Private &Confidentiol VALUATION REPORT for SUPRAJIT ENGINEERING LIMITED & PHOENIX LAMPS LIMITED 14" April 2016 Prepared by: Ishwar and Gopal Chartered Accountants Sri Vinayaka Building No. 21/3, 2" Floor T.S.P Road, Kalasipalyam, Bangalore 560002Ishwar and Gopal Private &Confidential ‘Chartered Accountants Contents I. Introduction.......... 1.1 Company profile .. 1.2 Purpose of the valuation 1.3 Sources of information... 1.4 Exclusion and limitation: Uahe Il. Approach to valuation. 2.1 Net Asset value... 2.2 Discounted cash flow method(DCF 2.3 Enterprise value to EBITDA method. 2.4 Market price method... 2.5 Book value method... II. Valuation... 3.1 Assumptions. 3.2 Weightages. 3.3 Valuation. TV. Conclusion...Ishwar and Gopal Private &Confidentiol ‘Chartered Accountants I, INTRODUCTION We, Ishwar and Gopal, Chartered Accountants have been engaged on 04" April 2016 to carry out valuation of Equity Shares of Suprajit Engineering Limited (herein after referred to as “SEL") and Phoenix Lamps Limited (herein after referred to as “PLL”, As requested, we have carried out an independent assessment of the swap ratio for the proposed amalgamation of PLL with SEL. 1.1 Company Profile Suprajit Engineering Limited (“SEL”) is a public limited company and is listed on the BSE Ltd (BSE) and the National Stock Exchange India Ltd (NSE). SEL is engaged interalia in the business of manufacturing of auto components consisting mainly of control cables, speedo cables and other components for automobiles. It is India’s largest manufacturer of automotive cables with a capacity of over 150 million cables a year and is amongst the top five cable manufacturers in the world, Phoenix Lamps Limited (“PLL”) is a public limited company and is listed on the BSE and NSE. PLL is engaged in manufacturing of Auto Lamps and caters to both domestic and international markets. Suprajit Engineering Limited has made strategic investment in Phoenix Lamps Limited by purchasing equity shares from ARGON INDIA LIMITED, Mauritius & ARGON SOUTH ASIA LIMITED, Mauritius at an agreed price of Rs. 89(Rupees Eighty Nine) per share of Rs, 10/- in May 2015. Further it has acquired shares through open offer at an agreed price of Rs.100/- per share of Rs.10 each in October 2015. Consequent to negotiated purchases and open offer, at present, SEL holds 1,73,52,176 equity shares of Rs.10/- each in PLL which constitutes 61.93% in the total share capital of PLL Capital Structure The authorized share capital of SEL as on 31st March 2016 is 15,00,00,000 Equity Shares of Re.1/- each aggregating to Rs.15,00,00,000, and Issued, Subscribed and Paid up Share capital as on that date is 13,13,38,774 Equity Shares of Re. I/- each aggregating to Rs.13,13,38,774. The authorized share capital of PLL as on 31st March 2016 is 4,10,00,000 Equity Shares of Rs. 10/- each aggregating to. Rs.41,00,00,000 and 29,00,000 RedeemableIshwar and Gopal Private &Confidentiol Chartered Accountants Preference Shares of Rs.100/- each aggregating to Rs.29,00,00,000. The Issued, Subscribed and Paid up Share Capital as on that date is 2,80,19,300 Equity Shares of Rs. 10/- each aggregating to Rs.28,01,93,000/-. 1.2 Purpose of Valuation The valuation exercise is being carried out to ascertain the benchmark for the swap ratio for the proposed amalgamation of PLL with SEL. The information contained herein and our report is absolutely confidential. It is intended only for the sole use and information of the companies and only in connection with the proposed amalgamation as aforesaid including for the purpose of obtaining regulatory approvals for the proposed amalgamation. We are not responsible to any other person/party for any decision of such person or party based on this report. Any person/party intending to provide finance/invest in shares/ business of any of the companies and/or investor companies shall do so after seeking their own professional advice and carrying out their own due diligence procedures to ensure that they are making an informed decision. It is hereby notified that any reproduction, copying or otherwise quoting of this report or any part thereof, other and in connection with proposed amalgamation as aforesaid, can be done only with our prior permission in writing. 1.3 Sources of Information For the purpose of this report the following documents have been perused and relied upon by us. a. Audited Balancesheets and Profit & Loss Accounts for the financial year ending 31st March 2014 & 31st March 2015 of SEL & PLL. b. 9 Months limited review financial statements as on 31st December 2015 of SEL & PLL. c. Financial Projections prepared by the management of SEL and PLL. d. Information on Business and profile provided by SEL and PLL. e. Market price related information & filings available on BSE and NSE for SEL and PLL.Ishwar and Gopal Private & Confidential Chartered Accountants £. Such other information and explanations as may be required by us and provided by the management. We have also placed reliance on the verbal explanations and information given to us by the promoters, senior executives and professionals of the company. 