Hitachi Home & Life Solutions (India) Limited - SEBI

For circulation to the EquityShareholders of the Company only

Hitachi Home & Life Solutions (India) Limited(formerly known as Amtrex Hitachi Appliances Limited)

(A Company incorporated in India as a private limited company on December 07, 1984 under the Companies Act, 1956 under the name ofAcquest Airconditioning Systems Private Ltd , converted into a deemed public limited company on April 18, 1990, name changed to Amtrex

Appliances Ltd on September 14, 1990, further changed to Amtrex Hitachi Appliances Ltd on January 25, 1999 and further changed toHitachi Home & Life Solutions (India) Ltd. on March 12, 2003)

Registered Office: 901, Abhijeet, Mithakhali Six Roads, Ahmedabad, 380006, India.Tel: (079) 6400673 ; Fax (079) 6401128.

E- mail: [email protected] Website : www.hitachi-hli.com

Issue of 88,01,379 Equity Shares of Rs. 10/- each for cash at a premium of Rs. 21/- per share aggregatingRs. 27,28,42,749/- to the Equity Shareholders of the Company on Rights basis in the ratio of 3 (three)

Equity Shares for every 5 (five) Equity Shares held on November 18, 2003 (i.e. The Record Date).

GENERAL RISKS

Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issueunless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors on Page No. (i) to(x) & 48 to 53 carefully before taking an investment decision in this Issue. For taking an investment decision, investors must relyon their own examination of Hitachi Home & Life Solutions (India) Limited (the issuer) and the Issue including the risks involved.The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBIguarantee the accuracy or adequacy of this document.

ISSUER’S ABSOLUTE RESPONSIBILITY

The issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this offer document contains allinformation with regard to the issuer and the issue, which is material in the context of the issue, that the information contained inthe offer document is true and correct in all material aspects and is not misleading in any material respect, that the opinions andintentions expressed herein are honestly held and that there are no other facts, the omission of which make this document as awhole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING

The Company’s existing Equity Shares are listed on the Stock Exchanges at Ahmedabad, Delhi, Mumbai (Designated StockExchange for the purpose of Rights Issue) and on National Stock Exchange. Applications will be made to these Stock Exchangesfor permission to deal in and for an official quotation in respect of the new Equity Shares now being offered in terms of this Letterof Offer upon a closure of Rights Issue. Draft Letter of Offer has been approved by The Stock Exchange, Ahmedabad vide theirletter dated March 25, 2003, The Stock Exchange, Mumbai vide their letter dated March 24, 2003, Delhi Stock Exchange videtheir letter dated March 31, 2003 and National Stock Exchange vide their letters dated April 9, 2003 and November 6, 2003.

LEAD MANAGERS TO THE ISSUE REGISTRARS TO THE ISSUE

IND GLOBAL CORPORATE FINANCE PVT LTD PINNACLE SHARES REGISTRY PVT LIMITED(A member of Ernst & Young Pvt Ltd) [Unit: Hitachi Home & Life Solutions (India) Ltd.]19th Floor, Express Towers Near Asoka Mills,Nariman Point Naroda RoadMumbai 400 021 Ahmedabad 380025Tel: (022) 2282 5000 Tel: (079) 2204226Fax: (022) 2282 6000 Fax (079) 2202963E Mail : [email protected] E Mail: [email protected]

Issue Opens On : Thursday, December 04, 2003

Last Date for receipt of Requests for Split Forms : Thursday, December 18, 2003

Issue Closes on : Friday, January 02, 2004

LETTER OF OFFER

TABLE OF CONTENTS

I. General Information ......................................................................................................................................... 02

II. Capital Structure .............................................................................................................................................. 05

III. Terms of the Present Issue .............................................................................................................................. 09

IV. Particulars of the Issue .................................................................................................................................... 18

V. Company, Management and Project ................................................................................................................ 20

VI. Financial and Other Information ....................................................................................................................... 31

VII. Stock Market Data ............................................................................................................................................ 40

VIII. Outstanding Litigations, Defaults, Liabilities .................................................................................................... 41

IX. Particulars of Listed Companies under the same Management ...................................................................... 45

X. Miscellaneous Information ............................................................................................................................... 46

XI. Statutory and Other Information ....................................................................................................................... 47

XII. Material Contracts and Inspection of Documents ............................................................................................ 53

XIII. Declaration ....................................................................................................................................................... 54

ABBREVIATIONS

The Company Hitachi Home & Life Solutions (India) Ltd.

LOF Letter of Offer

CAF Composite Application Form

SEBI/Board The Securities & Exchange Board of India

RBI Reserve Bank of India

Registrar to the Issue Pinnacle Shares Registry Pvt Ltd .

Act The Companies Act, 1956

CDSL Central Depository Services (India) Ltd.

NSDL National Securities Depository Limited

FEMA Foreign Exchange Management Act

NRI Non-Resident Indian

NR Non-Residents

OCB Overseas Corporate Body

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RISK FACTORS AS PERCEIVED BY THE MANAGEMENT AND PROPOSALS TO ADDRESS THE RISKS IF ANY

Internal Risk Factor No. 1

Outstanding litigations and defaults

Against the Company

Income Tax

Sr. Assessment Counter Party Amount Status Allegation / Financial implicationNo. Year Disallowed Charges

(Rs. in Lakhs)

1 1992-93 Income Tax 96.75 In Tribunal Disallowance Contingent Liability (in lakhs)Authorities of certain in respect of A.Y. 1992-93 is(Against the claims Rs.54.18, 1993-94 is Rs.2.46company) and 1994-95 is Rs.37.65 resp.

However there would be nocash outflow as tax demandwas adjusted or paid.

2 1993-94 8.43 In Tribunal3 1994-95 42.14 In Tribunal4 1995-96 Hitachi Home 320.92 In Tribunal Disallowance Contingent liability is

& Life of certain Rs.226.60 lakhsSolutions expenditure(India) Ltd. and claim(Against the underincome tax Section 80IAdepartment)

5 1996-97 304.87 In Tribunal Contingent liability isRs.207.96 lakhs


Sales Tax

Sr. Name of Allegation Details Amount Present Implication onNo. Authority involved Status financial position

(contingentliability)as on30.06.2003

1 CTO/Assessing Dispute over sites of sale taken Pending beforeofficer place from factory in the course assessing

of inter-state which were alleged authority/Appellateby the dept to be local sale in authority.the state.-Jaipur 62,78,440 62,78,440-Hyderabad 1,37,85,385 1,37,85,385

2 Various Due to mistakes on invoice, 8,66,281 Appeal proceedings 8,66,281Authorities inward/entry forms, penalty are in progress.

has been imposed in variouscases going on at Kota, Noida,Meerut, Patna, Cochin &Faridabad

3 ETO,Mohali Penalty imposed for delayed 1,20,210 Pending before 1,20,210payment of taxes. Tribunal

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4 A.O Cochin Entry tax imposed on the 1,09,440 Pending before second 1,09,440machines sold to Govt on appellate authority.the ground of ownershipbeing vested only on receipt.

5 STO, Delhi Demand raised in LST & 39,95,676 Pending before 39,95,676CST for the assessment Appellate Asstt.years 99-00, 00-01 & 01-02 Commissioner of& in works contract for 00-01 sales tax

6 Asst Comm Demand raised in LST & 16,79,907 Pending before 16,79,907of ST, Kolkata CST for the assessment Appellate Commissioner

years 98-99 ,99-00 & 00-01. of Sales Tax

7 STO,Ahd Demand raised in Central 36,530 Pending before 36,530Sales tax for the assessment Dy. Commr offor the year 98-99 Sales tax

Central Excise

Sl O.IO. NO. Allegation details Amount Present Status Implication onNo involved Financial position

(contingentliability )as at 30.06.03

1 OIO No.2/ Dispute over charging of duty 6,53,999 Pending before 6,53,999Commr/Ahd-II for procedural lapses in CEGAT.31.3.99 invoicing.

2 OIO No.106/ Denial of modvat on clearance 4,26,953 Pending before 4,26,953Ref/98 3.9.98 to exempted units. CEGAT.

3 OIO No.95 to Dispute over valuation 4,10,310 Pending before 4,10,31096/DEM/ adopted by the department. CEGAT.dt. 28.3.98

4 OIO No. 197 modvat on certain documents 2,45,458 Pending before 2,45,458to 213/D/97 disputed. Commissioner of

Central Excise(appeals).

5 V-(Ch.84) Dispute over procedural 20,74,472 Refund application 20,74,47215-35/OA/99 lapses in clearance of was returned stating

finished goods from factory. as prematured andSCN is still underhearing.

6 II/SCN/ Dispute over interpretation 1,10,818 Matter pending 1,10,818Amtrex / of Rule 57C(2) and before Tribunal.99-2000 57 CC(1) for reversal of30.3.2000 cenvat credit.

7 203/30-128/ Dispute over determination 2,98,57,766 Matter pending with 2,98,57,7662001/5176- of valuation where freight Commr of Central25/9/01 is alleged to be added to excise.

transaction valuation u/s 4.

8 Three SCNs Dispute over valuation of 1,68,63,734 Matter pending with 1,68,63,734goods under MRP based Commissioner ofassessment. Central Excise.

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Customs



1 letter Dispute over classification 1,67,604 Before 1,67,604dt. 1.8.2001 of indoor units as parts of AC. Dy. Commissionerdt. 8.3.2001 of Customs.

2 Finalisation of Order of SVB concluding 6,79,116 Pending before 6,79,116SVB non influence of relationship commissioner ofassessment of importer & exporter in Customs (Appeals)

supply of machine challengedby department.

Labour LawsThere are 22 cases pending against the company, filed by contract labourers, for re-instatement in the employment ofthe Company. All these cases are pending in conciliation proceeding before the labour Officer. In addition, two casesfor re-instatement in the services of the company filed by ex-employees are pending before the labour court. Thereare also 3 prosecution cases pending against the Company under the provisions the Apprenticeship Act. Thesecases have been filed by Labour Inspector for non-employment of sufficient number of Apprentice Trainees. There are99 prosecution cases filed by Labour Inspector for non compliance of provisions of Factories Act. There is oneprosecution case filed by Labour Inspector for non compliance of provisions of Maternity Benefits Act.

OthersGodrej-GE Appliances Limited (Godrej-GE) has filed a petition in the High Court of Gujarat for a cancellation ofcertain airconditioner grill design originally registered by the Company. Earlier, Company had obtained an interlocutoryorder against Godrej-GE restraining them from using this air conditioner grill design which is owned by the Company.In response to this, Godrej-GE has filed the petition.

Against the Promoter CompanySecurities LawsHitachi Home & Life Solutions, Inc Japan, the then Co promoters but presently the promoters of the Company acquired28,41,062 Equity shares constituting 19.37% of the paid up Equity Share Capital of the Company from AsmanInvestments Limited and other constituents of Lalbhai Group on January 18, 2003 at a price of Rs. 41.64 per EquityShare and claimed exemption from Regulation No. 11(1) and 12 of Securities and Exchange Board of India (SubstantialAcquisition of Shares and Takeovers) Regulations, 1997 and subsequent amendments thereto (SEBI TakeoverRegulations) under Inter se Transfer of Shares as per Regulation No. 3(i)(e)(iii)(a) of SEBI Takeover Regulations citingHitachi India Pvt Ltd as the persons acting in concert with them.

SEBI issued a Show Cause Notice on June 13, 2003 calling upon Hitachi Home & Life Solutions Inc Japan and HitachiIndia Pvt Ltd to show cause why action under Regulation No. 44 and 45(6) of SEBI Takeover Regulations and Section11 and 11B of SEBI Act, 1992 should not be initiated against them for violation of Regulation No. 2(1)(c ), 11(1) and 12of SEBI Take Over Regulations as SEBI made observations in the above mentioned Show Cause Notice that prioracquisition of shares by Asman Investments Limited from ICICI Bank [SEBI issued Show Cause Notice to AsmanInvestments Limited on April 08, 2003 in this regard] is not in order and therefore price of Rs. 33.53 paid for the saidacquisition can not be considered as one of the parameters for the determination of minimum price payable underinter se transfer route.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltd submitted their detailed reply to SEBI on July 28,2003 stating that said acquisition of shares is eligible for exemption under Inter se Transfer of Shares and price paidfor acquisition is as per the norms prescribed under the said provisions.

After joint hearing of both the Show Cause Notices if the submissions made by Asman Investments Limited / HitachiHome & Life Solutions Inc, Japan are not agreeable, SEBI may initiate action against Asman Investments Limited and

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/ or Hitachi Home & Life Solutions, Inc Japan which may include direction to Asman Investments Limited and / orHitachi Home & Life Solutions, Inc Japan to make open offer to the remaining Equity Shareholders of the Company toacquire minimum of 20% of the outstanding paid up Equity Share Capital of the Company at a price of not less thanRs. 33.53 / 41.64 per Equity Share in terms of SEBI Takeover Regulations. Asman Investments Limited as well asHitachi Home & Life Solutions Inc, Japan will have the option to appeal against any such direction by the SEBI.

Internal Risk Factor No. 2The accumulated losses as on September 30, 2002 exceeded fifty percent of the peak net worth of the Companyduring the immediately preceding four financial years. As a result, the Company is a potentially sick Company withinthe meaning of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Proposal to address the riskIn compliance of the requirement of SICA, Extra Ordinary General Meeting (EGM) of the Shareholders of the Companywas held on April 26, 2003 and considered such erosion of the net worth. Further, Company has submitted requisitereport with the Board for Industrial and Financial Reconstruction (BIFR) stating its recovery plan.

Internal Risk Factor No. 3The Company has incurred losses in three financial years out of last five financial years as per the details give below:

(Rs. in Lakhs)

Period / year April 01, April 01, April 01, April 01, October 01,1997 1998 1999 2000 2001

to to to to toMarch 31, March 31, March 31, September 30, September 30,

1998 1999 2000 2001 2002Profit / (Loss)After Tax 312.35 (731.29) 349.15 (1778.53) (2051.48)

Net worth (Equity Capital+Reserves-Accumulated Losses- Misc. Expenditure) of the Company as on September 30,2002 is negative to the extent of Rs. 99.90 Lakhs.

Proposal to address the riskIntense competition in the market led to large scale price drops by some of the leading brands and the Company wasforced to rationalize its prices, but maintaining a price premium of 10 to 20% over other prominent brands. This hasresulted in financial losses in three financial years out of last five financial years. It is now proposed to achieveprofitability in the ensuing financial year through a number of focused initiatives like value engineering for largereduction in product cost, integration with Hitachi's global sourcing for getting scale economy on buying, pruning ofcosts across the entire value chain and building customer value for Hitachi Brand.


The following are the contingent liabilities as per the Auditors' Report for the period ended June 30, 2003.

Sl. Matter AmountNo. (Rs. Lakhs)

1 Income Tax Matters 632.76

2 Excise matters 506.44

3 Sales tax matters 275.18

4 Guarantee given by the Bankers to various authorities on behalf of the company 324.89

5 Claims against the company not acknowledged as debt 18.65

Total 1757.92

Proposal to address the riskThe Company does not foresee any liabilities on account of the above. The detailed explanation has been providedunder the heading "outstanding litigations, defaults and liabilities" on page no. 41.

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Internal Risk Factor No. 5Total fund requirement of the Company is Rs. 5826.42 Lakhs and the Company proposes to source Rs. 1500.00Lakhs from its internal accruals. The Company incurred losses for the financial year ended as on September 30, 2001and September 30, 2002 and its net worth is negative at Rs.99.90 Lakhs as on September 30, 2002. In view of this,the amount of internal accrual as envisaged above may not be available and in such an event, there will be a short fallin available funds to attain the objects of the issue as mentioned under head "Objects of the issue" on page no. 18.

Proposal to address the riskDuring the financial year from Oct-03 to Sep-04 and Oct-04 to Sep-05, the budgeted profit of the Company is Rs.248.00 Lakhs and Rs. 907.00 Lakhs respectively. The Cash Profit for the same period is budgeted to be Rs. 786.00Lakhs and Rs. 1510.00 Lakhs respectively aggregating to Rs. 2296.00 Lakhs. The Company proposes to utilize Rs.1500.00 Lakhs out of this budgeted profit to meet the requirement as mentioned under the head "Requirement ofFunds" on page no. 19.

Internal Risk Factor No. 6Large investments are necessary for market development, brand building, distribution, new product development andcreating system and process back bone for customer satisfaction in this Industry.

Proposal to address the riskBeing under Hitachi's fold, the Company will have access to latest technology of Hitachi. Company will also be able topenetrate in export market with Hitachi's brand equity and with Hitachi's marketing expertise.

Internal Risk Factor No. 7Company was enjoying Sales Tax exemption at Silvassa by virtue of Sales Tax benefits to the Industries set up in theUnion Territory of Dadra & Nagar Haveli. Under these benefits scheme, the Territory was empowered to grant exemptionto Industries making interested sales to any customer without submission of Form C / Form D. However, with effectfrom June 2002 this power has been made conditional on production of Form C.

Proposal to address the riskMost of the customers of the company are individuals who do not have any trading / commercial entity and thereforenot able to issue any Form C. In such cases it becomes mandatory on the Company to charge full Sales Tax rate. Thisultimately has resulted indirectly in withdrawing the exemptions of Sales Tax to a large extent. Considering above, itwas found advisable to consolidate the anufacturing operations under one roof by shifting Silvassa Manufacturingfacility to Kadi, Gujarat.

Government of India declared various fiscal benefits including Central Excise exemptions to the industries, inter alia,set up in the States of Jammu & Kashmir as well as Himachal Pradesh. The Company has tied up with a localmanufacturers to purchase the Air conditioners produced as per the Company’s specifications. Company would enjoythe benefits in terms of pricing due to various fiscal benefits including exemptions from Excise Duty enjoyed by theSuppliers.

Internal Risk Factor No. 8The fund requirement has not been appraised by any Bank or Financial Institution and it has been based on theCompany's own estimates. The deployment of funds to be collected in this Issue is at the sole discretion of theDirectors of the Company.

Proposal to address the riskThe Company has estimated the requirement of funds based on the Company's current perception of business,prevailing market conditions and projects in hand and funds will be utilised at the discretion of the management.

Internal Risk Factor No. 9Technical Collaboration Agreement with Refrigeration and Air Conditioning Division of Hitachi Ltd, Japan, entered intoon April 10, 1998 for receiving technical information and technical assistance relating to window type and split typeroom air conditioners and also for the right and license to manufacture and sell such products continues to be effectivefor 10 years from the date of execution of agreement or 7 years from the commencement of commercial production oflast Amtrex products whichever falls earlier unless terminated as per the provisions of the agreement.

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Proposal to address the riskHitachi group has increased its holding from 35.20% to 54.58% in January 2003 and accordingly the Company isconfident to have better and swift access to Hitachi technology. Company is also confident of entering further technicalcollaboration for acquiring latest technology on ongoing basis.

Internal Risk Factor No. 10Industrial Development Bank of India (IDBI) has deferred principal and interest payment against Asset Credit Schemeand Corporate Loan Scheme in the month November 2002.

Proposal to address the riskIDBI deferred principal installments due on January 1, April 1, July 1 and October 1, 2002 so as to be payable alongwith principal installments falling due on January 1, April 1, July 1 and October 1, 2003. This was done on the requestof the Company as the Company was facing liquidity crunch at that point of time.

Internal Risk Factor No. 11Capacity utilization for Visi-coolers and Non-electric Ice Cooled Dispensors were low during the year ended onSeptember 30, 2002.

Proposal to address the riskHitachi Home & Life Solutions (India) Ltd was basically supplying Visi-coolers and Non-Electric-Ice Cooled Dispensersto Coca-cola as Original Equipment Manufacturer (OEM) supplier. As they have reduced their purchase during thesaid year, utilisation of capacity of those products were low.

Internal Risk Factor No. 12The Company entered the Capital Market in February 1991 with the public issue of (a) 5,00,000 Equity Shares of Rs.10/- each for cash at par and (b) 2,64,000 Debentures of Rs. 125/- each for cash at par both aggregating Rs. 380.00Lakhs and the objects of the issue were (a) to part finance the expansion project of the unit manufacturing airconditionersat Village Karannagar, (b) to acquire the assets and liabilities of M/s Kelvin Metalkrafts Pvt. Ltd., (c) to meet theworking capital and (d) to meet the cost of public isssue as mentioned in the prospectus dated January 15, 1991.

Proposal to address the riskAssets and liabilities of M/s Kelvin Metalkrfts Pvt. Ltd. were acquired by the Company with effect from January 1, 1991but import restrictions introduced by the Government of India entailed a delay in the implementation of the abovementioned expansion programme and the Company's profitability and sales were affected by this delay since thedelay in the import of capital equipments restricted the Company's production.

Internal Risk Factor No. 13The Company made a Rights Issue of 14% Fully Convertible Debentures of Rs. 155/- each for cash at par aggregatingto Rs. 1451.38 Lakhs in March 1994 and the objects of the Issue were (a) To finance the expansion and modernisationof its plant and machinery, (b) to increase the installed capacity of Air conditioners from 24,000 units to 50,000 unitsper year, (c) To achieve upgradation of technology and (d) to part finance the consequential increase in workingcapital requirements as mentioned in the Letter of Offer dated March 9, 1994.

Proposal to address the riskThe Company has achieved the above mentioned objectives but a comparative statement of financial projections asgiven in the above mentioned letter of offer and actual financials for said years is given below :

(Rs. in Lakhs)

Details 1993-94 1994-95 1995-96

Projected Actuals % Projected Actuals % Projected Actuals %achieve- achiev- achie-

ment ement vement

Net Sales 3087.50 2889.58 93.59 6487.50 5256.21 81.02 11866.25 8361.76 70.47

Profit After Tax 196.33 147.30 75.03 332.44 355.99 107.08 763.03 408.29 53.51

Dividend (%) 15.00 14.00 93.33 18.00 18.00 100 25.00 18.00 72

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During the year 93-94, while shifting to ad valorem rate of excise duty from specific rate of duty, the Government hadfixed excise duty at 60% which was higher than the then prevailing average rate of duty in the previous year whichadversely affected the entire air conditioning industry. During the year 1994-95 the Company had registered 107%growth in production and 93% in Sales in comparison to previous year. The Company could not achieve the projectedsales but exceeded its profits projections. The Company could not achieve the projections during 1995-96 due to dropof sales figures in absolute terms because of reduction in excise duty and adverse market conditions during thesecond half of the year.

Internal Risk Factor No. 14Hitachi India Pvt Limited, one of the associate companies in India, promoted by the Promoters which is engaged inliaisoning, trading and promoting manufacturing projects in Joint Ventures, incurred net loss of Rs. 99.69 lakhs for theyear 2001-02.

Internal Risk Factor No. 15The Company proposes to issue Equity Shares of Rs. 10/- each by way of rights to the existing Equity shareholdersof the Company at a premium of Rs. 21/- per Equity Share. The Equity Shares of the Company are currently traded onthe Stock Exchanges at a price of Rs. 22.80 per Equity Share as on November 14, 2003. Rights issue price ofRs. 31/- per Equity Share is considerably higher than the prevailing market price.

Proposal to address the riskThe Company proposes to achieve profitability in the ensuing financial years through a number of focused initiativeslike value engineering for large reduction in product cost, integration with Hitachi's global sourcing for getting scaleeconomy on buying, pruning of costs across the entire value chain and building customer value for Hitachi Brand.

Internal Risk Factor No. 16Equity Shares of the Company enjoy low liquidity on the Stock Exchanges.

Proposal to address the riskEquity Shares of the Company are listed on National Stock Exchange, Mumbai Stock Exchange, Delhi Stock Exchangeand Ahmedabad Stock Exchange and are regularly traded.

Internal Risk Factor No. 17Articles of Association of the Company provides that if the Equity Shares held by Hitachi reduces to 25% or less of thepaid up equity capital of the company, the word "Hitachi" shall be deleted from the name of the company and in suchan eventuality, the name of the company shall be changed to some other name acceptable to the then managementof the company

Proposal to address the riskAs per world wide policy of Hitachi group, Japan, a joint venture Company is allowed to include word "Hitachi" in itscorporate name only in case Hitachi group is having at least 25% share holding in the joint venture Company. TheHitachi has recently acquired the entire stake of the Lalbhai group and has increased its holding from 35.20% to54.58%.

Internal Risk Factor No. 18Hitachi Home & Life Solutions Inc, Co-promoter, purchased the entire share holding of Lalbhai group, Co-promoter ie28,41,062 equity shares constituting 19.37% from Lalbhai Group by way of inter se transfer of shares amongstpromoters in January 2003 at a price of Rs. 41.64 per share and increased its holding in the company from 35.20% to54.58%. After the said transfer of shares, Hitachi Home & Life Solutions, Inc. became the sole promoter of theCompany. Due to change in the promoters, the name of the company was changed from "Amtrex Hitachi AppliancesLtd" to "Hitachi Home & Life Solutions (India) Ltd" on March 12, 2003. There was no need to amend Objects Clauseto carry on activities as reflected by the new name as the company continues to carry on existing activities.

Internal Risk Factor No. 19With respect to compliance of listing agreements entered into with the respective stock exchanges, Company has notdefaulted except for an instance of shorter information of Book Closure (under clause 15/16 of the Listing Agreement)in the year 1999, as a result of which the trading of shares was suspended for five days on the Mumbai StockExchange.

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External Risk Factor No. 1The Company is subject to the exchange rate fluctuation due to its exposure to external commercial borrowings fromthe promoter Company and also import of raw materials from foreign vendors. Outstanding amount as on June 30,2003 with respect to external commercial borrowing is Rs. 1556.40 Lakhs (4000.00 Lakhs JPY considering foreignexchange rate @ Rs. 38.91 for 100 JPY) and import of raw materials is Rs. 1467.34 Lakhs (31.57 Lakhs US$ consideringforeign exchange rate @ Rs. 46.47 for 1 US$) and Rs. 474.86 Lakhs (1220.41 Lakhs JPY considering foreign exchangerate @ Rs. 38.91 for 100 JPY) aggregating to Rs. 1942.20 Lakhs.

Proposal to address the riskThe Company availed financial assistance from the promoter Company in the form of External Commercial Borrowingsin Japanese Yen and the rate of interest payable by the Company is 2% pa. Company evaluates the risk due toexposure to exchange rate fluctuation vis-à-vis the cost to be incurred for forward contract. On the basis of costbenefit analysis, the Company decides whether to cover the risk due to exchange rate fluctuation or not, on case tocase basis from time to time.

External Risk Factor No. 2Changes in the Fiscal and Economic policies of Government of India may affect the prospects of the Company.

Proposal to address the riskOver the last few years the Government policies towards air conditioning and refrigeration industry has been favourableand hence it is unlikely that Government of India would initiate any policy which could be detrimental to the growth ofindustry. Moreover, air conditioning industry is amongst the highest tax rate slab and the recent government initiativeis expected to benefit the Industry as well as the Company.

Highlights

l Hitachi Home & Life Solutions Inc, Co-promoter, purchased the entire share holding of Lalbhai group from LalbhaiGroup by way of inter se transfer of shares amongst promoters in January 2003 and increased its holding in thecompany from 35.20% to 54.58%. After the said transfer of shares, Hitachi Home & Life Solutions, Inc. becamethe sole promoter of the Company.

[Asman Investments Limited, a company belonging to Lalbhai Group, erstwhile Joint Promoter of the Company,holding 13,81,500 Equity Shares constituting 9.42% of the paid up Equity Share Capital of the Company acquired14,59,562 Equity shares constituting 9.95% of the paid up Equity Share Capital of the Company from ICICI Bank Ltdon September 26, 2002 at a price of Rs. 33.53 per Equity Share and claimed exemption under creeping acquisitionroute as permitted under Regulation No. 11(1) of SEBI Takeover Regulations citing Hitachi Group as the PersonsActing in Concert with them.

SEBI issued a Show Cause Notice on April 08, 2003 calling upon Asman Investments Limited to show cause whyaction under Regulation No. 44 and 45(6) of SEBI Takeover Regulations and Section 11 and 11B of SEBI Act, 1992should not be initiated against them for violation of Regulation No. 10 and 11(1) of SEBI takeover Regulations as SEBImade observations in the above mentioned Show Cause Notice that Asman Investments Limited and Hitachi Groupare not persons acting in concert.

Asman Investments Limited submitted its detailed reply to SEBI on May 19, 2003 stating that they are persons actingin concert with Hitachi Group.

Hitachi Home & Life Solutions, Inc Japan, the then Co promoters but presently the promoters of the Company acquired28,41,062 Equity shares constituting 19.37% of the paid up Equity Share Capital of the Company from AsmanInvestments Limited and other constituents of Lalbhai Group on January 18, 2003 at a price of Rs. 41.64 per EquityShare and claimed exemption from Regulation No. 11(1) and 12 of SEBI Takeover Regulations under Inter se Transferof Shares as per Regulation No. 3(i)(e)(iii)(a) of SEBI Takeover Regulations citing Hitachi India Pvt Ltd as the personsacting in concert with them.

SEBI issued a Show Cause Notice on June 13, 2003 calling upon Hitachi Home & Life Solutions Inc Japan andHitachi India Pvt Ltd to show cause why action under Regulation No. 44 and 45(6) of SEBI Takeover Regulations andSection 11 and 11B of SEBI Act, 1992 should not be initiated against them for violation of Regulation No. 2(1)(c ),11(1) and 12 of SEBI Take Over Regulations as SEBI made observations in the above mentioned Show Cause Notice

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that prior acquisition of shares by Asman Investments Limited from ICICI Bank is not in order and therefore price ofRs. 33.53 paid for the said acquisition can not be considered as one of the parameters for the determination ofminimum price payable under inter se transfer route.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltd submitted their detailed reply to SEBI on July 28,2003 stating that said acquisition of shares is eligible for exemption under Inter se Transfer of Shares and price paidfor acquisition is as per the norms prescribed under the said provisions.

After joint hearing of both the Show Cause Notices if the submissions made by Asman Investments Limited / HitachiHome & Life Solutions Inc, Japan are not agreeable, SEBI may initiate action against Asman Investments Limited and/ or Hitachi Home & Life Solutions, Inc Japan which may include direction to Asman Investments Limited and / orHitachi Home & Life Solutions, Inc Japan to make open offer to the remaining Equity Shareholders of the Company toacquire minimum of 20% of the outstanding paid up Equity Share Capital of the Company at a price of not less thanRs. 33.53 / 41.64 per Equity Share in terms of SEBI Takeover Regulations. Asman Investments Limited as well asHitachi Home & Life Solutions Inc, Japan will have the option to appeal against any such direction by the SEBI.]

l Hitachi Home & Life Solutions Inc, Japan placed India as a significant market for air conditioners and made adecision to expand the business in India and accordingly hiked its stake in the company.

l Priority of the new management will be to return to profitability in the current financial year through a number offocused initiatives like value engineering for large reduction in product cost, integration with Hitachi's globalsourcing for getting scale economy on buying, pruning of costs across the entire value chain and building customervalue for the Hitachi brand.

l Air conditioner industry witnessed high growth face in the latest financial year ie October 01, 2001 to September30, 2002 registering a volume growth of about 20% during the summer season and the company maintained itsvolume growth at a level higher than the market growth thereby improving its market share by 2% to reach 14%in the organized sector.

The above is company's estimate based on the information collected from various informal sources like suppliers ofvarious inputs, market intelligence, informal discussion at industries' meet with competitors, etc. The 20% growth ratepertains to the summer season i.e. March to May of 2002. The Company estimate of the overall market growth of thefinancial year i.e. October 01, 2001 to September 30, 2002 is about 11% to 12%. The details compiled by the companyare as under :

Companies Nos. of Air-conditioners %

LG 175000 29Hitachi 82000 14National 25000 4Samsung 50000 8O General 25000 4Daikin 17000 3Carrier 75000 12Voltas 90000 15Blue Star 20000 3Other brands 46000 8Total Branded 605000 100Unbranded 125000Total Market 730000

l Company has about 800 dealers nationwide with the presence in all the major cities of India. Company also hasplans to further expand its network to smaller cities and towns in India by appointing dealers and distributors.

l Indian Air-conditioning industry is estimated to be about Rs. 2,900 Crore. This comprises mainly of Room air-conditioners valued at about Rs. 1900 Crores with the balance Rs. 1000 Crores being bigger air conditioningsystems such as ductable splits, package Air Conditioners, Chillers and Central Plants.

x

As per the data prepared by the RAMA - CII, [Refrigerators and Airconditioners Manufacturers Association -Confederation of Indian Industries], the market size for Room Airconditioners (Window and Mini Split ) was Rs.1930 crores and for bigger airconditioners, it was shown as Rs. 860 crores during the year 2002. However, abovedata are as per company's estimates based on the information collected from various informal sources.

l The Company has been pursuing focused growth strategies, based on product and distribution, to drive growth inboth the room & package air-conditioner segments.

l Parts & products are approved by TIS (Tochigi Inspection Standard), one of the stringent standards of world andtested in world class laboratories, taking utmost care of customers by providing product safety, product reliability,customer comfort & technological advancement.

l The Company has been relentlessly pursuing brand building activities to ensure high brand awareness andpositive disposition for Hitachi brand among the target audience.

