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REPORT ON

RECOMMENDATION OF EXCHANGE RATIO

OF EQUITY SHARES FOR THE PURPOSE OF AMALGAMATION OF

VETPHARMA LIMITED

WITH

NUTRAPLUS INDIA LIMITED

By:

K C P AND ASSOCIATES Ic-i,CHARTERED ACCOUNTANTS (~)

79, Ground Floor, Virwani Industrial Estate, Off. Western Express Highway, Goregaon(East), Mumbai - 400 063

_K_Cc_: P_L ;_;_A,-N::-,D_A_cS-::-SOCiATE S Ll P I (;:.-;;.-':C H ART ERE D A C C-0 U N TAN T S l,~~.)

Report for Exchange Ratio for

Amalgamation dated 27th January

2016 of Vet Pharma Limited with

Nutraplus India Limited

1. Context and Purpose of Valuation

a) We have been informed that the management of the Companies (hereinafter

referred to as the "Management") are considering a proposal for the amalgamation of

VPLwith NPIL pursuant to provisions of Section 391 to 394 of the Companies Act, 1956including any statutory modifications, re-enactments or amendments thereof and other

applicable sections of the Companies Act, 1956 and shall include the relevant and

corresponding sections under Companies Act, 2013, as and when the same are made

applicable before the effective date of the Scheme of Amalgamation subject to receipt

of necessary approvals (hereinafter referred to as the "Amalgamation").

b) In this context, we have been engaged by the Management to carry out the relative

valuation of equity shares of the Companies in order to recommend a fair exchange

ratio of equity shares for the proposed Amalgamation of the Companies for theconsideration of the board of directors of the Companies.

c) We have been informed that the Appointed Date for the proposed Amalgamation

would be 1st April, 2015. Accordingly, the valuation date for carrying out the relative

valuation of equity shares of the Companies and recommending the Fair Exchange

Ratio of Equity Shares has been taken as on the Appointed Date i.e, pt April, 2015(hereinafter referred to as the "Valuation Date"). However, for using Market Price

Method we have considered current market price up to the Board Meeting for approvalof Scheme of Amalgamation i.e., 27thJanuary, 2016.

d) This report recommending the Fair Share Exchange Ratio for the consideration of the

Board of Directors of the Companies (hereinafter referred to as the "Report") is based

on the documents and information provided to us by the Management which have been

relied upon by us as true and correct and discusses the various valuation methods

considered for carrying out the relative valuation of equity shares of the Companies and

the weights assigned to each method of valuation to arrive at the fair weighted average

value of the Equity Shares based on which the Fair Exchange Ratio has beenrecommended.

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K C P LAND ASSOClf~TES Ltl' I (@",CHARTERED ACCOUNTANTS \.:'" r\) Report for Exchange Ratio for




e) This Report is subject to the scope of our engagement and assumptions, exclusions,limitations and disclaimers contained in this Report.

2. Background of the Companies as explained by the Management

A. NPIL

a) NPIL was incorporated on 06th February, 1990. Its Equity Shares are listed on theBombay Stock Exchange.

b) NPIL since 1990 has been engaged in carrying on the business of manufacturing of

bulk drugs / active pharmaceutical ingredients (APIs), speciality chemicals &intermediates.

c) The Board of Directors of NPIL as on 27th January, 2016 are:

:J:...1'7' -Iii!}' of Directors Designation

I1:1.,1. Nidhi Mukesh Naik Director i

j2. Narayan Ramgopal Pasari Director J3. Uday Mukesh Desai Director I

!4. Mukesh Ramesh Desai Director

I5. Prameshkumar Bipinchandra Mehta Director6. Dilip Kamalakar Pimple Whole-time Director7. Mukesh Dhirubhai Naik Managing Director

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d) The following table sets out the shareholding pattern of NPIL as on 27th January,2016:

Percentage ofShareholding

38.23%Group

Public Shareholders 76,07,348 61.77%

Total 1,23,15,948 100.00%

B.VPL

a) VPL was incorporated on 08th May, 1995. It is an unlisted public limited Company

b) VPL manufactures Active Pharmaceutical Ingredients & intermediates.

c) The Board of Directors of VPL as on 27th January, 2016 are:

