Fill - Free fillable Date: 14 January 2022 Audit Committee/ The Board PDF form

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

Date: 14 January 2022

To, To,

Audit Committee/ The Board of Directors Audit Committee/ The Board of Directors

Indokem Limited Refnol Resins and Chemicals Limited

Plot No. 410/411, Khatau House, Plot no. 410/411, Khatau House

Mogul Lane, Mahim Mogul Lane, Mahim

Mumbai – 400016 Mumbai - 400016

Subject: Recommendation of share exchange ratio for the proposed amalgamation of Refnol Resins

and Chemicals Limited (‘Refnol’) with Indokem Limited (‘Indokem’)

Dear Sir/ Madam,

We refer to the engagement letter dated 14 June 2021 and discussion undertaken with the

Management of Indokem Limited (‘Indokem’ or ‘Transferee Company’) and Refnol Resins and

Chemicals Limited (‘Refnol’ or ‘Transferor Company’) (hereinafter both together referred to as ‘the

Management’), wherein the Management has requested Niranjan Kumar, Registered Valuer –

Securities or Financial Assets (‘NK’, ‘we’ or ’us’) to undertake a valuation exercise and recommend a

share exchange ratio for the proposed amalgamation of Refnol (Transferor Company) with Indokem

(Transferee Company) (‘Proposed Amalgamation’).

Hereinafter the Management including the Board of Directors of Indokem and Refnol shall together

be referred to as ‘the Management’; and the Transferor Company and the Transferee Company shall

together be referred to as ‘Transacting Companies’.

Please find enclosed the report (comprising 15 pages including annexures) detailing our

recommendation of share exchange ratio for the proposed amalgamation, the methodologies

employed and the assumptions used in our analysis.

This report sets out our scope of work, background, source of information, procedures performed by

us and our recommendation of the share exchange ratio.

BACKGROUND, SCOPE AND PURPOSE OF THIS REPORT

Indokem Limited (‘Indokem’ or ‘Transferee Company’) (formerly known as ‘Khatau Junker Limited’)

was incorporated on 22 December 1964 and is engaged in the business of manufacturing and

marketing of dyes, sizing chemicals, textile auxiliaries and electrical capacitors. The equity shares of

Indokem are listed on BSE.

Refnol Resins and Chemicals Limited (‘Refnol’ or ‘Transferor Company’) (formerly known as ‘Refnol

Oil Refineries Limited’) was incorporated on 01 December 1980 and is engaged in the business of

manufacturing and marketing of resins and chemicals. The equity shares of Refnol are listed on BSE.

We understand that the Management of the Transacting Companies are contemplating a scheme of

amalgamation, wherein they intend to amalgamate Refnol with Indokem in accordance with the

provisions of Sections 230 to 232 of the Companies Act, 2013 or any statutory modifications, re-

enactment or amendments thereof for the time being in force (“the Act”) read with the Companies

(Compromises, Arrangements and Amalgamations) Rules, 2016 (“the Rules”), as amended from time

to time and all other applicable provisions, if any, of the Act and any other applicable law for the time

being in force including the applicable provisions of the SEBI (Listing Obligations and Disclosure

N5-1003, Hills and Dales Ph 3, NIBM Annexe, Pune – 411060. Mob.: +91 9921515656 | niranjan@nskumar.com | www.nskumar.com

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:14:02 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:14:42 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 2 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

Requirements) Regulations, 2015 and the circulars issued therein, in each case, as amended from time

to time, and in a manner provided in the Draft Scheme of Amalgamation (‘the Scheme’). Further as a

consideration for the proposed amalgamation under Part II the Scheme, equity shares of the

Transferee Company would be issued to the equity shareholders Transferor Company.

The equity shares to be issued for the aforesaid proposed amalgamation will be based on the share

exchange ratio as determined by the Board of Directors based on the share exchange ratio report

prepared by us.

We would like to emphasize that we had previously issued the valuation report dated 13 September

2021 recommending share exchange ratio basis the limited reviewed unaudited standalone/

consolidated financial statements of Transacting Companies as at 30 June 2021. However after taking

into consideration the latest requirements of Stock Exchange for furnishing valuation report

recommending the share exchange ratio based on the financial statements not being older than 3

(three) months from the date of valuation report, the Management has requested Niranjan Kumar,

Registered Valuer – Securities or Financial Assets (‘NK’, ‘we’ or ’us’) to submit a revised valuation

report recommending a revised share exchange ratio considering the limited reviewed unaudited

standalone/ consolidated financial statements of the Transacting Companies as at 31 December 2021.