Notes:

ü Investors are advised to refer to the para on "Justification for Issue Price" on Page No. 45 before making aninvestment in the issue.

ü Networth of the company before issue : The Company incurred losses for the financial year ended as on September30, 2001 and September 30, 2002 and its net worth is negative at Rs.99.90 Lakhs as on September 30, 2002.

ü Book Value per share of the Company is negative at Rs. 0.68 as on September 30, 2002 and Rs. 12.83 as on June30, 2003.

ü Cost per share to the promoters is Rs. 34.78

ü Other ventures of promoters have no business interest / other interest in the issuer company except to the extentdisclosure made in this letter of offer.

ü There are no loans and advances / sundry debtors, in the books of the company, made to directors / promoters,persons / companies in which directors / promoters are interested.

ü Investors may note that allotment shall be made in consultation with The Stock Exchange, Mumbai (DesignatedStock Exchange for the purpose of Rights Issue).

ü Promoters of the Company, apart from their shareholding in the company and their commercial transactions,have no other interests in the company except their interests in other ventures, which have commercial transactionswith the company.

ü Directors / key managerial personnel of the company, apart from reimbursement of expenses incurred, normalremuneration and benefits and their shareholding in the company, if any, have no other interest in the company.

ü The Company, its directors, promoters, any of the group / subsidiary / associate companies and thecompanies in which the directors of the issuer company are associated with as directors or promoters /persons in control of above companies have not been prohibited from accessing the capital market under anydirection or order of SEBI.

ü All information in respect of present issue shall be made available by the Lead Managers and the Issuer tothe public and investors at large and no selective or additional information would be made available to asection of the investors in any manner whatsoever including road shows, presentations, in research or salesreports etc.

1

DISCLAIMER CLAUSE

IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OFOFFER DOCUMENT TO SEBI SHOULD NOT IN ANY WAY BEDEEMED OR CONSTRUED THAT THE SAME HAS BEENCLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKEANY RESPONSIBILITY EITHER FOR THE FINANCIALSOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICHTHE ISSUE IS PROPOSED TO BE MADE OR FOR THECORRECTNESS OF THE STATEMENTS MADE OR OPINIONSEXPRESSED IN THE OFFER DOCUMENT. LEAD MANAGER INDGLOBAL CORPORATE FINANCE PVT. LTD. HAS CERTIFIEDTHAT THE DISCLOSURES MADE IN THE OFFER DOCUMENTARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITHSEBI (DISCLOSURE AND INVESTOR PROTECTION)GUIDELINES IN FORCE FOR THE TIME BEING. THISREQUIREMENT IS TO FACILITATE INVESTORS TO TAKE ANINFORMED DECISION FOR MAKING INVESTMENT IN THEPROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILETHE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FORTHE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALLRELEVANT INFORMATION IN THE OFFER DOCUMENT, THELEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCETO ENSURE THAT THE COMPANY DISCHARGES ITSRESPONSIBILITY ADEQUATELY IN THIS BEHALF ANDTOWARDS THIS PURPOSE, THE LEAD MANAGER IND GLOBALCORPORATE FINANCE PVT. LTD. HAS FURNISHED TO SEBI ADUE DILIGENCE CERTIFICATE DATED FEBRUARY 28, 2003 INACCORDANCE WITH SEBI (MERCHANT BANKERS)REGULATIONS 1992 WHICH READS AS FOLLOWS :

i. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDINGTHOSE RELATING TO LITIGATION LIKE COMMERCIALDISPUTES, PATENT DISPUTES, DISPUTES WITHCOLLABORATORS ETC. AND OTHER MATERIALS INCONNECTION WITH THE FINALISATION OF THE OFFERDOCUMENT PERTAINING TO THE SAID ISSUE;

ii. ON THE BASIS OF SUCH EXAMINATION AND THEDISCUSSIONS WITH THE COMPANY, ITS DIRECTORSAND OTHER OFFICERS, OTHER AGENCIES,INDEPENDENT VERIFICATION OF THE STATEMENTSCONCERNING THE OBJECTS OF THE ISSUE,PROJECTED PROFITABILITY, PRICE JUSTIFICATION ANDTHE CONTENTS OF THE DOCUMENTS MENTIONED INTHE ANNEXURE AND OTHER PAPERS FURNISHED BYTHE COMPANY,

WE CONFIRM THAT :

(a) THE OFFER DOCUMENT FORWARDED TO SEBI IS INCONFORMITY WITH THE DOCUMENTS, MATERIALS ANDPAPERS RELEVANT TO THE ISSUE;

(b) ALL THE LEGAL REQUIREMENTS CONNECTED WITHTHE SAID ISSUE, AS ALSO THE GUIDELINES,INSTRUCTIONS, ETC. ISSUED BY SEBI, THEGOVERNMENT AND ANY OTHER COMPETENTAUTHORITY IN THIS BEHALF HAVE BEEN DULYCOMPLIED WITH; AND

(c) THE DISCLOSURES MADE IN THE OFFER DOCUMENTARE TRUE, FAIR AND ADEQUATE TO ENABLE THEINVESTORS TO MAKE A WELL INFORMED DECISION ASTO THE INVESTMENT IN THE PROPOSED ISSUE.

iii. WE CONFIRM THAT BESIDES OURSELVES, ALL THEINTERMEDIARIES NAMED IN THE OFFER DOCUMENTARE REGISTERED WITH SEBI AND TILL DATE SUCHREGISTRATION IS VALID.

iv. PRESENT RIGHTS ISSUE IS NOT UNDERWRITTEN.

THE FILING OF OFFER DOCUMENT DOES NOT,HOWEVER, ABSOLVE THE COMPANY FROM ANYLIABILITIES UNDER SECTION 63 OR 68 OF THECOMPANIES ACT, 1956 OR FROM THE REQUIREMENT OFOBTAINING SUCH STATUTORY OR OTHER CLEARANCESAS MAY BE REQUIRED FOR THE PURPOSE OF THEPROPOSED ISSUE. SEBI FURTHER RESERVES THERIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THELEAD MERCHANT BANKER(S) ANY IRREGULARITIES ORLAPSES IN OFFER DOCUMENT."

Disclaimer Statement from the Issuer

The Company accepts no responsibility for statements madeotherwise than in the Letter of Offer or in the advertisement or anyother material issued by or at the instance of the Company and thatanyone placing reliance on any other source of information wouldbe doing so at his own risk.

Disclaimer Statement from The Stock Exchange - Ahmedabad(ASE)

As required, a copy of this LOF has been submitted to ASE. ASEhas given permission to the issuer to use the Exchange's name inthis LOF as one of the Stock Exchanges on which the Issuer'ssecurities are proposed to be listed. The Exchange has scrutinizedLOF for its limited internal purpose of deciding on the matter ofgranting the aforesaid permission to the Issuer. It is to be distinctlyunderstood that the aforesaid permission given by ASE should notin any way be deemed or construed that the LOF has been clearedor approved by ASE; nor does it in any manner warrant, certify orendorse the correctness or completeness of any of the contents ofthe LOF, nor does it warrant that the Securities of the Company willbe listed or will remain listed on the exchange nor take anyresponsibility for the financial or other soundness of this Issuer, itsproducts, its management or any scheme or project of this Issuer.

Every person who desires to apply for or otherwise, acquire anysecurities of this Issuer may do so pursuant to independent inquiry,investigation and analysts and shall not have any claim against theexchange whatsoever by reason of any loss, which may be sufferedby such person consequent to or in connection with suchsubscription / acquisition whether by reason of anything stated oromitted to be stated herein or any other reason whatsoever.

Disclaimer Statement from The Stock Exchange - Mumbai(BSE)

"BSE" gives this Company the permission to use the exchangename in the letter of offer as one of the Stock Exchanges on whichthis company's new securities are proposed to be listed. Theexchange has scrutinised this offer document for its limited

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internal purpose of deciding on the matter of granting theaforesaid permission to the Company. The exchange does not inany matter:

1. Warrant, Certify or endorse the correctness or completenessof any of the contents of this offer document; or

2. Warrant that the Securities of the Company will be listed orwill remain listed on the exchange; or

3. Take any responsibility for the Financial or other soundnessof the company, its promoters, its management or anyscheme or profit of the Company;

And it should not for any reason be deemed or construed that thisOffer Document has been cleared or approved by the exchange.Every person who desires to apply for or otherwise acquire anysecurities of the Company may do so pursuant to independentinquiry, investigation and analysis and shall not have any claimagainst Bombay Stock Exchange whatsoever by reason of any losswhich may be suffered by such person consequent to or inconnection with such subscription/acquisition whether by reason ofanything stated or omitted to be stated herein or any other reasonwhatsoever.

Disclaimer Statement from National Stock Exchange (NSE)

As required, a copy of this letter of offer has been submitted toNational Stock Exchange of India Limited (hereinafter referred to asNSE). NSE has given vide its letters dated April 9, 2003 andNovember 6, 2003 permission to the issuer to use the Exchange'sname in this letter of offer as one of the stock exchanges on whichthis Issuer's securities are proposed to be listed. The Exchange hasscrutinised this letter of offer for its limited internal purpose ofdeciding on the matter of granting the aforesaid permission to thisIssuer. It is to be distinctly understood that the aforesaid permissiongiven by NSE should not in any way be deemed or construed thatthe letter of offer has been cleared or approved by NSE ; nor doesit in any manner warrant, certify or endorse the correctness orcompleteness of any of the contents of this letter of offer ; nor doesit warrant that this Issuer's securities will be listed or will continueto be listed on the Exchange; nor does it take any responsibility forthe financial or other soundness of this issuer, its promoters, itsmanagement or any scheme or project of this Issuer.

Every person who desires to apply for or otherwise acquire anysecurities of this Issuer may do so pursuant to independent inquiry,investigation and analysis and shall not have any claim against theExchange whatsoever by reason of any loss which may be sufferedby such person consequent to or in connection with suchsubscription / acquisition whether by reason of anything stated oromitted to be stated herein or any other reason whatsoever.

Disclaimer Statement from The Stock Exchange - Delhi (DSE)

DSE gives this Company the permission to use the exchange namein the letter of offer as one of the Stock Exchanges on which thiscompany's new securities are proposed to be listed. The exchangehas scrutinised this offer document for its limited internal purposeof deciding on the matter of granting the aforesaid permission to theCompany. The exchange does not in any matter:

1. Warrant, Certify or endorse the correctness or completenessof any of the contents of this offer document; or

2. Warrant that the Securities of the Company will be listed orwill remain listed on the exchange; or

3. Take any responsibility for the Financial or other soundnessof the company, its promoters, its management or anyscheme or profit of the Company;

And it should not for any reason be deemed or construed that thisOffer Document has been cleared or approved by the exchange.Every person who desires to apply for or otherwise acquire anysecurities of the Company may do so pursuant to independentinquiry, investigation and analysis and shall not have any claimagainst the Delhi Stock Exchange whatsoever by reason of any losswhich may be suffered by such person consequent to or inconnection with such subscription/acquisition whether by reason ofanything stated or omitted to be stated herein or any other reasonwhatsoever.

Filing of Letter of Offer with SEBI/Stock Exchanges

The draft copy of the Letter of Offer is filed with (a) SEBI at theiroffice at Mumbai, (b) designated Stock Exchange i.e. The StockExchange, Mumbai and (c) other Stock Exchanges where thepresent Equity Shares are listed ie Ahmedabad, Delhi and NationalStock Exchange.

Stock Exchange Approvals

Draft Letter of Offer has been approved by The Stock Exchange,Ahmedabad vide their letter dated March 25, 2003, The StockExchange, Mumbai vide their letter dated March 24, 2003, DelhiStock Exchange vide their letter dated March 31, 2003 and NationalStock Exchange vide their letters dated April 9, 2003 and November6, 2003.

Jurisdiction

The draft offer document has been filed with SEBI for itsobservations and SEBI has given its observations. Final offerdocument has been filed with relevant Stock Exchanges.

Dear Shareholders,

Your Directors are pleased to issue 88,01,379 Equity Shares of Rs.10/- each for cash at a premium of Rs. 21/- per share aggregatingRs. 27,28,42,749/- to the Equity Shareholders of the Company onRights basis in the ratio of 3 (three) Equity Shares for every 5 (five)Equity Shares held on November 18, 2003 (i.e. The Record Date).

I. GENERAL INFORMATION

Name of the Company and Registered Office AddressHitachi Home & Life Solutions (India) Ltd.901, Abhijeet, Mithakhali Six RoadsAhmedabad, 380006, IndiaTel: (079) 6400673Fax (079) 6401128E- mail: [email protected]: www. hitachi-hli.com

Corporate Status

The Company was incorporated in India as a private limitedcompany on December 07, 1984 under the Companies Act, 1956under the name of Acquest Airconditioning Systems Private Limitedand subsequently it was converted into a deemed public limitedcompany on April 18, 1990 under the then provisions of Section

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43(A)(1) of the Companies Act, 1956. The name of the companywas changed to Amtrex Appliances Limited on September 14, 1990and further to Amtrex Hitachi Appliances Limited on January 25,1999 and further to Hitachi Home & Life Solutions (India) Ltd. onMarch 12, 2003.

Listing

The Company's existing Equity Shares are listed on the StockExchanges at Ahmedabad, Mumbai (Designated Stock Exchangefor the purpose of Rights Issue), Delhi and on National StockExchange.

Applications will be made to these Stock Exchanges for permissionto deal in and for an official quotation in respect of the new EquityShares now being offered in terms of this Letter of Offer, uponclosure of Rights Issue. In case permission to deal in and for anofficial quotation of the Equity Shares of the Company is notgranted by any of the concerned Stock Exchange (s), the Companyshall forthwith repay without interest all monies received fromapplicants in pursuance of this Letter of Offer, and if there is a delayin the refund of subscription by more than 8 days after the companybecomes liable to pay the subscription amount (i.e. forty two daysafter closure of the issue), the company will pay interest for thedelayed period, at rates prescribed under sub-section (2) and (2A)of Section 73 of the Companies Act, 1956.

The Company undertakes that all steps for completion of necessaryformalities for listing and commencement of trading at all stockexchanges where the securities are to be listed are taken within 7working days of finalisation of basis of allotment.

Compulsory Dematerialised Dealing

Applicants should note that as per SEBI's Press ReleaseNo.SMDRP/Policy/cir-9/2000 dated February 16, 2000, alldeliverables of Equity Shares of the Company are being settled inthe dematerialised form only. Accordingly, settlement of trades onthe Stock Exchanges are only in dematerialised form with effectfrom May 15, 2000.

Issue Schedule:

Issue Opening on: Thursday, December 04, 2003

Last date for receiving request for split forms: Thursday,December 18, 2003

Issue Closes on: Friday, January 02, 2004

Lead Managers to the Issue

Ind Global Corporate Finance Pvt. Ltd19th Floor, Express TowersNariman PointMumbai 400 021Tel: (022) 2282 5000Fax: (022) 2282 6000E Mail : [email protected]

Auditors

Bharat S Raut & Co448, KPMG HouseKamala Mills CompoundSenapati Bapat MargLower ParelMumbai 400013Tel: (022) 24913131Fax : (022) 24913132Email: [email protected]

Registrars to the Issue

Pinnacle Shares Registry Pvt LimitedNear Asoka MillsNaroda RoadAhmedabad 380025Tel: (079) 2204226Fax (079) 2202963E Mail: [email protected]

Bankers to the Issue

ICICI Bank LimitedCapital Markets Division30, Mumbai Samachar Marg, FortMumbai - 400001Tel : (022) - 22655285Fax : (022) - 22611138E Mail : [email protected]

Bankers to the Company

State Bank of IndiaParam Siddhi Complex, Opp. VS HospitalEllisbridge, Ahmedabad 380006Tel: (079) 6577380Fax : (079) 6581512Email: [email protected]

Corporation Bank

Industrial Finance BranchRangoli Complex, First FloorEllisbridgeAhmedabad 380006Tel : (079) 6584923Fax : (079) 6576942Email: [email protected]

ICICI Bank LimitedJMC HouseOpp. Parimal GardenAhmedabad 380006Tel : (079) 6461014Fax : (079) 6461748Email: [email protected]

Standard Chartered Bank90, Mahatma Gandhi RoadFortMumbai : 400001Tel : (022) 22670162Fax : (022) 22624912

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Mizuho Corporate Bank Ltd.Maker Chambers III, 1st FloorJamnalal Bajaj RoadNariman PointMumbai : 400 021Tel : (022) 22886638Fax : (022) 22886640

Compliance Officer & Company Secretary

Mr. Mahesh D AgrawalGM - Legal and Company SecretaryHitachi Home & Life Solutions (India) Ltd901, Abhijeet, Mithakhali Six RoadsAhmedabad, 380006, IndiaTel: (079) 6400673Fax (079) 6401128E- mail: [email protected]

The investors should contact the compliance officer in case of anypre-issue / post issue related problems such as non-receipt ofletters of allotment / share certificates / refund orders / cancelledstock invests / demat credit of Rights Shares etc.

Credit rating:

This being an issue of equity shares, credit rating / appointment oftrustees is neither required nor relevant.

Underwriting

The Present Rights Issue is not underwritten.

Impersonation

Attention of the applicants is specifically drawn to the provisions ofsub-section (1) of Section 68 (A) of the Companies Act, 1956, whichis reproduced below:

"Any person who -

a. makes in a fictitious name, an application to a Companyfor acquiring, or subscribing for, any shares therein, or

b. otherwise induces a Company to allot, or register anytransfer of shares therein to him, or any other person ina fictitious name,

shall be punishable with imprisonment for a term which mayextend to five years."

Declaration

The Company will issue and / or credit the allotted securities to therespective DP accounts or despatch Letter of Allotment / ShareCertificates and / or Letter of Regret alongwith Refund Orders, ifany, within 2 working days from the date of finalisation of basis ofallotment by registered post. If such money is not repaid within eightdays from the day the Company becomes liable to pay it, thecompany shall, as stipulated under Section 73(2A) of theCompanies Act, 1956 pay that money with interest as prescribedunder Section 73(2)/73 (2A) of the Companies Act, 1956.

The Board of Directors state that all moneys received out of theissue through this offer document shall be transferred to separatebank account maintained with a scheduled bank until thepermission has been granted or where an appeal has beenpreferred against the refusal to grant such permission, until thedisposal of appeal, and the money standing in this account shall,where the permission has not been applied for as aforesaid, or hasnot been granted, be repaid within the time and in manner specifiedunder sub-section (2) of Section 73.

All information shall be made by the lead managers and the issuercompany to the public and investors at large and no selective oradditional information would be available for a section of theinvestors in any manner whatsoever including at road shows,presentations, in research reports or sales reports etc.

Minimum Subscription

If the company does not receive the minimum subscription of 90%of the issue, on the date of closure of the issue, the entiresubscription shall be refunded to the applicants within 42 days fromthe date of closure of the Issue. If there is a delay in the refund ofsubscription by more than 8 days after the Company becomes liableto pay the subscription amount (i.e. 42 days after closure of theissue), the company shall pay interest for the delayed period, atrates prescribed under sub-sections (2) and (2A) of Section 73 ofthe Companies Act 1956.

In case the permission to deal in and for an official quotation of theEquity Shares is not granted by the Stock Exchanges atAhmedabad, Mumbai, Delhi and National Stock Exchange, theIssuer shall forthwith repay without interest, all monies receivedfrom the applicants in pursuance of this Letter of Offer and if suchmoney is not repaid within eight days after the day from which theIssuer is liable to repay it, the Issuer shall pay interest as prescribedunder Section 73 (2) / 73 (2A) of the Companies Act, 1956.

Government Approvals

The Company has obtained all necessary permissions andapprovals from the Government and / or various Government /relevant authorities / agencies for its current activities. No furtherapprovals from the Government authorities / RBI are required toundertake its current activities, save and except those approvalswhich may be required to be taken in the normal course of businessfrom time to time. The Company will, wherever necessary, apply forand obtain approvals from Government agencies / regulatoryauthorities as may be required in the course of implementation ofthe projects, if any.

Details of relevant approvals obtained from the Government of Indiaand the Reserve Bank of India are given under the head "CapitalStructure" by way of separate Note No. 11 on page no. 8 .

The Company has obtained necessary registrations under theCentral Sales Tax Act and the State Sales Tax Act from the SalesTax Authorities.

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II. CAPITAL STRUCTURE OF THE COMPANY

Sr. No. No. of Shares Description Nominal Value (Rs.) Issue Price (Rs.)

A. Authorised Capital

3,00,00,000 Equity Shares of Rs. 10/- each 30,00,00,000

B. Issued, Subscribed and Paid Up Capital

1,46,68,965 Equity Shares of Rs. 10/- each 14,66,89,650

C. Present Issue

88,01,379 Equity Shares of Rs. 10/- each for cash at a premium ofRs. 21/- Equity Share 8,80,13,790 27,28,42,749

D. Paid Up Equity Share Capital - After the Issue2,34,70,344 Equity Shares of Rs. 10/- each 23,47,03,440

E Share Premium Account

Before the Issue 21,35,79,925

After the Issue 39,84,08,884

Notes to Capital Structure :

Note No. 1: The build up of the capital :

Sr No. Date of Date when No. of Issue % of post Lock in Paid Up RemarksAllotment made fully Shares Price issue paid period Capital

paid up (Rs.) up capital as on (Rs.)date

1 28.03.1985 28.03.1985 1500 100 0.06 NA 150000 Allotted to Original Promoters




5 23.04.1991 23.04.1991 3645500 10 15.53 NA 36455000 Public Issue

6 10.03.1993 10.03.1993 1075500 10 04.58 NA 10755000 Second Conversion ofDebentures of 1991 Public Issue

7 31.05.1994 31.05.1994 1872990 10 7.98 NA 18729900 First Conversion of Debenturesof 1994 Rights Issue

8 01.10.1995 01.10.1995 1312155 10 5.59 NA 13121550 Second Conversion ofDebentures of 1994 RightsIssue



11 30.01.1999 30.01.1999 5165490 10 22.01 NA 51654900 Preferential Allotment

Total 146689650

Increase in Authorised Capital / Reclassification of Preference Share Capital as Equity Share Capital :

Authorised Share Capital of the Company was increased from Rs. 20,00,00,000/- [ 1,99,80,000 Equity Shares of Rs. 10/- each and 20,000 9%Cumulative Redeemable Preference Shares of Rs. 10/- each] to Rs. 30,00,00,000/- [ 3,00,00,000 Equity Shares of Rs. 10/- each] by (i) increasing1,00,00,000 Equity Shares of Rs. 10/- each and (ii) reclassifying 20,000 9% Cumulative Preference Shares of Rs. 10/- each into 20,000 EquityShares of Rs. 10/- each and necessary resolution was passed in the 18th Annual General Meeting of the Company held on February 27, 2003.

Note No. 2: Particulars relating to locked in shares

As of today the Company does not have any equity shares in its books which are subject to lock in requirement.

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Note No. 3: The shareholding pattern of the Company as on the date of Letter of Offer is as follows:

Shareholders No. of shares % of Issued Capital

Promoters 80,06,552 54.58

Non Resident Indians, OCBs and Foreign Nationals 17,700 0.12

Non domestic Companies 700 0.00

Banks, Financial Institutions and Insurance Companies 24,02,178 16.38

Mutual Funds and Unit Trust of India 6,750 0.05

Other Private Body Corporates 5,63,953 3.84

Public 36,71,132 25.03

Total 1,46,68,965 100.00

As per the Beneficiary Positions as on November 14, 2003 received from the Registrars to the Issue.

Note No. 4: The Pre & Post-Issue shareholding pattern are as under :

Shareholders Pre-Issue Post Issue

No. of share holders No. of shares Percentage No. of shares Percentage

Promoters 2 8006552 54.58 12810483 54.58

Non Resident Indians, OCBs and Foreign Nationals 23 17700 0.12 28320 0.12

Non domestic Companies 1 700 0.00 1120 0.00

Banks, Financial Institutions and Insurance Companies 5 2402178 16.38 3843485 16.38

Mutual Funds and Unit Trust of India 6 6750 0.05 10800 0.05

Other Private Body Corporates 231 563953 3.84 902325 3.84

Public 15476 3671132 25.03 5873811 25.03

Total 15744 14668965 100.00 23470344 100.00

Note No. 5: Promoters Undertakings :

Promoter’s undertaking to subscribe

The Promoters have expressed their willingness to support the Issue by subscribing to their Rights entitlement in full and also to subscribe to /arrange to subscribe to the under-subscribed /un-subscribed portion of the Issue, if any, upto a minimum of 90 percent of the Issue size. ThePromoters have received their Board of Directors approval to subscribe in the Rights Issue of Hitachi Home & Life Solutions (India) Limited uptotheir Rights entitlement in full and also to subscribe / arrange subscription to the un-subscribed/under-subscribed portion of the Issue upto aminimum of 90 percent of the Issue size. A written confirmation along with the certified copy of the Resolution passed by the Board of Directorsof Hitachi Home & Life Solutions, Inc i.e. Promoter Company has been filed with Hitachi Home & Life Solutions (India) Ltd i.e. the IssuerCompany.

Option to accept interest free advance from shareholders / promoters

The Company would have the option to accept and utilise interest free advance from the shareholders /promoters either to the full extent of theirentitlement or upto the Issue size or in part and at any time and from time to time before the opening of the Issue, such advance(s) to be receivedand utilised by the Issuer Company will be adjusted towards Issue of Equity Shares to the shareholders/ promoters respectively against theirrights entitlement and any shortfall in the Rights Issue subscription.

Disclosure under Regulation No. 3(1)(b) of the SEBI Takeover Regulations 1997

The Promoters hereby confirm their intention to acquire additional Rights Shares, beyond the Promoters' Right entitlement in the event theRights Issue is under-subscribed to the extent the Rights Issue is so under-subscribed. Allotment to promoters over and above their entitlementwill be done in compliance with Clause 40A of the Listing Agreement.

It is also clarified that no change in the control of the Management of the Company is possible by virtue of any subscription by the Promotersbeyond their Right entitlement since the Promoters are already in control of the Management of the Company.

The above declarations are made pursuant to the requirement of Regulation 3(1)(b) of Securities and Exchange Board of India (SubstantialAcquisition of Shares and Takeovers) Regulations, 1997 as amended till date.

Promoter’s Undertaking in compliance with SEBI Delisting Guidelines 2003

The Promoters undertake to comply with Clause No. 17 of Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003, aslong as it remains effective as it so provides now, by making offer for sale to bring up the public shareholding in Hitachi Home & Life Solutions(India) Limited to the required level for continuous listing in case after exhausting all available remedies including court proceedings against anydecision of SEBI against its show cause notice issued to them on June 13, 2003, they are required to make an open offer by SEBI and as a resultof which non promoter holding in Hitachi Home & Life Solutions (India) Limited falls below the level required for continuous listing requirement.

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Note No. 6: Names and details of the ten largest shareholders of the Company as on the date of Letter of Offer

Sr. No Name of Holders No. of Shares Held % of Total

1 Hitachi Home & Life Solutions, Inc 7506552 51.17

2 ICICI Bank Limited 2399003 16.35

3 Hitachi India Pvt.Ltd 500000 3.41

4 Jindal Securities Pvt.Ltd 74837 0.51

5 Bally Merchandise Ltd. 65887 0.45

6 Aavishkar Finance Trade Ltd. 54425 0.37

7 Arun Choudhary 54409 0.37

8 Steel Traders Pvt Ltd 51701 0.35

9 Vinod Modha 50000 0.34

10 Farsight Securities Limited 46083 0.31

As per the Beneficiary Positions as on November 14, 2003 received from the Registrars to the Issue

Note No. 7: Names and details of the ten largest shareholders of the Company as on November 08, 2003 ie 10 days prior to the dat e ofLetter of Offer

Sr.No Name of Holders No of Shares held % of T otal

1 Hitachi Home & Life Solutions, Inc 75,06,552 51.17

2 ICICI Bank Limited 23,99,003 16.35

3 Hitachi India Pvt.Ltd 5,00,000 3.41

4 Jindal Securities Pvt. Ltd 74,438 0.51

5 Bally Merchandise Ltd. 65,887 0.45

6 Aavishkar Finance Trade Ltd. 54,425 0.37

7 Arun Choudhary 54,409 0.37

8 Steel Traders Pvt Ltd 51,701 0.35

9 Vinod Modha 50,000 0.34

10 Farsight Securities Limited 46,083 0.31

Note No. 8: Names and details of the ten largest shareholders of the Company as on November 18, 2001 ie 2 years prior to the dat e ofLetter of Offer

Sr.No Name of Holders No of Shares held % of T otal

1 Hitachi Ltd.Japan 46,65,490 31.81

2 ICICI Limited 38,58,565 26.30

3 Hitachi India Pvt.Ltd 5,00,000 3.41

4 Asman Investments Ltd. 3,39,874 2.32

5 Kelvin Metal Krafts Ltd 3,31,250 2.26

6 Equinox Brands Pvt.Ltd 2,50,000 1.70

7 Krupa Holding P Ltd 2,20,000 1.50

8 Abundance Invts.Ltd 1,50,000 1.02

9 Aavishkar Finance Trade Ltd. 74,510 0.51

10 Vinod Modha 50,000 0.34

Note No. 9: Aggregate shareholding of Promoter Group and Directors of Promoters as on November 18, 2003

Sr. No. Names of the Promoter Companies No of Shares held % of Total

01 Hitachi Home & Life Solutions, Inc. 75,06,552 51.17

02 Hitachi India Pvt. Ltd. 5,00,000 3.41

Total 80,06,552 54.58

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Relevant details of allotment are as follows:

Sr. Names of the Promoter Date of No of Shares Face % of Date of % of ConsiderationNo. Companies Allotment Allotted value shares on Transfer share Amount

the date capital per shareof Allotment / as on (Rs)

(Rs) Transfer date

1 Hitachi Ltd. 30.01.1999 46,65,490 10 31.81 01.04.2002 Nil 31.00

2 Hitachi India Pvt. Ltd. 30.01.1999 5,00,000 10 3.41 Nil 3.41 31.00

3 Hitachi Home & LifeSolutions, Inc. (Transfer) 01.04.2002 46,65,490 10 31.81 01.04.2002 31.81 Inter-se transfer on

succession resultedfrom Company

separation ofHitachi Ltd.

4 Hitachi Home & LifeSolutions, Inc. 18.01.2003 28,41,062 10 19.36 Nil 19.36 41.64

Total 80,06,552 54.58

Note: All above shares were fully paid up and not subject to any lockin period as of date. However, shares allotted to Hitachi Ltd and HitachiIndia Pvt Ltd on January 30, 1999 were subject to lock in from January31, 1999 to January 29, 2002 as per the then prevailing rules andregulations.

None of the Directors of the promoter companies i.e., Hitachi Home &Life Solutions, Inc. and Hitachi India Pvt Ltd. holds any equity sharesin the paid up equity share capital of the Company. Further, no othergroup companies of Hitachi hold any equity shares in the paid upequity share capital of the Company.

Note No. 10: Dealing in the shares by Promoter Group andDirectors of Promoters

The details of transactions of purchases by the promoters and theirdirectors in the equity shares of the Company along with the price atwhich such purchase made during the six month period preceding thedate of filing the draft document with SEBI are as under:

Asman Investments Limited, a company belonging to LalbhaiGroup, erstwhile Joint Promoter of the Company, holding13,81,500 Equity Shares constituting 9.42% of the paid up EquityShare Capital of the Company acquired 14,59,562 Equity sharesconstituting 9.95% of the paid up Equity Share Capital of theCompany from ICICI Bank Ltd on September 26, 2002 at a priceof Rs. 33.53 per Equity Share and claimed exemption undercreeping acquisition route as permitted under Regulation No. 11(1)of SEBI Takeover Regulations citing Hitachi Group as the PersonsActing in Concert with them.

SEBI issued a Show Cause Notice on April 08, 2003 calling uponAsman Investments Limited to show cause why action underRegulation No. 44 and 45(6) of SEBI Takeover Regulations and Section11 and 11B of SEBI Act, 1992 should not be initiated against them forviolation of Regulation No. 10 and 11(1) of SEBI takeover Regulationsas SEBI made observations in the above mentioned Show CauseNotice that Asman Investments Limited and Hitachi Group are notpersons acting in concert.

Asman Investments Limited submitted its detailed reply to SEBI onMay 19, 2003 stating that they are persons acting in concert withHitachi Group.

Hitachi Home & Life Solutions, Inc Japan, the then Co promoters butpresently the promoters of the Company acquired 28,41,062 Equityshares constituting 19.37% of the paid up Equity Share Capital of theCompany from Asman Investments Limited and other constituents ofLalbhai Group on January 18, 2003 at a price of Rs. 41.64 per Equity

Share and claimed exemption from Regulation No. 11(1) and 12 ofSEBI Takeover Regulations under Inter se Transfer of Shares as perRegulation No. 3(i)(e)(iii)(a) of SEBI Takeover Regulations citing HitachiIndia Pvt Ltd as the persons acting in concert with them.