1. Uday Mukesh Desai Director

2. Dilip Kamalakar Pimple Director

3. DirectorParesh Mohanbhai Desai

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d) The following table sets out the shareholding pattern of VPL as on 27thJanuary,2016:

ofShares shareholding

Engineers &1. Projects Limited 2,89,500 35.89%

2. UCE Projects Private Limited 1,40,000 17.36%

3. Gita Naik 1,43,550 17.80%

4. Uday Mukesh Naik 66,025 8.19%

5. Mukesh Naik 32,500 4.03%

6. Nidhi Mukesh Naik 20,850 2.59%

7. Nirmalaben Naik 1,06,950 13.26%

8. Dilip Pimple 7,200 0.88%

Total 8,06,575 100.00%

3. Documents and Sources of Information

For the purpose of carrying out the valuation exercise we have relied upon, and the

contents of this Report are based on, inter alia, the following documents provided, and

representations given, by the Management and the documents/information which areavailable in the public domain.

a) Memorandum of Association and Articles of Association of NPIL and VPL.

b) Shareholding pattern of NPIL and VPL as on 27thJanuary, 2016.c) List of directors of NPIL and VPL as on 27thJanuary, 2016.d) Website of NPIL i.e. http://www.nutraplusindia.com

e) Audited Financial Statements of NPIL for the financial year ended March 31, 2013,March 31, 2014 and March 31, 2015.

Page50fl6



2016 of Vet Pharma Limited vVlth


f) Audited Financial Statements of VPL for the financial year ended March 31, 2013,March 31, 2014 and March 31, 2015.

g) Financial projections of NPIL for six (6) financial years (FY) from the FY 2015-16 toFY2020-21.

h) Financial projections of VPL for six (6) financial years (FY) from the FY 2015-16 to FY2020-21.

i) Market price data of NPIL from the website of the BSE Limited i.e.http://www.bseindia.com

j) NPIL has Land manufacturing units situated at Plot No. N-92, L-11, T-30, L-9/3

MIDC Tarapur Bolser, Taluka Palghar Dist. Palghar (Maharashtra) 401 506 and

Valuation Report dated 15th January, 2016 issued by S. assets relation to the valuation

of land building and other fixed assets at manufacturing units owned by NPIL.

k) NPIL owns Office building situated at MIDC Tarapur Bolser, Taluka Palghar Dist.

Palghar (Maharashtra) 401 506 in relation to which Valuation Report dated 15th

January, 2016 has been issued by S. N. Samdani & Associates, Approved Valuer &Chartered Engineers

I) VPL owns Land & manufacturing units situated at Plot No. E-62 and E-63, MIDC

Tarapur Industrial Area, Boisar, Taluka Palghar, Dist. Palghar (Maharashtra) 401506 in

relation to which Valuation Report dated 15th January, 2016 has been issued by S. N.

Samdani & Associates, Approved Valuer & Chartered Engineers.

m) Other relevant information made available to us by the Management throuqh

meetings, emails, discussions etc. and other clarifications and explanations as we

required and which have been provided by the Management including the managementrepresentation letters

n) Further for our analysis and independent checks, we have relied on published and

secondary sources of data available in public domain which can reasonably be relied

upon. However we have not independently verified the timeliness and precision of thesame.

4. Our Scope, Assumptions, Exclusions and Limitations

a) This Report is intended solely for the use and information of the Companies and

only in connection with the proposed Amalgamation. Any person/party intencling to

provide finance/invest in the shares/businesses of any of the Companies, shall clo so,

Page: (1 of 16

K C P LAND ASSOCIATES u.r I (a\'1C H ART ERE D Ace 0 U N TAN T S \ __ ..j


Amalgamation dated 27th JanUJI-Y



after seeking their own professional advice and after carrying out their own duediligence procedures without relying on the contents of this Report.

b) It is to be noted that this Report is confidential and reproduction of the contents

of this Report or otherwise giving reference to the contents of this Report in part or full

or placing any reliance on this Report, can be done only with our prior written consentand not otherwise.

c) The information given and opinions expressed in this Report are based, on the

documents and information provided by the Companies or their representatives and the

same are relied upon by us as true and correct and, on sources believed to be reliable,

and in good faith, but which may not be verified independently. We have also relied on

the various representations, information and explanations given by the ManagerncI1t on

the assets and liabilities of both the Companies and other related matters. We assume

no responsibility for any omissions, errors or inaccuracy in the information furnished by

the Companies and resulting impact on the present valuation exercise.

d) No investigation of the Companies' claim to title of assets including the land owned

by the Companies has been made by us for the purpose of this valuation and their

claim to such rights has been assumed to be valid. No consideration has been given to

liens or encumbrances against the assets, beyond the loans disclosed in the financial

statements. Therefore, no responsibility is assumed for matters of a legal nature.

e) During the course of valuation exercise, we have relied upon estimates,

assumptions and projections made by the management of companies. These

estimates/assumptions require the exercise of judgment and are subject to

uncertainties hence there can be no assurance as to their accuracy. The fact that we

have considered the financial projections of companies for this Report should not be

construed or taken as our being associated with or a party to such projections Since

the estimates/projections relate to the future, actual results may be materially different

from estimated/projected results because events and circumstances may not occur asexpected due to internal and external factors.