1.4 Exclusions & Limitations a. Our report is subject to the scope limitations detailed hereinafter. As much the report is to be read in totality, and not in parts, in conjunction with the relevant documents referred to therein, b. Our work does not constitute an audit or certification of the historical financial statements including the working results of the Company referred to in this report. Accordingly, we are unable to and do not express an opinion on the accuracy of any financial information referred to in this report. Valuation analysis and results are specific to the purpose of valuation and valuation date mentioned in the report is as agreed as per term of our engagement. It may not be valid if done on behalf of any other entity. c. A valuation of this nature involves consideration of various factors including those impacting industry trends. This report is issued on the understanding that SEL and PLL have drawn our attention to all material information, which they are aware of concerning the financial position of the respective Companies and any other matter, which may have impact on our opinion, on the fair value, including any significant changes that have taken place or are likely to take place in the financial position of the respective Companies, subsequent to last audited balance sheet. We have no responsibility to update this report for events and circumstances occurring after the date of this report. 4. During the course of our work, we have relied upon assumptions made by management of SEL and PLL. These assumptions require the exercise of judgment and are subject to uncertainties. While we have reviewed the assumptions for reasonableness and discussed these assumptions with management of SEL and PLL, there can be no assurance that the assumptions are accurate. To the extent that the assumed events do not occur, the outcome may vary significantly from the assumed. The fact that we have considered the assumptions in this exercise of valuation should not be construed or taken as our being associated with or a party to such assumptions.Ishwar and Gopal Private & Confidential Chartered Accountants e. In the course of the valuation, we were provided with both written and verbal information. We have however, evaluated the information provided to us SEL and PLL through broad inquiry, analysis and review (but have not carried out a due diligence or audit of SEL and PLL for the purpose of this engagement), Our conclusions are based on the information given by / on behalf of SEL and PLL. However, we make no representation or warranty, express or implied, in respect of the completeness, authenticity or accuracy of such statements. f. Neither our employees nor the partners have any financial interest in SEL and PLL. The fee for the report is not contingent upon the results reported. (This Space has been intentionally left blank)Ishwar and Gopal Private &Confidential Chartered Accountants Il. APPROACH TO VALUATION Valuation of the enterprise or its equity shares is not an exact science and ultimately depends upon what it is worth to a serious investor or buyer who may be even prepared to pay goodwill. This exercise may be carried out based on the generally accepted methodologies, the relative emphasis of each often varying with the factors such as; Specific nature of the business Listing and liquidity of the equity Economic life cycle in which the industry or the company Is operating and Extent to which rind comparable company information is available eo cee The results of this exercise could vary significantly depending upon the basis used, the specific circumstances and professional judgment of the valuer. In respect of going concerns, certain valuation techniques have evolved over time and commonly in vogue. In this regard, we have evaluated suitability of five commonly used approaches of valuation to determine the fair value of two companies and used them in our valuation. After arriving at the values based on appropriate methods, we have assigned weights to these methods to determine the fair value of the two companies, The valuation methods identified are Net Asset Value method Discounted Cash Flow (DCF) Enterprise value to EBITDA method Market Price method Book Value method 2.1 Net Asset Value Net Asset Value (NAV) method is logically a refined version of book value method in as much as the Net Worth under this method is derived incorporating the current values of assets and liabilities as against the historical values used In the book value method. In order to factor in the fair market value of the land and buildings belonging to both the companies, the latest valuation provided by the chartered engineers has been considered.Ishwar and Gopal Private &Confidentiol Chartered Accountants This method has its genesis in the logic that the value of immovable properties to its owner identical in amount with the current fair market values. 