SEBI issued a Show Cause Notice on June 13, 2003 calling uponHitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltd toshow cause why action under Regulation No. 44 and 45(6) of SEBITakeover Regulations and Section 11 and 11B of SEBI Act, 1992should not be initiated against them for violation of Regulation No.2(1)(c ), 11(1) and 12 of SEBI Take Over Regulations as SEBI madeobservations in the above mentioned Show Cause Notice that prioracquisition of shares by Asman Investments Limited from ICICI Bankis not in order and therefore price of Rs. 33.53 paid for the saidacquisition can not be considered as one of the parameters for thedetermination of minimum price payable under inter se transfer route.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdsubmitted their detailed reply to SEBI on July 28, 2003 stating thatsaid acquisition of shares is eligible for exemption under Inter seTransfer of Shares and price paid for acquisition is as per the normsprescribed under the said provisions.

After joint hearing of both the Show Cause Notices if the submissionsmade by Asman Investments Limited / Hitachi Home & Life SolutionsInc, Japan are not agreeable, SEBI may initiate action against AsmanInvestments Limited and / or Hitachi Home & Life Solutions, Inc Japanwhich may include direction to Asman Investments Limited and / orHitachi Home & Life Solutions, Inc Japan to make open offer to theremaining Equity Shareholders of the Company to acquire minimumof 20% of the outstanding paid up Equity Share Capital of the Companyat a price of not less than Rs. 33.53 / 41.64 per Equity Share in termsof SEBI Takeover Regulations. Asman Investments Limited as well asHitachi Home & Life Solutions Inc, Japan will have the option to appealagainst any such direction by the SEBI.

There are no transaction of sales in the equity shares of the Companyby the existing promoters during this period.

Further there are no transactions of purchase and sales in the equityshares of the Company by the existing promoters during the six monthsperiod preceding the date of filling final document with SEBI and StockExchanges.

Note No. 11: GOI / RBI Approvals

Foreign Collaboration - II Section, Secretariat for Industrial Assistance,Department of Industrial Policy and Promotion, Ministry of Commerceand Industry, Government of India, vide their letter No. FC.II:116(1998)/

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98(1998) Amendment No. 4 dated October 24, 2002, has givenapproval to (a) Hitachi Home & Life Solutions Inc (formerly HitachiLimited, Japan) to purchase 28,41,062 Equity Shares of the Companyconstituting 19.37% of the paid up Equity Share Capital of the Companyfrom Lalbhai Group and (b) Hitachi, Japan to eventually increase itsshareholding in the company upto 74% in terms of previous / existingapprovals by way of purchase of shares from the public or othermechanisms such as preferential allotment.

As per Clause No. 6 of the Foreign Exchange Management (Transferor issue of Security by a person resident outside India) Regulations,2000 [ Notification No. FEMA 20 / 2000 - RB dated May 03, 2000 ]general permission has been given to (a) Indian companies to issueRights shares to Non-Residents and to send such shares out of Indiaand (b) Non Residents to acquire such shares, subject to stipulatedconditions. Hence the Company does not need an in principlepermission from RBI for issue of shares to Non Residents, upto theirentitlement and the Non Resident shareholders need not apply to RBIfor any such approval.

Further, the sector in which the company is operating ie Refrigerationand Air Conditioning industry is eligible for 100% non residentInvestment in terms of Annexure B to Schedule 1 of Notification No.FEMA 20 / 2000 - RB dated May 03, 2000. However, the Companyhas made an application on February 21, 2003, to the Regional Officeof Reserve Bank of India at Ahmedabad seeking approval to issueand allot rights Equity Shares to Non Residents on Repatriable basis.The Company has received the approval vide their letter No.EC.AH.FID.640/06.04.15A(R)/2002-2003 dated February 26, 2003.

RBI, vide Notification dated September 16, 2003 derecognised OCBsas eligible class of investors in India and they shall not purchase EquityShares / Preference Shares / Convertible Debentures offered on rightsbasis by an Indian Company with immediate effect. However, in termsof Press Release issued by RBI on September 18, 2003, overseasentities owned by NRIs can enjoy all the facilities available to foreigninvestors including automatic route for Foreign Direct Investment andaccordingly investment by such entities in rights issues would beconsidered as investment by foreign investors / non residents.

The Company will make an application to the Reserve Bank of Indiaseeking an In principle approval to issue and allot Equity Shares toForeign Institutional Investors if any, as on Record Date on aRepatriable basis.

Note No. 12: Details of Preferential Allotment made by theCompany in the past :

Kunte & Associates, Chartered Accountants, have certified vide theirletters dated December 26, 1998 and February 19, 1999 that the pricingof the preferential allotment of 51,65,490 Equity Shares of Rs. 10/-each made to Hitachi Limited, Japan ( 46,65,490 shares) and HitachiIndia Pvt Limited, India (5,00,000 shares) at an issue price ofRs. 31/- per share ie at a premium of Rs. 21/- per share on January30, 1999 is in accordance with the preferential allotment guidelinesissued by SEBI on August 4, 1994.

Note No. 13: Other Relevant Details(a) This being Rights Issue, Company is exempted from the

provisions of requirements of promoters contributions interms of Clause No. 4.10.1 (c) of Securities and ExchangeBoard of India (Disclosure and Investor Protection)Guidelines, 1999 as amended till date and therefore theprovisions relating to promoters contribution and Lock-in arenot applicable.

(b) There are no 'buyback', 'standby' or similar arrangement forpurchase of securities offered through this Letter of Offer bythe Promoters, Directors and the Lead Managers. TheCompany has not made any underwriting arrangement.

(c) The Company has not issued any warrant, option orconvertible loan or any debentures to the Promoters or

Directors or shareholders that would entitle them to furthershares in the Company.

(d) The Issuer shall not make any further issue of capitalwhether by way of Issue of Bonus shares, preferentialallotment, rights Issue or public Issue or in any other mannerduring the period commencing from the submission of thisoffer document with SEBI till the securities referred in thisoffer document have been listed or application moneysrefunded on account of failure of Issue.

(e) The Company has 15,744 Shareholders as on November 14,2003.

(f) The number of shares in transit are 26,277 with NSDL as onNovember 14, 2003 and 4,018 with CDSL as on November14, 2003. The shares in transit will be kept in abeyance underone folio. Based on the information received from NSDL/CDSL from time to time during the period when the issueremains open, the CAF will be issued to the respectivebeneficiary.

(g) Company has availed financial assistance of Rs. 15.00Crores in February, 2003 from Standard Chartered Bank,Mumbai to meet its long term working capital requirementsand the Company proposes to repay the same out of theproceeds of the rights issue.

(h) Securities offered and issued through this rights issue shallbe made fully paid up or forfeited within a period of 12months from the date of allotment of securities.

(i) Company undertakes that it will comply with the disclosureand accounting norms specified by SEBI from time to time.

(j) At any given time there shall be only one denomination forthe shares of the company.

III. TERMS OF THE PRESENT ISSUE

Authority for the Issue

This Rights Issue of Equity Shares is made pursuant to the Resolutionpassed by the Board of Directors at their meeting held on January 21,2003 and Shareholders in the Annual General Meeting held onFebruary 27, 2003. In terms of the said resolutions, if any Equity Sharesremain un subscribed, the Board shall have full discretion and absoluteauthority to offer such Shares to whomsoever they may deem fit andproper.

The Company is eligible to make rights issue in terms of Clause2.4.1(iv) of Securities and Exchange Board of India (Disclosure andInvestor Protection) Guidelines, 1999 as amended till date.

Basis of Offer

The Company proposes to issue 88,01,379 Equity Shares ofRs. 10/- each for cash at a premium of Rs. 21/- per share aggregatingRs. 27,28,42,749/- to the Equity Shareholders of the Company onRights basis in the ratio of 3 (three) Equity Shares for every 5 (five)Equity Shares held on November 18, 2003 (i.e. The Record Date).

Principal Terms of the Issue

The Equity Shares being issued are subject to the terms of this Letterof Offer, the CAF, the Memorandum and Articles of Association of theCompany, provisions of the Companies Act, 1956 (hereinafter referredto as "the Act"), approvals from GOI/RBI (if applicable) or any otherlegislative enactments and rules as may be applicable and introducedfrom time to time.

l Face value - Each Equity Share shall have a face value ofRs. 10/-

l Issue Price - Rs. 10/- each for cash at a premium ofRs. 21/- per Equity Share.

l Terms of payment - Full amount of Rs. 31/- shall be payable onapplication

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Ranking

The Equity Shares of Rs. 10/- each to be issued on allotment shallrank pari-passu in all respects, including their eligibility to be paiddividend, with the then fully paid up equity Shares in the Equity ShareCapital of the Company and will be subject to the provisions of theMemorandum and Articles of Association of the Company.

Rights Entitlement

As your name appears in the Register of Members as an EquityShareholder of the Company on the Record Date i.e. November 18,2003, you are entitled to the number of Equity Shares by way of Rightsas shown in Block II of Part A of the enclosed CAF on the basismentioned above.

Nomination facility to the Investor

In accordance with Section 109 A of the Act, the sole or first applicant,along with other applicants may nominate any one person in whom, inthe event of the death of the sole applicant or in case of joint applicants,death of all applicants as the case may be, the Equity Shares allotted,if any, shall vest. Such a nominee on becoming entitled to the EquityShares by reason of the death of the original holder(s), shall inaccordance with Section 109 A of the Act, be entitled to the sameadvantages to which he would be entitled if he were the registeredholder of the Equity Share(s). Where the nominee is a minor, theholder(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 orher death during the minority. A nomination shall stand rescinded uponsale of Equity Shares by the person nominating in the mannerprescribed. Fresh nomination can be made only on the prescribedform available on request at the Registered Office of the Company orthe Registrars to the Issue.

Any person who becomes a nominee by virtue of the provisions ofSection 109 A of the Act, shall upon the production of such evidenceas may be required by the Board, elect either:

l To register himself as holder of Equity Shares or

l To make such transfer of the Equity Shares, as the deceasedholder could have made.

Further, the Board may at any time give notice requiring any nomineeto elect either to be registered himself or to transfer the Equity Shares,and if the notice is not complied within ninety days, the Board maythereafter withhold all dividends, bonuses or other monies payable inrespect of the Equity Shares, until the requirements of the notice havebeen complied with.

Fractional Entitlement

On applying rights ratio, rights entitlement may contain fractionalentitlements amounting to 0.6, 1.2, 1.8, 2.4 or 3.00. In all such casesfractional entitlement will be rounded off to the next higher integer.Resulting additional allotment of shares, if any, shall be adjusted againstthe promoters' entitlement.

No of Equity Shares held Rights Rights SharesEntitlement to be issued

1 0.6 1

2 1.2 2

3 1.8 2

4 2.4 3

5 3.0 3

Odd Lots

Shareholders / renouncees applying for additional shares beyond theirentitlement/shares offered may make an application for additional

shares in such numbers so that shares offered to them / renounced intheir favour and accepted plus the additional shares may in totalconstitute a Market lot and the Company would endeavor to makeallotment of additional shares in such lots so as to facilitate a marketlot.

The Company has not made any arrangements for odd lots that mayarise out of this Issue. However, the Company shall as the case maybe, issue certificates in denominations, of 1-5-10-25-50 shares, incase shareholders prefer to receive allotment in physical mode.However, Equity Shares of the Company are traded compulsorily indemat mode and accordingly the market lot for such shares is l.

Acceptance of Offer

You may accept and apply for the Equity Shares hereby offered whollyor in part by filling in Part A of the enclosed CAF and submit the samealong with the application money to the Collection Centres as listed inthe CAF before the close of business hours on January 02, 2004. TheBoard may extend the last date for receipt of the CAF for such periodas it may deem fit but in no case would the offer for subscribing to theIssue be kept open for more than 60 days.

If the CAF together with the amount payable is not received by theCollection Centres as listed in the CAF, on or before the closing of thebusiness hours on January 02, 2004 or by such extended date asmay be determined by the Board in conformity with the CompaniesAct, 1956, the offer contained in the Letter of Offer shall be deemed tohave been declined.

Additional Shares

You are eligible to apply for additional Equity Shares provided youhave applied for all the equity shares offered to you without renouncingthem in full or in part.

The application for additional Equity Shares shall be considered andallotment shall be made at the sole discretion of the Board and inconsultation, if necessary, with The Stock Exchange, Mumbai(Designated Stock Exchange for the purpose of Rights Issue). Thisallotment of additional Equity Shares will be made on an equitablebasis with reference to the number of Equity Shares held by you onthe Record Date.

Renouncees who have applied for full entitlement renounced in theirfavour only can apply for additional shares.

In the case of non resident shareholders, the allotment of additionalshares shall be subject to the approval of Reserve Bank of India, ifany.

If you desire to apply for additional Equity Shares, you may fill in thenumber of additional Equity Shares in Block IV of Part A of the enclosedCAF.

Renunciation

The rights offer is renunciable wholly or in part, in favour of IndianNationals residing in India, minors through natural/legal guardians,limited companies, statutory corporations/institutions, trusts orsocieties (if such trusts or societies are registered under the SocietiesRegistration Act, 1860 or other applicable laws and are authorisedunder their Memorandum and Articles of Association and/or their Rulesand Bye-laws to hold shares in the Equity Share Capital of a Company).

Any renunciation from residents to non-residents or any renunciationfor consideration from non-residents to residents is subject to therenouncer(s) /renouncee(s) obtaining the necessary GOI / RBIapproval, if required, under the Foreign Exchange Management Act,1999 (FEMA) and the said permission should be attached to the CAF.Allotment of Equity shares to such renouncee(s) shall be subject tothe approval of RBI under FEMA, if any.

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A person in whose favour the shares are renounced has no furtherright to renounce. Renouncees are eligible to apply for additional sharessubject to they applying for their full entitlement renounced in theirfavour.

To renounce in whole

If you wish to renounce this offer in whole, please complete Part B ofthe CAF. In case of joint holdings, all joint holders must sign in thesame order as per the specimen signatures recorded with the Company/ Registrars / Depository. The renouncee i.e. the person in whose favouryour offer has been renounced, should complete and sign Part C ofthe CAF.

To renounce in part

If you wish to accept this offer in part and renounce the balance orrenounce this offer in favour of one or more renouncees, the CAFmust first be split by applying to the Registrars to the Issue. Pleaseindicate your requirements of the split forms in the space provided forthis purpose in Part D and return the entire CAF to the Registrars tothe Issue so as to reach them latest by the close of business hours onor before December 18, 2003. On receipt of the required number ofsplit forms from the Registrar, the procedure as mentioned under "torenounce in whole" should be followed.

If the applicant wishes to apply for shares jointly with any other persons(upto 3) who are not already joint holders with the applicant, it wouldamount to renunciation and the procedure for renunciation as statedabove would apply viz. Parts B & C of the CAF will have to be filled in.

Similarly, any change in the order of the names and signatures of theshareholders would amount to renunciation and the procedure forrenunciation as stated would apply.

Split Forms

l Split forms cannot be re-split.

l Only the person to whom the offer is made and not therenouncee(s) shall be entitled to obtain split forms.

l Requests for split forms should be sent to the Registrars tothe Issue, not later than December 18, 2003 by filling in PartD of the CAF.

l Requests for split forms will be entertained only once.

Basis of Allotment

The basis of allotment shall be finalised in consultation with The StockExchange, Mumbai (Designated Stock Exchange for the purpose ofRights Issue) in the following order of priority:

(a) Full allotment to the Shareholders who have applied for theirRights entitlement either in full or in part and also to therenouncee(s) who have applied for Equity shares renouncedin their favour either in full or in part.

(b) Allotment to the shareholders, who having applied for all theshares offered to them as rights have also applied foradditional shares. The allotment of such additional EquityShares will be made as far as possible on an equitable basiswith reference to the number of Equity Shares held on theRecord Date in consultation with The Stock Exchange,Mumbai (Designated Stock Exchange for the purpose ofRights Issue).

(c) Allotment to the renouncees who have applied for all theshares renounced in their favour and have applied foradditional shares, provided there is a surplus remaining aftermaking full allotment under (a) and (b) above.

(d) Allotment to any other person, including promoters, as theBoard may in their absolute discretion deem fit, provided

there is a surplus after making full allotment under (a), (b)and (c) above.

(e) Fractional entitlement

Note: The Promoters confirmed their intention to acquire additionalRights Shares, beyond the Promoters' Right entitlement in the eventthe Rights Issue is under-subscribed to the extent the Rights Issue isso under-subscribed. Allotment to promoters over and above theirentitlement will be done in compliance with Clause 40A of the ListingAgreement.

On applying rights ratio, rights entitlement may contain fractionalentitlements amounting to 0.6, 1.2, 1.8, 2.4 or 3.00. In all such casesfractional entitlement will be rounded off to the next higher integer.Resulting additional allotment of shares, if any, shall be adjusted againstthe promoters' entitlement.

No of Equity Shares held Rights Rights SharesEntitlement to be issued

1 0.6 1

2 1.2 2

3 1.8 2

4 2.4 3

5 3.0 3

The unsubscribed portion of the Equity shares, if any, offered to theshareholders after considering the application for Rights/Renunciationand additional Equity shares, as above, shall be offered to any otherperson as the Board may in their absolute discretion deem fit.

The Promoters have given an Undertaking to subscribe to / arrangesubscription to the unsubscribed portion of the Issue, if any, upto aminimum of 90 percent of the Issue size to support the Rights Issueand this will be borne in mind while finalising the basis of allotment.

Instructions for Equity Shareholders

How to apply

The enclosed CAF for Equity Shares should be completed in allrespects in entirety before submission to the Collection Centres asthey appear in the CAF. The CAF should not be detached under anycircumstances; otherwise the application will be rejected forthwithwithout giving any reasons.

Options Available Action Required

Accept whole or part of the Indicate in Block III of Part A,Equity shares offered to you the number of Equity shareswithout renouncing the balance accepted. If you accept all the

Equity shares offered in BlockII, you may apply for additionalEquity Shares.

Indicate in Block IV, the additionalEquity Shares required.Complete Block V and VI.

Renounce all the Equity Shares Fill in and sign Part B indicatingoffered to you to one person the number of Shares(joint renouncees are deemed renounced in Block VII andas one person) without your hand over the entire CAF to theapplying for any of the Equity renouncees. The renouncee /Shares offered to you joint renouncees must fill in and

sign Part C.

Accept a part of your entitlement Fill in and sign Part D forand renounce the balance or required number of split formspart of it to one or more persons and send the entire CAF to the

Registrars to the Issue.

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OR

Renounce your entitlement or On receipt of the Split Forms:part of it to one or more persons a) For the Equity shares you(joint renouncees are deemed are accepting, fill in andas one person) sign Part A.

b) For the Equity shares youare renouncing, fill in andsign Part B indicating thenumber of Equity sharesrenounced in Block VII.

c) Each of the renounceesshould fill in and signPart C.

Notes

l The last date for receipt of request for split forms isDecember 18, 2003.

l The last date for submission of completed forms withremittance is January 02, 2004.

l Part A of the CAF must not be used by any person(s) inwhose favour this entitlement has been renounced. This willrender the application invalid.

l A renouncee is not entitled to split a CAF.

l While applying for or renouncing Equity Shares, joint holdersmust sign in the same order and as per the specimensignatures registered with the Company / Registrars /Depository.

l Shareholders cannot utilise both Part A and Part Bsimultaneously i.e. accepting the offer as well as renouncingthe offer. If all the parts are filled in, the allotment will bemade under part B & C i.e. to the renouncee only and theentry in part A shall be ignored.

l Please check the number of shares registered in your name.In case of any discrepancy in the number of shares held byyou as appearing in the Form, the Company shall be entitledto amend the same on the basis of the entry in the Registerof Members / Depository.

l The application form shall contain space for indicatingnumber of shares subscribed for in demat and physical orboth.

l No separate applications for demat and physical is to bemade. If such applications are made, the applications forphysical shares will be treated as multiple application andrejected accordingly.

l In case of partial allotment, allotment will be done in dematoption for the shares sought in demat and balance, if any, willbe allotted in physical shares.

Payments - Where to be made

The completed CAF (duly signed by all joint holders, if any), togetherwith the Cheque/Demand Draft/Stockinvest for the amount payableon application at the rate of Rs. 31/- per share should be forwarded toany of the Collection Centres as mentioned in the CAF, on or beforeJanuary 02, 2004. Application(s) will not be accepted by the LeadManagers to the Issue or by the Company directly at any of theiroffices.

The Shareholders residing at places other than the collection centresmentioned in the CAF and applicants who wish to send theirapplications by post are requested to send their applications directly

to the Registrars to the Issue together with their Demand Draft drawnin favour of " ICICI Bank A/c. -HHLI- Rights Issue" payable atAhmedabad, so as to reach them on or before the closure of the Issue.In such cases, the applicants may make payment net of Demand Draftand postal charges, since these charges will be borne by the Company.In the interest of the members, it is advised that such applications besent by Registered Post. The Company is not responsible for any postaldelay/loss in transit on this account.

Payments - How to be made

Resident Shareholders

Only one mode of payment should be used. Payment must be madeby Cheque / Demand Draft / Stockinvest drawn on any Bank (includinga Co-operative Bank) which is situated at and is a member or sub-member of the Bankers Clearing House in the city/town at which theCAF is submitted. A separate Cheque/ Demand Draft/ Stockinvest,must accompany each CAF. Outstation/ Post-dated Cheques andPostal/ Money Orders will not be accepted and CAFs accompaniedby such Cheques/Demand Drafts/Orders are liable to be rejected.Return Cheques shall not be represented and the accompanyingapplication will not be considered.

The Cheque/Demand Draft accompanying the application must bedrawn in favour of "ICICI Bank A/c. - HHLI - Rights Issue" crossed"Account Payee Only". Stockinvests should be drawn in favour of theCompany i.e. "Hitachi Home & Life Solutions (India) Ltd." and marked"Account Payee Only". You are requested to mention the Folio number/ Client ID and DP ID and the CAF number on the reverse of theCheque/Demand Draft/Stockinvest. If a Cheque or Demand Draft isdrawn on a bank that is not participating in clearing, the CAFaccompanying such Cheque/Demand Draft shall, at the discretion ofthe Board, be liable to be rejected.

Particulars of applicant's Savings Bank/Current Account must be givenin the space provided for in the CAF, so as to enable the Registrars toprint the same on the refund order, if any. Applications without suchdetails are liable to be rejected.

Where the application is for shares of the total value of Rs. 50,000/- ormore, the applicant or in the case of application in joint names, eachof the applicants should mention his/her Permanent Account No/GIRNo. allotted under the Income Tax Act, 1961. In case where thePermanent Account No./GIR No. has not been allotted, the fact ofnon-allotment should be mentioned in the Application Form. Withoutthis information, the Application Form will be considered incompleteand will be liable to be rejected.

Procedure for payment by means of Stockinvest

Individual Investors and Mutual Funds have the option to useStockinvest for applying for the shares offered in terms of this Letterof Offer. Stockbrokers, Corporate Bodies, Banks and FinancialInstitutions cannot avail of this facility. The Reserve Bank of India hasfurther prescribed a ceiling of Rs. 50,000/- per Individual per capitalIssue for Issue of Stockinvests by banks. The ceiling would, however,not be applicable to Mutual Funds. The prospective investor mayapproach the issuing bank with which he maintains an account forissue of Stockinvest for payment of application money. The Stockinvestwould be issued only against term deposits and credit balancesavailable in saving and current accounts of the Individual Investor/Mutual Funds.

1. The prospective investor, at the time of request for issue ofStockinvest to the issuing bank, may have to :

l indicate that he agrees to abide by the terms of the issue andencashment of the Stockinvest;

l give irrevocable authority to his/her bank to mark a lien forthe value of the Stockinvest against the balance held in hissavings/current/other term deposit account;

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l agree for lifting of the bankers lien on expiry of the currencyof the Stockinvest or in case of intimation of partial/non-allotment of shares; and

l agree that the issuing bank will not be liable for any damagesor consequences arising out of the loss of these instruments.

2. The Stockinvest should bear "Account Payee Only" and non-negotiable crossing and will be payable only to the account ofthe payee and to the purchaser investor on cancellation.

3. The Stockinvest should be utilised by the purchaser(s) andthe purchaser's name/name of one of the purchasers shouldbe invariably indicated as the first applicant in the CAF.Investor should not hand over the stock invest taken againsthis account to any third party.

4. The investors should use only one Stockinvest along witheach CAF.

5. The currency of Stockinvest shall not exceed 4 months. TheStockinvest should be used within 10 days from the date ofits Issue, to ensure that it remains valid till the time ofcollection.

6. The Stockinvest will be issued to the applicant in the nameof "Hitachi Home & Life Solutions (India) Ltd." afterauthentication of the date of issue by the designated branch.

The above information is given for benefit of investors and the Companyis not liable for any modification of the terms of Stockinvest or procedurethereof by the issuing banks.

Applicants using Stockinvest should submit the CAF along with theinstrument to the Collection Centres as mentioned in the CAF.Applications accompanied partly by Stockinvest and partly by Cheque/Draft will not be accepted and such applications are liable to be rejected.

The applicant has to fill in the following particulars:

1. Title of the Account - Hitachi Home & Life Solutions (India)Ltd.;

2. The number of Equity shares applied for; and

3. The amount payable on the Equity shares applied for.

The instrument should thereafter be signed by the applicant. It shouldalso bear the stamp of the bank issuing the instrument and should becrossed "A/c Payee Only". Service charges for issuing the Stockinvestmust be borne by the applicant.

The applicant should not fill in the portion to be filled up by theRegistrars to the Issue (right hand portion of the instrument). TheRegistrars to the Issue will fill up the Right hand portion of theStockinvest indicating the number of Equity Shares allotted to theapplicant and also the amount calculated as follows:

l In case of full allotment, the number of Equity Shares and theamount on the right hand side will be the same as on the lefthand side of the instrument.

l In case of partial allotment, the number of Equity Shares andthe amount filled up by the Registrars to the Issue (on theright hand side of the instrument) will be less than thenumber filled up by the applicant (on the left hand side).

l In case the allotment is nil, the number of Equity Shares andthe amount filled up by the Registrars to the Issue on theright hand side of the instrument will be nil.

In case of Non allotment of Equity Shares, the cancelled Stockinvestwould be returned to the investors by the Registrars to the Issue.

The Registrars to the Issue have been authorised by the Companyvide its Board Resolution passed on January 21, 2003 to sign onbehalf of the Company to realise the proceeds of the Stockinvest fromthe issuing bank or to affix non- allotment advice on the instrument or

cancel the Stockinvest of the non- allottees or partially successfulallottees who have enclosed more than one stock invest. Suchcancelled Stockinvest shall be sent back by the Registrars directly tothe Investors.

Non-Resident Shareholders including NRIs/OCBs

Applications received from Non-Resident Indian(s)/Persons of Indianorigin, resident abroad, for allotment of Equity Shares shall be interalia, subject to the conditions as may be imposed from time to time bythe Reserve Bank of India in the matter of refund of application moneys,allotment of Equity Shares, issue of letters of Allotment/ShareCertificates, payment of interest, dividends etc.

No permission is necessary for the issue of Equity shares to NonResidents as a general permission is given by the Reserve Bank ofIndia under clause 6 of Foreign Exchange Management (Transfer orissue of Security by a person resident outside India) Regulations, 2000if the conditions stated in sub regulation (2) there under have beensatisfied.

RBI, vide Notification dated September 16, 2003 derecognised OCBsas eligible class of investors in India and they shall not purchase EquityShares / Preference Shares / Convertible Debentures offered on rightsbasis by an Indian Company with immediate effect. However, in termsof Press Release issued by RBI on September 18, 2003, overseasentities owned by NRIs can enjoy all the facilities available to foreigninvestors including automatic route for Foreign Direct Investment andaccordingly investment by such entities in rights issues would beconsidered as investment by foreign investors / non residents.

The Company will make an application to the Reserve Bank of Indiafor their approval to issue and allot Equity Shares to Foreign InstitutionalInvestors if any, as on Record Date on a Repatriable Basis.

Mode of payment by Non-Resident (NR) shareholders will depend onwhether the Equity Shares to be allotted to them are on repatriation ornon-repatriation basis.

While making an application, the respective NR has to ensure that theFIRC and bank certificates submitted along with the Application formshould contain the following details:

l The name of the Issuer company;

l The name of the bank and the address along with theaccount name and nos. of the account from which the fundsare being remitted from;

l The amount remitted;

l The purpose of remittance;

l The name of the remittor along with their address;

If the FIRC and Bank certificates do not mention these details, theapplication is liable to be rejected.

On Repatriation basis

Payment is to be made by such NRs in any of the followingmodes:

l Indian Rupee Draft purchased from abroad drawn on anybank in India and made payable at Ahmedabad or

l Cheques/Stockinvest drawn on Non-Resident ExternalAccount (NRE A/c) with any Bank at Ahmedabad or

l Indian Rupee Draft/Stockinvest purchased out of NRE/FCNRa/cs maintained anywhere in India and payable atAhmedabad

l Payments through NR(O) a/c. will not be permitted.

l Payments by FII's must be paid through the special NREAccount.

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In case of NRs who remit their application money through Indian rupeedrafts from abroad, refunds, payment of interest and otherdisbursements, if any, will be made in the relevant foreign currenciesat the rate of exchange prevailing at such time subject to the permissionof the RBI. The Company will not be liable for any loss on account ofexchange fluctuations for converting their rupee amount in any foreigncurrency. In case of those NRs who remit their application moneyfrom funds in NRE/FCNR accounts, refund, payment of interest andother disbursements, if any, shall be credited to such account, detailsof which account should be furnished in the appropriate column of theCAF.

On Non-repatriation basis

Payments are to be made by such NRs either as mentioned above orby Cheques drawn on Non-Resident Ordinary A/c (NRO A/c) or RupeeDemand Draft purchased out of NRO A/c maintained anywhere inIndia, but payable at Ahmedabad. In such cases, refund, interest andother disbursement, if any, will be payable in Indian Rupees only. Theapplication should be accompanied by a non-repatriation undertaking.

Whether the application being made for the Equity Shares is onrepatriation/non- repatriation basis, a separate Cheque/Demand Draft/Stockinvest must accompany each CAF. All Cheques/Demand Draftsmust be crossed "A/c Payee Only" and drawn in favour of "ICICI BankA/c - HHLI -Rights Issue - NR". Stockinvests should be drawn in favourof the Company viz. "Hitachi Home & Life Solutions (India) Ltd.".Further, the applicants are requested to mention the folio number /Client ID and DP ID and the CAF number on the reverse of the Cheque/Demand Draft/Stockinvest.

An account debit certificate from the Bank issuing the draft confirmingthat the draft has been issued by debiting FCNR/NRE/NRO/SpecialNRE account must be attached in all cases where drafts have beenpurchased from FCNR/NRE/NRO/Special NRE accounts alongwiththe CAF or sent latest by the Issue closing date, failing which theapplication may be considered incomplete and liable for rejection. Theduly completed CAF with a Cheque/Demand Draft/Stockinvest for theamount payable must be lodged before the close of banking hours onJanuary 02 , 2004 with the Registrars to the Issue. In no circumstancesshould the CAF be delivered to the Lead Managers to the Issue or tothe Company at their respective offices.

Applicants should note that the CAF provides for space for the investorto mention his bank account number, the name of the bank and thebranch where the account is maintained so that the refund orders areprinted with the said details after the name of the investor to ensurethat the amount is credited to the right account thereby preventingfraudulent encashment of the refund orders.

In cases where repatriation benefit is available, dividend and saleproceeds derived from the investment in shares can be remittedoutside, subject to tax as applicable, according to Income-Tax Act,1961. In case of shares allotted on non-repatriation basis, the dividend/sale proceeds of the new Equity cannot be remitted outside India.

Joint Applicants

In case of renouncees, applications may be made in the name ofthree joint holders. In case of joint application, refund pay orders (ifany), dividend etc. will be made in favour of and all communicationswill be addressed to the applicant whose name appears first at his/heraddress stated in the CAF.

Minimum Subscription

If the company does not receive the minimum subscription of 90% ofthe issue, on the date of closure of the issue, the entire subscriptionshall be refunded to the applicants within 42 days from the date ofclosure of the Issue. If there is a delay in the refund of subscription bymore than 8 days after the Company becomes liable to pay thesubscription amount (i.e. 42 days after closure of the issue), the

company shall pay interest for the delayed period, at rates prescribedunder sub-sections (2) and (2A) of Section 73 of the Companies Act1956.

In case the permission to deal in and for an official quotation of theEquity Shares is not granted by the Stock Exchanges at Ahmedabad,Mumbai, Delhi and National Stock Exchange, the Issuer shall forthwithrepay without interest, all monies received from the applicants inpursuance of this Letter of Offer and if such money is not repaid withineight days after the day from which the Issuer is liable to repay it, theIssuer shall pay interest as prescribed under Section 73 (2) / 73 (2A)of the Companies Act 1956.