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2016 of Vet Pharma Limited vVlthNutraplus India Limited

f) Our work did not constitute an audit, due diligence or validation of financial

statements of the Companies, Our work did not constitute independent valuation of any

assets or liabilities of the Companies. We wish to point out that whilst our opinion as to

the fair share exchange ratio is one that we consider to be both reasonable and fair,

others may have a different opinion. In this context we wish to point out observations

of Lord Viscount Simon in Gold Coast Selection Trust Limited V. Humphrey (1949) 17

ITR Supplement 19 (House of Lords) that "Valuation is an art and not an exact science.Mathematical certainty is not demanded nor indeed is possible".

g) Valuation has been carried out assuming a reasonably good economic and business

environment, with the factoring of all known risk factors, The methodology adopted

may not be the sole criteria for valuing the business/shares and may vary for diFrerent

categories of stakeholders, The perspective and intrinsic business value build-up isbased on current facts and perceived achievable targets of the Companies.

h) Normally, valuation of shares for the purpose of determining the exchange ratio of

shares in an amalgamation can be made on a consideration of some or all of a number

of relevant factors i.e. the market price (wherever there is one), dividend paid on the

share, the relative worth and growth prospects of the companies under amalgamation,

the ratio of distributable earnings to the shareholders, the value of the net assets of the

companies under amalgamation, profitability trends, value of human resources,

marketing and market position, earnings per share, government licenses, brand

valuation, strengths and weaknesses and opportunities and threats to a company, etc.

The answer to the question whether some or all of these factors can be applied willdepend upon the circumstances of each case,

i) Our Report is not, nor should it be construed as our opining or certifying the

compliance of the proposed Amalgamation with the provisions of any applicable laws

including the companies, taxation, securities, foreign exchange and capital market

related laws or as regards any legal implications or issues arising from such proposedAmalgamation.

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j) The valuation analysis recommendation contained in this Report is not intended to

represent the value at any time other than the date that is specifically stated in this

Report. This report is issued on the understanding that the Management has drawn our

attention to all matters of which they are aware concerning the financial position of the

businesses, which may have an impact on our Report up to the date of issue. We have

no responsibility to update this report for events and circumstances occurring after thedate of this Report.

k) While utmost care has been taken in preparing this Report, neither we nor our

partners, managers, employees or agents of any of them make any guarantee,

representation or warranty, whether express or implied and accept no responsibihtv or

liability as to its accuracy or completeness of the data, being provided. All such parties

expressly disclaim any and all liability for, or based on or relating to any suchinformation contained in this Report.

5. Valuation Approach and Selection of appropriate valuation method andweightage to each selected method of valuation

A. Valuation Approach

Generally, for the purpose of valuation of equity shares of the companies under

amalgamation, the following well established and commonly adopted broad methods ofvaluation can be considered:

(i) Valuation Method based on the 'underlying assets' owned by the Companies;

(ii) Valuation Method based on the 'income' generating capability of the Companies and

(iii) Valuation Method based on 'Market Price' data of the Companies.

Each method proceeds on different fundamental assumptions, which have greater or

lesser relevance and at times even no relevance, to a given situation. Thus the

methods to be adopted for a particular valuation must be judiciously chosen. The

different valuation methods within the above stated broad methods and specific

mechanism of valuation under each method is discussed in subsequent paras.

K C P LAND ASSOCIATES LLP I (~.J.C HART ERE D Ace 0 U N TAN T S ~ ..





(i) Valuation based on the 'underlying assets' owned by the Companiesa) Under this category, the valuation is carried out based on the Net Asset Value (based

on market values) of the company.

b) Under the Net Asset Value method, the value per share is determined based on the

Market Value of Net Assets of the Company divided by the total number of Equity

Shares. The value of net assets is arrived at by deducting amount of liabilities from the

market value of assets of the Company as on the Appointed Date.

c) In calculating the value of assets and liabilities, we have made appropriate

adjustments, wherever warranted and possible, to the book values of such assets and

liabilities to arrive at the current market value of such assets and liabilities. In other

cases, the book values have been assumed to be the market values.

