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Case No.70/2006 Duncans Industries Ltd. (DIL) the existing promoters ( through their Group Company- M/s. ISG Traders Ltd ) and M/s Jaiprakash Associates Ltd.( through their WOS - M/s Jaypee Fertilizers & Industries Ltd.). The holding structure of KFCL is set out below: i) Kanpur Fertilizers & Cement Ltd (KFCL) (wholly owned subsidiary of JUBVPL) It is a wholly owned subsidiary of JUBVPL which has been formed with the initial share capital of Rs 10 lakh which will be increased by Rs 400.63 Cr on allotment of equity shares of Rs 400 Cr to JUBVPL and Rs 0.53 Cr to the existing share holders of DIL in terms of the scheme. ii) Jaypee Uttar Bharat Vikas Pvt. Ltd. (JUBVPL) ( Joint Venture Company) It is a 50:50 JV Company of Jaypee Fertilizers & Industries Ltd. ( Jaypee Group) and ISG Traders Ltd. ( existing Promoter Group) has been formed with the initial equity share capital Rs 15 lakh which is held by Jaypee Fertilizers & Industries Ltd. and ISG Traders Ltd. in the ratio of 50:50 which will be enhanced to Rs 20 Cr in the equal ratio. iii) ISG Traders Ltd (ISGTL) (Existing Promoter Group) The existing share capital of the company is Rs 22.86 Cr out of which 92.98% shares are held by the Promoters and associate companies. Balance equity is with the non promoters entities / public. iv) Jaypee Fertilizers & Industries Ltd. (JFIL) (Jaypee Group) It is a wholly owned subsidiary (WOS) of M/s Jaiprakash Associates Ltd (JAL)( Strategic Investor) has been formed with the initial share capital of Rs 25 lakh by JAL. The equity capital of this company shall be increased to Rs 250 Cr or more by M/s JAL / its associates. 12.1.1 Rationale / Justification for De-merger: Due to non operation of the fertilizer unit, the Company has been continuously incurring huge losses and as a result , performance of the Tea units of the company has also suffered very badly. Due to the substantial requirement of working capital for the operation of fertilizer plant the funds of the company remained utilized in the said unit and retrospective downward revision of RPS by GOI, the requirement of funds of Tea unit could not be met. Further, businesses of Fertilizer and Tea are entirely unrelated and they do no have synergies of operations and have different dynamics, require different strategies for growth and different focus for alliance / consolidation. In view of the same and to cure the problems, which are being faced by the Company, it has been proposed that Fertilizer undertaking of the Company be separated from the Tea undertaking, so that adequate attention is paid by the separate Board of Directors to the 18 --
Case No.70/2006 Duncans Industries Ltd. (DIL) respective businesses and the adverse conditions prevailing, in any, of these businesses do not affect the business of other undertaking. The de-merger shall also enable the respective business undertakings to raise the funds, which are needed for their revival based on their own strengths. The Company s liabilities would substantially reduce upon settlement / payment of dues of creditors , out of the funds to be inducted by JUBVPL the JV Co. , and conversion of feed stock of fertilizer plant from Naphtha to Gas cum Naphtha along with additional capital expenditure on energy saving measures and revamping the plant will improve the operational efficiency of the fertilizer plant which, in turn, is expected to turn both the companies profitable / viable on long term basis. The Scheme of Arrangement between DIL and KFCL for proposed De-merger Scheme is as per Annexure A . The board of M/s Duncans Industries Ltd in its meeting held on 17.06. 2010 has approved the participation of M/s Jaypee Fertilizers & Industries Ltd.(a Jaypee Group Co) as a strategic investor for the revival and rehabilitation of the company's fertilizer unit at Panki, Kanpur through JUBVPL the JV Co. of M/s Jaypee Fertilizers & Industries Ltd and M/s ISG Traders Ltd, a group company of the existing promoters of DIL, upon sanction of the Rehabilitation Scheme and de-merger of the fertilizer undertaking into a separate entity i.e. KFCL. 12.1.2 Share Exchange / Swap Ratio : The Fertilizer undertaking is getting liabilities of Rs 1182.19 Cr against assets of Rs 101.13 Cr as per book value being transferred to KFCL as on 01.10.2010. The net assets value is Rs (-) 1081.06 Cr as per book value as on 30.9.2010. As per estimated fair value of assets, the net assets value is arrived at Rs (-) 732.20 Cr after accounting for liabilities of Rs 1182.19 Cr and contingent liabilities of Rs 22.97 Cr( Total Liabilities: Rs 1205.16 Cr) whereas, the assets are valued at Rs 336.40 Cr ( Fixed assets Rs 286.75 Cr and current assets: Rs 49.65 Cr). Exchange ratio of 1 equity share of KFCL for 40 equity shares of DIL is proposed as per Report dated 27.10.2010 of M/s Chaturvedi & Partners, Chartered Accountants, New Delhi, on exchange ratio for the proposed de-merger of fertilizer undertaking of the company with Kanpur Fertilizer & Cement Ltd. As per valuation report, to arrive at the exchange ratio, a nominal value of Rs 0.01 paisa per share has been assigned to the shares of DIL which subsequent to the restructuring and reduction of capital as proposed works out to Rs 0.25/- per share of Rs 10/- of DIL ( Post restructuring and reduction and consolidation of share capital) and the same has been considered for the purpose of determining share exchange ratio. 12.1.3 Approval of Secured Lenders for de-merger: As per the minutes of CDR Lenders Meeting held on 30.8.2010, ARCIL, the largest lender with an exposure of Rs 319.16 Cr (47.16%) is agreeable In principle to the de-merger of the Fertilizer Divn and 19 --
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