Disposal of applications and application money

No separate receipt will be issued for application money received.However, the collection centres as listed in the CAF, will acknowledgeits receipt by stamping and returning the acknowledgement slip at thebottom of each CAF. In the event of shares not being allotted in full,the excess amount paid on application will be refunded to the applicantwithin 2 working days from the date of finalisation of basis of allotment.

No permission is necessary for the issue of Equity shares to NonResidents as a general permission is given by the Reserve Bank ofIndia under Regulation No. 6 of Foreign Exchange Management(Transfer or issue of Security by a person resident outside India)Regulations, 2000 [ Notification No. FEMA 20 / 2000 - RB dated May03, 2000 ] as the conditions stated in sub regulation (2) there underare satisfied. According to the notification issued by Reserve Bank ofIndia, NRs are allowed to sell the shares originally allotted in primarymarket or in secondary market without prior permission from theReserve Bank of India.

However, the Company has made an application on February 21, 2003,to the Regional Office of Reserve Bank of India at Ahmedabad seekingapproval to issue and allot rights Equity Shares to Non Residents ona Repatriable basis. The Company has received the approval videtheir letter No. EC.AH.FID.640/06.04.15A(R)/2002-2003 datedFebruary 26, 2003.

The Board reserves its full, unqualified and absolute right to accept orreject any application in whole or in part and in either case withoutassigning any reason thereof. In case an application is rejected in fullthe whole of the application money received will be refunded to theapplicant. Where an application is rejected in part, the excessapplication money, if any will be refunded to the applicant.

Utilisation of Proceeds

The subscription received against the Rights Issue will be kept inspecific bank accounts and the Company would not have access tothese funds unless it satisfies The Stock Exchange, Mumbai(Designated Stock Exchange for the purpose of Rights Issue) withsuitable documentary evidence that the minimum subscription of 90per cent of the Issue amount has been received.

Board of Directors state that (a) details of all monies utilised out of theissue shall be disclosed under an appropriate separate head in thebalance-sheet of the company indicating the purpose for which suchmonies had been utilized and (b) details of all un utilised monies outof the issue of shares, if any, shall be disclosed under an appropriateseparate head in the balance-sheet of the company indicating theform in which such unutilised monies have been invested.

Allotment/Refund

The excess of application money in respect of Equity Shares for whichthe application may be received but not allotted in full, will be refundedwithin a period of 2 working days from the date of finalisation of basisof allotment by registered post. Refunds will be made by Cheques orRefund orders drawn in favour of the first named applicant marked"Account Payee". Bank charges will be payable by the applicant.However, such Cheques or refund orders will be payable at par at all

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Stock Exchange centers and all other centers where the applicationsare accepted.

The Lead Manager shall ensure that the Company despatches refundorders of value upto Rs. 1500/- (Rupees One Thousand and FiveHundred only) Under Certificate of Posting and those over Rs. 1500/-and Share Certificates by Registered Post only, and adequate fundsfor the same will be made available to the Registrars to the Issue bythe Issuer Company.

In case of joint applications, refund orders, if any, will be made out inthe first name and all communications will be addressed to the personwhose name appears first in the Application Form.

In case the Equity Shares are applied for through Stockinvest, theRegistrar will fill in the required amount in the space provided andpresent it for payment to the issuing bank. The intimation of the amountutilised will be sent to the applicant. In case the application is rejectedin full, the cancelled Stockinvest will be sent to the applicant alongwith the Letter of Regret within 2 working days from the date offinalisation of basis of allotment.

Letters of Allotment will be issued and Share Certificates will bedespatched by Registered Post at the applicant's risk.

Allotment Schedule

l The Company agrees that as far as possible allotment ofsecurities offered to the shareholders shall be made within 30days from the date of the closure of the Issue.

l The Company further agrees that it shall pay interest @ 15%per annum for the delayed period if the allotment has notbeen made and/or allotment letters / the refund orders havenot been despatched to the applicants within 30 days fromthe date of the closure of the Issue.

Undertaking by the Issuer Company

We undertake:

1. That the complaints received in respect of the Issue shall beattended to by us expeditiously and satisfactorily;

2. That all steps for completion of the necessary formalities forlisting and commencement of trading at all stock exchangeswhere the securities are to be listed are taken within 7working days from the date of finalisation of basis ofallotment;

3. That the funds required for despatch of refund orders/allotment letters/certificates by registered post shall be madeavailable to the Registrars to the Issue;

4. That the certificates of the securities/refund orders to the nonresident Indians shall be despatched within specified time;and

5. That no further Issue of securities shall be made till thesecurities offered through this offer document are listed or tillthe application moneys are refunded on account of non-listing, under subscription etc.

Notes:

In case the shareholders have neither received the original CAF norare they in a position to obtain the duplicate CAF, they may subscribeto the Rights Issue on a plain paper giving the following particulars (a)his/her/their full name including joint holder(s), if any, in the sameorder as in the records of the Company/ Registrars/ Depository. (b)the folio number, (c) address, (d) Number of Equity Shares held as onthe Record Date (i.e. November 18, 2003) (e) Number of Equity Sharesentitled to in the ratio of 3 Equity Shares for every 5 Equity Sharesheld, (f) number of additional shares applied for, if any, (g) total numberof shares applied for, (h) total amount paid at the rate of Rs. 31/- pershare, (i) Cheque /Demand Draft/Stockinvest number, date and Bank

on which drawn. Cheque/Demand Draft is to be drawn in favour of"ICICI Bank A/C - HHLI - Rights Issue" made payable at Ahmedabadand marked "Account Payee" only. Stockinvest is to be drawn in favourof "Hitachi Home & Life Solutions (India) Ltd." made payable atAhmedabad and marked "Account Payee". (j) PAN/GIR number in casethe application is for shares of the total value of Rs. 50,000/- or more.(k) Saving/Current Account Number, name of the Bank and branchfor Refund purposes. Application without these details will be liableto be rejected, (l) In case of Non-Resident shareholders the detailsof the NRE/FCNR/NRO/Special NRE account alongwith the nameand the address of the Bank and the branch (m) Signature of theshareholders should be in the same order as they appear in therecords of the Company / Registrars / Depository. Such applicationsshould be sent by Registered Post together with the Cheque/DemandDraft/Stockinvest to the Registrars to the Issue before the closure ofthe Issue. i.e. January 02, 2004. Further, the applicants are requestedto mention the Folio number or Client ID and DP ID and the CAFnumber on the reverse of the Cheque/Demand Draft/Stockinvest.

In case an original CAF is not received, or misplaced by the applicant,a request may be made to the Registrars to the Issue for a duplicateCAF on or before December 18, 2003, furnishing the registered folionumber / Client ID and DP ID, full name and address. The Registrarsto the Issue may issue a duplicate on request of the applicant and asmay be decided by the Board of Directors of the Company.

Attention of the shareholders is drawn to the fact that thoseshareholders making the application otherwise than on the CAF (i.e.on a plain paper as stated above) shall not be entitled to renouncetheir rights and should not utilise the CAF for any purpose includingrenunciation even if it is received subsequently. In case the originaland duplicate CAFs and application on the plain paper or any two ofthese applications are lodged or if any shareholder violates any ofthese requirements, the company will have the absolute right to rejectany one or both of his/her/their application and refund the applicationmoney received. However, the Company is not liable to pay any interestwhatsoever on money so refunded.

Tax Benefits

Certificate on Statement of Tax Benefit by Bharat S. Raut &Co, Auditors.

To the Board of Directors of Hitachi Home & Life Solutions (India)Limited (formerly known as Amtrex Hitachi Appliances Limited)

Dear Sirs,

In connection with Hitachi Home & Life Solutions (India) Limited’s(formerly known as Amtrex Hitachi Appliances Limited) ('the Company')proposed letter of offer to the rights issue of 8,801,379 equity sharesof Rs 10 each, we have read the attached statements of tax benefitscurrently available to the Company and its members as set out in theaccompanying Annexure and found them to be in accordance withthose available under the Income Tax Act, 1961, the Wealth Tax Act,1957 and the Sales Tax Act and Rules. However, we express no opinionor provide any other form of assurance concerning the exhaustivenessof this list or as to whether the Company or its members will obtainthese benefits at any future date or as to whether such benefits asdescribed meet the conditions prescribed for their availability.

This report is being issued by us solely for the purpose of incorporatingin the letter of offer to be issued by the Company in connection withthe proposed rights issue by the Company.

Yours faithfully

Sd/-

Bharat S. Raut & Co.

Mumbai10 October 2003

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Tax benefits available to the Company and its shareholders

The following tax benefits are currently available to the Company andits shareholders under the Income-tax Act, 1961 and the Wealth-taxAct, 1957 and the Sales Tax Act and Rules. .

The benefits discussed below are not exhaustive. It is only intendedto provide general information to the investors and is neither designednor intended to be a substitute for professional tax advice. In view ofthe individual nature of the tax consequences and the changing taxlaws, each investor is advised to consult his or her own tax consultantwith respect to the specific tax implications arising out of theirparticipation in the issue.

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

n the Company or its shareholders will continue to obtain thesebenefits in future; or

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

The Income-tax Act, 1961 ('the IT Act')

I Benefits available to the Company

1 Under section 32 of the IT Act, the Company can claimdepreciation allowance at the prescribed rates on tangibleassets such as building, plant and machinery, furniture andfixtures, etc.; and on intangible assets such as patent,trademark, copyright, know-how, licences, etc., if acquiredafter 31 March 1998. The Company can carry forward andset-off the unabsorbed depreciation allowance, if any, againstits income of the future years. The Company is also entitledto carry forward and set-off its unabsorbed business lossesfor a period upto eight subsequent years for set-off against itsbusiness income. In case of machinery and plant acquiredand installed after 31 March 2002 by the company, additional15% depreciation can be claimed provided the Companyachieves substantial expansion by increasing its installedcapacity by not less than 25%.

2 Under section 35 of the IT Act, the Company can also claimdeduction of the whole of the capital expenditure (other thanon land and any interest in land) incurred on scientificresearch related to the business carried on by the Companyin the year in which such expenditure is incurred.

3 Dividend income received by the Company from anotherdomestic company on or after 1 April 2003 is tax-exempt inthe hands of the Company.

4 The Company can claim a deduction under section 80HHC ofthe IT Act of 30% of profits from export of goods forassessment year 2004-05. Moreover, sale of goodsmanufactured or produced by the Company to anyundertaking situated in a Special Economic Zone eligible forbenefits under section 10A of the IT Act during the previousyear relevant to the assessment year 2004-05 would bedeemed to be exports, and benefits under section 80HHC ofthe IT Act could be available for such sale.

II Benefits available to the Shareholders of the Company

(a) Resident shareholders

1 Dividends declared, distributed or paid on or after 1 April2003 are tax-free in the hands of shareholders.

2 Capital gains arising on sale of shares of the Company heldfor more than 12 months are considered as "long-term capitalgains". Under Section 48 of the IT Act, such gains arecomputed after indexing the cost of acquisition /improvement.

3 Long-term capital gains arising from transfer of an 'eligibleequity share' in a company, purchased during the period 1March 2003 to 29 February 2004 (both days inclusive) andheld for a period of 12 months or more, are tax-exempt.'Eligible equity share' means:

n any equity share in a company being a constituent ofBSE-500 Index of the Stock Exchange, Mumbai as on 1March 2003 and the transaction of purchase and sale ofsuch equity share are entered into on a recognisedstock exchange in India; or

n any equity share in a company allotted through a publicissue on or after 1 March 2003 and listed on arecognised stock exchange in India before 1 March 2004and the transaction of sale of such equity share isentered into on a recognised stock exchange in India.

4 Under Section 112 of the IT Act, the tax on the long-termcapital gains arising on sale of equity shares of the companywill be lower of 10% (plus surcharge) of capital gainscomputed without indexation benefit or 20% (plus surcharge)of capital gains computed with indexation benefits.

5 In case of individuals and HUFs, where the total income asreduced by long-term capital gain is below the basicexemption limit, the long-term capital gain will be reduced tothe extent of the shortfall and only the balance long-termcapital gain will be subject to tax.

6 Under Section 54EC of the IT Act, capital gains arising ontransfer of the a long-term capital asset of the Company shallbe exempt from capital gains tax to the extent such gains areinvested within six months from the date of transfer in thepurchase of any specified bonds issued by the National Bankfor Agriculture and Rural Development (NABARD), theNational Highway Authority of India (NHAI), the NationalHousing Bank (NHB), the Rural Electrification CorporationLtd. (REC) and Small Industrial Development Bank of India(SIDBI).

7 Under Section 54ED of the IT Act, long-term capital gains taxarising on transfer of the listed securities or unit shall beexempt from capital gains tax if the gains are invested withinsix months from the date of transfer in equity shares formingpart of an 'eligible issue of capital'. 'Eligible issue of capital'means an issue of equity shares that satisfies the followingconditions:

n The issue is made by a public company formed andregistered in India; and

n The shares forming part of the issue are offered forsubscription to the public.

8 Under Section 54F of the IT Act, long-term capital gains taxarising on transfer of the shares of the Company held by anindividual or Hindu Undivided Family shall be exempt fromcapital gains tax if the net sales consideration is utilized,within a period of one year before, or two years after the dateof transfer, in the purchase of a new residential house, or forconstruction of a residential house within three years.

9 Under section 10(32) of the IT Act, any income of a minorchild clubbed in the total income of the parent under section64(1A) of the IT Act will be exempt from tax to the extent ofRs. 1,500/- per minor child. This benefit is available for twominor children;

10 Investment in specified securities, funds and schemes couldprovide certain taxpayers with a tax rebate under section 88of the Act.

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(b) Non-Resident shareholders

1 Dividend Income earned by an individual and HinduUndivided Family from shares is eligible for deduction underSection 80L of the IT Act upto a sum of Rs. 12,000/- upto 31March 2003. From 1 April 2003, dividend income is tax-freein the hands of the shareholder.

2 Long-term capital gains arising from the transfer of sharesare generally taxed at a concessional rate of 20% (plussurcharge).

3 Under Section 48 of the IT Act, capital gains arising out oftransfer of capital assets being shares in the Company arecomputed by converting the cost of acquisition, expenditurein connection with such transfer and full value of theconsideration received or accruing as a result of the transferinto the same foreign currency in which the shares wereoriginally purchased and such gains are reconverted intoIndian currency.

4 The benefits to resident shareholders mentioned in para 3, 5,6, 7, 8, 9 and 10 of clause (a) above are also available tonon-resident shareholders.

5 Under section 90(2) of the IT Act, the provisions of the taxtreaty applicable to non-resident would override theprovisions of the IT Act, unless the provisions of the IT Actare more beneficial to the non-resident.

(c) Non-Resident Indians

1 Besides the benefits applicable for non-residents, as persection 115-I of the IT Act, a Non-Resident Indian has theoption to be governed by the provisions of Chapter XII-A ofthe IT Act according to which:

a) Under Section 115E of the IT Act, any income frominvestment acquired out of convertible foreign exchangewill be taxable at 20% (plus surcharge) while incomefrom long-term capital gains on transfer of shares of theCompany acquired out of convertible foreign exchangeshall be taxed at the rate of 10% (plus surcharge).

b) Under Section 115F of the IT Act, long-term capitalgains arising to a Non-Resident Indian from transfer ofshares of the Company acquired out of convertibleforeign exchange are wholly exempt from capital gainstax if the entire net consideration is invested within sixmonths of the date of transfer in any specified asset asdefined in section 115C(f) of the IT Act and, if the entirenet consideration is not invested in the cost of the newasset, then the proportionate capital gains are tax-exempt.

c) Under Section 115G of the IT Act, it is not necessary fora Non-Resident Indian to file a return of Income underSection 139(1) of the IT Act, if his total income consistsonly of investment income and/or long-term capital gainsearned on transfer of such investment acquired out ofconvertible foreign exchange, and the tax has beendeducted at source from such income under theprovisions of Chapter XVII-B of the IT Act.

(d) Foreign Institutional Investors (FIIs)

1 In accordance with the provisions of Section 115AD of the ITAct, FIIs will be taxed at 10% (plus surcharge) on long-termcapital gains and at 30% (plus surcharge) on short termcapital gains arising on the sale of the shares of theCompany.

2 Under section 90(2) of the IT Act, the provisions of the taxtreaty applicable to FII should override the provisions of theIT Act, unless the provisions of the IT Act are more beneficialto the FII.

(e) Mutual Funds

1 Under Section 10(23D) of the IT Act, any income inclusive ofdividends from shares, earned by a Mutual Fund set up by apublic sector bank or a public financial institution orauthorized by the Securities and Exchange Board of India orthe Reserve Bank of India will be exempt from income-tax,subject to such conditions as the Central Government may bynotification in the Official Gazette specify in this behalf.

The Wealth-tax Act, 1957

Asset as defined under Section 2(ea) of the Wealth-tax Act, 1957 donot include shares and hence, the share of the Company is not liableto wealth-tax.

Sales Tax Acts

The Company has got sales tax benefits in the form of exemptionfrom payment of sales tax on the sales made from its factory atSilvassa, situated in the union territory of Dadra Nagar & Haveli. Henceall sales made from the said factory in the union territory of DadraNagar & Haveli and in the course of inter state trade have been grantedexemption from payment of sales tax for a period of 15 years from 9February 1994 to 8 February 2009.

However, in respect of sales made in the course of inter-state trade,with effect from 1st June 2002, pursuant to Notification dated 31 May2002 issued by Commissioner, Dadra Nagar & Haveli consequent uponan amendment in Central Sales Tax Act, 1956, the exemption isavailable only if the Company is able to furnish necessary declarationsin the prescribed Form "C" which are collectible from customers.

The benefit in form of exemption is likely to undergo a change if VAT isintroduced in Dadra Nagar & Haveli.

The Company has subsequently discontinued its operations at SilvassaFactory in July, 2003.

General

Applications should be made only on the prescribed CAFs providedby the Company and should be complete in all respects. Applicationswhich are not complete or which are not accompanied with remittanceof the proper amount calculated as aforesaid are liable to be rejectedand the money paid in respect thereof will be refunded without interest.

The Company will not allot any Equity Shares in favour of:

l more than three persons as joint holders (including the firstholder), in the case of renouncees

l a partnership firm

l an Hindu Undivided Family

l a trust or society (unless such trust or society is registeredunder the Societies Registration Act, 1860 and it isauthorised under its Memorandum & Articles of Associationand/or its Rules & Bye Laws to hold shares in a company)

l a minor (unless application is made through a guardian)

l any renouncee(s) whom the Board may not approve of

In case the applicants in the above categories are already shareholdersof the company, they will be eligible for their entitlement. In case ofapplications made under a Power of Attorney (POA) or by LimitedCompanies or Bodies Corporate or Societies, a certified true copy ofthe relevant POA or the relevant resolution or authority to make the

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application as the case may be, along with the copy of theMemorandum & Articles of Association and/or Bye laws must be lodgedfor scrutiny giving the serial number of the CAF with the Registrars tothe issue, simultaneously with the submission of the CAF failing whichthe application is liable to be rejected. In case the POA is alreadyregistered with the Company, the same need not be furnished again.However, the serial number under which the POA has been registeredwith the Company, must be mentioned below the signature(s) of theconcerned applicants(s).

The CAF must be filled in English in BLOCK LETTERS.

In case of joint holders, all joint holders must sign the CAF at theappropriate places in the same order as per specimen signaturesrecorded in the Register of Members of the Company / Registrars/Depository.

Signatures in languages other than those prescribed in the 8thSchedule of the Constitution of India and thumb impressions must beattested by a Magistrate or a Notary Public or a Special Executivemagistrate under his/her official seal.

In case of renouncee(s), the name of the applicant(s), details ofoccupation, address and father's/husband's name must be filled inBlock Letters.

The CAF must be presented to the Collection Centres as mentionedin the CAF in its entirety. If any of the parts A, B, C, D and theacknowledgement of the CAF is/are detached or separated, suchapplications will be rejected forthwith.

Any dispute or suit or action or proceeding arising out of or in relationto this Letter of Offer or in respect of any matter or thing containedtherein and any claim by either party against the other shall be institutedor adjudicated upon or decided solely by the appropriate Court inAhmedabad.

All communications in connection with your application for the EquityShares should be addressed to the Registrars to the Issue.

Depository Option to Investors

l The Existing Shares of the Company have been admitted fordematerialisation on National Securities Depository Limitedwith effect from August 12, 1999. The Company has alsobeen admitted for dematerialisation on the Central DepositoryServices (India) Limited (CDSL) with effect from March 27,2000. The Demat ISIN number is INE 782 A 01015.

l A tripartite agreement has been signed between the IssuerCompany, Registrars and National Securities DepositoryLimited and also between the Issuer Company, Registrarsand Central Depository Services (India) Limited for offeringthe depository option to the investors.

l The investor has the option to seek allotment of equityshares, either in the electronic or physical mode. Applicationsmade both in the electronic and physical mode by the sameapplicant/(s) will be treated as multiple applications, whichwill be dealt with in a manner as detailed under the head"Notes" under "How to Apply" on Page No. 12.

l Such an option if exercised should be indicated in therelevant blocks in the composite application form itself.

l Investors who wish to apply for equity shares in electronicform need to have at least one beneficiary account with adepository participant prior to the application.

l Allotment advice/refund orders will be directly sent to theinvestors by the Registrars.

l If incomplete/incorrect investor depository account details aregiven in the composite application form, physical equityshares will be allotted to the investors.

l Responsibility for correctness of applicant's demographicdetails, given in the Composite Application Form vis-à-visthose with his/her depository participant, would rest with theinvestor.

l Shares in the electronic form can be traded only on the StockExchanges having electronic connectivity with NSDL / CDSL.

l The securities allotted through this letter of offer shall betraded on stock exchanges in demat segment only for allinvestors.

IV. PARTICULARS OF THE ISSUE

Objects of the Issue

Objects of the issue are as follows:

l To augment the financial resources of the company for itsongoing business needs

To infuse the fund for long-term working capital purpose inview of the cash losses incurred by the Company.

l Expansion of manufacturing capacity as well as capability

Considering high potential for growth, the manufacturingcapacity is to be enhanced .

l New model development

To maintain the technological leadership and to speed up thepace of growth, capital investments in this area is required tobe made.

l To repay short term financial assistance availed fromStandard Chartered Bank

The Company has availed Rs. 1500.00 lakhs as short term financialassistance from Standard Chartered Bank and proposes to repay thesame from the proceeds of the proposed Rights Issue.

The Company has availed further short term assistance of Rs. 600Lakhs from Standard Chartered Bank and proposes to repay the samefrom the proceeds of the proposed Rights Issue or from any otherloan taken by the Company.

Current Working Capital Facilities

Particulars of Working Capital facilities as on June 30, 2003 are asfollows:

(Rs. in Lakhs )

Name of the Banks Sanctioned Availed Utilised as onLimit Limits June 30, 2003

Fund Based

State Bank of India 950.00 950.00 -9.32

Corporation Bank 285.00 285.00 192.42

ICICI Bank Ltd 285.00 285.00 -129.26

Standard Chartered Bank 380.00 380.00 350.00

Mizuho Corporate Bank,Ltd 1080.00 500.00 500.00

Total 2980.00 2400.00 903.84

Non Fund Based

Letter of Credit :

State Bank of India 1000.00 1000.00 845.23


ICICI Bank Ltd 1300.00 1300.00 1039.36



Total 3000.00 3000.00 2304.32

19

Bank Guarantee

State Bank of India 200.00 200.00 77.77


ICICI Bank Ltd 75.00 75.00 66.81



Total 500.00 500.00 324.89

Negative figures of fund based limits of SBI and ICICI bank indicatepositive balance in loan accounts.

Note : All the above mentioned Banks have given their consent for theproposed Rights Issue.

Security Offered:

Above mentioned working capital facilities are secured by way of :

(a) pari passu first charge on the whole of the Company's stockof raw materials, stock in process, finished goods, stores andspares, packing materials lying at the Company's godown,factory premises and by Company's all present and futurebook debts, receivables, domestic and exports outstandingmonies, receivables, claims, bills, contracts engagements,securities, investments, rights and assets in favour of all theabove mentioned Banks.

(b) Second pari passu charge on all the movable and immovableFixed Assets including movable machinery spares, tools andaccessories and other movables both present and future andpari passu first charge on immovable property of theCompany situated at Abhijeet, Ahmedabad in favour of StateBank of India, Corporation Bank and ICICI Bank.

Supplier Bills Discounting

Sanctioned Utilised as onJune 30, 2003

SIDBI 200.00 199.41

Security Offered : Third charge on all the movable assets of theCompany.

Requirement of Funds

Total fund requirement is Rs. 5826.42 Lakhs as per the details givenbelow :

(Rs. in Lakhs )

Particulars Amount

Long term working capital requirements 4326.42

Expansion of manufacturing capacity/New Product Development during next two years 1500.00

Total fund requirements 5826.42

Means of Finance

(Rs. in Lakhs)

Particulars Amount

Rights Issue 2728.42

External Commercial Borrowing FromPromoter Company 1598.00

Internal accrual 1500.00

Total 5826.42

Status of Application of Funds and sources / extent of tie up ofMeans of Finance :

The Company has sourced Rs. 1598.00 Lakhs from its promoters asExternal Commercial Borrowing.

The External Commercial Borrowing is repayable with interest at therate of 2% pa payable every six months. The principal amount is to berepaid in two equal installments payable on January 21, 2007 andJanuary 21, 2008.

The Company has availed Rs. 1500.00 lakhs as short term financialassistance from Standard Chartered Bank and proposes to repay thesame from the proceeds of the proposed Rights Issue.

The Company has availed further short term assistance Rs. 600 Lacsfrom Standard Chartered Bank and proposes to repay the same fromthe proceeds of the proposed Rights Issue or from any other loantaken by the Company.

Therefore, firm arrangements of finance through verifiable means (forRs. 1598.00 Lakhs as against the minimum requirement of Rs. 1198.50Lakhs) towards minimum of 75% of the stated means of finance (ex-cluding the amount to be raised through the proposed Rights Issueand Internal Accruals), as required by SEBI, have been made and thebalance portion of Means of finance for which no firm arrangementshave been made is (a) proposed Rights Issue of Rs. 2728.42 Lakhs(b) Internal accruals of Rs. 1500.00 Lakhs, aggregating to Rs. 4228.42Lakhs.

The Company has already utilised Rs. 3698.00 Lakhs out of abovesources.

20

Details of secured long term loans sanctioned by various Financial Institutions are as follows :

(Rs. in Lakhs)

Date availed Sanctioned Disbursed Interest Interest Payment ScheduleInstitutions as on Rate as on Repayment

June 30, 2003 June 30, 2003 Terms

IDBI - Loan 1-CLS 01-Jul-98 500.00 100.00 12.70% Int.to be Every qtr 25 Lakhs till Sept.paid qly. 2003 effect from Dec.98

IDBI - Loan 2 - ACS 01-Feb-99 150.00 75.62 16.00% Int to be Every qtr as per repaymentpaid qly. schedule till Sept. 2004 effect

from March, 2000

ICICI 30-Jun-00 1000.00

16-Aug-00 500.00

1500.00 900.00 13.08% Int to be Every qtr 75 Lakhs from Septpaid qly. 15, 2001 to June, 2006

HDFC - Corporate Loan 30-Nov-99 21.00 7.69 13.50% Int.to be Monthly Installmentpaid mthly.

TOTAL 2171.00 1083.31

Note : All the above mentioned Financial Institutions have given their consent for the proposed Rights Issue.

V. COMPANY, MANAGEMENT AND PROJECT

Brief History of the Company

The Company was incorporated in India as a private limited companyon December 07, 1984 under the Companies Act, 1956 under thename of Acquest Airconditioning Systems Private Limited and thecompany was promoted by Lalbhai Group of India. Subsequently itwas converted into a deemed public limited company on April 18,1990 under the then provisions of Section 43(A)(1) of the CompaniesAct, 1956. The name of the company was changed to AmtrexAppliances Limited on September 14, 1990 and the company adopteda new set of Articles deleting the conditions required by Section 3(1)(iii)of the Companies Act, 1956 by passing a Special Resolution in theExtraordinary General Meeting of the Company held on October 15,1990.

The Company entered the capital market in February 1991 with aPublic Issue of 5,00,000 Equity Shares of Rs. 10/- each for cash atpar and 2,64,000 Debentures of Rs. 125/- each for cash at par thusaggregating Rs. 380.00 lakhs. Further, the Company made a RightsIssue of 9,36,375 14% Fully Convertible Debentures of Rs. 155/- eachfor cash at par aggregating Rs. 1451.38 lakhs in March 1994.

Since inception the Company operates from its site located atKarannagar Village, Kadi Taluka, Mehsana District, Gujarat and in 1994it set up a plant at Silvassa, Dadra & Nagar Haveli, a Union Territory.Kadi plant has state-of-the-art manufacturing facilities consisting ofSheet metal shop, heat exchanger shop, paint shop and assemblylines with the most modern equipments for manufacturing of Airconditioners and Commercial Refrigeration products and their parts.

Company was enjoying Sales Tax exemption at Silvassa by virtue ofSales Tax benefits to the Industries set up in the Uninon Territory ofDadra & Nagar Haveli. The modification in the Central Sales Tax Actwith effect from June, 2002, has resulted indirectly in withdrawing theexemptions of Sales Tax to a large extent. Considering above theCompany has shifted its manufacturing operations from Silvassa toKadi in July, 2003

Government of India declared various fiscal benefits including CentralExcise exemptions to the industries, inter alia, set up in the States ofJammu & Kashmir as well as Himachal Pradesh. The Company hastied up with a local manufacturers to purchase the Air conditionersproduced as per the Company’s specifications. Company would enjoy

Security Offered:

Terms Loans granted by IDBI and ICICI are secured by way of :

(1) pari passu first charge on all the movable and immovable propertiesincluding movable machinery spares, tools and accessories and othermovables both present and future.

(2) pari passu second charge on the whole of the Company's stock ofraw materials, stock in process, finished goods, stores and spares,packing materials lying at the Company's godown, factory premises,and by Company's all present and future book debts, receivables,domestic and exports outstanding monies, receivables, claims, bills,contracts engagements, securities, investments, rights and assets.

(3) pari passu second charge on immovable property of the Companysituated at Abhijeet, Ahmedabad.

HDFC Corporate Loan is secured by way of mortgage of specificimmovable property of the Company.

Proposed funds utilisation:

Rs. 2728.42 Lakhs to be collected from the proposed Rights Issue ofthe Company will be utilised as follows:

(Rs. in Lakhs)

Particulars Amount

Towards expansion of manufacturing capacity/ New ProductDevelopment 1200.00

Towards long terms working capital requirement * 1528.42

Total 2728.42

*Out of this, Rs. 1500.00 lakhs has been obtained as short termfinancial assistance from Standard Chartered Bank and the same willbe repaid out of the proceeds of the right issue.

Bridge Loan or Financial Assistance

The Company has availed financial assistance of Rs. 1500 Lakhs inFebruary, 2003 from Standard Chartered Bank, Mumbai to meet itslong term working capital requirements and the Company proposesto repay the same out of the proceeds of the rights issue with interestpayable on a monthly basis.

21

the benefits in terms of pricing due to various fiscal benefits includingexemptions from Excise Duty enjoyed by the Suppliers.

The Company had entered into various Drawing and Design Agreementand Technical Collaboration Agreement for various types of windowas well as split Air conditioners with Hitachi Limited, Japan Since 1990.

In December 1996 the Company has entered into a TechnologyCollaboration with Orford Pty. Ltd. Australia to avail related know howfor manufacturing of visi coolers in India.

In April 1998 Company entered into a Technical collaborationagreement along with strategic alliance under which Hitachi agreed tofurnish the company with the technical information of Hitachi modelsand to allow use of Hitachi trade mark.

The Company became a Joint Venture of Lalbhai Group and Hitachiby issue of 46,65,490 Equity Shares to Hitachi Ltd and 5,00,000 EquityShares to Hitachi India Pvt Ltd thus aggregating 51,65,490 EquityShares to Hitachi Group on a Preferential Allotment basis in January1999 pursuant to Management Agreement entered into on January22, 1999 between (a) Hitachi Ltd, Japan, representing Hitachi (b) ArvindMills Ltd representing Lalbhai group and (c) the Company andaccordingly the name of the Company was changed to Amtrex HitachiAppliances Limited on January 25, 1999. After the preferentialallotment, Hitachi and Lalbhai group held 35.20% each in the paid upEquity Share Capital of the Company whereas remaining 29.60% washeld by the public.

Hitachi Home & Life Solutions Inc, Co-promoters, (formerly HitachiLimited, Japan) purchased the entire share holding of Lalbhai groupie 28,41,062 shares constituting 19.37% from Lalbhai Group by wayof inter se transfer of shares amongst promoters in January 2003 at aprice of Rs. 41.64 per share and increased its holding in the companyfrom 35.20% to 54.58%. After the said transfer of shares, Hitachi Home& Life Solutions, Inc. became the sole promoter of the Company. Sharetransfer was executed in accordance with business strategies of boththe parties whereas Lalbhai group decided to exit from their non corebusiness, Hitachi Home & Life Solutions Inc, Japan placed India as asignificant market for air conditioners and made a decision to expandthe business in India.