d) In case of NPIL, the Company has issued equity shares on preferential basis in the

month of December 2015 which falls after the Appointed Date. Accordingly, while

calculating the Net Asset value, we have considered the consideration received on such

issue of equity shares and the expanded equity capital for arriving at the Net AssetValue per share of the Company.

e) Further, in case of NPIL, the Company has issued warrants which are convertible into

equity shares of the Company after the Appointed Date but within a period of 18

months from the dates of their issue. While arriving at the Net Asset value of NPIL, we

have considered the present value of consideration to be received and the expanded

capital on such conversion of warrants to equity shares for arriving at the Net Asset

Value per share of the Company under this Method. We have assumed that ali the

outstanding share warrants will be converted into equity share capital.

f) Accordingly, in calculating the number of equity shares, we have considered such

additional number of shares issued by NPIL in the abovementioned preferential issue of

Equity Shares. Further, we have also considered such diluted number of equity shares

pursuant to conversion of warrants to equity shares of NPIL after the Appointed Date.

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g) In case of NPIL, the underlying Net Asset Value as arrived above is divided by the

diluted number of equity shares as on the Valuation date to arrive at the fair value pershare under this method.

h) In case of VPL, the underlying Net Asset value as arrived above is divided by the

outstanding number of equity shares as on the Valuation date to arrive at the fair valueper share under this method.

(ii) Valuation based on the 'income' generating capability of the Companies

This principle of valuation considers the expected income/cash flows the business is

expected to generate and is more appropriate in case of a going concern. Under this

principle of valuation, there are two widely accepted methods of valuation viz. 1)

Earning Capitalisation Method (ECM) and 2) Discounted Free Cash Flow (DFCF) Method.

1) Earning Capitalisation Method (ECM)

a) Under ECM, the value per share is determined based on the business value of the

company divided by the total number of equity shares. The business value is derived by

applying an appropriate capitalization rate to the maintainable earnings level (If thecompany.

b) The ECM involves determination of the maintainable earnings level of the company

from its normal operations in past and future projections. For this purpose, normal

earnings (i.e. net profit earned by the company excluding extra-ordinary and

exceptional items) are calculated based on the actual normal earnings for certain past

financial years and projected normal earnings for future financial years. The projected

normal earnings for future years are discounted appropriately to consider the present

value of such earnings. The normal earnings for past and future financial year-s, as

discounted appropriately, under consideration are summed-up and then averageci out

to derive the maintainable earnings level of the company.

c) The maintainable earnings level so derived are then capitalised at a capitalisation

rate, which, in the opinion of the valuer, combines an adequate expectation of reward

from enterprise and risk to arrive at the business value. While applying an appropriate

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KC P LANDASSOCIATES u i- Report for Exchange Ratio For

Amalgamation dated 27th Janu.irv



CHARTERED ACCOUNTANTS

capitalization rate, the prevalent capitalization rate for the comparable cornparues in

listed space in the same industries and the average capitalization rate for the industryto which the company belongs are also considered.

d) The business value so arrived at is then divided by the number of outstanding

diluted equity shares to arrive at per share value. This method is based on the c'i1rning

capacity of the business and is consistent with the "Going Concern" basis applicable tocontinuing business entities.

2) Discounted Free Cash Flow (DFCF) method

a) The DFCF method is considered the most sound, scientific and acceptable method for

determination of the value of a business undertaking on a going concern basis.

b) The DFCF method involves determination of projected free cash flows from business

operations which are discounted at an appropriate discount rate to derive the present

value. The sum total of present value of such projected free cash flows gives the

enterprise value which is appropriately adjusted to arrive at the value of business for

shareholders. Such business value is divided by the outstanding diluted number of

shares to obtain the value per share. The steps involved and mechanism to calculatevariables used under this method is as below:

Estimating the future free cash flows which are derived from the financial

projections of the company. The future free cash flows consist of the cash flows fOI

the explicit period and also of perpetuity period.

Free cash flows are the cash flows expected to be generated by the cornpanv that

are available to all providers of the company's capital.

- The cash flows are determined by deducting from the earnings before depreciation,

interest and taxes (EBDIT), (i) cash taxes and ii) other non-cash charges. The cash

flow so derived is adjusted for change in working capital requirements and capital

expenditure to derive the free cash flows.

- Appropriate discount rate is applied to future cash flows to obtain the present value

of such cash flows. This discount rate should reflect the opportunity cost of the

capital providers i.e. weightage average cost of capital consisting of weightage costof equity and cost of debt.