In light of the above, we have determined the revised share exchange ratio based on our updated

valuation analysis considering the limited reviewed unaudited financial statements of the Transacting

Companies as at 31 December 2021 and closing market prices prevailing as at the report date

(‘Valuation Date’)

We would like to emphasize that certain terms of the proposed amalgamation are stated in our report,

however the detailed terms of the proposed amalgamation shall be more fully described and

explained in the Scheme document to be submitted with relevant authorities in relation to the

proposed amalgamation. Accordingly, the description of the terms and certain other information

contained herein is qualified in its entirety by reference to the underlying Scheme.

We understand that the appointed date for the proposed amalgamation shall be 01 April 2021 as

defined in the Scheme or such other date as the competent authority may direct or approve. We have

determined the revised share exchange ratio for the proposed amalgamation as at the Valuation Date.

The scope of our services is to conduct a relative (and not absolute) valuation exercise as at the

Valuation Date to determine the equity value of the Transacting Companies and then arrive at the

share exchange ratio using internationally accepted valuation methodologies as may be applicable to

the Transacting Companies and report on the same in accordance with generally accepted

professional standards including ICAI Valuation Standards, 2018 notified by the Institute of Chartered

Accountants of India (ICAI) and requirement prescribed by the Regulations applicable to listed

companies as prescribed by the Securities Exchange Board of India (‘SEBI’).

The Management have informed us that:

a) There would not be any capital variation in the Transacting Companies till the proposed

amalgamation becomes effective without approval of the shareholders and other relevant

authorities;

b) Till the proposed amalgamation becomes effective, neither of the Transacting Companies would

declare any dividend which are materially different from those declared in the past few years.

Mahendra

Kishore Khatau

Digitally signed by

Mahendra Kishore Khatau

Date: 2022.01.15 18:15:27

+05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:16:06 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 3 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

c) There are no unusual/ abnormal events in the Transacting Companies other than those

represented to us by the Management till the report date materially impacting their operating /

financial performance.

d) There would be no significant variation between the draft scheme of amalgamation and the final

scheme approved and submitted with the relevant authorities.

This report is our deliverable for the said engagement and is subject to the scope, assumptions,

exclusions, limitations, and disclaimers detailed hereinafter. As such, the report is to be read in totality

and in conjunction with the relevant documents referred to therein.

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Mahendr

a Kishore

Khatau

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by Mahendra

Kishore Khatau

Date: 2022.01.15

18:16:52 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh

Dinkar Pisal

Date:

2022.01.15

18:17:07 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 4 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

COMPANY OVERVIEW AND SHAREHOLDING PATTERN OF TRANSACTING COMPANIES:

a) Indokem Limited (‘Indokem’ or Transferee Company’)

Indokem is engaged in the business of manufacturing and marketing of dyes, sizing chemicals, textile

auxiliaries and electrical capacitors. The manufacturing and warehousing facilities of Transferee

Company are located at Dahisar Mori and Ambernath near Mumbai.

The equity shareholding pattern of Indokem as at 31 December 2021 is set out below:

In addition to the equity shares, Indokem has issued non-cumulative redeemable preference shares,

the total number of 8% Non-cumulative redeemable preference shares issued by Indokem and

outstanding as at report date is set out below:

b) Refnol Resins and Chemicals Limited (‘Refnol’ or ‘Transferor Company’)

Refnol is engaged in the business of manufacturing and marketing of resins and chemicals. Refnol

holds 100% equity stake in Refnol Overseas Limited (‘Refnol Overseas’) which further holds 100%

controlling interest in Texcare Middle East L.L.C. (TCME).

