by them require to
be paid by way of allotment money, call or otherwise in respect of those shares shall immediately on the
insertion of the name of the allottee in the Register as the holder of such shares, shall become a debt due to
and recoverable by the company from the allottee thereof and shall be paid by him accordingly.

2. If, by the conditions of allotment of any shares, the whole or part of the amount or issue price thereof
shall be payable by installment, every such instalment shall, when due be paid to the Company by the
person who, for the time being, shall be the registered holder of the share or by his executor or
administrator.

Article 8 provides as under

8. 1. The joint holders of a share shall be severally as well as jointly liable for the payment of all
instalments and calls due in respect of such share.

2. On the death of any of the joint holders of a share the survivors shall be the wholly person or persons
recognised by the Company as having any title to or interest in such share, but the Board may require such
evidence of death as it may deem fir and nothing herein contained shall be taken to release the estate of a
deceased’ joint holder from any liability of such share.

3. Any one of such joint holders may give effectual receipts of any dividends or other moneys payable in
respect of such share.

4. Only the person whose name stands first in the register as one of the joint holders of any share, unless
otherwise directed by all of them in writing, shall be entitled to delivery of the certificate relating to such
share or to receive documents from the company and any documents served on or set to such person shall
be deemed served on all the joint holders.

5. Any one of two or more joint holders of a share may vote at any meeting either personally or by
Attorney or by proxy in respect of such shares as if he were solely entitled thereto and if more than one of
such joint holders be present at any meeting personally or by Attorney or by proxy then that one such
person so present whose name stands higher on the register in respect of such shares shall alone be entitled
to vote in respect thereof but the other joint holders shall be entitled to be present at the meeting.
Provided that a joint holder present at any meeting personally shall be entitled to vote in preference to a
joint holder present by a Attorney or proxy although the name of such joint holder Present by Attorney or
proxy stands higher in the register in respect of such shares.

6. Except as provided in this Article the person first named in the register as one of the joint holders of a
share shall be deemed to be the sole holder thereof for matters connected with the company.

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Article 9 provides as under

9. Save as herein otherwise provided, the Company shall be entitled to treat the registered holder of any
share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent
jurisdiction, or as by statute required, be bound to recognise any equitable or other claim or interest in such
share on the part of any other person.

Article 11 provides as under

Share certificates

11. 1. The issue of share certificates and duplicates, and the issue of new share certificates on
consolidation or sub-division or in replacement of share certificates which are surrendered for cancellation
due to their being defaced, torn, old, decrepit or worn out or the cages for recording transfers having been
utilised or of share certificates which are lost or destroyed shall (issue of share certificates) Rules 1960, or
any statutory modification or re-enactment thereof. If any share certificate be lost or destroyed, then, upon
proof thereof to the satisfaction of the Board and on such indemnity as the Board thinks fit being given, a
new certificate in lieu thereof shall be given to the party entitled to the shares to which such lost or
destroyed certificate shall relate.

2) Every member shall be entitled, without payment, to one or more certificates in marketable lots for all
the shares of each class or denomination registered in his name, or if the Directors so approve (upon paying
such fee as the Directors may from time to time determine) to several Certificates, each for one or more of
such shares and the company shall complete and have ready or delivery such certificates, within three
months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within one
month of the receipt of application of registration of transfer, transmission, sub-division, consolidation of
renewal of any of its shares as the case may be, every certificate of shares shall be under the seal of the
Company and shall specify the numbers and distinctive numbers of shares in respect of which it is issued
and amount paid up thereon and shall be in such form as the Directors may prescribe or approve, provided
that in respect of a share or shares held jointly by several persons, the company shall not be bound to issue
more than one certificate and delivery of a certificate of shares to one of several joint holders shall be
sufficient delivery to all such holders. The Company shall not charge any fee for sub-division or
consolidation of shares/debentures certificates or for sub-division of letter of allotment, or for splitting,
consolidation or renewal of pucca transfer receipts into denominations corresponding to market units of
trading or for issue of new certificates in replacement of those which are old and worn out or where the
cases on the reverse for recording transfers have been fully utilised.

3) Except where a duplicate certificate is issued in lieu of one that is lost or destroyed, in accordance with
the Companies (Issue of share certificates) Rules 1960, the Board shall not issue a new share certificate
relating to any share or shares in the Company, save as provided herein before unless the certificate
previously issued in respect of the said share or shares has been surrendered to the Company.

Article 17 and 18 provide as under

17. The Board may, if it thinks fit, receive from any member willing to advance the same, all or any part of
the money due upon the shares held by him beyond the sums actually called for, and upon the money so
paid in advance, or so much thereof as from time to time exceeds the amount of the calls then made in
respect of which such advance has been made, the Company may pay interest at such rate not exceeding,
unless their Company in General Meeting shall otherwise direct, six percent per annum to the Member
paying such sum in advance as the Board may agree upon. Money so paid in excess of the amount of calls
shall not rank for dividends or confer right to participate in profits. The Board may at any time repay the
amount so advanced upon giving to such member not less than three months notice in writing.

18. The members shall not be entitled to any voting rights in respect of the moneys paid by him until the
same would, but for such payment, become presently payable. The provisions of these Articles shall
mutadis mutanis apply to the calls on debentures of the Company.