2.2 Discounted Cash Flow(DCF) ‘The DCF method uses the future cash flows of the company discounted by the cost of capital to arrive at the present value. In general, the DCF method is a strong and widely accepted valuation tool, as it concentrates on cash generation potential of a business considering that this method is based on future potential and is widely accepted. We have included this approach as one of the methodologies in the valuation exercise. Es 2 future free cash flows Free cash flows are the expected cash flows to be generated by the Company that is available to all providers of the company's Capital — both debt and equity. Appropriate discount rate to be applied to cash flow ie., the cost of capital This discount rate, which is applied to the free cash flows, should reflect the opportunity cost to all the capital providers (namely share holders and creditors), weighted by their relative contribution to the total capital of the company. The opportunity cost to the equity capital provider equals the rate of return the capital provider expects to earn on the other investments of equivalent risk. To the values so obtained from DCF analysis, the amount of loans has to be adjusted to arrive at the total value available to equity shareholders. The total value for equity shareholders is then divided by the total number of equity shares in order to work out the value per equity share of both companies. Terminal Value The terminal value refers to the present value of the business as a going concern basis beyond the period of projection up to perpetuity. This value is estimated taking into account business growth rates as well as estimated growth rates of the industry and economy.Ishwar and Gopal Private &Confidentiol Chartered Accountants Discount Cash Flow approach has been considered for valuation of both the companies. While calculating Weighted Average Cost of Capital, suitable assumptions have been made. 2.3 Enterprise value to EBITDA method Enterprise value multiples look at market value of the operating assets of the firm and not just the equity invested in them. They provide a broader measure of value that is less affected by financial leverage decision. Earnings before interest, taxes, depreciation and amortization are an approximate measure of cash flow of the operating assets of the firm, prior to taxes and reinvestment needs. Multiples are estimated from the prices of other Companies with characteristics comparable to the Company being valued. These comparables are Companies in the same industry. Multiples are applied to current year earnings in order to obtain the present value of the enterprise of its equity. 2.4 Market price Method The Market Price of any Equity share as quoted on a stock exchange is considered as the fair value of the equity shares of that company. The market price also reflects the investor's view of the ability of the management to deliver a return on the capital it is using. In the case of companies not frequently traded, this value may be very different from the inherent value of the shares, but nevertheless forms a benchmark value, The Equity Shares of SEL & PLL are listed on the BSE and NSE, therefore we use this method to value the price per share of SEL & PLL. This valuation method reflects the price that the market at a point in time is prepared to pay for the shares. It is therefore influenced by the condition of the stock market, the concerns, the opportunities that are seen for the business in the sector or market in which it operates. The Equity Shares of both the companies are actively traded on the stock exchanges. Hence, we have considered daily weighted average price of the past 6 months. 2.5 Book Value Method The book value of a Company is the value of a company's assets expressed on the basis of the balance sheet, It is the difference between the balance sheet assets and balance sheet liabilities. The book value provides investors a way to compare the market value,Ishwar and Gopal Private &Confidential Chartered Accountants or what they are paying for each share, to a conservative measure of the value of the firm. We have considered the book values of both companies, based on nine months results ending 31% December 2015(subject to limited review by the statutory auditor) and material changes / developments that may have taken place after the balance sheet date and also considered the changes in the number of fully paid-up shares, (This Space has been intentionally left blank)Ishwar and Gopal Private &Confidential Chartered Accountants Tl. Valuation 3.1 Assumptions Following assumptions have been made based on information shared by the management and the further clarifications: * Based on management letter of SEL & PLL, actual value of tangible assets is more than or equal to the value in the balance sheet as on 31 December 2015 of SEL & PLL respectively * Based on management letter of SEL & PLL, actual value of inventory is more than or equal to the value in the balance sheet as on 31 December 2015 of SEL & PLL respectively. * Based on management letter of SEL & PLL, all the sundry debtors are good as in the balance sheet as on 31st December 2015 of SEL & PLL respectively. * As per management letter of SEL, current fair values of land and building which are belonging to SEL is Rs.160.99 Crores as detailed below. Units ‘Address of the property Fair Market value (Rs. Crores) 1] No. 100, Sy. No 177 & 437 179, Bommasandra Industrial Area, Bangalore = 560099 9) No. 101, Sir, No, 173, Bommasandra 12.04 industrial area = 2A | No. 189-A & I89B, Sy.No. 45 & 46, 15.68 Bommasandra Industrial Area, Bangalore 12 | No. 14-A, Sy. No. 270 & 328. Bommasandra 12.62 Bangalore -560099 12A | No. 132, Bommasandra industrial Area, 841 Bangalore - 560099 3 | No, 25, 26 & 27A, Sy.No_98 & 99, 9.45 | Veerapura Village, Doddaballapura Tq, Bangalore Rural Dist, a) 4 | No. 164 & 165. Sector-3_ Imt Manesar, 20.53 Gurgaon District, Haryana — 122050 5 | B-13, Miide, Chakan Industrial Area Pune — 23.64Ishwar and Gopal Private &Confidentiol ‘Chartered Accountants 41501 14] B-13, Miiide, Chakan Industrial Area, Pune - 41501. 