The equity shareholding pattern of Refnol as at 31 December 2021 is set out below:

Category of shareholder Number of shares Percentage

(Face value of INR 10 each) %

Promoter and Promoter Group 1,72,53,011 70.9%

Public 70,72,589 29.1%

Total 2,43,25,600 100.0%

Particulars Number of shares

Preference shares having a face value of INR 10 20,70,975

Category of shareholder Number of shares Percentage

(Face value of INR 10 each) %

Promoter and Promoter Group 16,55,431 53.6%

Public 14,34,469 46.4%

Total 30,89,900 100.0%

Mahendra

Kishore

Khatau

Digitally signed by

Mahendra Kishore

Khatau

Date: 2022.01.15

18:17:30 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:17:45 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 5 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

SOURCES OF INFORMATION

In connection with the recommendation of share exchange ratio, we have used the following

information obtained from the Management and/ or gathered from public domain:

A. Company specific information:

Information provided by the Management which includes:

 Limited reviewed unaudited standalone financial statements for nine months period ended 31

December 2021 and audited standalone financial statements for the financial year ended 31 March

2021 of Indokem;

 Limited reviewed unaudited consolidated financial statements for nine months period ended 31

December 2021 and audited consolidated financial statements for the financial year ended 31

March 2021 of Refnol;

 Shareholding pattern of Transacting Companies as at 31 December 2021;

 Draft scheme of amalgamation between the Transacting Companies pursuant to which proposed

amalgamation is to be undertaken;

 Discussions and correspondence with the Management in connection with business operations,

past trends, proposed future business plans and prospects, realizability of assets, etc.

B. Industry and economy information:

 Information including market prices, trading volumes, trading multiples etc. of Transacting

Companies and other listed comparable companies of Indokem, available in public domain and

databases such as Capitaline, NSE, BSE etc.

 Such other information and documents as provided by the Management for the purposes of this

engagement.

Besides the above listing, there may be other information provided by the Management which may

not have been perused by us in detail, if not considered relevant for our defined scope.

We have also considered/ obtained such other analysis, review, explanations and information

considered reasonably necessary for our exercise, from the Management.

The Management of the Transacting Companies have been provided with the opportunity to review

the draft report (excluding the recommended share exchange ratio) as part of our standard practice

to make sure that factual inaccuracy/ omissions are avoided in our report.

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Mahendra

Kishore

Khatau

Digitally signed by

Mahendra Kishore

Khatau

Date: 2022.01.15

18:18:06 +05'30'

Rajesh

Dinkar Pisal

Digitally signed by

Rajesh Dinkar Pisal

Date: 2022.01.15

18:18:23 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 6 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

PROCEDURES ADOPTED

Procedures used in our analysis included such substantive steps as we considered necessary under the

circumstances, including, but not necessarily limited to the following:

 Discussion with the Management to:

- Understand the business and fundamental factors that affect the business of the Transacting

Companies including their earning generating capability.

- Enquire about the historical financial performance and current state of affairs.

 Analysis of information shared by the Management;

 Reviewed the draft scheme of amalgamation between the Transacting Companies;

 Reviewed the limited reviewed unaudited standalone financial statements for nine months period

ended 31 December 2021 and audited standalone financial statements for the financial year

ended 31 March 2021 of Indokem;

 Reviewed the limited reviewed unaudited consolidated financial statements for nine months

period ended 31 December 2021 and audited consolidated financial statements for the financial

year ended 31 March 2021 of Refnol;

 Reviewed the shareholding pattern of Transacting Companies as at 31 December 2021;

 Identification of suitable comparable companies for Indokem in discussion with the Management;

 Selection of appropriate internationally accepted valuation methodology/ (ies) after deliberations

and consideration to the sector in which the Transacting Companies operate and analysis of the

business operations and financial performance of the Transacting Companies;

 Arrived at valuations of the Transacting Companies using the method/(s) considered appropriate;

 Arrive at the value of the shares after giving due weightage to the value arrived under the different

methods.

 Arrived at the share exchange ratio for the proposed amalgamation of Refnol with Indokem.

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Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:18:41 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:18:55 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 7 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

SCOPE LIMITATIONS, ASSUMPTIONS, QUALIFICATIONS, EXCLUSIONS AND DISCLAIMERS

Provision of valuation opinions and consideration of the issues described herein are areas of our

regular practice. The services do not represent accounting, assurance, accounting/ tax due diligence,

consulting or tax related services that may otherwise be provided by us.