The accumulated losses as on September 30, 2002 exceeded fiftypercent of the peak net worth of the Company during the immediatelypreceding four financial years. As a result, the Company is a potentiallysick Company within the meaning of Section 23 of the Sick IndustrialCompanies (Special Provisions) Act, 1985 (SICA). In compliance ofthe requirement of SICA, Extra Ordinary General Meeting (EGM) ofthe Shareholders of the Company was held on April 26, 2003 andconsidered such erosion of the net worth. Further, Company hassubmitted requisite report with the Board for Industrial and FinancialReconstruction stating its recovery plan.

Head Office of the company has been shifted from 'Abhijeet',Ahmedabad to Kadi factory in the month of May / June 2003. It willimprove the synergy between the various functions of the company,there by improving overall efficiency and faster decision making andreducing overhead cost and manpower.

Company has not been prohibited from accessing the capital marketunder any order or directions passed by SEBI.

The Company is not detained as willful defaulter by RBI / Govt.Authorities and there are no violations of securities laws committedby it in the past or pending against it.

Previous Capital Issue

The Company has not made any Public Issues / Rights Issues in thelast five years and the details of the build up of share capital havebeen stated under the head "Capital structure of the Company" onPage No. 5.

Main Objects of the Company

The main objects of the Company as set out in its Memorandum ofAssociation are as follows:

1. To carry on the business of fabricating, designing,manipulating, die smoking, processing, producing, erectingand manufacturing, manufacture of and dealing in all types,kinds, varieties of air conditioning, refrigeration plant andtemperature control equipments, components andaccessories and similar and relevant equipments includingcentral stations, cooling towers, gases for air conditioning,equipments, compressors and grill and also to carry on thebusiness of importing, exporting, buying, selling, indentingand otherwise dealing in such implements.

2. To carry on the business of buying, selling, manufacturing ,servicing, repairing, importing, exporting, altering anderecting of air conditioners, refrigerators, water coolers, bottlecoolers, deep freezers, all types of refrigerations,equipments, industrial and consumer cooling and heatingtemperature controlling plants, cold storage, fabricating,erecting, repairs.

Other objects incidental or ancillary to the attainment of main objectsare stated in the Memorandum of Association of the company and theactivities carried out by the company are in line with the above objects.

Objects Clause of the Company

Main Object Clause of the Memorandum of Association of theCompany enables the company to undertake the activities for whichthe funds are being raised in the present issue. The activities theCompany has been carrying out until now is in accordance with theobject of Memorandum of Association of the Company. Main Objectsof the Company adequately cover its existing and proposed activities.

Present business of the Company

The Company is currently operative in both household and commercialsegments of the Air Conditioners and refrigeration market. It offers awide range of products which cater to all the segments in these markets.Window Air Conditioners, Split Air Conditioners, Ducted Split AirConditioners, Ceiling Air Conditioners, Vertical floor mounted type SplitAir conditioners, Inverter Air Conditioning systems and Spacemakes(precision telecom solutions) form part of the offerings in the AirConditioner segment. Apart from the above, the company alsomanufactures and markets visicoolers, chest coolers, non-electricalice-cooled dispensors, etc. and markets stabilizers, gas tables,dispensors, set free systems, and air & water cooled screw type chillers,etc. The Company recently launched a new model "Logicool", a furthersophisticated model of logicool series in terms of electronic technologyand customer satisfaction.

Recognition and acceptance of Hitachi brand increased a great dealduring the past two years in the Indian market owing to high evaluationfor the product's quality and reliability and the focused brand buildingactivities carried out by the company.

Promoters and their Background

Hitachi Ltd, Japan ventured into restructuring of group companies inthe year 2002 and a decision was taken to separate consumer productsgroup by forming Hitachi Home & Life Solutions, Inc. Relevant detailsof the restructuring scheme are given under the head "Hitachi Limited,Japan" below.

Hitachi India Pvt. Ltd. is a wholly owned subsidiary of Hitachi Asia,Ltd., Singapore, which is a wholly owned subsidiary of Hitachi, Ltd.,Japan. Hitachi India Pvt. Ltd. is the Indian arm of Hitachi Ltd. and ismainly engaged in the business of liaisoning, trading, promotingmanufacturing projects in joint venture with Indian Companies etc.

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Promoter Group holds 54.58% in the paid up equity share capital ofthe company with Hitachi Home & Life Solutions Inc holding 51.17%and Hitachi India Pvt Ltd holding 3.41%.

Hitachi Ltd, Japan

Founded in Japan in 1910, Hitachi, the second largest industrialconglomerate in Japan, is one of the most respected Japanesebusiness power houses with respect to technology in areas as diversedas consumer products, information system and electronics, power andindustrial system, material and services, etc. Hitachi is a reputed nameworld wide in consumer goods business and one of the top five brandsof Air conditioners in the world market. Hitachi Limited, Japan wasincorporated on February 01, 1920 and its principal office is presentlysituated at 6, Kanda-Surugadai, 4-Chome, Chiyoda-ku, Tokyo, 101-8010, Japan. It has 3,21,517 employees and 3,76,206 shareholdersas on March 31, 2002. Shares of the company are presently listed onthe Stock Exchanges at Tokyo, Osaka, Nagoya, Fukuoka and Sapporoin Japan and on Luxembourg, Frankfurt, Amsterdam, Paris and NewYork Stock Exchanges overseas.

For the year ended March 31, 2002, the Company registered net salesof 7993.7 billion Yen ( US$ 60104 million) but posted net loss of 483.8billion Yen ( US$ 3638 million) as the Company faced the challengesof an unprecedented scale, negative growth and deflation in Japanand recessionary trend in US. Company implemented reforms toovercome the difficulties encountered in the fiscal 2001 and to returnto long term sustainable growth, the company plans to improvemanagement efficiency by accelerating the pace of corporateinnovation initiative.

Financials are as follows:

(Rs. in Lakhs )

Particulars March 31, 2003 March 31, 2002 March 31, 2001 March 31, 2000(Yen) (Rs) (Yen) (Rs) (Yen) (Rs) (Yen) (Rs)

Net Sales 81917520 30162031 79937840 29409131 84169820 31496346 80012030 33172987

Net Income 278670 102606 -4838370 -1780036 1043800 390589 169220 70158

Total Assets 101793890 37480513 99156540 36479691 112466080 42084807 99833610 41391014

Shareholders Equity 18532120 6823527 23042240 8477240 28615020 10707740 29876870 12386950

(conversion Rate : 100Yen = Rs. 36.82 on March 28, 2003, Rs. 36.79on March 28, 2002, 37.42 on March 30, 2001 and 41.46 onMarch 31, 2000)

Hitachi Home & Life Solutions, Inc

Background and Business :

Hitachi Home & Life Solutions, Inc, head quartered in Tokyo, Japan, afully owned subsidiary of Japanese major Hitachi, Ltd was split offfrom Hitachi on April 01, 2002 and became an independent companywith its registered office located at Hitachi Atago Building, 15-12, NishiShimbashi, 2-Chome, Minato-Ku, Tokyo, 105-8410, Japan. Mr. KunioSebata is the President and CEO of the Company which employsabout 18000 people. The Company has 56 affiliates in Japan and 13overseas forming a corporate group dedicated to providing digital activeproducts to homes around the world. The Company's motto is tobecome a driving force behind the image of Hitachi as a cutting edgebrand that opens up the future and is the global brand of choice. Theword "Solutions" was included in the corporate name to signify anevolution from the consumer products of 20th century and the newrelationships the company want to build up with the customers.

The Company is engaged in the business of developing, manufacturingand selling of home appliances and marketing of consumer electronicsand the company has established an integrated structure specificallyfor the consumer electric appliance products business which includessales, maintenance and service subsidiaries. Home appliances suchas refrigerators, room air conditioners and washing machines are someof the many products designed and manufactured by the Companyand ties with Hitachi Ltd, Hitachi Maxell Ltd and other members ofHitachi group are used to supply products that enhance home lifesuch as plasma TVs and DVD systems. Consumer products wouldincorporate digital, network and sensor technologies that would giveadvanced interactive capabilities and these products are called asdigital products. Interactivity will benefit consumers in many ways bygiving rise to new concepts in functionality, software and services.Hitachi group is moving forward with a corporate branding campaignusing "Inspire the next" as its corporate statement and the productsand services of the company will play a major role in shaping Hitachi'sbrand image. The company also uses its innovative technology toexpand in a number of new directions that include software and serviceswhich utilize network technology, business to business solutions suchas online information support systems for home appliances storesand home IT systems.

Hitachi Home & Life Solutions Inc, Co-promoters, ( formerly HitachiLimited, Japan) purchased the entire share holding of Lalbhai groupie 28,41,062 shares constituting 19.37% from Lalbhai Group by wayof inter se transfer of shares amongst promoters in January 2003 at aprice of Rs. 41.64 per share and increased its holding in the companyfrom 35.20% to 54.58%. After the said transfer of shares, Hitachi Home& Life Solutions, Inc. became the sole promoter of the Company.

23

Board of Directors :

Names Designations Residential addresses

Mr. Kunio Sebata President & Director 5-16, Oaza-Tomita,Ohiramachi,Shimotsuga-gun, Tochigi, Japan

Mr. Kenichi Iizuka Executive Managing Director Egota-Haitsu 506,2-74-7 Kotake cho,Nerima-ku, Tokyo, Japan

Mr. Mitsuru Murata Executive Managing Director 5-21-4-103 Nagasaki,Toshima-ku,Tokyo, Japan

Mr. Shingo Tsuneyoshi Executive Managing Director Room No. 1704, Krungthep Thani,Tower 56 Sukhumvit Road, soi 24, Klongton,Klongtoey, Bangkok 10110, Thailand

Mr. Kiyoshi Yoshida Director 3-59-2 Utsukushigaoka,Aoba-ku, Yokohama,Kanagawa, Japan

Mr. Katsuji Kanaida Director 603 Shimura-house No2,2-43-12, Nakadai,Itabashi-ku,Tokyo, Japan

Mr. Yoshitaro Ishii Director Egota-Haitsu 403,2-74-7 Kotake-cho,Nerima-ku,Tokyo, Japan

Mr. Koichi Kawai Director 1-23-15-105 Harigaya,Saitama-shi, Saitama, Japan

Mr. Shinji Matsuoka Director 2-43-12 Nakadai, Itabashi-ku,Tokyo, Japan

Mr. Yoshiteru Fukamizu Director 3-23-1-245 Fukuei, Ichikawa-shi,Chiba, Japan

Mr. Kazuo Sato Director 1-7-1-503 Taihei, Sumida-ku,Tokyo, Japan

Mr. Kazutaka Kato Director 1-14-26-1101 Shimomae,Toda-shi, Saitama, Japan

There has been no change in the management of Hitachi Home& Life Solutions, Inc./persons who are holding controlling interestin the company, during the above mentioned period.

Directors / Persons in control of Hitachi Home & Life Solutions,Inc. Japan have not been prohibited from accessing the capitalmarket under any order or directions passed by SEBI.

Hitachi India Pvt Ltd and Hitachi India Trading Pvt Ltd.

Background and Business :

Hitachi India Trading Pvt. Ltd. is wholly owned subsidiary of HitachiIndia Pvt. Ltd. and Hitachi India Pvt Ltd. is a wholly ownedsubsidiary of Hitachi Asia, Ltd., Singapore, which is a whollyowned subsidiary of Hitachi, Ltd., Japan.

Hitachi India Pvt. Ltd. and Hitachi India Trading Pvt Ltd are theIndian arms of Hitachi Ltd. and are mainly engaged in thebusiness of liaisoning, trading, promoting manufacturing projectsin joint venture with Indian Companies etc.

There has been no change in the management of Hitachi India PvtLtd. and Hitachi India Trading Pvt. Ltd. / persons who are holdingcontrolling interest in these companies, during the abovementioned period.

Promoters Confirmation:

Promoters have not been prohibited from accessing the capitalmarket under any order or directions passed by SEBI.

Besides disclosure made in this letter of offer, promoters are notinvolved with any other ventures in the same line of business inIndia as that of Hitachi Home & Life Solutions (India) Ltd. andthere is no potential conflict of interest amongst them.

Promoters have complied with relevant provisions of SEBITakeover Regulations. However SEBI has issued show causenotice to promoters and the details are as follows:

[Hitachi Home & Life Solutions, Inc Japan, the then Co promotersbut presently the promoters of the Company acquired 28,41,062Equity shares constituting 19.37% of the paid up Equity ShareCapital of the Company from Asman Investments Limited andother constituents of Lalbhai Group on January 18, 2003 at a priceof Rs. 41.64 per Equity Share and claimed exemption fromRegulation No. 11(1) and 12 of SEBI Takeover Regulations underInter se Transfer of Shares as per Regulation No. 3(i)(e)(iii)(a) ofSEBI Takeover Regulations citing Hitachi India Pvt Ltd as thepersons acting in concert with them.

SEBI issued a Show Cause Notice on June 13, 2003 calling uponHitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdto show cause why action under Regulation No. 44 and 45(6) ofSEBI Takeover Regulations and Section 11 and 11B of SEBI Act,1992 should not be initiated against them for violation ofRegulation No. 2(1)(c ), 11(1) and 12 of SEBI Take OverRegulations as SEBI made observations in the above mentionedShow Cause Notice that prior acquisition of shares by AsmanInvestments Limited from ICICI Bank [SEBI issued show causenotice to Asman Investments Ltd. in this regard on April, 08 2003]is not in order and therefore price of Rs. 33.53 paid for the saidacquisition can not be considered as one of the parameters for thedetermination of minimum price payable under inter se transferroute.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdsubmitted their detailed reply to SEBI on July 28, 2003 stating thatsaid acquisition of shares is eligible for exemption under Inter seTransfer of Shares and price paid for acquisition is as per thenorms prescribed under the said provisions.

After joint hearing of both the Show Cause Notices if thesubmissions made by Asman Investments Limited / Hitachi Home& Life Solutions Inc, Japan are not agreeable, SEBI may initiateaction against Asman Investments Limited and / or Hitachi Home& Life Solutions, Inc Japan which may include direction to Asman

24

Investments Limited and / or Hitachi Home & Life Solutions, Inc Japan to make open offer to the remaining Equity Shareholders of theCompany to acquire minimum of 20% of the outstanding paid up Equity Share Capital of the Company at a price of not less than Rs.33.53 / 41.64 per Equity Share in terms of SEBI Takeover Regulations. Asman Investments Limited as well as Hitachi Home & LifeSolutions Inc, Japan will have the option to appeal against any such direction by the SEBI.]

Promoters are not detained as willful defaulters by RBI/Govt. Authorities and there are no violations of securities laws commit ted by themin the past or pending against them except the details given above.

Associate Companies / Companies promoted by the Promoters in India:

Name of Companies : Hitachi India Hitachi India Dass Hitachi CG Hitachi KokiPvt. Ltd. Trading Pvt. Ltd. Hitachi Motor India Ltd.

Ltd. EngineeringCo. Pvt. Ltd.

Date of Incorporation : 03.02.1997 27.02.1997 14.06.1960 11.06.1996 26.04.1996

Business Activity Liaisoning, Liaisoning, Energy meter, Engg. service Electrictrading, trading, Rope ways Company Power Tools

promoting mfg. promoting mfg. for motorsprojects in JV projects in JV

Equity Capital : Rs in 000 34750 17750 2350 16000 250000

Reserves : 'Rs in 000

1999-00 0 2793 145 0 500

2000-01 412 3370 66 0 500

2001-02 0 3817 66 0 500

Sales / Other Income : Rs in 000

1999-00 48 43740 37479 3320 137026

2000-01 579 47045 50775 2593 155318

2001-02 138 38757 43812 2407 186834

Profit After Tax : Rs in 000

1999-00 -30 1043 667 -615 -17430

2000-01 492 577 238 331 333

2001-02 -9969 448 130 239 190

Earning per Share : In Rs.

1999-00 -0.01 0.59 2.84 -0.38 -0.70

2000-01 0.14 0.33 1.01 0.21 0.01

2001-02 -2.87 0.25 0.55 0.15 0.01

Net Asset Value per share(Capital+Reserve- AccumulatedLoss- Misc. Exp./No. of shares) : In Rs.

1999-00 9.874 11.466 17.022 0.006 3.396

2000-01 9.794 11.806 15.867 0.006 3.435

2001-02 9.874 12.074 15.173 0.006 3.449

Whether Listed Company No No No No No

Whether Sick Company within the meaningof the Sick Industrial Companies(Special Provisions) Act, 1995 No No No No No

Hitachi group holding (%) 100.00 100.00 17.00 51.00 100.00

Above Companies are the associate Companies in India of (a) Hitachi Home & Life Solutions, Inc., Japan (Promoters) and (b) Hitachi,Ltd., Japan which is the holding Company of Hitachi Home & Life Solutions, Inc., Japan.

Above mentioned Associate Companies are not detained as willful defaulters by RBI/Govt. Authorities and there are no violations ofsecurities laws committed by them in the past or pending against them.

Above mentioned Associate Companies have not been prohibited from accessing the capital market under any order or directions passedby SEBI.

25

Natural persons in control of bodies corporate forming part ofthe promoter group

Hitachi, Ltd. Japan : Mr. Esuhiko Shoyama -President, Chief ExecutiveOfficer and Director

Hitachi Home & Life : Mr. Kunio Sebata - President

Solutions Inc. & Chief Executive Officer

Hitachi India Trading : Mr. Kazuyoshi Morita -

Pvt. Ltd. Managing Director

Hitachi India Pvt. Ltd. : Mr. Kazuyoshi Morita -Managing Director

Hitachi CG Motor : Mr. Tetsuo Etoh -

Engineering Pvt. Ltd. Managing Director

Hitachi Koki India Ltd. : Mr. M Sasaki - President

Dass Hitachi Limited : Mr. S K Dass -Managing Director

Above corporates and persons have not been restrained fromaccessing the capital market for any reasons under any order ordirections passed by SEBI or any other authorities.

Besides above Hitachi group has made investments inTransformers and Electricals Kerala Ltd, Ernakulam, Kerala to theextent of 7.7% of their paid up equity share capital and JCTElectronics Ltd., Thapar House, 124, Janpath, New Delhi to theextent of 6.6% of their paid up equity share capital.

Related party transactions

The Company reported total purchases of Rs. 2183.00 Lakhs andtotal sales of Rs. 52.82 Lakhs for the year ended September 30,2002 with respect to related party transactions.

Subsidiaries

The Company has no subsidiary companies.

Board of Directors of Hitachi Home & Life Solutions (India) Ltd

Name, Description, Father's Name, Other Directorships & Partnerships HeldAddress and Occupation of the Directors

Mr. Kiyoshi Nagasawa Hitachi Air Conditioning Products (M) Sdn. Bhd. MalaysiaChairman Hitachi Household Appliances (Wuhu) Co., Ltd.S/o Mr. Hidenosuke NagasawaShimominagawa 2003-12, Oohiramachi,Shimotsuga-gun, Tochigi Prefecture,329-4406, Japan

Service

Mr. Akira Kamitani NilManaging DirectorS/o Mr. Hideo Kamitani902,Rushin Apartments, SomeshwarBungalowsAhmedabad 380015

Service

Mr. Makoto Takeshita NilExecutive DirectorS/o Mr. Yasushi TakeshitaRushin Apartments, Someshwar BungalowsAhmedabad 380015

Service

Mr. Saburo Enami NilExecutive DirectorS/o Mr. Kazuo EnamiRushin Apartments, Someshwar BungalowsAhmedabad 380015

Service

Mr. Shinichi Iizuka NilAlternate to Mr. Kiyoshi Nagasawa(Whole Time Director)S/o Mr. Hideichi IizukaRushin Apartments, Someshwar BungalowsAhmedabad 380015Service

Mr. Aloke Nandi NilDirectorS/o Mr. Manoranjan NandiE-950, Chittaranjan Park, New Delhi 110019

Service

26

Name, Description, Father's Name, Other Directorships & Partnerships HeldAddress and Occupation of the Directors

Mr. Mukesh Patel Cadila Healthcare LtdDirector German Remedies LtdS/o Mr. Mangalbhai P. Patel Desai Brothers Ltd"Prakruti", 11-Ashwamegh Bungalows, Part - II,Off. Satellite Road, Ahmedabad - 380 015.

Tax Consultant

Mr. Arvind Nair Dominos Pizza India LtdDirectorS/o Mr. C N Nair2, Western Avenue, Maharani Bagh,New Delhi 110065

Service

Mr. Tarun Sheth Bank of India LtdDirector Renfro (India) LtdS/o Mr. Natvarlal Sheth Arvind Clothing LtdB-505, El-Dirado, Kashinath Dhuru Street,Off. Veer Savarkar Marg, Mumbai- 400 025.

Management Consultant

Directors, apart from reimbursement of expenses incurred, normal remuneration and benefits and their shareholding in the company, ifany, have no other interest in the company. All non executive directors except Mr. Aloke Nandi are paid sitting fees. Managing Directorand Executive / Whole Time Directors are paid salary and perquisites.

Above Directors have not been prohibited from accessing the capital market under any order or directions passed by SEBI.

The Companies with which the above Directors are associated as Directors / Promoters have not been prohibited from accessing thecapital market under any order or directions passed by SEBI.

Executive Management

The day to day activities of the Company are managed by its Managing Director Mr. Akira Kamitani supported by Mr. Shinichi Iizuka,Executive Director and Chief Operating Officer, Mr. Saburo Enami, Executive Director - Sales & Marketing and Mr. Makoto Takeshita -Executive Director - Finance & Accounts under the overall supervision, direction and control of the Board of Directors. Mr. KiyoshiNagasawa, is the Chairman of the Company. A team of competent and qualified professionals assist the Managing Director and theExecutive Directors in managing the day to day operations of the company. The Company has a well-developed executive set up.

Key Senior Management Personnel

Sr. Employees Name Age Qualification Date of Joining Designation Name of last organisationNo1 Mr. Vinay M Chauhan 43 B.E. Mech. Engg. 06/12/1993 Sr. Vice President Dynatron Pvt. Ltd.

PGDIE, NIIT - Supply Chain

2 Mr. Rakesh Kumar 40 B.E. Mech. Engg. 03/05/1994 Sr. Vice President Wipro Ltd.Khanna Master Of Marketing - Sales

Management.3 Mr. Anil Gupta 37 B.Sc. Physics.PG 11/12/1995 Sr. Vice President - Synergy Agrotech Pvt. Ltd.

Dip. In Business Corporate AffairsManagement,IRMA

4 Mr. Suri V 43 ACA,AICWA 19/07/1993 Vice President - Falcon Gulf Ceramics Ltd.Commercial

5 Mr. Amit L Doshi 43 B.E. Mech. Engg. 07/03/1994 Vice President - Bradma of India Ltd.PG Dip In Business Service &Management. Marketing

6 Mr. Satoshi Kawabe 34 Bachelor of 23/02/2003 G. M. Quality Hitachi Home &Electrical Management Life Solutions Inc.,Engineering Japan.

7 Mr. Shinichi Abe 42 Engineering From 23/09/2001 GM - Design Hitachi Tochigi TechnologyNihon University & Development Company Ltd., Japanof Tokyo

8 Mr. Agam Vyas 40 B.E. Mech. Engg. 05/02/1987 General Manager Red Comet Automatic FireGujarat University - Materials Extinguishers

9 Mr. Anil G Shah 44 ACA 01/07/1993 General Manager - Amal Investments Ltd.Finance & Accounts

27

Sr. Employees Name Age Qualification Date of Joining Designation Name of last organisationNo

10 Mr. Mahesh 37 LL.B., AICWA, ACS 04/01/1994 General Manager - Miranda ToolsKumar Agrawal Legal & Co. Secretary

11 Mr. Donald F Renison 40 M.Com. 01/02/1995 General Manager - Modi Xerox LtdDMP & Business Strategy

12 Mr. Ashoke Ray 40 B Com 03/04/1987 GM - East Region ContinentalCommercial Co. Ltd.

13 Mr. Gurmeet Singh 38 B Sc, DIM 04/01/2001 GM - North Region Mirc Electronics Ltd.

14 Mr. Gopalarathnam V 42 B A 15/06/1989 GM - South Region National Radio andElectronics Ltd.

15 Mr. Varghese Joseph 34 B Com, PGPM 28/02/1991 GM - West & Central Pertech Computers Ltd.Region

16 Mr. Teddy J D’Souza 35 B.E. Mechanical 13/10/2003 GM-Projects & Major 21st Century AMF Pvt. Ltd.Accounts

The employees stated above are permanent employees of the Company.

Key managerial personnel of the company, apart from reimbursement of expenses incurred, normal remuneration and benefits and theirshareholding in the company, if any, have no other interest in the company.

Given below are the resignations in the last one year:

Name & Age Designations Date of Resignation Remarks

Mr. Hemant Bhange AVP - Supply Chain June 25,2003 Resignation

Mr. Srihari K Belur VP - Service Operations July 23, 2003 Resignation

Mr. Yashpal Singh Negi GM - VEC June 1, 2003 Resignation

Mr. Sean Thomas J Menezes Head - National Sales - September 5, 2002 ResignationCommercial RefrigerationBusiness

Mr. Kallol Choudhury GM - Sales Systems June 30, 2003 Resignation

Mr. Ramesh Nair GM - Solutions & July 19, 2003 ResignationCorporate Sales.

Mr. Mukul Ghanekar VP - Solutions and February 28, 2003 ResignationCorporate Sales

Corporate Governance

The Company has, in pursuance of Corporate Governance normsprescribed in Clause 49 of Listing Agreement, constituted an AuditCommittee on January 30, 2001 and at present it consists of Mr.Mukesh Patel as Chairman and Mr. Arvind Nair, Mr. Tarun Shethand Mr. Aloke Nandi as members. The Company has formed aRemuneration Committee on March 03, 2003 and at present itconsists of Mr. Tarun Sheth as Chairman and Mr. Arvind Nair, Mr.Mukesh Patel and Mr. Aloke Nandi as Members and all thedecisions relating to remuneration of Executive Directors are takenby the said committee subject to approvals from the shareholdersand Central Government as and when necessary. Investor'sGrievance Committee consists of Mr. Aloke Nandi as Chairmanand Mr. Akira Kamitani and Mr. Makoto Takeshita as Members.

Technology / Technical Collaboration

The Company had entered into various Drawing and DesignAgreement and Technical Collaboration Agreement for varioustypes of window as well as split Air conditioners with HitachiLimited, Japan since 1990. In April 1998 the Company entered intoa Technical collaboration agreement along with strategic allianceunder which Hitachi agreed to furnish the company with thetechnical information of Hitachi models and to allow use of Hitachi

trade mark. Hitachi Ltd., Japan was incorporated at Japan in theyear of 1920. It's shareholders Equity as on March 31, 2003 isRs. 6823527 Lakhs. Its turnover for the last financial year endedon 31.03.2003 was Rs. 30162031 Lacs. (Conversion Rate :100Yen = Rs. 36.82 (March 28, 2003)

In December 1996 the Company had entered into TechnologyCollaboration Agreement with Orford Pty. Ltd, Australia, for makingavailable to the Company on exclusive basis, required expertiseand know how in relation to manufacture and servicing of visicoolers, chest coolers, etc. and to jointly develop indigenouscomponents etc for such manufacturing. Orford has also permittedthe Company to use Orford trademark for the productsmanufactured in India under the collaboration agreement.Company has already absorbed the Technology for manufacturingof these products and in the year 2000 the technical collaborationagreement was expired.

Infrastructure Details:

Offices

Registered Office of the Company is situated at 901, Abhijeet,Mithakhali Six Roads, Ahmedabad, 380006, India and spreadsacross an area of 12825 Sq. Ft. on 9th and 10th Floor of the

28

building. Head Office of the Company has been shifted to HitachiComplex, Village : Karan Nagar, Taluka Kadi, District Mehsana inthe month of May/June 2003. The Company has 14 Branch officesspread across 14 cities in India and they are located atAhmedabad, Bangalore, Bhubaneswar, Chandigarh, Chennai,Kochin, Hyderabad, Indore, Jaipur, Kolkota, Lucknow, Mumbai,New Delhi, and Pune.

Plants

The plant at Kadi, Mehsana, Gujarat, is spread across more than28934 Sq. Mtrs. of the land with a built up area of 15903.61 Sq.Mtrs . The company has state-of-the-art Laboratories set up to testthe quality of its products in conformity with Tochigi Standards ofHitachi, Japan. Other plant of the Company, situated at Silvassa,Union Territory of Dadra & Nagar Haveli has been shifted to Kadiin the month of July, 2003. The entities from whom the companyhas acquired the land are not related to any of the existingpromoters / directors of the company. The Company has cleartitles of the land acquired by it and the land is registered in thename of the company.

Raw Materials

The major raw materials and components for the Company'sproducts are Compressors, Copper Tubes, Aluminum Foils, Steelsheets, Electric Motors, etc. The Compressors are imported fromother Hitachi's factories around the world as well as procureddomestically from Tecumseh Products India Ltd. and fromKirloskar Copeland Ltd. Copper Tubes are being imported fromMettube of Malaysia and other reputed suppliers. Other major rawmaterials are usually procured from the reputed Indian suppliers.

Power

The power requirements are as follows:

Sites Power PowerRequirement Sanctioned Source

Kadi, Mehsana, 475 KVA 475 KVA GujaratGujarat Electricity Board

The above contracted loads are sufficient to meet powerrequirements.

Water

Water is required for industrial , drinking and sanitary purposesand the requirements are as follows:

Sites Water WaterRequirement Sanctioned Source

Kadi, Mehsana, 100000 Ltr. Not Own Bore WellGujarat Per day applicable

Pollution clearance

The operations of the Company do not generate any harmfuleffluents. However, the company has a effluent treatment plant atits factory located at Kadi in Gujarat. The Company had receivedno objection certificate for water and air pollution from GujaratPollution Control Board for Industrial plant at Kadi, Gujarat for themanufacture of air conditioners and chillers.

Manpower

As on date, the man power strength of the Company is around 435permanent employees out of which around 84 are in managerialcadre and 351 in non-managerial cadre. Further, the Companyhires contract labour for its loading, unloading, housekeeping andother activities. Requisite registration for the same has beenobtained under the Contract Regulation Act. It has safety officersat the plants. The Company has been maintaining cordialrelationship with its employees.

Manufacturing Process

The manufacturing process followed in Hitachi Home & LifeSolutions (India) Ltd. for the manufacture of air conditionerconsists of three sub processes;

1. Sheet Metal shop process

2. Heat Exchanger shop process

3. Assembly Shop process

1. Sheet Metal shop: This process is divided into two asmachine shop and paint shop. The machine shop is used forprocessing GP sheets and parts. This shop is equipped withGP sheet processing machines like shearing machine , CNCpress brakes , spot welding machines, nut welding machines,folding machine etc. Processed GP sheet parts are thenpowder coated after passing through a 7 tank phosphatingand degreasing process. All critical process have checkingsystem for quality control.

2. Heat Exchanger shop: Heat exchangers which is the heart ofthe air-conditioner namely condensor coil and evaporator coilare manufactured in this shop. For this purpose this shop isequipped with world class state of the art machines.

3. Assembly shop: This shop is equipped with motorised slatconveyor system to ensure consistent quality andproductivity. An on-line climate controlled commercial testroom installed on this assembly line for 100% on-lineperformance testing and product safety testing ensures thatonly good quality machines leave the factory.

Production Capacity

The Government of India De-licensed the Air conditioning Industry.Therefore, details of licenced capacity are not relevant. Plant wiseparticulars of Installed capacity and capacity utilisation are givenbelow :

Details of Installed Capacity and Capacity Utilisation (in Units) :

Products 2001-02 2000-01* 1999-00

Installed Capacity Installed Capacity Installed CapacityCapacity Utilised Capacity Utilised Capacity Utilised

Airconditioners 1,00,000 87832 1,50,000 104699 1,00,000 47411

Visi-coolers 18,000 735 27,000 7298 18,000 9630

Non ElectricIce- cooledDispensers 2000 0 3,000 652 2,000 717

Source: Company Annual Reports

* The figures are for 18 month period from April 2000 toSeptember 2001

Note : The installed capacity for the Airconditioners was increasedin March, 2003 to 150,000 Units.

Hitachi Home & Life Solutions (India) Ltd was basically supplyingVisi-coolers and Non-Electric-Ice Cooled Dispensers to Coca-colaas Original Equipment Manufacturer (OEM) supplier. As they havereduced their purchase during the years under review, utilisation ofcapacity of those products were low.

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Product Particulars (Category wise) :

Category % of total Turnover(Oct 01-Sept 02)

AC & AC spares 93.00

Commercial Refrigeration 2.20

Service 3.50

Others 1.30

Total 100.00

Source: Company reports

Industry Scenario

Industry Structure & Developments

Air-conditioning Industry

The Indian Air-conditioning industry is estimated to be aboutRs. 2,900 Crore. This comprises mainly of Room air-conditionersvalued at about Rs. 1,900 Crore with the balance Rs. 1,000 Crorebeing bigger air-conditioning systems such as Ductable Splits,Package AC's, Chillers and Central plants.