6 | A-1/5411, Iv Phase, Gide, Vapi - 396195 4.32 7 | 14, Sector 10 Sidcul — leePantnagar, Rudrapur, Udhamsingh Nagar District, Uttaranchal — 263 153, 8.05 10| Plot No 04, IndustrialPark Iv, Begaumpur Village, Roorkee, Haridwar 249403, Uttarakhand, 537 15] Plot No. 50 - 887, Pathredi Industrial Area, Biwadi, Alwar () Rajasthan-301019 23.42 17/ Plot No. 0-28 & G-29, SIPCOT Industrial Park at vallamVadagal, Chennai ~ 600008 6.50 11 | Plot NO. 1047, Charal Industrial Area, Sanand District, Ahmadabad 641 Total 160.99 | * As per management letter from PLL, current fair values of land and building which are belonging to PLL is Rs.44.57 Crores as detailed below. Sino Address Fair Market value (Rs. Crores) 1 A-1, Phase II, Noida , 36.95 Gauthambudhnagar, UP-201305 a 2 59-A to F, NSEZ, Noida Phase II, 7.62 Gauthambudhnagar, UP-201305 Total 44.57 © Based on management letter from SEL & PLL, both companies are not expecting major capital expenditure in the next few years. A nominal amount of capital expenditure is expected for routine upgradation. © The projections of are as indicated by the management of both SEL & PLL. © Market Price related information, announcements and information shared on the BSE website, www.bserindia.com, for SEL & PLL.Ishwar and Gopat Private & Confidential Chartered Accountants 3.2 Weightages We have attached weights, to the valuations under the different methods, which are as explained below. Since the Net Asset Value (NAV) method provides another method to arrive at intrinsic valuation of the company which considers the fair market valuation of the company's assets, we have attached a weight of 2 to the valuation under Net Asset Value Method. Since the Discounted Cash Flow (DCF) method is a more scientific basis of valuation and considers the cash generating capability of the company which has an important relevance on the valuation, we have attached a weight of 2 to the valuation under Discounted Cash Flow Method. Enterprise value EBITDA method represents comparable method to value the business. As both the transferor and transferee company belongs to same industry of auto components having regard to similar expected growth and risk, we attached a weight of 2 to the valuation under EV to EBITDA method. Since the shares of both the companies are actively traded on the stock exchange, and the market price is still relevant for the purposes of fair valuation, we have attached a weight of 3 to the valuation under the Market Price Method. Since the companies are currently running their business operations as a going concern, there is no specific need to liquidate the assets of the companies and hence no weight has been attached to the valuation under the Book Value Method. (This Space has been intentionally left blank)Ishwar and Gopal Private &Confidential Chartered Accountants 3.3 VALUATION Having assigned the respective weights to the valuation methodologies employed in valuing SEL and PLL, the following table summarizes the valuation of SEL and PLL: (in Rs.) Suprajit Engineering Limited Phoenix Lamps Ltd Value | Weight | Product | Value | Weight | Product per per equity equity Method Share Share| Net Assets Method 19.53 2 39] 36.21 2 n EV/EBITDA Method | 97.03 2 194] 96.44 2 193 DCF Method 43.33 2 87 2.06 2 4 Market Price Method | 134.38 5 404} 102.00 3 306 Book value method 20.50 0] -| 23.00 o| Total 9] 724 9 575 Fair Value per share Rs) 80.39 63.94 Rounded off to Rs.80 Rs.64 For Suprajit Engineering Ltd, Fair value per equity share is Rs.80(Rupees Eighty only) for the face value Re.I(Rupee One only) per share and premium of Rs.79(Rupees Seventy Nine only) per share. For Phoenix Lamps Limited, Fair value per equity share is Rs.64(Rupees Sixty Four only) for the face value Rs.10(Rupees Ten only) per share and premium of Rs.54(Rs. Fifty Four only) per share. (This Space has been intentionally left blank)Ishwar and Gopal Private &Confidential Chartered Accountants IV.CONCLUSION In the light of the above, and on a consideration of all the relevant factors and circumstances as discussed and outlined hereinabove, in our opinion, the fair value of the equity shares of SEL is Rs.80(Rupees Eighty only) per share of face value of Re.I (Rupee One only ) and the equity shares of PLL is Rs.64(Rupces Sixty Four only) per share of face value Rs 10(Rupees Ten only). The swap ratio of equity shares of SEL to the shareholders of PLL would be allotted in the ratio of 4(Four) equity shares of SEL of Re.1(Rupee One only) each fully paid up for every (Five) equity shares of PLL of Rs.10(Rupees Ten) each fully paid uplie. for every 5(Five) shares of PLL the shareholder will receive 4(Four) shares of SEL]. If there is any difference in future financial projections the exchange ratio as indicated above may change. The above information is tabulated below: Exchange Ratio Suprajit Engineering | Phoenix Lamps Limited Ltd value per equity share 80 64 Swap ratio/Exchange ratio 4 5 For Ishwar & Gopal, Chartered Accountants, Jase S. Bhaskar, Partner, MNo. 205977 Bangalore, dated 14th April 2016 ISHWAR & GOPAL Chartered Accountants. ona nat Sa }, T.S.P Road Kal: BANGALORE-s60 0027"