This report, its contents and the results herein are specific and subject to:

 the purpose of the valuation agreed as per the terms of the engagement;

 the date of the report;

 shareholding pattern of Transacting Companies as at 31 December 2021;

 limited reviewed unaudited standalone/ consolidated financial statements for nine months

period ended 31 December 2021 of the Transacting Companies;

 comparability of the companies considered for comparable companies multiple (CCM) Method

including the financial parameters considered;

 accuracy of the information available in public domain with respect to Transacting Companies

and other comparable companies identified for Indokem and their financial information

considered;

 market price reflecting the fair value of the underlying equity shares of the Transacting

Companies;

 draft scheme of amalgamation pursuant to which the proposed amalgamation between

Transacting Companies is to be undertaken; and

 data detailed in the section - Sources of Information.

We have been informed that the business activities of the Transacting Companies have been carried

out in the normal and ordinary course between the latest available financials and the report date and

that no material changes have occurred in their respective operations and financial position between

the latest available financial statements and the report date.

A value analysis of this nature is necessarily based on the prevailing stock market, financial, economic

and other conditions in general and industry trends in particular. It is based on information made

available to us as of the date of this report, events occurring after that date hereof may affect this

report and the assumptions used in preparing it, and we do not assume any obligation to update,

revise or reaffirm this report.

The ultimate analysis will have to be tempered by the exercise of judicious discretion by the valuer

and judgment taking into account the relevant factors. There will always be several factors e.g.

Management capability, present and prospective yield on comparable securities, market sentiment

etc., which are not evident on the face of the financial statement, but which will strongly influence the

worth of a share.

The recommendation(s) rendered in this report only represent our recommendation(s) based upon

information furnished by the Transacting Companies till the date of this report and other sources, and

the said recommendation(s) shall be considered to be in the nature of non-binding advice (our

recommendation should not be used for advising anybody to take buy or sell decision, for which

specific opinion needs to be taken from expert advisors).

The determination of fair value for arriving at share exchange ratio is not a precise science and the

conclusions arrived at in many cases, will, of necessity, be subjective and dependent on the exercise

of individual judgment. There is, therefore, no indisputable single fair value. While we have provided

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:19:24 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:19:39 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 8 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

our recommendation of the share exchange ratio based on the information available to us and within

the scope and constraints of our engagement, others may have a different opinion. The final

responsibility for the determination of the share exchange ratio at which the proposed amalgamation

shall take place will be with the Board of Directors of the Transacting Companies, who should take

into account other factors such as their own assessment of the proposed amalgamation and input of

other advisors.

In the course of our analysis, we were provided with both written and verbal information, including

market, technical, financial and operating data including information as detailed in the section –

Sources of Information.

In accordance with the terms of our engagement, we have assumed and relied upon, without

independent verification of

 the accuracy of information that was publicly available; and

 the accuracy of information made available to us by the Management;

both of which formed a substantial basis for the report.

We have not carried out a due diligence or audit or review of the Transacting Companies for the

purpose of this engagement, nor have we independently investigated or otherwise verified the data

provided.

We are not legal or regulatory advisors with respect to legal and regulatory matters for the proposed

amalgamation. We do not express any form of assurance that the financial information or other

information as prepared and provided by the Management of the Transacting Companies is accurate.

Also, with respect to explanations and information sought from the advisors, we have been given to

understand by the Transacting Companies that they have not omitted any relevant and material

factors and that they have checked the relevance or materiality of any specific information to the

present exercise with us in case of any doubt. Accordingly, we do not express any opinion or offer any

form of assurance regarding its accuracy and completeness.

Our conclusions are based on these assumptions and information given by/ on behalf of the

Management. The Management has indicated to us that they have understood any omissions,

inaccuracies or misstatements may materially affect our recommendation. Accordingly, we assume

no responsibility for any errors in the information furnished by the Transacting Companies and their

impact on the report. Also, we assume no responsibility for technical information (if any) furnished by

the Transacting Companies. However, nothing has come to our attention to indicate that the

information provided to us was materially misstated/ incorrect or would not afford reasonable

grounds upon which to base the report. We do not imply and it should not be construed that we have

verified any of the information provided to us, or that our inquiries could have verified any matter,

which a more extensive examination might disclose.

The report assumes that the transacting Companies comply fully with relevant laws and regulations

applicable in all its areas of operations and that the Transacting Companies will be managed in a

competent and responsible manner. Further, except as specifically stated to the contrary, this report

has given no consideration on to matters of a legal nature, including issues of legal title and compliance

with local laws and litigation and other contingent liabilities that are not represented to us by the

Management.