The air-conditioning industry as a whole, has been a beneficiaryof the reduction of taxes in the post-liberalisation era of 1990's,with the major benefit being high demand growth and infusion ofnew technology. On the other hand, this has also led to intensityof competition of global dimensions, before the market has gainedthe size to sustain such competition.

Room Air-Conditioners

This category consists of both Window type & Split type air-conditioners in smaller capacity for use both in Residential &Commercial spaces. Since mid-90's, the residential segmentdemand has been growing rapidly and now constitutes almost50% of the total demand in this segment. The high growth isabetted, in part by the following key drivers:

l Changes in lifestyles, higher affordability & increase indisposable incomes

l platueing penetration of other major consumer durable in theaspiring middle class homes in main cities

l breakdown of attitudinal blocks against air-conditioners

l Rapid expansion of width and depth of distribution of roomair-conditioners.

Residential segment is expected to be main driver of futuregrowth, and its contribution to total sales may go upto 80%, as inother world markets.

The reduction in prices of air-conditioners from branded playersdue to lowering of excise duties and higher economies of scale,their increased visibility and brand push, and availability in multi-product appliance showrooms across the country have moved theresidential buyer away from the small scale unbrandedmanufacturers. The share of SSI has been declining sharply andhas now become less than 15% of the total market.

Package & Ductable Air-conditioning Systems

This category consists of bigger size units for conditioning theenvironment in large commercial, office or public places, andcomprises of a variety of units from ductable splits to large sizechillers. This market has grown rapidly, almost 3 times the GDPgrowth, with service sector on a fast-track and upgradation of air-conditioning in the commercial segment.

Easy availability of comprehensive range of ducted splits andductless flexible PAC systems & improved affordability are drivinggrowth in usage in IT, healthcare, retail, telecom, entertainment,leisure & tourism, financial services and other service sectors.

The approximate size of Domestic Market of Air-conditioningIndustry for last three years were as under :

Segment Unit Sector Year Year Year2000-01 2001-02 2002-03

PAC* Tons Org. sector 165000 185000 215000RAC* Nos. Org. sector 446000 540000 605000

MarketShare 79% 82% 83%Nos. Unorg. sector 120000 120000 125000

MarketShare 21% 18% 17%

Nos. Total 566000 660000 730000

Source : For the year 2000-01 ICRA Report February, 2003 For the year 2001-02 T V Journal of March 2002 For the year 2002-03 Company estimates

* PAC Package & Ductable Air Conditioning SystemsRAC Room Airconditioners

Air conditioner industry witnessed high growth face in the latestfinancial year ie October 01, 2001 to September 30, 2002registering a volume growth of about 20% during the summerseason and the company maintained its volume growth at a levelhigher than the market growth thereby improving its market shareby 2% to reach 14% in the organized sector.

The above is company's estimate based on the informationcollected from various informal sources like suppliers of variousinputs, market intelligence, informal discussion at industries' meetwith competitors, etc. The 20% growth rate pertains to the summerseason i.e. March to May of 2002. The Company estimate of theoverall market growth of the financial year i.e. October 01, 2001 toSeptember 30, 2002 is about 11% to 12%. The details compiledby the company are as under :

Company Nos. of Air-conditioners %

LG 175000 29

Hitachi 82000 14

National 25000 4

Samsung 50000 8

O General 25000 4

Daikin 17000 3

Carrier 75000 12

Voltas 90000 15

Blue Star 20000 3

Other brands 46000 8

Total Branded 605000 100

Unbranded 125000

Total Market 730000

Product Group-wise Performance

The Company has been pursuing focused growth strategies,based on product and distribution, to drive growth in both the room& package air-conditioner segments. At the time, The Company isone of the unique companies in the industry with focused and welldeveloped distinct distribution system for Residential &Institutional buyers.

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Deriving almost 79% of sales from room air-conditioners, theCompany has emerged among the top 3 players in this categoryin India. The Company has been pursuing the innovationleadership position in the room air-conditioner market in India, andis constantly developing and introducing new models on thebacking of strong technology support from Hitachi Japan. Thefocus on consumer-led technology led to a development of HitachiLogicool i range that offers futuristic features, especially for theresidential user. The Logicool range, first introduced early 2001,and this year expanded to Logicool i is already contributing morethan 50% of room air-conditioner sales of The Company.

In the Ductable split category, the Company indigenouslydeveloped and launched intelligent air-conditioning system calledMicroCool. This microprocessor control ductable spilt air-conditioner range, offering key benefit of lower electricityconsumption and flexibility for air-conditioning spaces, caters theneeds of institutional market. To ride the on-going boom in thetelecom sector, The Company indigenously developed advancedmodels of its Precision air-conditioner range called Spacemaker.These initiatives helped achieve a significant volume growth in thecategory at 44%, much ahead of the market growth.

Brand Equity

Since the launch of Hitachi brand room air-conditioner in India inthe season of 1999, the Company has been relentlessly pursuingbrand building activities to ensure high brand awareness andpositive disposition for Hitachi brand among the target audience.Consumer research findings (Research Report submitted onOctober 14, 2002) from reputed market research firm, NFO MBL,indicate Hitachi brand awareness crossing the threshold ofuniversal recall at 90% plus, as compared to 61% in 1999.

The brand building efforts also received a rare recognition for theadvertising fraternity this year when the Hitachi air-con campaign,both for TV and Print, won all the three awards on offer in itscategory in Abby 2002. In addition the Hitachi campaign was alsochosen among the top five out of more than 2500 campaigns atthe Abby, generally considered to be among the most prestigiousawards in advertising in India.

The Company has been pursuing the twin brand strategy, withboth Hitachi and Amtrex brands being positioned to satisfy theneeds of different customer segments. The year also saw thecompany putting a strong emphasis on its twin brand strategy byway of new product development under Amtrex brand along withfocused efforts on brand promotion and distribution support.During the year from October-2001 to September-2002 HitachiBrand contributed 56% of the total sales of the Company whereasAmtrex Brand contributed balance 44% .

Future Outlook - Opportunities, Risks & Threats

That Indian air-conditioning market holds immense future potentialand this has been borne out by numerous independent studies.With overall penetration of less than 1%, much lower than otherconsumer durables, and even cars, coupled with the climaticconditions and ever increasing affordability and awareness, theIndian market offers untapped potential. A recent study by aleading Management Consultancy also points out that the highgrowth in the Indian room air-conditioner market is not onlysustainable, but can also accelerate steeply, on the backing ofgovernment and industry initiatives to boost demand.

The industry is further hopeful of removal of anomalies on Exciseduty imposition. VAT, already announced by the government, ifimplemented, will also hopefully result in a simple and uniform taxregime, with a lowering of sales tax impact on air-conditioners inmany parts of the country.

Irrespective of what happens on the taxation front, the industryseems poised to enter a high growth phase on a bigger volumebase, due to significant changes in the character of both thesupply side and demand side dynamics over the last few years.Government initiatives and a good summer will only help thegrowth to accelerate.

In a recent development, the Union government announced exciseexemptions and other benefits for manufacturing units in Northernstates like Jammu, in addition to existing exemptions in NorthEastern states. In view of high incidence of excise duty on air-conditioners, such exemptions will result in significant costdifferential for units in such excise free zones. Such exemptions,coming on the back of virtual withdrawal of sales tax exemptionsalready grated at Silavssa, will force manufacturers to examine re-locating existing/ new capacities to such zones and may result infragmentation of capacities and resources and also may preventbuilding large world-class factories. The Company is also studyingthe competitive implications and feasibility of undertakingmanufacturing at one of such places, and is preparing to quicklyset up such manufacturing, if required to maintain its competitivestance.

Sales and Distribution Network and Proposed Marketing Set upCompany has about 800 dealers nationawide with the presence inall the major cities of IndiaThe Next phase of the distribution strategy will be to expand thedealer network and moving into distributor based set up to caterto the increasing rural and semi urban markets.

Competition

The room air conditioner market as a whole is dominated bybrands like LG, Amtrex, Hitachi, Carrier, Voltas. etc. These brandsaccount for 50% of the room Air conditioners market. Currently,there are about 15 major players competing to grab a share of theair conditioner market. In packaged Air conditioner market Bluestar, Carrier, etc., are the major competitors for the Company.

Exports Market

The Company has been exporting its products for last 8 yearsmainly to and Middle-East countries, Africa, SAARC countries etc.The Company offers both window & split type Air conditioners inthe export markets but emphasis is currently on the window typeair conditioners. The global trends are changing and the market forMini Splits and Ductables is expected to grow more rapidly thanthe window Air conditioners. The Company is planning to increasethe size of its export operations in the next 2 to 3 years with atarget of 10% of its turnover coming from exports in the worldmarket. This is to be achieved both by development of newmarkets and higher penetration in the existing markets.

Changes in the Board of Directors and Auditors during thelast three years and reasons thereof

Changes in the Board of Directors of the Company during the lastthree years prior to the Issue of this Letter of Offer.

Name Date of Date of RemarksInduction Cessation

Mr. V L Mote 31/01/2003 Resigned

Mr. N I Parikh 21/01/2003 Resigned

Mr. Sanjay S Lalbhai 21/01/2003 Resigned

Mr. Nobuhiko Sasamoto 31/05/2000 Resigned

Mr. Yuuhiko Yabe 31/03/2001 Resigned

Mr. Kunio Sebata 31/05/2000 31/07/2001 Resigned

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Mr. Kazuyoshi Sumida 31/05/2000 31/10/2000 Being Alternate Director,(Alternate to Mr. Sebata) term expired with the

cessation of office ofDirector

Mr. Shigeru Ishi 31/10/2000 31/07/2001 Being Alternate Director,(Alternate to Mr. Sebata) term expired with the

cessation of officeof Director

Mr. Tomomichi Kaneko 31/07/2001 23/03/2002 Resigned

Mr. Shigeru Ishii 31/07/2001 23/03/2002 Being Alternate Director,(Alternate to term expired with theMr. Tomomichi Kaneko) cessation of office of

DirectorMr. Shoji Tsubokuta 01/04/2001 31.03.2003 Retired on expiry of hisAdditional Director term of appointmentand Joint ManagingDirector

Appointed asManaging Director 21/01/2003

Mr. Shinya Yoshinaga 31/05/2002 29.04.2003 Resigned

Mr. Shigeru Ishi 31/05/2002 27/02/2003 Being Alternate Director,(Alternate to term expired with theMr. Shinya Yoshinaga) cessation of office of

Director

Mr. Makoto Takeshita 21.01.2003Appointed asExecutive Director 15.02.2003

Mr. Kiyoshi Nagasawa 29.04.2003

Mr. Akira Kamitani 27.03.2003Appointed asManaging Director 07.04.2003

Mr. Arvind Nair 27.03.2003

Mr. Tarun Sheth 27.03.2003

Mr. Mukesh Patel 27.03.2003

Mr. Saburo EnamiAppointed asExecutive Director 03.06.2003

Mr. Shinichi Iizuka 31.07.2003 Appointed as AlternateAlternate to to Mr. Kiyoshi NagasawaMr. Kiyoshi Nagasawa

Changes in the Auditors of the Company during the last threeyears prior to the Issue of this Letter of Offer.


Kunte & Associates 12/08/2000 Resignation

Bharat S Raut & Co. 12/08/2000 – Appointment

VI. FINANCIAL AND OTHER INFORMATION

Report of Auditors (Bharat S. Raut & Co., Mumbai) on financialinformation

To the Board of Directors of Hitachi Home & Life Solutions (India)Limited (formerly known as Amtrex Hitachi Appliances Limited)

We have examined the attached Statement of Assets andLiabilities (Annexure I), the Statement of Profits and Losses(Annexure II) and the financial information contained in Annexures

III to XIII of Hitachi Home & Life Solutions (India) Limited (formerlyknown as Amtrex Hitachi Appliances Limited) ('the Company') asrequired under paragraph 6.18 of the Securities and ExchangesBoard of India (Disclosures and Investor Protection) Guidelines,2000 ("SEBI Guidelines").

Annexures I to XIII are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on theAnnexure I - XIII based on our examination. The Annexures I toXIII have been prepared by the Company's management basedon:

1. The audited financial statements of the Company for theyears ended 31 March 1998, 31 March 1999 and 31 March2000 audited by another firm of chartered accountants;

2. The audited financial statements of the Company for the 18months period ended 30 September 2001, year ended 30September 2002 and nine month period ended 30 June 2003audited by us; and

3. The audited financial statement of the Company's erstwhilesubsidiary, Avikal Investments Limited ("the Subsidiary") forthe years ended 31 March 1998, 31 March 1999 and 31March 2000 audited by another firm of charteredaccountants.

The information contained in Annexure I to XIII extracted fromaudited financial statements referred to in paragraph 1 and 3above are based solely on the auditors report of another firmof chartered accountants.

Based on our examination and the information andexplanations received by us, we report that:

(i) As more fully explained in Annexure V by the Company'smanagement, certain changes to accounting policies /application of new Accounting Standards have not beenadjusted in Annexure I and II for earlier years as it is notpossible to quantify these adjustments;

(ii) We have verified the arithmetical accuracy of ratiosincluded in Annexure VIII and IX and found them to bearithmetically correct on the basis disclosed in theseAnnexures;

(iii) The Company has declared dividend of 15 percent and10 percent on the ordinary shares for the years ended31 March 1998 and 31 March 2000 respectively and theCompany did not have any other class of shares duringthose years. No dividend has been declared for the otheryears/periods covered by this report; and

(iv) In our opinion, the financial information contained inAnnexure I to XIII :

a) has been properly derived in all material respectfrom the Company's audited financial statements;and

b) fairly states, in all material respect, the informationrequired by SEBI guidelines referred to above.

This report is being issued by us solely for the purpose ofincorporating in the letter of offer to be issued by theCompany in connection with the proposed rights issue by theCompany.

Yours faithfully

Sd/-

Bharat S. Raut & Co.

Mumbai10 October 2003

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Annexure -I

Statement of Assets and Liabilities (Rs. in Lakhs)

Year ended on / Period ended on 31.03.1998 31.03.1999 31.03.2000 30.09.2001 30.09.2002 30.6.200312 months 12 months 12 months 18 months 12 months 9 months

A Fixed Assets

Gross Block 2,183.40 3,211.24 3,807.56 4,599.53 5,307.26 5,450.08

Less Depreciation 471.70 695.85 973.61 1,556.14 1,928.50 2,197.68

Net Block 1,711.70 2,515.39 2,833.95 3,043.39 3,378.76 3,252.40

Capital Work in Progress 402.37 8.82 323.94 544.35 38.62 5.85

Net Block afteradjustment for CWIP 2,114.07 2,524.21 3,157.89 3,587.74 3,417.38 3,258.25

B Investments 743.22 471.23 472.93 42.50 29.50 4.37

C Current Assets,Loans and Advances

Inventories 1,528.27 2,446.16 3,090.84 5,585.15 4,558.91 4,834.23

Sundry Debtors 2,448.56 2,775.30 3,694.44 3,574.34 3,374.95 4,457.08

Cash and Bank Balances 366.41 643.88 607.00 554.14 503.01 761.78

Loans and Advances 872.82 1,276.39 1,230.56 1,449.29 1,301.90 1,329.93

8,073.35 10,137.17 12,253.66 14,793.16 13,185.65 14,645.64

D Liabilities and Provisions

Secured Loans 1,550.69 1,634.73 1,788.92 3,997.86 3,708.54 2,018.50

Unsecured Loans 632.53 439.45 960.30 644.07 674.86 3,550.03

Current Liabilities and Provisions 3,101.07 4,479.90 5,787.12 8,143.47 8,902.15 10,958.76

5,284.29 6,554.08 8,536.34 12,785.40 13,285.55 16,527.29

Networth prior toadjustment (per SEBI) 2,789.06 3,583.09 3,717.32 2,007.76 (99.90) (1,881.65)

Adjustments as per SEBI Clarification

Change in policy of treatingexpenditure on computer softwareas deferred revenue expenditure. 14.85 (7.42) (7.43) –– –– ––

Networth after SEBI Clarification 2,803.91 3,575.67 3,709.89 2,007.76 (99.90) (1,881.65)

E Represented by

1. Share Capital 950.06 1,466.90 1,466.90 1,466.90 1,466.90 1,466.90

2. Reserve 1,897.91 2,233.88 2,434.20 628.27 (1,423.21) (3,238.52)

Adjustments as per SEBI Clarification

Change in policy of treatingexpenditure on computer softwareas deferred revenue expenditure. 14.85 (7.42) (7.43) –– –– ––

Reserves (Adjusted as perSEBI Clarifications) 1,912.76 2,226.46 2,426.77 628.27 (1,423.21) (3,238.52)

F Miscellaneous Expenditure (58.91) (117.69) (183.78) (87.41) (143.59) (110.03)(To the extent not writtenoff or adjusted)

Networth after SEBI Clarification 2,803.91 3,575.67 3,709.89 2,007.76 (99.90) (1,881.65)

Note 1 In the above statement, the figures have been shown as per the audited financial statements and the adjustments required tobe made as per the SEBI guidelines have been shown seperately and the adjusted net worth at the year/period end have beenarrived accordingly.

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Annexure - II

Statement of Profit and Losses (Rs. in Lakhs)

Year ended on / Period ended on 31.03.1998 31.03.1999 31.03.2000 30.09.2001 30.09.2002 30.6.200312 months 12 months 12 months 18 months 12 months 9 months

INCOME

SalesManufacturing Sales 10,670.51 12,723.97 15,855.29 32,136.44 23,779.09 17,908.04

Less :- Excise Duty 2,361.84 2,865.45 3,384.36 7,202.18 5,651.68 3,381.07

Net Sales-Manufacturing 8,308.67 9,858.52 12,470.93 24,934.26 18,127.41 14,526.97

Trading Sales 646.40 711.47 1,414.47 2,145.39 794.23 615.66

Income from Service Operations 17.09 180.35 821.74 1,430.21 902.90 800.30

Total income from Operations 8,972.16 10,750.34 14,707.14 28,509.86 19,824.54 15,942.93

Other Income

Dividend Income 26.64 18.70 6.01 6.53 5.38 -

Scrap Sales 24.45 38.39 32.92 115.39 93.89 65.18

Profit on sale of investments (net) - - - 166.40 - -

Foreign Exchange Fluctuation - - - - - 106.66

Others 5.24 26.82 21.93 32.07 72.91 39.40

Total other Income 56.33 83.91 60.86 320.39 172.18 211.24

Increase/(Decrease) in Inventories (68.77) 525.62 285.61 881.19 216.49 (389.89)

Total Income 8,959.72 11,359.87 15,053.61 29,711.44 20,213.21 15,764.28

EXPENDITURERaw material consumed/Trading purchases 5,642.16 7,756.93 9,553.63 19,978.82 13,636.03 10,286.65

Staff costs 543.70 768.84 954.44 1,958.56 1,507.34 1,316.89

Other manufacturing andoperating expenses 115.58 263.13 897.18 1,532.99 1,152.68 1,012.78

Administration and other expenses 764.15 1,475.20 1,026.81 2,263.49 1,854.96 1,427.75

Selling and distribution expenses 1,064.22 1,182.70 1,615.11 4,371.47 2,872.06 2,645.56

Interest and financial charges (net) 343.26 413.69 341.72 845.46 856.07 593.25

8,473.07 11,860.49 14,388.89 30,950.79 21,879.14 17,282.88

Profit/(Loss) before depreciation 486.65 (500.62) 664.72 (1,239.35) (1,665.93) (1,518.60)

Depreciation 174.30 230.67 296.16 539.18 385.55 296.71

Profit/(loss) before tax andextra-ordinary items 312.35 (731.29) 368.56 (1,778.53) (2,051.48) (1,815.31)

Provision for Tax - - 19.41 - - -

Net Profit/ (Loss) beforeExtra-ordinary Items 312.35 (731.29) 349.15 (1,778.53) (2,051.48) (1,815.31)

Extra-Ordinary items - - - - - -

Prior year (Expenses)/Income (8.29) (18.76) 30.13 (27.40) - -

Net Profit/ (Loss) after Extra-ordinaryItems as per Audited Financialstatements 304.06 (750.05) 379.28 (1,805.93) (2,051.48) (1,815.31)

Adjusted as per SEBI ClarificationChange in policy of treating expenditureon computer software as deferred revenueexpenditure. 14.85 (7.42) (7.43) - -

Adjusted Net profit/(Loss)for the year / period 318.91 (757.47) 371.85 (1,805.93) (2,051.48) (1,815.31)

Note1 In the above statement, the figures have been shown as per the audited financial statements and the adjustments required tobe made as per the SEBI guidelines have been shown seperately, and the adjusted net profit/(loss) for the year/period have beenarrived accordingly.

34

Annexure - III

1. Significant accounting policies

1.1 Basis of preparation of financial statements

The accompanying financial statements have been preparedunder the historical cost convention, going concern and onthe accrual basis of accounting and comply with theAccounting Standards issued by the Institute of CharteredAccountants of India to the extent applicable.

1.2 Accounting estimates

The preparation of the financial statements in accordancewith generally accepted accounting principles requires thatmanagement makes estimates and assumptions that affectthe reported amount of assets and liabilities and disclosure ofcontingent liabilities as of the date of financial statements andthe reported amounts of revenue and expenses during thereporting period. Management believes that the estimatesused in the preparation of the financial statements areprudent and reasonable. Actual results could differ from theseestimates.

1.3 Going concern

There is erosion in the net worth due to continued businesslosses. These financial statements have been prepared on agoing concern basis as the Company's management believesthat the Company will be able to operate as a going concernin the foreseeable future based on letter of support, includingfinancial support by way of equity and/or debt, received fromits holding company, Hitachi Home & Life Solutions Inc.,Japan, in the following manner, but not limited to:

(a) long term ECB loan of Rs 16 crores (Japanese Yen 40crores) provided to the Company in January 2003;

(b) undertaking to subscribe as per their right ( 54.6%) tothe proposed Rights Issue of Rs 27.28 crores of theCompany and also subscribe upto 90% of the newly -issued shares in case issue remain under subscribed.

(c) support through teams from head office forimprovements of business, comprising specialists in fieldof engineering, technology for room air conditioners,reduction of costs and expenses, sales planningactivities, credit control for improvement of cashstatement, control of inventory and stock in supplychain; and

(d) to consider suitable and reasonable support to theCompany as a promoter, should it become necessary inthe future, notwithstanding, legal commitment or binding.

These financial statements do not include any adjustmentsregarding the recoverability and classification of carryingamount of assets or the amounts and classification ofliabilities that may be necessary if the Company is unable tocontinue as a going concern.

1.4 Fixed assets and depreciation

Fixed assets are stated at cost, net of Cenvat credit availedor taken, less accumulated depreciation. The cost of an assetcomprises its purchase price, finance costs related toborrowed funds, any directly attributable cost of bringing theassets to working condition for its intended use and allocatepre-operative project expenditure. Expenditure for additionand improvements are capitalised and expenditure formaintenance and repairs are charged to profit and lossaccount. Manufactured assets utilised for self are capitalisedat direct cost. The cost of assets not put into use, before theperiod end, is disclosed under capital work in progress.

Depreciation on fixed assets (other than trade-marks) hasbeen provided on straight-line method at the rates and inmanner prescribed in Schedule XIV of the Companies Act,1956. For the assets added during the financial year underreview, depreciation is charged on pro-rata basis from thedate of put to use/commissioning. Incremental cost arising onaccount of translation of foreign currency liabilities foracquisition of fixed assets is depreciated over the residualuseful life of the respective asset.

Trademark is written off, based on management's estimate ofits useful economic life, on pro-rata basis over a period ofseven years in equal installments.

1.5 Investments

Long-term investments are carried at cost. Provision fordiminution in the value of investments is made if such declineis other than temporary. The diminution is charged to profitand loss account.

1.6 Inventories

Inventories are valued at lower of cost or estimated netrealisable value after providing for cost of obsolescence:

(i) Raw materials, stores and spares parts, packingmaterials and fuel and oil are valued at weightedaverage cost and appropriated direct expenses.

(ii) Work in progress is valued at cost, which includesmaterial, direct expenses and appropriate overheads.

(iii) Manufactured finished goods are valued at lower of costor net realisable value. Cost includes material, directexpenses and appropriate overheads.

(iv) Trading finished goods are valued at lower of cost orestimated net realisable value for which cost is arrivedon the basis of FIFO method except in case of stock ofspares and stabilisers remaining out of the inter unittransfer which is valued on weighted average basis ornet realisable value and in case of Air Conditioner thesame are valued at cost or realisable value, whichever islower.

(v) Goods in transit are valued at cost.

(vi) Loose tools are amortised over a period of three yearsfrom the date of purchase.

(vii) Excise duty is included in value of finished goodsinventory.

(viii) Custom duty on goods, where title has been passed tothe Company is included in value of inventory.

1.7 Revenue recognition

(i) Sales are inclusive of excise duty, freight, octroi andinsurance, installation charges in some cases and net ofsales returns, sales tax and trade discounts. Sales donot include the cost of material used for internal capitalconsumption.

(ii) Income from service operations/maintenance contract ispro-rated on monthly basis as per the terms of thecontract.

(iii) Dividend income is recognised on establishment of theright to receive the same.

Interest income is recognised on accrual basis.

1.8 Retirement benefits

i) Payment for present liability of future payment of gratuityof employees is covered by a group gratuity policy under

35

the cash accumulation system of The Life InsuranceCorporation of India ('LIC'). Provision for gratuity isbased on actuarial valuation carried out by anindependent actuary at year-end.

ii) Retirement benefits in form of Provident fund andSuperannuation / pension scheme whether in pursuanceof any law or otherwise is accounted on accrual basisand charged to profit and loss account for the period.The Company contributes to the employees' providentfund maintained under the employees provident fundscheme by the Central Government for provident fund.Payments are made to the Life Insurance Corporation ofIndia for contribution towards superannuation fund indischarge of liabilities.

iii) Provision for leave encashment is determined on thebasis of actuarial valuation carried out by anindependent actuary at year-end.

1.9 Foreign currency transactions

a) Foreign currency liabilities incurred for the acquisition offixed assets are translated at the exchange ratesprevailing on 30 June 2003 or the forward rates asapplicable. The net variation arising out of the saidtranslation, actual settlement during the year is adjustedto the cost of fixed assets.

b) Balance in form of current assets and current liabilitiesin foreign currencies, outstanding at the close of theperiod, are converted in Indian currency at theappropriate rates of exchange rates prevailing on thedate of balance sheet. Resulting gain or loss isaccounted during the period in the profit and lossaccount.

c) Other incomes and expenditures in foreign currency arerecorded at the rates of exchange prevailing on thedates when the relevant transactions took place. Theexchange differences arising out of their settlement aredealt with in profit and loss account.

1.10 Warranty costsProvision for warranty costs is determined on the basis ofmanagement estimate of product wise liability and iscalculated based on analysis of actual costs incurred inearlier years.

1.11 Research and development expenditureRevenue expenditure pertaining to research and developmentis charged to revenue under respective heads of account inthe year in which they are incurred. Capital expenditure onresearch and development is shown as an addition to FixedAssets and depreciated at the applicable rates.

1.12 TaxationIncome tax expense comprises current tax expense anddeferred tax expense/credit.

Current tax provision is made annually based on the taxliability computed after considering tax allowances andexemptions. Further, deferred tax liability or assets isrecognised for timing differences between the profit/lossesoffered for income taxes and profits/losses as per thefinancial statements. Deferred tax assets and liabilities aremeasured using the tax rates and tax laws that have beenenacted or substantially enacted at the balance sheet date.

Deferred tax assets are recognised only to the extent thatthere is a reasonable certainty that sufficient future taxableincome will be available against which such deferred taxasset can be realized, other than deferred tax assets inrespect of unabsorbed depreciation and carry forward tax

losses, which are recognised only to the extent that there isvirtual certainty that they will be realised. The deferred taxassets are reviewed at each balance sheet date for theappropriateness of their carrying values. The deferred taxliability pertaining to timing differences adjustable againstdeferred tax assets are recognised in the financial statementsonly if liabilities exceed the recognisable deferred tax assets.

1.13 Miscellaneous expenditureTechnical know how fees, engineer dispatch fees and modelapproval/testing fees paid to technical collaborators forreceipt of technical know how and technical assistance inproduction process of products. These costs are beingamortised over a period of five years, based on themanagement estimate of future benefit to be derived fromthis expenditure.

Software costs incurred are amortised over a period of threeyears from the date they are put to use.

Annexure-IVChanges in accounting policy during the last five financialyears

Year Change

1997-1998 Valuation of inventoriesThe Company has changed the method of valuingstock of Raw material from first in first out ('FIFO')method to weighted average cost method and hasaccordingly valued the closing stock. Due to changein the method of valuation, the closing stock of rawmaterial inventory is overstated to the tune of Rs.32,263.

1998-1999 Insurance ClaimsThe Company during the year, changed the methodof accounting for insurance claims from cash basisto accrual basis. Due to change in the method ofaccounting the loss for the year is under stated byRs. 309,303.

Computer Software ExpensesHitherto the expenditure on computer software ischarged to profit and loss account as expense.During the year the Company has changed thepolicy to treat the same as deferred revenueexpenditure to be written off over a period of threeyears. Accordingly expenses of Rs. 972,659 (net ofwritten off during the year) has been carried forwardas miscellaneous expenditure to be written off. Ifno change was effected in the current year the lossfor the year would have been higher by Rs. 972,659.

Valuation of InventoriesDuring the year the Company has changed methodof valuation of closing stock of raw material, stores,spares and packing material of Changodar Unit fromweighted average method to last purchase pricemethod. Considering the value, there appears nosignificant/material impact.

1999 - 2000 Valuation of InventoriesHitherto the Company was providing for the exciseduty liability in respect of finished goods lying inthe bonded warehouse at the close of the year andhence was included in the valuation of such goods.The Company has changed the policy and has notprovided for the liability of excise duty amounting toRs.12,732,998 on finished goods lying in the bondedwarehouse at the close of the year and not includedin the same in the valuation of such goods. Howeverthis has no effect on the profit for the year.

36

During the year the Company has changed methodof valuation of closing stock of raw material, stores,spares, and packing material to Changodar Unitfrom last purchase price method to weightedaverage cost method. Considering the value thereappears no significant/material impact.In order tocomply with the requirement of Section 211(3C) ofthe Companies Act, 1956 consequent to AccountingStandard - 2 (revised), valuation of inventories withoverhead loading being made mandatory in respectof accounting periods commencing on or after 1April 1999, the Company has changed its accountingpolicies for valuation of closing stock of raw material,stores & spares and packing material. Had theinventories been valued on the same basis as inthe earlier year, the inventories would have beenlower by Rs.4,179,018 and profit for the year wouldhave been lower by the same amount.During the year the Company has changedaccounting policy for valuation of closing stock ofspares received free of cost by valuing the same atcost incurred by way of payment of customs duty,and other direct expenses. Had the inventories beenvalued on the same basis as in the earlier year, theinventories would have been lower by Rs.614,433and profit for the year would have been lower bythe same amount.

2000 - 2001 Valuation of InventoriesUntil the previous year, the Company did not providefor the excise duty on goods manufactured. At 30September 2001, in accordance with AccountingStandard 2 on Valuation of inventories issue by theInstitute of Chartered Accountants of India, theCompany has made provision for unpaid exciseduty on manufactured finished goods inventoryaggregating to Rs.6,465,434. Previously, such exciseduty was accounted for on despatch from the factory.This has no effect on the net loss for the periodand the shareholders funds at 30 September 2001.

During the year, the Company has accounted forcustom duty in the year in which the liability on thegoods is transferred to the Company. Accordingly,the Company has made provision for customs dutyon closing inventory aggregating to Rs.53,147,393.Until the previous year, the Company used toprovide for such goods on clearance from custombonded warehouse. This has no effect on the netloss for the period and shareholders funds at 30September 2001.

2001 - 2002 Taxation

The Institute of Chartered Accountants of India hasissued Accounting Standard 22 "Accounting fortaxes on income", which is mandatory for theCompany in respect of accounting periodcommencing 1 April 2001. Accordingly, the Companyhas adopted this accounting standard in the currentyear in preparation of its financial statements.Income tax expense comprises current tax expenseand deferred tax expense and credit.

Current tax provision is made annually based onthe tax liability computed after considering taxallowances and exemptions. Further, deferred taxliability or asset is recognized for timing differencesbetween the profit/losses offered for income taxesand profit/losses as per the financial statements.

Deferred tax assets and liabilities are measuredusing the tax rates and tax laws that have beenenacted or substantially enacted at the balancesheet date.

Deferred tax assets are recognized only to the extentthat there is a reasonable certainty that sufficientfuture taxable income will be available against whichsuch deferred tax assets can be realized, otherthan deferred tax assets in respect of unabsorbeddepreciation and carry forward tax losses, whichare recognized only to the extent that there is virtualcertainty that they will be realised. The deferred taxassets are reviewed at each balance sheet date forthe appropriateness of their carrying values. Thedeferred tax liability pertaining to timing differencesadjustable against deferred tax assets arerecognized in the financial statement only if liabilitiesexceed the recognisable deferred tax assets.