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!5_S::_ P LAND ASSOC;IATES LLP I(iCHARTERED ACCOUNTANTS "Ci:\.) Report for Exchange Ratio for


2016 of Vet Pharma Limited withNutraplus India Limited

- To the sum of the present value of the cash flows for the explicit period and for the

perpetuity, adjustments are made for loan funds, surplus assets, value of

investments and contingent liabilities, after considering the tax impact whereverapplicable.

In case of NPIL, the value as arrived above is divided by the diluted number ofequity shares to arrive at the value per share.

- In case of VPL, the value as arrived above is divided by the outstanding number ofequity shares to arrive at the value per share.

(iii) Valuation based on the 'market price' data of the Companies

a) Under this principle of valuation, the value of the share is based on the market

price of the shares of the company listed on the recognised stock exchange i.e the

Market Price Method. Hence this method ideally can be applied to listed companiesonly.

b) The Market Price is considered as indicative of the value perception for the shares by

investors operating under free market conditions. The market price of an equity Share

as quoted on a stock exchange is normally considered as the fair value of the equity

shares of that company since the market considers all the relevant factors affecting the

business of the company and such factors are incorporated in the price of the equity

shares. However yet at times the market price may not indicate the actual fair value of

the shares owing to many factors including speculative transactions, not properly

appreciating the factors affecting the company by the investor community etc.

c) Thus, under the Market Price method, we have conSidered the volume weighted

average market price of NPIL quoted on the SSE Limited. For this purpose, we have

considered the average market price daily, for the twentv-slx (26) weeks period endedJanuary 27, 2016 being the date of announcement of Amalgamation.

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B. Selection of appropriate valuation method and weightage to each selectedmethod of valuation

a) The fair value of equity shares has to be determined after taking into consider-ation

all the factors and valuation principles mentioned hereinabove.

b) In this context, after considering the various relevant factors, we are of the opinion

that it is appropriate to apply the applicable four methods i.e. 1) Net Asset Value

method (based on market value); 2) Earning Capitalisation IYlethod; 3) DCF t-lethod and

4) Market Price Method under the four broad valuation principles as discussed above

should be applied for valuing the equity shares of NPIL. NPIL being a listed company

and having an established business track record, all these methods are appropriate to

be considered for valuation of equity shares.

c) In the case of VPL, after considering the various relevant factors, we are of the

opinion that it is appropriate to apply the applicable three methods i.e. 1) Net Asset

Value method (based on market value); 2) DCF Method; 3) Earning Capitalisation

Method. VPL being an unlisted company, the Market Price Method cannot be applied.

d) It is pertinent to note that the value per share derived under each method would be

different owing to the different principles and techniques involved under each method.

However, for the purposes of recommending a fair ratio of exchange, it is necessary to

arrive at a single value for the shares of the Companies. It is however important to

note that in doing so, we are not attempting to arrive at the absolute values of the

shares of each company but to work out a relative value per share appropriate underthe given circumstances.

e) For this purpose, it is necessary to give appropriate weightage to the values arrived

at under each method so as to derive the fair share exchange ratio. Considering the

fact that, after the Amalgamation, the business of the Companies is intended to be

continued by NPIL on a "going concern" basis, that there is no intention to dispose-off

the assets and that NPIL is a listed company, to arrive at relative value of NPIL, we

have considered it appropriate to give a weightage as follows:

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--Method Weights (%)

Net Asset Method (based on market values) 10

ECMMethod 25

f---

DFCFMethod 25

Market Price Method 40

The weighted average value per share of NPIL is arrived at after considering the abovementioned weights.

f) In the case of VPL we have given weights as follows:

._-Method Weights (Ufo)

Net Asset Method (based on market values) 20

ECMMethod 40

._-_ ..

DFCF Method 40

The weighted average value per share of VPL is arrived at after considering the abovementioned weights.

g) Further the weighted value of VPL is being discounted by 15% being an unlistedcompany.

Page I:' of 16

K C P L. AND ASSOCIATES LL_!)1(----'CHARTERED ACCOUNTANTS 1\(%\)





6. Exchange Ratio

On consideration of all the relevant factors and circumstances as discussed and stated

in this Report, in our opinion, the Fair Exchange Ratio of Equity Shares for the proposed

Amalgamation of VPL with NPIL would be Seven (7) fully paid up equity shares having

face value of Rs. 10/- each of NPIL for every One (1) fully paid up equity share havingface value of Rs. 10/- each of VPL.

Yours faithfully,

For K C P L And Associates LLPChartered Accountants

Firm Reg. No. 119223WMem. No. 119139

(CA Saurabh Agarwal)Partner

Place: MumbaiDate: 27th January 2016