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:20:11 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:20:31 +05'30'

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 9 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

This report does not look into the business/ commercial reasons behind the proposed amalgamation

nor the likely benefits arising out of the same. Similarly, the report does not address the relative merits

of the proposed amalgamation as compared with any other alternative business transaction, or other

alternatives, or whether or not such alternatives could be achieved or are available. This report is

restricted to recommendation of share exchange ratio only.

We would like to emphasize that we had previously issued the valuation report dated 13 September

2021 recommending share exchange ratio basis the limited reviewed unaudited standalone/

consolidated financial statements of Transacting Companies as at 30 June 2021. However after taking

into consideration the latest requirements of Stock Exchange for furnishing valuation report

recommending the share exchange ratio based on the financial statements not being older than 3

(three) months from the date of valuation report, the Management has requested NK to submit a

revised valuation report recommending a revised share exchange ratio considering the limited

reviewed unaudited standalone/ consolidated financial statements of the Transacting Companies as

at 31 December 2021. Accordingly, we have determined the revised share exchange ratio based on

our updated valuation analysis considering the limited reviewed unaudited financial statements of the

Transacting Companies as at 31 December 2021 and closing market prices prevailing as at the report

date (‘Valuation Date’)

We must emphasize that one of the Transacting Company had incurred loss in the previous year, we

have therefore used different valuation methods to determine the fair value of the two transacting

company equity shares.

We would like to emphasize that latest financials of the Transacting Companies as at the report date

were not provided by the Management for the purpose of our value analysis, however, the

Management has represented that they do not expect significant changes in financial performance

between 31 December 2021 and the report date. We have therefore considered the financials as at

31 December 2021 of Transacting Companies for the purpose of our value analysis.

We must emphasize that the realization of the assets at their values considered in our analysis will be

dependent on the continuing validity of assumptions on which they are based. Our analysis therefore,

will not, and cannot be directed to provide any assurance about the realisation of the assets at the

values considered in our analysis.

Certain terms of the proposed amalgamation are stated in our report, however the detailed terms of

the proposed amalgamation shall be more fully described and explained in the scheme document to

be submitted with relevant authorities in relation to the proposed amalgamation. Accordingly, the

description of the terms and certain other information contained herein is qualified in its entirety by

reference to the Scheme document.

The fee for the Engagement is not contingent upon the results reported.

We owe responsibility only to the Board of Directors of the Transacting Companies who have

appointed us, and nobody else. We do not accept any liability to any third party in relation to the issue

of this report. It is understood that this analysis does not represent a fairness opinion. In no

circumstance shall our liability exceed the amount as agreed in our Engagement Letter.

This valuation report is subject to the laws of India.

Neither the report nor its contents may be referred to or quoted in any registration statement,

prospectus, offering memorandum, annual report, loan agreement or other agreement or document

given to third parties, other than in connection with the purpose of determining the share exchange

Mahendra

Kishore

Khatau

Digitally signed by

Mahendra Kishore

Khatau

Date: 2022.01.15

18:21:01 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:21:19 +05'30'

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signature

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Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 10 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

ratio for the proposed amalgamation and relevant filing with regulatory authorities in this regard,

without our prior written consent.

In addition, this report does not in any manner address the prices at which equity shares of Refnol and

Indokem shall trade following announcements of the proposed amalgamation and we express no

opinion or recommendation as to how shareholders of the Transacting Companies should vote at any

shareholders’ meetings. Our report and the opinion/ valuation analysis contained herein is not to be

construed as advice relating to investing in, purchasing, selling or otherwise dealing in securities.

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Mahendra

Kishore

Khatau

Digitally signed by

Mahendra Kishore Khatau

Date: 2022.01.15 18:21:39

+05'30'

Rajesh

Dinkar Pisal

Digitally signed by

Rajesh Dinkar Pisal

Date: 2022.01.15

18:21:57 +05'30'

Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 11 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

VALUATION APPROACHES

It should be understood that the valuation of any company or its assets is inherently subjective and is

subject to uncertainties and contingencies, all of which are difficult to predict and are beyond our

control. In performing our analysis, we made numerous assumptions with respect to project related

performance, market, industry performance and general business and economic conditions, many of

which are beyond the control of the company.

The application of any particular method of valuation depends on the purpose for which the valuation

is done. Although, different values may exist for different purpose, it cannot be too strongly

emphasized that a valuer can only arrive at one value for one purpose. Our choice of methodology of

valuation has been arrived at using usual and conventional methodologies adopted for transactions

of similar nature and our reasonable judgment, in an independent and bona fide manner based on

our previous experience of assignments of a similar nature.