Annexure - VAdjustments as per SEBI clarification

1 In financial year 1997-1998 the Company has followed cashbasis of accounting in respect of recognising insuranceclaims. As this income could not be quantified by themanagement no adjustment has been made. However,effective from financial year 1998-1999 insurance income hasbeen accounted on accrual basis in the respective accounts.

2 In financial year 1997-1998 the Company has changedmethod of valuation of closing stock of raw material, stores,spares and packing material of Changodar unit from first infirst out ('FIFO') basis to weighted average basis, which waschanged in financial year 1998-99 to last purchase pricebasis. Since these changes were not expected to havematerial impact by the management, no adjustment havebeen made.

3 In the financial year 1999-2000 the Company has adoptedthe mandatory Accounting Standard - 2 (Revised) Valuationof Inventories issued by the Institute of CharteredAccountants of India and hence the change in method ofvaluation of closing stock of raw material, stores, spares andpacking material has not been considered as change inaccounting policy.

4 In the financial year 1997-1998, 1998-1999 the Company wasvaluing the stocks of spares received free of cost at Rs. Nilinstead of valuing them at cost incurred by way of paymentof custom duty and other direct expenses. As the impact ofsuch change could not be quantified by the management noadjustment has been made in the financial years 1997-1998and 1998-1999. However, effective from financial year 1999-2000 the Company has valued the closing stock of sparesreceived free of cost incurred by way of payment of customsduty, and other direct expenses.

5 In the financial period ended 30 September 2001, theCompany has changed the method of valuation of closingstocks and started making provision for excise duty onfinished goods inventory and provision for custom duty ongoods lying in bonded warehouse. As this change inaccounting policy does not have any impact on adjusted profitand loss account and adjusted net worth, no adjustment hasbeen made in the financial years 1997-1998, 1998-1999 and1999-2000 with respect to changes in significant accountingpolicies due to implementation of mandatory accountingstandards issued by the Institute of Chartered Accountants ofIndia ('ICAI'), the Company's management has notconsidered necessary to adjust the profits/losses and assetsof liabilities of previous years/period.

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Annexure - VI

Changes in the share Capital

During the financial year 1998-1999 there was a change in Company's share capital on account of re-issue of 5,750 equity shares ofRs. 10/- each forfeited during the previous year. Further, during that year the Company allotted 51,65,490 equity shares of Rs 10/- eachto Hitachi Limited, Japan and Hitachi India Private Limited on preferential basis, making Hitachi Group as co-promoter along with LalbhaiGroup.

Annexure -VII

Dividend Details (Rs. in Lakhs)

Year Ended on 31.03.1998 31.03.1999 31.03.2000 30.09.2001 30.09.2002 30.06.200312 months 12 months 12 months 18 months 12 months 9 months

Rate of Dividend- Equity (In %) 15.00 - 10.00 - - -No. of equity shares (fully paid up) 94.97* 146.69 146.69 146.69 146.69 146.69

Paid up Capital 949.77* 1,466.90 1,466.90 1,466.90 1,466.90 1,466.90

Amount of dividend 142.47 - 146.69 - - -Tax on dividend 14.25 - 32.27 - - -

Note: *Number of equity shares considered for payment of dividend for the year ended 31 March 1998 does not include 5,750 equityshares forfeited by the Company during that year.

Annexure -VIII

Accounting Ratios

Year Ended on 31.03.1998 31.03.1999 31.03.2000 30.09.2001 30.09.2002 30.6.200312 months 12 months 12 months 18 months 12 months 9 months

a. Earnings Per Share (in Rs) 3.36 (7.32) 2.53 (12.31) (13.99) (12.38)

b. Return on Net Worth (in %) 11.37 (21.18) 10.02 (89.95) (2,053.53) (96.47)

c. Net Asset Value per Share (in Rs) 29.52 24.38 25.29 13.69 (0.68) (12.83)

Note : (i) Earnings Per Share represents basic earning per share calculated as net profit/(loss) after tax and extra-ordinary itemsdivided by weighted average number of shares employed during the period/year .

(ii) Return on Net Worth is calculated on the basis of net worth at the end of the year/period.

(iii) Net Asset Value per share is calculated based on number of equity shares at the end of the accounting period/year.

(iv) Number of equity shares for the year ended 31.03.1998 does not includes 5,750 equity shares forfeited.

Annexure - IX

Capitalisation Statement (Rs. in Lakhs)

Pre-issue as at Pre-issue as at As Adjusted30-09-2002 30-6-2003 for Rights Issue

Short- term Debt 2,765.53 2,824.09 1,324.09

Long-term Debt 1,617.87 2,744.44 2,744.44

Shareholders Funds

Share Capital 1,466.90 1,466.90 2,347.04

Reserves 2,142.46 2,142.46 3,990.75

Debit balance in profit and loss account (3,565.67) (5,380.98) (5,380.98)

Miscellaneous Expenditure (143.59) (110.03) (110.03)

Total Shareholders funds (99.90) (1,881.65) 846.78

Long-Term Debt/Equity Ratio (16.19) (1.46) 3.24

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Annexure X

Tax Shelter Statement Amount (Rs. in Lakhs)

Assessment Year 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Financial Year 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

Profit (Loss) as per books of account 312.35 (731.29) 349.20 (507.03) (1,980.17) (3084.29)

Tax Rate (Including Surcharge) 35.00% 35.00% 38.50% 39.55% 35.70% 36.75%

Tax at Notional Rate 109.32 (255.95) 134.44 (200.53) (706.92) (1,133.48)

Adjustments:

Deduction U/s. 80IA 263.51 – 62.73 – – –

Deduction U/s. 80HHC 5.45 – – – – –

Difference Between Tax Depreciationand Book Depreciation 70.43 202.99 174.60 (356.91) 429.67 267.53

Other Adjustments (27.04) (631.16) 55.19 (143.20) (333.07) (758.64)

Net adjustments 312.35 (428.17) 292.52 (500.11) 96.60 (491.11)

Tax Burden (Savings) (109.32) 149.86 (112.62) 197.79 (34.49) (180.48)

Total Taxation – (106.09) (84.27) (87.01) (828.41) (2,142.37)

Tax Provision made in books of U/s. 115JA – – 19.41 – –

Unabsorbed Depreciation & Business Loss – 303.12 246.44 253.36 2,330.13 4,923.31

Capital Loss – 542.49 542.49 542.49 504.35 504.35

Notes:

1. The figures in the above statement for the year 2002-03 (Assessment Year - AY 2003-04) are provisional and would be finalised atthe time of filing the return of income for A.Y.2003-04.

2. The figures of all other years are as per the Returns on income filed.

3. Tax depreciation of Rs. 525.44 lakhs is not claimed in the return of income for the year ended 31 March 2001.

Annexure XI

AVIKAL INVESTMENTS LIMITED

Statement of Assets and Liabilities (Rs. in Lakhs)

Year Ended on 31.03.1998 31.03.1999 31.03.200012 months 12 months 12 months

A Investments 3.68 3.68 3.68

B Current Assets, Loans and Advances

Cash and Bank Balances 0.39 0.09 0.12Loans and Advances 30.08 26.03 25.99

34.15 29.80 29.79

C Liabilities and ProvisionsCurrent Liabilities and Provisions 4.00 0.38 0.38

D Networth 30.15 29.42 29.41

E Represented by1. Share Capital 29.45 28.85 28.85

2. Reserve 0.97 0.82 0.78

F Miscellaneous Expenditure (0.27) (0.25) (0.22)( To the extend not written off)

Networth 30.15 29.42 29.41

Note 1 The Company has divested the investment made in the shares of its erstwhile subsidiary, Avikal Investments Ltd by selling itsentire equity holding of 96.81% shares in the year March 2001and consequently it is no more a subsidiary of the Company.

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Annexure -XIIAVIKAL INVESTMENTS LIMITED

STATEMENT OF PROFIT AND LOSSES (Rs. in Lakhs)

Year Ended on 31.03.1998 31.03.1999 31.03.200012 months 12 months 12 months

INCOMEDividend 3.82 –– ––Interest received 0.03 –– ––

Total income from Operations 3.85 –– ––

EXPENDITUREAdministration Expenses 0.05 0.15 0.04

0.05 0.15 0.04

Profit/(loss) before tax and extra-ordinary items 3.80 (0.15) (0.04)Provision for Tax 0.04 –– ––

Net Profit/ ( Loss) before Extra-ordinary Items 3.76 (0.15) (0.04)

Extra-Ordinary items –– –– ––Net Profit/ ( Loss) after Extra-ordinary Items 3.76 (0.15) (0.04)

Note 1 The Company has divested the investment made in the shares of its erstwhile subsidiary, Avikal Investments Ltd by selling itsentire equity holding of 96.81% shares in the year March 2001 and consequently it is no more a subsidiary of the Company.

Annexure XIII

Accounting Policies

(a) Method of Accounting

The Accounts are prepared on accrual basis

(b) Investments

Investments are stated at Cost.

(c) Preliminary Expenses

One tenth of Preliminary Expenses are written off every year.

Management Discussion and Analysis of Financial Condition and Results of operations as reflected in the financial statements

A summary of last three years financial is given below:

For the year ended on 31.03.2000 30.09.2001 30.09.2002 30.06.03(12 months) (18 months) (12 months) (9 Months)

Total Income from operations 14,707.14 28,509.86 19,824.54 15,942.93Total other income 60.86 320.39 172.18 211.24

Total Income 15,053.61 29,711.44 19,996.72 16,154.17

Total Expenditure 14,388.89 30,950.79 21,662.65 17,672.77Profit / Loss Before Depreciation 664.72 (1,239.35) (1,665.93) (1518.60)

Depreciation 296.16 539.18 385.55 296.71

Profit / Loss before tax andExtraordinary items 368.56 (1,778.53) (2,051.48) (1815.31)

Provision for Taxation 19.41 Nil Nil Nil

Profit / loss before Extraordinary items 349.15 (1,778.53) (2,051.48) (1815.31)Extraordinary items Nil Nil Nil Nil

Prior Period (Expenses)/ Income 30.13 (27.40) Nil Nil

Net Profit / Loss 379.28 (1,805.93) (2,051.48) (1815.31)Net Profit / Loss adjusted 371.85 (1,805.93) (2,051.48) (1815.31)

Unusual or Infrequent Events

Company has not reported any unusual or infrequent events during the last three years except information provided in this offer document.

Significant economic changes that materially affected or are likely to affect income from continuing operations

There are no significant economic changes that materially affected or are likely to affect income from continuing operations.

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Known trends or Uncertainties that have had or are expectedto have material adverse impact on sales, revenues or incomefrom continuing operations:

There were no known trends or uncertainties and there are nosuch known trends or un certainties that are expected to have amaterial adverse impact on sales, income or revenue fromcontinuing business.

Future changes in relationship between Costs and Revenues:

Future variable costs, as a percentage of sales, are not likely toregister any adverse trend.

The extent to which material increases in net sales or revenuesare due to increased sale volumes, introduction of newproducts or services or increased sales prices:

The increase of sales as shown above is basically due to theincrease in Sales volumes and increase in customer. This trend isexpected to sustain in the ensuing period.

The extent to which business is seasonal:

The AC market is seasonal in nature, with almost 45% of sales inQ1(April-June) and 25% sales in Q4 (Jan-Mar) and therefore theindustry sees heightened activity in the summer months due to thenature of the product category.

Significant dependence on a single or few suppliers orcustomers:

The Company is not dependent on any single or few suppliers fortheir major raw materials. Company's customer network is largeand as such the Company is not dependent on any single or fewcustomers.

Competitive conditions:

With highly innovative and constantly evolving products like theLogicool series, the Company has consistently outperformed theair conditioner industry growth, largely due to its technology drivenmarketing strategy. The success of the Logicool i range hashelped the company maintain this trend and achieve an impressivevolume growth of more than 40% during summer of 2002.

The Company with a market share of about 14% in organizedsector has emerged among the top 3 players and one of thefastest growing companies in the high growth RAC market in India.

The high potential of Indian air-conditioning industry has attractedall major international manufactures and brands, giving rise tointense competition in the market. The intensity of competition inthe market also led to large scale price drops by some of theleading brands though the Company was able to maintain a pricepremium of 10-20% over other prominent brands.

Any discontinued business

The Company has not discontinued any business during the lastone year.

VII. STOCK MARKET DATA

The following table shows the movement in the share prices of the Company on The Stock Exchange, Mumbai.

Closing High and Low prices and volume of the shares for the last 3 years:

Year High Low Average pricefor the year

(Rs.)

High Date of Volume on Low Date of Volume on(Rs.) High date of high (Rs.) Low date of low

(No. of (No. ofshares) shares)

2003 * 28.00 01.09.2003 78773 18.20 29.01.2003 4075 23.10

2002 23.80 26.12.2002 29941 8.70 23.01.2002 300 16.25

2001 23.00 20.02.2001 8475 8.00 08.10.2001 1100 15.50

2000 37.10 11.02.2000 3800 14.75 16.10.2000 810 25.92

* Upto October 31, 2003

Closing High and Low prices and volume of the shares during last 6 months:

Month High Low

High Date of V olume Low Date of Volume on Total volume(Rs.) High on date of (Rs.) Low date of for the month

high (No. of low (No. (no. of shares)shares) of shares)

Oct 2003 24.00 01.10.2003 3410 21.00 20.10.2003 4085 61,106

Sep 2003 28.00 01.09.2003 78773 21.90 23.09.2003 3200 1,74,349

Aug 2003 27.40 29.08.2003 47526 22.40 04.08.2003 3175 1,29,956

July 2003 24.80 02.07.2003 10800 21.95 10.07.2003 5757 93,199

June 2003 23.30 04.06.2003 1650 21.50 23.06.2003 2400 37,307

May 2003 24.00 16.05.2003 9336 21.40 02.05.2003 300 75,681

The closing share price on January 22, 2003, the first day of trading after the Board Meeting approving the Rights Issue was Rs. 23.05.

41

Weekend prices for the last four weeks

Date Price per share (Rs.)

November 14, 2003 22.80

November 07, 2003 22.25

October 31, 2003 22.35

October 24, 2003 21.15

Current market price as on November 14, 2003 is Rs. 22.80 on TheStock Exchange, Mumbai.

Closing High and Low prices of the shares during the week endedfor last 4 weeks

Week Ended on Highest High Lowest LowDate (Rs.) date (Rs.)

November 14, 2003 13.11.2003 23.80 10.11.2003 22.75

November 07, 2003 03.11.2003 23.00 05.11.2003 21.90

October 31, 2003 29.10.2003 22.45 27.10.2003 21.50

October 24, 2003 25.10.2003 21.85 20.10.2003 21.00

VIII. OUTSTANDING LITIGATIONS, DEFAULTS AND LIABILITIES

Against the Company

There are no outstanding litigation's, disputes, defaults, non payment of statutory dues, overdues to banks/financial institutions, defaultsagainst banks/Financial institutions, contingent liabilities not provided for, proceedings initiated for economic/civil/any other offences(including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph(i) of part 1 of Schedule XIII of the Companies Act, 1956) against Hitachi Home & Life Solutions (India) Ltd which are likely to affectthe performance or operations of the company except the following :

Income Tax


(Rs. in Lakhs)



2 1993-94 8.43 In Tribunal3 1994-95 42.14 In Tribunal

4 1995-96 Hitachi Home 320.92 In Tribunal Disallowance Contingent liability is& Life of certain Rs.226.60 lakhsSolutions expenditure(India) Ltd. and claim(Against the underincome tax Section 80IAdepartment)



Sales Tax







42







Central Excise














43

Customs






Labour Laws

There are 22 cases pending against the company, filed by contractlabourers, for re-instatement in the employment of the Company.All these cases are pending in conciliation proceeding before thelabour Officer. In addition, two cases for re-instatement in theservices of the company filed by ex-employees are pending beforethe labour court. There are also 3 prosecution cases pendingagainst the Company under the provisions the Apprenticeship Act.These cases have been filed by Labour Inspector for non-employment of sufficient number of Apprentice Trainees. There are99 prosecution cases filed by Labour Inspector for non complianceof provisions of Factories Act. There is one prosecution case filedby Labour Inspector for non compliance of provisions of MaternityBenefits Act.

Note with respect to Labour litigations: There are certain labourcases pending under Industrial Disputes Act against the Company,filed by the contract labourers against their termination of servicesby the labour contractor and the Company is facilitating theprocess of arriving at a mutual settlements though the issues arebetween the labour contractor and the contract labour. Thecompany hires contract labour for loading, unloading, housekeeping and other similar activities and have requisite registrationunder the contract labour regulations.

The concerned Factory Inspector has filed a complaint against theCompany with respect to Kadi plant under the Apprenticeship Actfor non compliance of the provisions of the said Act and theCompany is contesting the case.

Further, the Labour Inspector has filed a complaint against theCompany with respect to its Mumbai Branch under the provisionsof the Maternity Benefits Act for non-compliance and the Companyis contesting the case.

Others

Godrej-GE Appliances Limited (Godrej-GE) has filed a petition inthe High Court of Gujarat for a cancellation of certainairconditioner grill design originally registered by the Company.Earlier, Company had obtained an interlocutory order againstGodrej-GE restraining them from using this air conditioner grill

design which is owned by the Company. In response to this,Godrej-GE has filed the petition.

Contingent Liabilities

The following are the contingent liabilities as per the Auditors'Report for the period ended June 30, 2003.

Sl. Matter AmountNo. (Rs. in Lakhs)




4 Guarantee given by the Bankers tovarious authorities on behalf of the company 324.89

5 Claims against the companynot acknowledged as debt 18.65

Total 1757.92

Explanation to the contingent liabilities :

Income tax matters: - These are in relation to certain disputedliabilities towards income tax demand for various assessmentyears starting from 1992-93 to 2001-02 where appeals arepending with appellate authorities. Substantial portion of thesedemands are raised due to restriction of deduction under Section80 IA of the Income Tax Act relating to benefit available to theindustries set up in the backward areas in relation to the SilvassaPlant. The Company has received CIT (Appeals) orders for A.Y.1995-96, 1996-97 and 1998-99 in its favour with respect toallowance under Section 80IA. and expects similar views to betaken by the tax authorities for the subsequent assessment years.

Excise matters: - Major demand consisting of approximately Rs.299 lakhs relates to show cause notice issued by the excisedepartment claiming chargeability of excise on freight andinsurance charges in the invoices during the year 1995-96 to1999-00 stating that these sales are not at factory gate but thepoint of sale is customer's location. Company does not foreseeany liability on this account as various Commissionerates,Tribunals, High Courts and Supreme Court have already decidedagainst the department's stand in similar matters.

44

Other items of dispute consisting of appox. Rs. 169 Lakhs relatesto show cause notice issued by the Excise Department for havingdifferent MRP by the company based on marketing pattern.Department has demanded excise on difference between twoMRPs i.e., MRP for direct despatches to customers and MRP forsales through branches/dealers stating that different MRP are notpermitted for different marketing patterns. Company does notforesee any liability as it is well accepted practice to have differentMRPs for sales through different distribution channels/ Marketingpatterns.

Other issues relate to disputes raised by Excise Department in theordinary course of business and the company is defending thesame before the appropriate authroties.

Sales Tax matters: - Major demand consisting of approximately Rs.201 lakhs relates to disputes raised by sales tax department ofAndhra Pradesh and Rajasthan alleging direct sales made duringthe year 2000-01 / 2001-02 from Silvassa plant of the company aslocal sales made within the State liable for local sales tax.Company has already submitted its written reply and does notforesee any liability in this matter as legal position is well settledand sales made from Silvassa plant is inter-state sales as definedunder CST Act.

Other issues relate to disputes raised by Sales Tax Department atvarious States in the ordinary course of business and thecompany is defending the same before the appropriate authorities.

Guarantee given by the Bankers on behalf of the company: - SuchBank Guarantees are issued in the Normal course of business forvarious matters relating to fulfilment of export obligations againstadvance licence, EPCG Licence, for performance under warrantyperiod etc. There are, in aggregate, 157 bank guarantees and theperiod of Gurantees varies from 6 months to 8 years. Details ofwhich are as under :

Bank Amount of Guarantee

State Bank of India 77.77

ICICI Bank 66.81

Corporation Bank 63.76

Standard Chartered Bank 113.84

Mizuho Corporate Bank Ltd. 2.71

Total 324.89

Claims against the company not acknowledged as debts: - Theserelate to various complaints filed by the Customers before variousconsumer forums/ civil court with respect to defect/damages to thegoods, alleged to be not attended to their satisfaction. Companydoes not foresee any liability in this respect as such disputes getresolved by the dealers of the company at their cost.

Against the Directors

There are no outstanding litigation's, disputes, disputes towardstax liabilities, defaults, non payment/ overdues of statutory dues,overdues to banks/ financial institutions, defaults against banks/financial institutions, proceedings initiated for economic/civil/anyother offences (including past cases where penalties may or maynot have been awarded and irrespective of whether they arespecified under paragraph (i) of part 1 of schedule XIII of theCompanies Act, 1956) against the Directors of Hitachi Home &Life Solutions (India) Limited which are likely to affect theperformance or operations of the company and further there areno criminal prosecutions launched against the Directors for anyalleged offences (irrespective of whether they are covered underPart 1m of Schedule XIII of the Companies Act, 1956).

Against the Promoters / Directors of Promoter Company

There are no outstanding litigation's, disputes, defaults, nonpayment of statutory dues, overdues to banks/ financialInstitutions, defaults against banks/ Financial Institutions,contingent liabilities not provided for, proceedings initiated foreconomic/ civil/ any other offences (including past cases wherepenalties may or may not have been awarded and irrespective ofwhether they are specified under paragraph (i) of part 1 ofSchedule XIII of the Companies Act, 1956) against the Promoters/ Directors of Promoter Company in India which are likely to affectthe performance or operations of the company except thefollowing:

Securities Laws

Hitachi Home & Life Solutions, Inc Japan, the then Co promotersbut presently the promoters of the Company acquired 28,41,062Equity shares constituting 19.37% of the paid up Equity ShareCapital of the Company from Asman Investments Limited andother constituents of Lalbhai Group on January 18, 2003 at a priceof Rs. 41.64 per Equity Share and claimed exemption fromRegulation No. 11(1) and 12 of SEBI Takeover Regulations underInter se Transfer of Shares as per Regulation No. 3(i)(e)(iii)(a) ofSEBI Takeover Regulations citing Hitachi India Pvt Ltd as thepersons acting in concert with them.

SEBI issued a Show Cause Notice on June 13, 2003 calling uponHitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdto show cause why action under Regulation No. 44 and 45(6) ofSEBI Takeover Regulations and Section 11 and 11B of SEBI Act,1992 should not be initiated against them for violation ofRegulation No. 2(1)(c), 11(1) and 12 of SEBI Take OverRegulations as SEBI made observations in the above mentionedShow Cause Notice that prior acquisition of shares by AsmanInvestments Limited from ICICI Bank [SEBI issued show causenotice to Asman Investments Ltd. on April 8, 2003 in this regard]is not in order and therefore price of Rs. 33.53 paid for the saidacquisition can not be considered as one of the parameters for thedetermination of minimum price payable under inter se transferroute.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdsubmitted their detailed reply to SEBI on July 28, 2003 stating thatsaid acquisition of shares is eligible for exemption under Inter seTransfer of Shares and price paid for acquisition is as per thenorms prescribed under the said provisions.

After joint hearing of both the Show Cause Notices if thesubmissions made by Asman Investments Limited / Hitachi Home& Life Solutions Inc, Japan are not agreeable, SEBI may initiateaction against Asman Investments Limited and / or Hitachi Home& Life Solutions, Inc Japan which may include direction to AsmanInvestments Limited and / or Hitachi Home & Life Solutions, IncJapan to make open offer to the remaining Equity Shareholders ofthe Company to acquire minimum of 20% of the outstanding paidup Equity Share Capital of the Company at a price of not less thanRs. 33.53 / 41.64 per Equity Share in terms of SEBI TakeoverRegulations. Asman Investments Limited as well as Hitachi Home& Life Solutions Inc, Japan will have the option to appeal againstany such direction by the SEBI.

The Promoters have not defaulted in payment of any statutorydues and/or dues to any bank or financial institutions in India.There are no other litigation's pending against the Promoters inIndia that are likely to affect the performance or operations of theCompany.

Against Group / Associate Companies

There are no outstanding litigation's, disputes, defaults, nonpayment of statutory dues, overdues to banks/financial

45

institutions, defaults against banks/ financial institutions,contingent liabilities not provided for, proceedings initiated foreconomic/civil/any other offences (including past cases wherepenalties may or may not have been awarded and irrespective ofwhether they are specified under paragraph (i) of part 1 ofSchedule XIII of the Companies Act, 1956) against the group /associate companies which are likely to affect the performance oroperations of the company.

The company, its directors, promoters, associate companies,group companies, companies in which directors are associatedwith as directors or promoters, persons in control of abovecompanies have not been prohibited from accessing the capitalmarket under any order or direction passed by SEBI.

IX PARTICULARS OF LISTED COMPANIES UNDER THE SAMEMANAGEMENT

There are no listed Companies under the same managementwithin the meaning of Section 370 (1-B) of the Companies Act,1956 and the Company has not made Public or Rights Issue in thelast three years.

Promise vs Performance - Public Issue of 1991

The Company entered the Capital Market in February, 1991 withthe public issue of (a) 5,00,000 Equity Shares of Rs. 10/- each forcash at par and (b) 2,64,000 Debentures of Rs. 125/- each forcash at par both aggregating Rs. 380.00 Lakhs and the objects ofthe issue were (a) to part finance the expansion project of the unit

manufacturing airconditioners at Village Karannagar, (b) to acquirethe assets and liabilities of M/s Kelvin Metalkrafts Pvt. Ltd., (c) tomeet the working capital and (d) to meet the cost of public isssueas mentioned in the prospectus dated January 15, 1991.

Assets and liabilities of M/s Kelvin Metalkrfts Pvt. Ltd. wereacquired by the Company with effect from January 1, 1991 butimport restriction introduced by the Government of India entaileda delay in the implementation of the above mentioned expansionprogramme and the Company's profitability and sales wereaffected by this delay since the delay in the import of capitalequipments restricted the Company's production.

Promise vs Performance - Rights Issue of 1994

The Company made a Rights Issue of 14% Fully ConvertibleDebentures of Rs. 155/- each for cash at par aggregating to Rs.1451.38 Lakhs in March, 1994 and the objects of the Issue were(a) To finance the expansion and modernisation of its plant andmachinery, (b) to increase the installed capacity of Air conditionersfrom 24000 units to 50000 units per year, (c) To achieveupgradation of technology and (d) to part finance theconsequential increase in working capital requirements asmentioned in the Letter of Offer dated March 9, 1994.

The Company has achieved the above mentioned objectives but acomparative statement of financial projections as given in theabove mentioned letter of offer and actual financials for said yearsis given below :

(Rs. in Lakhs)

Particulars 1993-94 1994-95 1995-96

Projected Actuals % achie- Projected Actuals % achie- Projected Actuals % achie-vement vement vement

Net Sales 3087.50 2889.58 93.59 6487.50 5256.21 81.02 11866.25 8361.76 70.47

Profit After Tax 196.33 147.30 75.03 332.44 355.99 107.08 763.03 408.29 53.51

Dividend (%) 15.00 14.00 93.33 18.00 18.00 100 25.00 18.00 72

During the year 93-94, while shifting to ad valorem rate of exciseduty from specific rate of duty, the Government had fixed exciseduty at 60% which was higher than the then prevailing averagerate of duty in the previous year which adversely affected theentire air conditioning industry. During the year 1994-95 theCompany had registered 107% growth in production and 93% inSales in comparison to previous year. The Company could notachieve the projections Because its lower base of last year interms of sales but exceeded its profits projections. The Companycould not achieve the projections during 1995-96 due to drop ofsales figures in absolute terms because of reduction in exciseduty and adverse market conditions during the second half of theyear.

Subsidiary/Associate Companies of Hitachi Home & LifeSolutions (India) Ltd.

Relevant details are given in the letter of offer under the headAssociated Companies/Companies Promoted by The Promoters InIndia on page No 24.

Justification for Issue Price

Hitachi which is one of the top five brands of air conditioners in theworld, has acquired the majority stake in the Company in January,2003. The Company is expected to have better and swift accessto Hitachi Technology for Air conditioners.

The Indian air-conditioning market holds immense future potentialas has been borne out by numerous independent studies. With

overall penetration of less than 1%, much lower than otherconsumer durables, and even cars, coupled with the climaticconditions and ever increasing affordability and awareness, theIndian market offers untapped potential.

Quantitative

1. Adjusted Earning Per Share (EPS)

(a) 1999-00 2.53

(b) 2000-01 (18 months) (12.31)

(c) 2001-02 (13.99)

(d) Weighted Average NA

2. Price/ Earning Ratio (P/E) in relation to Issue Price

(a) Based on 2001-02 EPS NA

(b) Industry P/E for Air Conditioner Industry

(i) Highest 8.10

(ii) Lowest 2.00

(iii) Average 7.00

(* Based on Capital Market Vol XVIII/18 dated November 10, 2003)

3. Return on Net Worth

(a) 1999-00 10.02(b) 2000-01 (18 mths) (89.95)(c) 2001-02 (2053.53)(d) Weighted Average NA

46

4. Minimum Return on Total Net Worth after Issue

Needed to maintain EPS NA

5. Net Asset Value (NAV)

(a) As at 30/09/2002 (0.68)

(b) After issue 1.12

(c) Issue price 31.00

Profit related ratios are not relevant as the company is incurringlosses. Accounting Ratios of peer Group Companies are asfollows :

(In Rs.)

Company Source Year EPS Return On NAV perEnding Net Worth Share

per Share

Voltas Ltd. Company'sAnnual Rep. Mar-02 5.09 0.09 56.82

Blue Star Company'sAnnual Rep. Mar-03 16.79 0.27 64.23

Carrier Company's Mar-02 -3.35 -0.08 40.80Aircon Annual Rep.

X. MISCELLANEOUS INFORMATION

Information as required by Government of India, Ministry ofFinance, Circular Number: F2\5\SE\76 dated 5th February, 1977as amended vide their circular of even number dated 8th March,1977 is given below:

Unaudited working results for the period from July 01, 2003 toSeptember 30, 2003

Particulars Rs. in Lakhs

Sales / Income from operations 4810.98

Excise Duty 621.68

Net Sales 4188.40

Other Income 47.09

Total Expenditure 4202.49

Interest 164.57

Gross Profit / (Loss) after interest (131.57)

Provision for Depreciation 87.94

Net Profit / (Loss) before tax (219.51)

Provision for Taxation ––

Net Profit / (Loss) after tax (219.51)

Paid up Equity Capital 1466.90

Reserves excluding Revaluation Reserve(as per Balance Sheet of previous Accounting year) (1423.21)

Adverse events affecting the Company since the date of lastfinancial statement

In the opinion of the company there have not arisen since the dateof last audited financial statement disclosed in the letter of offerany circumstances that materially and adversely affects or likely toaffect the trading or profitability of the company or the value of itsassets or its ability to pay its liabilities within next twelve monthsexcept those stated under the head "Material developments afterthe date of last audited financial statement" below.

Material changes, commitments and developments after thedate of last audited financial statement

There are no material changes, commitments and developmentsaffecting the financial position of the company since the date oflast audited financial statement except the following:

Hitachi Home & Life Solutions Inc, Co-promoter, purchased theentire share holding of Lalbhai group, Co-promoter ie 28,41,062shares constituting 19.37% from Lalbhai Group by way of inter setransfer of shares amongst promoters in January 2003 at a priceof Rs. 41.64 per share and increased its holding in the companyfrom 35.20% to 54.58%. After the said transfer of shares, HitachiHome & Life Solutions, Inc. became the sole promoter of theCompany. Share transfer was executed in accordance withbusiness strategies of both the parties whereas Lalbhai groupdecided to exit from their non core business, Hitachi Home & LifeSolutions Inc, Japan placed India as a significant market for airconditioners and made a decision to expand the business in India.

The board of the Company was reconstituted, subsequent to theacquisition of majority stake by Hitachi. The Lalbhai group nominees,Mr. Sanjay Lalbhai, Chairman and Mr. Naishad Parikh, ManagingDirector, resigned from the board. As on date Hitachi has inductedexpertised professionals in the Company including Mr. KiyoshiNagasawa as Chairman, Akira Kamitani as Managing Director, Mr.Makoto Takeshita and Mr. Saburo Enami as Executive Directors andMr. Shinichi Iizuka as Chief Operating Officer.

Due to change in the promoters the name of the company waschanged from "Amtrex Hitachi Appliances Ltd" to "Hitachi Home &Life Solutions (India) Ltd". on March 12, 2003.