The following are commonly used and accepted methods for determining the value of the equity

shares of a company:

1. Market Approach:

a) Market Price method

b) Comparable Companies Market Multiple method

2. Income Approach – Discounted Cash Flow method

3. Asset Approach – Net Asset Value method

For the proposed amalgamation, we have considered the following commonly used and accepted

methods for determining the value of the equity shares of the Transacting Companies for the purpose

of recommending the share exchange ratio, to the extent relevant and applicable:

1. Market Approach

a) Market Price Method

The market price of an equity share as quoted on a stock exchange is normally considered as the value

of the equity shares of that company where such quotations are arising from the shares being regularly

and freely traded in, subject to the element of speculative support that may be inbuilt in the value of

the shares.

In the present case, equity shares of Indokem and Refnol are listed on BSE, they are regularly and

frequently traded with reasonable volumes on the exchanges. We have therefore used the market price

approach to value the equity shares of Indokem and Refnol.

b) Comparable Companies Multiples (‘CCM’) / Comparable Transactions Multiples (‘CTM’)

method

Under CCM, the value of shares/ business of a company is determined based on market multiples of

publicly traded comparable companies. This valuation is based on the principle that market valuations,

taking place between informed buyers and informed sellers, incorporate all factors relevant to

valuation. CCM applies multiples derived from similar or ‘comparable’ publicly traded companies.

Although no two companies are entirely alike, the companies selected as comparable companies

should be engaged in the same or a similar line of business as the subject company. Relevant multiples

need to be chosen carefully and adjusted for differences between the circumstances.

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:22:21 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date:

2022.01.15

18:22:49 +05'30'

Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 12 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

Based on our analysis and discussion with the Management, we understand that there are comparable

listed companies which operate in similar line of business and have similar business model as that of

Indokem, we have therefore used CCM Method to value the equity shares of Indokem.

Refnol has incurred loss in the previous year hence use of the profitability matrices is not possible.

Further, valuation of loss-making companies is not comparable with those of profitable companies

when considered on other financial parameters, we have therefore not used the CCM Method to value

the equity shares of Refnol.

Under CTM, the value of shares/ business of a company is determined based on market multiples of

publicly disclosed transactions in the similar space as that of the subject company. Multiples are

generally based on data from recent transactions in a comparable sector, but with appropriate

adjustment after consideration has been given to the specific characteristics of the business being

valued.

Based on our analysis and discussion with the Management, we understand that there are no recent

comparable transactions, data of which is available in public domain, involving companies of similar

nature and having a similar operating/ financial metrics as that of Indokem and Refnol, we have

therefore not used CTM method to value the equity shares of these Companies.

2. Income Approach – Discounted Cash Flow Method (‘DCF’)

DCF method values a business based upon the available cash flow a prudent investor would expect

the subject business to generate over a given period of time. This method is used to determine the

present value of a business on a going concern assumption and recognizes the time value of money

by discounting the free cash flows for the explicit forecast period and the terminal value at an

appropriate discount factor. The free cash flows represent the cash available for distribution to both

the owners of and lenders to the business. The terminal value represents the total value of the

available cash flow for all periods subsequent to the forecast period. The terminal value of the

business at the end of the forecast period is estimated and discounted to its equivalent present value

and added to the present value of the explicit forecast period cash flow to estimate the value of the

business.

The projected free cash flows are discounted by the Weighted Average Cost of Capital (WACC) to

arrive at the enterprise value. The WACC represents the returns required by the investors of both debt

and equity weighed to their relative funding in the entity.

Indokem and Refnol both are listed companies and since the information related to future financial

projections of the Company or its subsidiaries are price sensitive in nature, further given the

uncertainties with respect to Covid – 19 and its impact on business, we were not provided with the

financial projections of these Companies by the Management. We have therefore not used DCF method

to determine the fair value of the equity shares of Indokem and Refnol.

3. Asset Approach - Net Asset Value Method (‘NAV’)

The asset-based value analysis technique is based on the value of the underlying net assets of the

business, either on a book value basis or realizable value basis or replacement cost basis. This

methodology is likely to be appropriate for business which derives value mainly from the underlying

value of its assets rather than its earnings i.e. in case where the assets base dominates earning

capability. It is also used where the main strength of the business is its asset backing rather than its

capacity or potential to earn profits.