Authorised Share Capital of the Company was increased fromRs. 20,00,00,000/- [ 1,99,80,000 Equity Shares of Rs. 10/- eachand 20,000 9% Cumulative Redeemable Preference Shares ofRs. 10/- each] to Rs. 30,00,00,000/- [ 3,00,00,000 Equity Sharesof Rs. 10/- each] by (i) increasing 1,00,00,000 Equity Shares ofRs. 10/- each and (ii) reclassifying 20,000 9% CumulativePreference Shares of Rs. 10/- each into 20,000 Equity Shares ofRs. 10/- each and necessary resolution was passed in the 18thAnnual General Meeting of the Company held on February 27,2003.

The accumulated losses as on September 30, 2002 exceeded fiftypercent of the peak net worth of the Company during theimmediately preceding four financial years. As a result, theCompany is a potentially sick Company within the meaning ofSection 23 of the Sick Industrial Companies (Special Provisions)Act, 1985 (SICA). In compliance of the requirement of SICA, ExtraOrdinary General Meeting (EGM) of the Shareholders of theCompany was held on April 26, 2003 and considered such erosionof the net worth. Further, Company has submitted requisite reportwith the Board for Industrial and Financial Reconstruction statingits recovery plan.

Company was enjoying Sales Tax exemption at Silvassa by virtue ofSales Tax benefits to the Industries set up in the Uninon Terrotory ofDadra & Nagar Haveli. Under these benefits the Territory had the powerto grant exemption to Industries making interested sales to any cus-tomer without submission of Form C / Form D. However with effectfrom June, 2002 this power has been made conditional on productionof Form C. Most of the customers of the company are individuals whodo not have any trading / commercial entity and therefore not able toissue any Form C. In such cases it becomes mandatory on the Com-pany to charge full Sales Tax rate. This ultimately has resulted indi-rectly in withdrawing the exemptions of Sales Tax to a large extent.Considering above, it was found advisable to consolidate theanufacturing operations under one roof by shifting Silvassa Manufac-turing facility to Kadi, Gujarat.

Government of India declared various fiscal benefits including CentralExcise exemptions to the industries, inter alia, set up in the States ofJammu & Kashmir as well as Himachal Pradesh. The Company hastied up with a local manufacturers to purchase the Air conditionersproduced as per the Company’s specifications. Company would enjoy

47

the benefits in terms of pricing due to various fiscal benefits includingexemptions from Excise Duty enjoyed by the Supplier.

Head Office of the company has been shifted from 'Abhijeet',Ahmedabad to Kadi factory in the month of May / June 2003. It willimprove the synergy between the various functions of thecompany, there by improving overall efficiency and faster decisionmaking and reducing overhead cost and manpower.

Registrar of Companies, Gujarat has approved the extension offinancial year of the Company upto March 31, 2004.

Interest of Promoters and Directors

The Promoters have no interest in Hitachi Home & Life Solutions(India) Ltd. except to the extent of equity shares held in theCompany and to the extent of benefits arising out of suchshareholding and reimbursement of expenses incurred or normalremuneration or benefits or interest in other ventures, if any, whichhave commercial transactions, if any with Hitachi Home & LifeSolutions (India) Ltd.

The Directors of Promoter Company / Companies have no interestin Hitachi Home & Life Solutions (India) Ltd. except to the extentof any equity shares held by them in Hitachi Home & LifeSolutions (India) Ltd. or their relatives and associates or thecompanies, firms and trusts in which they are interested asdirectors, members, partners and/or trustees and to the extent ofbenefits arising out of such shareholding and reimbursement ofexpenses incurred or normal remuneration or benefits or interestin other ventures, if any, which have commercial transactions, ifany with Hitachi Home & Life Solutions (India) Ltd.

Directors have no interest in Hitachi Home & Life Solutions (India)Ltd. except to the extent of any equity shares held by them inHitachi Home & Life Solutions (India) Ltd. and to the extent ofbenefits arising out of such shareholding and reimbursement ofexpenses incurred or normal remuneration or benefits or interestin other ventures, if any, which have commercial transactions, ifany with Hitachi Home & Life Solutions (India) Ltd.

All Directors may be deemed to be interested in the contracts,agreements/arrangements entered into or to be entered into by thecompany with any company in which they hold Directorships.

Investor Grievances and Redressal Systems

The Company has a team of qualified and experienced staff in itssecretarial department who co ordinate with the Company'sRegistrars and Share Transfer Agents for attending to andresolving the Complaints of its shareholders. The Companyensures that all complaints are resolved satisfactorily. TheCompany ordinarily attempts to dispose of the complaints withinfour weeks of receipt of complaints.

As on date, there are no complaints pending with the Company.

Investors may contact the Compliance Officer in case of any pre-Issue/post -Issue related problems such as non receipt of lettersof allotment/share certificates/refund orders/cancelled stockinvest/demat credit etc. The company has appointed Mr. Mahesh DAgrawal as the Compliance Officer.

Complaint letters should be either type written or legibly handwritten quoting Folio number / DP ID and Client ID, applicationnumber, number of shares applied for, name and address of thefirst applicant, name and address of the Bank, Branch whereapplication was submitted with date thereof and the date of receiptby the Registrars to the Issue in case application was sent byPost. Envelopes containing the complaints should be addressedto:

Mr. Mahesh D AgrawalGM - Legal and Company SecretaryHitachi Home & Life Solutions (India) Ltd.901, Abhijeet, Mithakhali Six RoadsAhmedabad, 380006, India.Tel: (079) 6400673Fax (079) 6401128E- mail: [email protected]

The number of times the Company's name has appeared in PressReleases issued by SEBI regarding maximum number ofcomplaints received from investors :

To the best of our knowledge, the name of the Company has notappeared in the Press Release issued by SEBI relating tomaximum number of Investors complaints received during the lastthree months.

Further, there are no outstanding Investor Grievances as on datepending redressal by the Company.

Expert Opinion

Save and except as stated elsewhere in this Letter of Offer, theCompany has not obtained any expert opinion.

XI. STATUTORY AND OTHER INFORMATION

Minimum SubscriptionIf the company does not receive the minimum subscription of 90% ofthe issue, on the date of closure of the issue, the entire subscriptionshall be refunded to the applicants within 42 days from the date ofclosure of the Issue. If there is a delay in the refund of subscription bymore than 8 days after the Company becomes liable to pay thesubscription amount (i.e. 42 days after closure of the issue), thecompany shall pay interest for the delayed period, at rates prescribedunder sub-sections (2) and (2A) of Section 73 of the Companies Act1956.

In case the permission to deal in and for an official quotation of theEquity Shares is not granted by the Stock Exchanges at Ahmedabad,Mumbai, Delhi and National Stock Exchange, the Issuer shall forthwithrepay without interest, all monies received from the applicants inpursuance of this Letter of Offer and if such money is not repaid withineight days after the day from which the Issuer is liable to repay it, theIssuer shall pay interest as prescribed under Section 73 (2) / 73 (2A)of the Companies Act 1956.

Public / Rights Issues in last 5 yearsThe Company has not made any Public or Rights Issue during the last5 years. However, the Company entered the capital market in February1991 with a Public Issue of 5,00,000 Equity Shares of Rs. 10/- eachfor cash at par and 2,64,000 Debentures of Rs. 125/- each for cash atpar thus aggregating Rs. 380.00 lakhs and made a Rights Issue of9,36,375 14% Fully Convertible Debentures of Rs. 155/- each for cashat par aggregating Rs. 1451.38 lakhs in March 1994.

Debentures / Redeemable Preference Shares issued andoutstandingThe Company has no Debentures or Redeemable Preference Sharesissued and outstanding as of date.

However, the Company reclassified 20,000 9% Cumulative PreferenceShares of Rs. 10/- each aggregating Rs. 2,00,000/- into 20,000 EquityShares of Rs. 10/- each and necessary resolution was passed in the18th Annual General Meeting of the Company held onFebruary 27, 2003.

48

Risk Factors as perceived by the Management and Proposals to address the risks if any

Internal Risk Factor No. 1Outstanding Litigations And Defaults:

Against the Company

Income Tax


(Rs. in Lakhs)



2 1993-94 8.43 In Tribunal3 1994-95 42.14 In Tribunal4 1995-96 Hitachi Home 320.92 In Tribunal Disallowance Contingent liability is

& Life of certain Rs.226.60 lakhsSolutions expenditure(India) Ltd. and claim(Against the underincome tax Section 80IAdepartment)



Sales Tax













49

Central Excise














Customs






Labour LawsThere are 22 cases pending against the company, filed by contractlabourers, for re-instatement in the employment of the Company. Allthese cases are pending in conciliation proceeding before the labourOfficer. In addition, two cases for re-instatement in the services of thecompany filed by ex-employees are pending before the labour court.There are also 3 prosecution cases pending against the Companyunder the provisions the Apprenticeship Act. These cases have beenfiled by Labour Inspector for non-employment of sufficient number of

Apprentice Trainees. There are 99 prosecution cases filed by LabourInspector for non compliance of provisions of Factories Act. There isone prosecution case filed by Labour Inspector for non compliance ofprovisions of Maternity Benefits Act.

OthersGodrej-GE Appliances Limited (Godrej-GE) has filed a petition in theHigh Court of Gujarat for a cancellation of certain airconditioner grilldesign originally registered by the Company. Earlier, Company had

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obtained an interlocutory order against Godrej-GE restraining themfrom using this air conditioner grill design which is owned by theCompany. In response to this, Godrej-GE has filed the petition.

Against the Promoter CompanySecurities LawsHitachi Home & Life Solutions, Inc Japan, the then Co promoters butpresently the promoters of the Company acquired 28,41,062 Equityshares constituting 19.37% of the paid up Equity Share Capital of theCompany from Asman Investments Limited and other constituents ofLalbhai Group on January 18, 2003 at a price of Rs. 41.64 per EquityShare and claimed exemption from Regulation No. 11(1) and 12 ofSecurities and Exchange Board of India (Substantial Acquisition ofShares and Takeovers) Regulations, 1997 and subsequentamendments thereto (SEBI Takeover Regulations) under Inter seTransfer of Shares as per Regulation No. 3(i)(e)(iii)(a) of SEBI TakeoverRegulations citing Hitachi India Pvt Ltd as the persons acting in concertwith them.

SEBI issued a Show Cause Notice on June 13, 2003 calling uponHitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltd toshow cause why action under Regulation No. 44 and 45(6) of SEBITakeover Regulations and Section 11 and 11B of SEBI Act, 1992should not be initiated against them for violation of Regulation No.2(1)(c ), 11(1) and 12 of SEBI Take Over Regulations as SEBI madeobservations in the above mentioned Show Cause Notice that prioracquisition of shares by Asman Investments Limited from ICICI Bank[SEBI issued Show Cause Notice to Asman Investments Limited onApril 08, 2003 in this regard) is not in order and therefore price of Rs.33.53 paid for the said acquisition can not be considered as one of theparameters for the determination of minimum price payable under interse transfer route.

Hitachi Home & Life Solutions Inc Japan and Hitachi India Pvt Ltdsubmitted their detailed reply to SEBI on July 28, 2003 stating thatsaid acquisition of shares is eligible for exemption under Inter seTransfer of Shares and price paid for acquisition is as per the normsprescribed under the said provisions.

After joint hearing of both the Show Cause Notices if the submissionsmade by Asman Investments Limited / Hitachi Home & Life SolutionsInc, Japan are not agreeable, SEBI may initiate action against AsmanInvestments Limited and / or Hitachi Home & Life Solutions, Inc Japanwhich may include direction to Asman Investments Limited and / orHitachi Home & Life Solutions, Inc Japan to make open offer to theremaining Equity Shareholders of the Company to acquire minimumof 20% of the outstanding paid up Equity Share Capital of the Companyat a price of not less than Rs. 33.53 / 41.64 per Equity Share in termsof SEBI Takeover Regulations. Asman Investments Limited as well asHitachi Home & Life Solutions Inc, Japan will have the option to appealagainst any such direction by the SEBI.

Internal Risk Factor No. 2The accumulated losses as on September 30, 2002 exceeded fiftypercent of the peak net worth of the Company during the immediatelypreceding four financial years. As a result, the Company is a potentiallysick Company within the meaning of Section 23 of the Sick IndustrialCompanies (Special Provisions) Act, 1985 (SICA).

Proposal to address the riskIn compliance of the requirement of SICA, Extra Ordinary GeneralMeeting (EGM) of the Shareholders of the Company was held on April26, 2003 and considered such erosion of the net worth. Further,Company has submitted requisite report with the Board for Industrialand Financial Reconstruction (BIFR) stating its recovery plan.


The Company has incurred losses in three financial years out of last five financial years as per the details give below:

(Rs. in Lakhs)

Period / year April 01, April 01, April 01, April 01, October 01,1997 1998 1999 2000 2001

to to to to toMarch 31, March 31, March 31, September 30, September 30,

1998 1999 2000 2001 2002

Profit / (Loss)After Tax 312.35 (731.29) 349.15 (1778.53) (2051.48)

Net worth (Equity Capital+Reserves-Accumulated Losses- Misc.Expenditure) of the Company as on September 30, 2002 is negativeto the extent of Rs. 99.90 Lakhs.

Proposal to address the riskIntense competition in the market led to large scale price drops bysome of the leading brands and the Company was forced to rationalizeits prices, but maintaining a price premium of 10 to 20% over otherprominent brands. This has resulted in financial losses in three financialyears out of last five financial years. It is now proposed to achieveprofitability in the ensuing financial year through a number of focusedinitiatives like value engineering for large reduction in product cost,integration with Hitachi's global sourcing for getting scale economy onbuying, pruning of costs across the entire value chain and buildingcustomer value for Hitachi Brand.


The following are the contingent liabilities as per the Auditors' Reportfor the period ended June 30, 2003.

Sl. Matter AmountNo. (Rs. Lakhs)




4 Guarantee given by the Bankers tovarious authorities on behalf of the company 324.89

5 Claims against the company notacknowledged as debt 18.65

Total 1757.92

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Proposal to address the riskThe Company does not foresee any liabilities on account of the above.The detailed explanation has been provided under the heading"outstanding litigations, defaults and liabilities" on page no. 41.

Internal Risk Factor No. 5Total fund requirement of the Company is Rs. 5826.42 Lakhs and theCompany proposes to source Rs. 1500.00 Lakhs from its internalaccruals. The Company incurred losses for the financial year endedas on September 30, 2001 and September 30, 2002 and its net worthis negative at Rs.99.90 Lakhs as on September 30, 2002. In view ofthis, the amount of internal accrual as envisaged above may not beavailable and in such an event, there will be a short fall in availablefunds to attain the objects of the issue as mentioned under head"Objects of the issue" on page no. 18.

Proposal to address the riskDuring the financial year from Oct-03 to Sep-04 and Oct-04 to Sep-05, the budgeted profit of the Company is Rs. 248.00 Lakhs and Rs.907.00 Lakhs respectively. The Cash Profit for the same period isbudgeted to be Rs. 786.00 Lakhs and Rs. 1510.00 Lakhs respectivelyaggregating to Rs. 2296.00 Lakhs. The Company proposes to utilizeRs. 1500.00 Lakhs out of this budgeted profit to meet the requirementas mentioned under the head "Requirement of Funds" on page no. 19.

Internal Risk Factor No. 6Large investments are necessary for market development, brandbuilding, distribution, new product development and creating systemand process back bone for customer satisfaction in this Industry.

Proposal to address the riskBeing under Hitachi's fold, the Company will have access to latesttechnology of Hitachi. Company will also be able to penetrate in exportmarket with Hitachi's brand equity and with Hitachi's marketingexpertise.

Internal Risk Factor No. 7Company was enjoying Sales Tax exemption at Silvassa by virtue ofSales Tax benefits to the Industries set up in the Union Territory ofDadra & Nagar Haveli. Under these benefits scheme, the Territorywas empowered to grant exemption to Industries making interestedsales to any customer without submission of Form C / Form D. However,with effect from June 2002 this power has been made conditional onproduction of Form C.

Proposal to address the riskMost of the customers of the company are individuals who do nothave any trading / commercial entity and therefore not able to issueany Form C. In such cases it becomes mandatory on the Company tocharge full Sales Tax rate. This ultimately has resulted indirectly inwithdrawing the exemptions of Sales Tax to a large extent. Consideringabove, it was found advisable to consolidate the anufacturingoperations under one roof by shifting Silvassa Manufacturing facilityto Kadi, Gujarat.

Government of India declared various fiscal benefits including CentralExcise exemptions to the industries, inter alia, set up in the States ofJammu & Kashmir as well as Himachal Pradesh. The Company hastied up with a local manufacturers to purchase the Air conditionersproduced as per the Company’s specifications. Company would enjoythe benefits in terms of pricing due to various fiscal benefits including

exemptions from Excise Duty enjoyed by the Supplier.

Internal Risk Factor No. 8The fund requirement has not been appraised by any Bank or FinancialInstitution and it has been based on the Company's own estimates.The deployment of funds to be collected in this Issue is at the solediscretion of the Directors of the Company.

Proposal to address the riskThe Company has estimated the requirement of funds based on theCompany's current perception of business, prevailing market conditionsand projects in hand and funds will be utilised at the discretion of themanagement.

Internal Risk Factor No. 9Technical Collaboration Agreement with Refrigeration and AirConditioning Division of Hitachi Ltd, Japan, entered into on April 10,1998 for receiving technical information and technical assistancerelating to window type and split type room air conditioners and alsofor the right and license to manufacture and sell such productscontinues to be effective for 10 years from the date of execution ofagreement or 7 years from the commencement of commercialproduction of last Amtrex products whichever falls earlier unlessterminated as per the provisions of the agreement.

Proposal to address the riskHitachi group has increased its holding from 35.20% to 54.58% inJanuary 2003 and accordingly the Company is confident to have betterand swift access to Hitachi technology. Company is also confident ofentering further technical collaboration for acquiring latest technologyon ongoing basis.

Internal Risk Factor No. 10Industrial Development Bank of India (IDBI) has deferred principaland interest payment against Asset Credit Scheme and CorporateLoan Scheme in the month November 2002.

Proposal to address the riskIDBI deferred principal installments due on January 1, April 1, July 1and October 1, 2002 so as to be payable along with principalinstallments falling due on January 1, April 1, July 1 and October 1,2003. This was done on the request of the Company as the Companywas facing liquidity crunch at that point of time.

Internal Risk Factor No. 11Capacity utilization for Visi-coolers and Non-electric Ice CooledDispensors were low during the year ended on September 30, 2002.

Proposal to address the riskHitachi Home & Life Solutions (India) Ltd was basically supplying Visi-coolers and Non-Electric-Ice Cooled Dispensers to Coca-cola asOriginal Equipment Manufacturer (OEM) supplier. As they havereduced their purchase during the said year, utilisation of capacity ofthose products were low.

Internal Risk Factor No. 12The Company entered the Capital Market in February 1991 with thepublic issue of (a) 5,00,000 Equity Shares of Rs. 10/- each for cash atpar and (b) 2,64,000 Debentures of Rs. 125/- each for cash at parboth aggregating Rs. 380.00 Lakhs and the objects of the issue were(a) to part finance the expansion project of the unit manufacturingairconditioners at Village Karannagar, (b) to acquire the assets andliabilities of M/s Kelvin Metalkrafts Pvt. Ltd., (c) to meet the workingcapital and (d) to meet the cost of public isssue as mentioned in theprospectus dated January 15, 1991.

Proposal to address the riskAssets and liabilities of M/s Kelvin Metalkrfts Pvt. Ltd. were acquiredby the Company with effect from January 1, 1991 but import restrictionsintroduced by the Government of India entailed a delay in theimplementation of the above mentioned expansion programme andthe Company's profitability and sales were affected by this delay sincethe delay in the import of capital equipments restricted the Company'sproduction.

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Internal Risk Factor No. 13The Company made a Rights Issue of 14% Fully ConvertibleDebentures of Rs. 155/- each for cash at par aggregating to Rs. 1451.38Lakhs in March 1994 and the objects of the Issue were (a) To financethe expansion and modernisation of its plant and machinery, (b) toincrease the installed capacity of Air conditioners from 24,000 units to50,000 units per year, (c) To achieve upgradation of technology and

(Rs. in Lakhs)

Details 1993-94 1994-95 1995-96

Projected Actuals % Projected Actuals % Projected Actuals %achieve- achiev- achie-

ment ement vement

Net Sales 3087.50 2889.58 93.59 6487.50 5256.21 81.02 11866.25 8361.76 70.47Profit After Tax 196.33 147.30 75.03 332.44 355.99 107.08 763.03 408.29 53.51

Dividend (%) 15.00 14.00 93.33 18.00 18.00 100 25.00 18.00 72

During the year 93-94, while shifting to ad valorem rate of excise dutyfrom specific rate of duty, the Government had fixed excise duty at60% which was higher than the then prevailing average rate of duty inthe previous year which adversely affected the entire air conditioningindustry. During the year 1994-95 the Company had registered 107%growth in production and 93% in Sales in comparison to previous year.The Company could not achieve the projected sales but exceeded itsprofits projections. The Company could not achieve the projectionsduring 1995-96 due to drop of sales figures in absolute terms becauseof reduction in excise duty and adverse market conditions during thesecond half of the year.


Hitachi India Pvt Limited, one of the associate companies in India,promoted by the Promoters which is engaged in liaisoning, tradingand promoting manufacturing projects in Joint Ventures, incurred netloss of Rs. 99.69 lakhs for the year 2001-02


The Company proposes to issue Equity Shares of Rs. 10/- each byway of rights to the existing Equity shareholders of the Company at apremium of Rs. 21/- per Equity Share. The Equity Shares of theCompany are currently traded on the Stock Exchanges at a price ofRs. 22.80 per Equity Share as on November 14, 2003. Rights issueprice of Rs. 31/- per Equity Share is considerably higher than theprevailing market price.

Proposal to address the risk

The Company proposes to achieve profitability in the ensuing financialyears through a number of focused initiatives like value engineeringfor large reduction in product cost, integration with Hitachi's globalsourcing for getting scale economy on buying, pruning of costs acrossthe entire value chain and building customer value for Hitachi Brand.


Equity Shares of the Company enjoy low liquidity on the StockExchanges.


Equity Shares of the Company are listed on National Stock Exchange,Mumbai Stock Exchange, Delhi Stock Exchange and AhmedabadStock Exchange and are regularly traded.


Articles of Association of the Company provides that if the EquityShares held by Hitachi reduces to 25% or less of the paid up equitycapital of the company, the word "Hitachi" shall be deleted from thename of the company and in such an eventuality, the name of thecompany shall be changed to some other name acceptable to thethen management of the company


As per world wide policy of Hitachi group, Japan, a joint ventureCompany is allowed to include word "Hitachi" in its corporate name

only in case Hitachi group is having at least 25% share holding in thejoint venture Company. The Hitachi has recently acquired the entirestake of the Lalbhai group and has increased its holding from 35.20%to 54.58%.


Hitachi Home & Life Solutions Inc, Co-promoter, purchased the entireshare holding of Lalbhai group, Co-promoter ie 28,41,062 equity sharesconstituting 19.37% from Lalbhai Group by way of inter se transfer ofshares amongst promoters in January 2003 at a price of Rs. 41.64per share and increased its holding in the company from 35.20% to54.58%. After the said transfer of shares, Hitachi Home & Life Solutions,Inc. became the sole promoter of the Company. Due to change in thepromoters, the name of the company was changed from "AmtrexHitachi Appliances Ltd" to "Hitachi Home & Life Solutions (India) Ltd"on March 12, 2003. There was no need to amend Objects Clause tocarry on activities as reflected by the new name as the companycontinues to carry on existing activities.


With respect to compliance of listing agreements entered into with therespective stock exchanges, Company has not defaulted except foran instance of shorter information of Book Closure (under clause 15/16 of the Listing Agreement) in the year 1999, as a result of which thetrading of shares was suspended for five days on the Mumbai StockExchange.

External Risk Factor No. 1

The Company is subject to the exchange rate fluctuation due to itsexposure to external commercial borrowings from the promoterCompany and also import of raw materials from foreign vendors.Outstanding amount as on June 30, 2003 with respect to externalcommercial borrowing is Rs. 1556.40 Lakhs (4000.00 Lakhs JPYconsidering foreign exchange rate @ Rs. 38.91 for 100 JPY) and importof raw materials is Rs. 1467.34 Lakhs (31.57 Lakhs US$ consideringforeign exchange rate @ Rs. 46.47 for 1 US$) and Rs. 474.86 Lakhs(1220.41 Lakhs JPY considering foreign exchange rate @ Rs. 38.91for 100 JPY) aggregating to Rs. 1942.20 Lakhs.


The Company availed financial assistance from the promoter Companyin the form of External Commercial Borrowings in Japanese Yen andthe rate of interest payable by the Company is 2% pa. Companyevaluates the risk due to exposure to exchange rate fluctuation vis-à-vis the cost to be incurred for forward contract. On the basis of costbenefit analysis, the Company decides whether to cover the risk dueto exchange rate fluctuation or not, on case to case basis from time totime.

External Risk Factor No. 2

Changes in the Fiscal and Economic policies of Government of Indiamay affect the prospects of the Company.


(d) to part finance the consequential increase in working capitalrequirements as mentioned in the Letter of Offer dated March 9, 1994.

Proposal to address the riskThe Company has achieved the above mentioned objectives but acomparative statement of financial projections as given in the abovementioned letter of offer and actual financials for said years is givenbelow :

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Over the last few years the Government policies towards airconditioning and refrigeration industry has been favourable and henceit is unlikely that Government of India would initiate any policy whichcould be detrimental to the growth of industry. Moreover, air conditioningindustry is amongst the highest tax rate slab and the recent governmentinitiative is expected to benefit the Industry as well as the Company.

Option to Subscribe

Save and except as stated elsewhere in this Offer Document theCompany has not entered into nor does it intend for the present purposeto enter into any contract or arrangement whereby any option orpreferential right of any kind has been or is proposed to be given toany person to subscribe for the shares of the Company.

Option to subscribe in Dematerialised Form

The investors have the option to subscribe to the shares of theCompany either in the physical form or dematerialised form. However,applicants should note that as per SMDRP/Policy/cir-9/2000 datedFebruary 16, 2000, all deliverables of Equity Shares of the Companyare being settled in the dematerialised form only. Accordingly,settlement of trades on the Stock Exchanges are only in dematerialisedfrom with effect from May 15, 2000.

Separate applications for dematerialised and physical Equity Sharesshall be treated as multiple applications and rejected. Applicants mustindicate in the application form the number of shares they wish toreceive in dematerialised and physical form out of the total number ofshares applied for. In case of partial allotment, shares will be firstallotted in dematerialsied form and the balance Equity Shares, inexcess of the applicant's request for Equity Shares in dematerialsedform will be allotted in physical form. Equity Shares allotted in Physicalform will be in multiples of 100.

XII MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS

The contracts referred to under "Material Contracts" (not beingcontracts entered into in the ordinary course of business carried onby the Company) are or may be deemed to be material contracts.Copies of these contracts along with copies of the documents referredto below may be inspected at the Registered Office of the Companybetween 10.00 am and 1.00 p.m. on any working day of the Companytill the closing of the subscription list.

Material Contracts

1. Job Arrangement Letter dated January 10, 2003 from Ind GlobalCorporate Finance Pvt. Ltd. to act as Lead Managers to the RightsIssue and the Company's acceptance thereof.

2. Memorandum of Understanding dated February 12, 2003 betweenthe Company and Ind Global Corporate Finance Pvt. Ltd, LeadManagers to the Issue.

3. Letter dated February 07, 2003 from Pinnacle Shares RegistryPvt Limited, Registrars to the Issue, offering their services asRegistrars for the proposed Rights Issue and the Company'sacceptance thereof.

4. Memorandum of Understanding dated February 19, 2003 betweenthe Company and Pinnacle Shares Registry Pvt Limited,Registrars to the Issue.

Material Documents1. Memorandum and Articles of Association of the Company as

amended from time to time.2. Certificate of Incorporation dated December 07, 1984 issued by

the Registrar of Companies, Gujarat in the name of AcquestAirconditioning Systems Private Limited

3. Fresh Certificate of Incorporation dated September 14, 1990issued by the Registrar of Companies, Gujarat consequent tochange of name to Amtrex Appliances Limited

4. Fresh Certificate of Incorporation dated January 25, 1999 issuedby the Registrar of Companies, Gujarat consequent to change ofname to Amtrex Hitachi Appliances Limited

5. Fresh Certificate of Incorporation dated March 12, 2003 issuedby the Registrar of Companies, Gujarat consequent to change ofname to Hitachi Home & Life Solutions (India) Ltd.

6. Due diligence certificate dated February 28, 2003 filed by IndGlobal Corporate Finance Pvt. Ltd with SEBI.

7. Resolution u/s 81(1)(a) of the Companies Act, 1956 passed bythe Board of Directors in their meeting held on January 21, 2003authorising the Rights Issue and authoring the Registrars to theIssue to cancel the Stockinvest instruments on behalf of theCompany.

8. Resolutions u/s 81(1A) and other relevant provisions of theCompanies Act, 1956 passed by the Shareholders in the AnnualGeneral Meeting held on February 27, 2003 for Rights Issue andother related matters.

9. Tripartite Agreement dated August 05, 1999 between theCompany, Registrars and the National Securities DepositoryLimited (NSDL).

10. Tripar tite Agreement dated March 08, 2000 between theCompany, Registrars and the Central Depository Services (India)Limited (CDSL).

11. Annual Reports of Hitachi Home & Life Solutions (India) Ltd. forthe years 2001-02, 2000-01,1999-2000, 1998-99 and 1997-98.

12. Annual Reports of Hitachi Ltd, Japan for the years ended onMarch 31, 2003, 2002 and 2001.

13. Annual Reports of Hitachi India Private Ltd for the years endedon March 31, 2002 & 2001 & 2000.

14. Annual Reports of Hitachi India Trading Pvt Ltd for years endedon March 31, 2002 & 2001 & 2000.

15. Joint Corporate Split Agreement dated December 25, 2001.16. Auditors Certificate dated October 10, 2003 certifying the tax

benefits.17. Auditors Report dated October 10, 2003 for the financial

performance of the Company adjusted as per SEBI guidelinesfor the last five years.

18. Auditors Consent letter dated October 10, 2003 for inclusion oftheir Auditors Report dated October 10, 2003 and Certificate onTax Benefits dated October 10, 2003 in the Letter of Offer.

19. Consents from the Lead Managers to the Issue, Registrars tothe Issue, Bankers to the Issue, Bankers to the Company, Auditorsof the Company, Directors of the Company and ComplianceOfficer / Company Secretary to act in their respective capacitiesand include their names in the Letter of Offer.

20. Sanction letters released by State Bank of India, CorporationBank, ICICI Bank, Standard Chartered Bank and MizuhoCorporate Bank for working capital facilities and amendmentletters for revision of facilities and sanction letter released bySIDBI.

21. Sanction letters released by IDBI and ICICI for term loan /loan, HDFC loan agreement and repayment deferral sanctionletter issued by IDBI

22. NOC letters issued by above mentioned banks and financialinstitutions for the proposed Rights Issue.

23. Factory license issued for Kadi plant and applicationsubmitted for renewal thereof.

24. Land and building ownership agreements relating to KadiPremises and Regd Office of the Company

25. Pollution / environment clearance for Kadi operations26. Power sanction letters for Kadi operations27. Letter dated October 24, 2002 issued by SIA for foreign

holding in the company.28. Technical collaboration agreement dated April 10, 1998

entered into with Hitachi Ltd. Japan.29. Sanction letter dated February 14, 2003 issued by Standard

Chartered Bank for short term financial assistance.30. Applications made for listing at Stock Exchanges31. Observation letter No. CFD/DIL/SNB/17365/2003 dated

September 12, 2003 issued by SEBI for the Rights Issue.

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XIII. DECLARATION

No statement made in this letter of Offer shall contravene any of the provisions of the Companies Act, 1956 and the rules madethereunder. All legal requirements connected with the said Issue as also the guidelines, instructions etc. issued by SEBI, Governmentor any other competent authority in this behalf have been duly complied with. All the disclosures made in this Letter of Offer are trueand correct.

By order of the Board of DirectorsFor Hitachi Home & Life Solutions (India) Ltd.

Sd/-

Akira KamitaniManaging Director

Sd/-

Mr. Makoto TakeshitaExecutive Director

Sd/-

Mr. Saburo EnamiExecutive Director

Sd/-

Mr. Shinichi IizukaWhole-Time Director

Alternate to Mr. Kiyoshi Nagasawa - Chairman

Sd/-

Mr. Aloke NandiDirector

Sd/-

Mr. Mukesh PatelDirector

Sd/-

Mr. Arvind NairDirector

Sd/-

Mr. Tarun ShethDirector

Sd/-

Mr. Makoto TakeshitaExecutive Director-Finance & Accounts

Place : Ahmedabad

Date : November 18, 2003

Encl. : Composite Application Form

Hitachi Home & Life Solutions (India) Limited - SEBI

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Transcript of Hitachi Home & Life Solutions (India) Limited - SEBI