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:23:47 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:24:13 +05'30'

Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 13 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

Based on our analysis and discussion with the Management we understand that Refnol derives major

of its value from the significant asset base held by them, we have therefore used NAV method to

determine the fair value of the equity shares of Refnol.

NAV Method does not value the future profit earning potential of the business, we have therefore not

used this method to value the equity shares of Indokem.

<<<<< This space has been left blank intentionally>>>>>

Mahendra

Kishore

Khatau

Digitally signed by

Mahendra Kishore

Khatau

Date: 2022.01.15

18:24:40 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:25:04 +05'30'

Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 14 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

RECOMMENDATION OF THE RATIO OF SHARE EXCHANGE FOR THE PROPOSED AMALGAMATION.

The share exchange ratio has been arrived at on the basis of a relative (and not absolute) equity value

of the Transferor company and Transferee company for the proposed scheme of amalgamation based

on the various methodologies mentioned herein earlier. Suitable rounding off have been carried out

wherever necessary to arrive at the recommended share exchange ratio.

Refer Annexure 1 for value per share under different methods prescribed and the share exchange ratio.

In light of the above and on a consideration of all the relevant factors and circumstances as discussed

and outlined herein above including scope, limitations and assumptions describe in this report and

the engagement letter, we recommend the share exchange ratio as follows:

1) To the equity shareholders of Refnol

1,153 (One Thousand One Hundred and Fifty-Three) equity shares of Indokem having face value of

INR 10 each fully paid up shall be issued for every 1,000 (One Thousand) equity shares held in

Refnol having face value of INR 10 each fully paid up.

Respectfully submitted,

Niranjan Kumar

Registered Valuer- Securities or Financial Assets

IBBI Registration Number: IBBI/RV/06/2018/10137

Date: 14 January 2022 ICAIRVO/06/RV-P000021/2018-19

Place: Pune UDIN: 22121635AAAAAI6066

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:25:32 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:26:05 +05'30'

Recommendation of share exchange ratio for the proposed

amalgamation of Refnol with Indokem Page 15 of 15

Niranjan Kumar

Registered Valuer

Securities or Financial

Asse

Annexure 1: Summary of share exchange ratio

Amalgamation of Refnol (Transferor Company) with Indokem (Transferee Company)

Notes:

1) Market Approach – Comparable Companies Multiple (CCM) Method

Refnol has incurred loss in the previous year hence use of the profitability matrices is not

possible. Further, valuation of loss-making companies is not comparable with those of

profitable companies when considered on other financial parameters, we have therefore not

used the CCM Method to value the equity shares of Refnol.

2) Income Approach- Discounted Cash Flow Method

Indokem and Refnol both are listed companies and since the information related to future

financial projections of the Company or its subsidiaries are price sensitive in nature, further

given the uncertainties with respect to Covid – 19 and its impact on business, we were not

provided with the financial projections of these Companies by the Management. We have

therefore not used DCF method to determine the fair value of the equity shares of Indokem and

Refnol.

3) Asset Approach- NAV Method

NAV Method does not value the future profit earning potential of the business, we have

therefore not used this method to value the equity shares of Indokem.

<<<<< This space has been left blank intentionally>>>>>

Valuation Approach

Value per share

(INR)

Weight (%) Value per share

(INR)

Weight (%)

Market approach

- Market Price Method 39.23 50.0% 37.19 50.0%

- Comparable Companies Multiple (CCM) Method 48.75 50.0% NA 0.0%

Income approach - Discounted Cash Flows Method NA 0.0% NA 0.0%

Asset approach - NAV Method NA 0.0% 64.22 50.0%

Relative value per share 43.99 (A) 50.70 (B)

Share Exchange Ratio Round Off [(B)/(A)] 1.153

Recommended Share Exchange Ratio (For every 1000 equity shares)

1,153

NA : Not Adopted

Indokem (A) Refnol (B)

Transferee Company Transferor Company

Mahendr

a Kishore

Khatau

Digitally signed

by Mahendra

Kishore Khatau

Date: 2022.01.15

18:26:36 +05'30'

Rajesh

Dinkar

Pisal

Digitally signed

by Rajesh Dinkar

Pisal

Date: 2022.01.15

18:27:06 +05'30'

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