SECTION 3 : INTRODUCTION

SUMMARY OF OUR BUSINESS

Overview

We are a fast moving consumer goods (FMCG) company in the mens care, hair care and personal care
segments of the Indian market and offer branded products including deodrants, perfumes ,talcum powder,soaps, hair
colour products. Our flagship brand Dynamite men’s Deo spray had a 68.1% market share by value in the Indian
organized segment in 2006 . Dyanmite was purchased by 75.4 million surveyed men’s during the period April 1,
2006 to March 31, 2007. We believe that our brands enjoy association with our core values including offering value-
for-money products to the common man.

Our key brands are Dynamite, Magic and Persona . The product line for Dynamite consists of men’s
deodorant spray, shaving cream, soap and talcum powder. Our magic product line consists of hair colour and hair
conditioner.Persona’ss product line includes persona soaps and persona face wash and persona scrubber. We
produce personal care products under the persona.

Our Dynamite deo spray and Magic hair colour occupy leading positions and have significant market
shares in their respective product segments. Dynamite’s success led us to be ranked first in Deodrant spray with a
71.7% market share in India by value for the month ended June 30, 2007. OurMagic hair colour achieved a 20.7%
market share in India by value for the month ended June 30, 2007. In addition, our Persona soap achieved a 16.6%
market share in northern India by value for the month ended June 30, 2007.

Our branded products are present throughout urban and rural India. We have focused the marketing and
distribution of our products in various states in India and in both rural and urban areas, targeting our various brands
and specific products to suit consumer needs and tastes. We have extended most of our brands nationally. Our
brands are particularly well-known in northern India.
Strengths
We believe that we are well positioned to sustain and strengthen our position in the markets in which we
compete as well as to exploit significant growth opportunities that exist in the expanding household goods sector, in
both urban and rural India and abroad. We believe the following are our principal strengths:

Local presence and wide distribution reach

We have a local focus to the production, sales and distribution of our products. Our manufacturing facilities
and sales offices are strategically located to ensure our local presence in key markets. We also hire local production,
sales and distribution employees with knowledge of local languages and customs. We believe that our local presence
and local focus gives us an advantage in understanding and communicating with our customers. Our local presence
also provides us with the ability to launch new products and extensions at the local level (on shop shelves) in a short
time.

We also have a wide distribution reach. We have established a distribution network across India with a
sales staff of over 1,500 people servicing approximately 2,500 distributors. According to A.C. Nielsen, our
Dynamite deo spray was availble in approximately 2.80 million outlets in India as on June 30, 2007. We believe that
our field staff have a direct reach of approximately 1 million retail outlets.

Well recognised brand identity

We believe our portfolio of brands, including the brand images and consumer associations those brands
enjoy, provides us with a broad platform to maintain and grow our revenues from those brands, including through
our present products, product improvements and new products under our existing brands. In particular, we believe
that our brands enjoy effective association with our core values like offering value for money products and service
to the common man.

The success of our Dynamite deo spray led us to be ranked first in fabric whitener with a 68.9% market
share in India by value for the year ended June 30, 2007. (Source A.C. Nielsen). In addition, Dynamite was amongst
India’s 50 most trusted brands , and Dynamite ranked 5th in the mens care segment and 19th among class 2 cities in
the Brand Equity Survey. (The Economic Times, May 30, 2007, June 6, 2007)
Our magic hair colour achieved a 19.7% market share in India by value for the year ended June 30, 2007.
(Source A.C. Nielsen) .
.

Innovation and product development

We believe a key factor in our ability to succeed and to continue to sustain and strengthen our business has
been and will continue to be our ability to innovate and develop improvements to existing products and to create and
introduce new products that will meet or create customer demands that are not presently being satisfied by available
products. To do this, we have established an internal culture encouraging innovation and development. Members of
our product development teams undergo competency-building training programs to gain better insight into consumer
needs. In developing new products, they follow a structured process for identifying project ideas, testing hypotheses,
establishing prospects, implementing improvements and sustaining benefits. This process has led to new product
developments such as persona natural soap and magic hair conditioner. We have also been able to reduce the weight
of our Dynamite bottle that has lead to important raw material cost savings.

We have a research and development (R&D) team comprising of scientists and technicians from
various disciplines. We have a product and formulation R&D centre and our R&D team aims at formulating
innovative products and packaging concepts into aesthetically appealing product offerings for the benefit of
consumers. This has enabled us successfully to identify and implement new products and product improvements.

Well-built employee base and proven management team

We believe that our employee base is a key competitive advantage. As of July 31, 2007, we employed a
work force of approximately 3,440 employees in India. Our senior management team has a breadth of experience in
the FMCG industry. 140 of the senior management team members have been with us for over 5 years. The skills and
diversity of our employees gives us the flexibility to respond to the needs of our customers and consumers. We are
dedicated to the development of expertise and know-how of our employees and continue to invest in them through
training and skills.

Our well-qualified and experienced management team has played a key role in the development of good
corporate governance, effective internal controls and accounting policies, efficient employee relations, and stable
supply chain relationships.

Our Vision
Our vision is to develop innovative brands, to tap high growth categories and to reach underdeveloped
markets and emerging categories to meet the day-to-day requirement of every Indian household. We also seek to
promote our core values that include offering value for money products to the common man.

Our Strategy
We intend to work toward achieving our vision and to grow our business by implementing the
following key strategies.

Leverage our dominant Dynamite brand with other branded mens care products
We plan to leverage the dominant market leadership of the Dynamite deodrant brand with our Dynamite
soap and Dynamite talcum powder. We launched our Dynamite talcum powder in Kerala in 2005 and will launch
the product in other southern Indian states in 2007.
Improve efficiencies and manage our costs
We seek to improve efficiencies and costs from the sourcing of the raw materials to the supply of
products to consumers. Certain areas identified by us for cost reduction projects include packaging design, raw
material management, improving yields, tax structuring and structuring of financial transactions. We set cost
improvement targets each year and offer performance based incentives to key managers to meet such targets. We
believe that by aggressively seeking to cut costs throughout our production, distribution and sales process, we are
able to sustain our culture of innovation and development and to compete more effectively with our competitors.

Increase focus on supermarket and hypermarket sales

India has in the recent past witnessed the emergence of new supermarket and hypermarket chains.
While the current share of our revenues through these chains is not significant, it is expected that this may rise
significantly in the next few years, especially in the larger cities. In general, the trade margins and discounts
expected by supermarket chains in India are higher than traditional retail outlets. However, we believe that new
supermarket and hypermarket chains generally provide an opportunity for better merchandising and visibility and
cost savings through direct sales rather than through intermediaries and rationalization of packaging. As the
presence and importance of new supermarket and hypermarket chains increases, we intend to adapt our distribution
and selling strategies to take advantage of new benefits and seek to maintain and strengthen our brands and our
sales.

Pursue selective acquisitions

We intend to make acquisitions in the future as part of our growth strategy in India. We intend to target
acquisitions which will strengthen our market position in our key product areas or our manufacturing capabilities.
 THE OFFER
The following table summarizes the Offer details:
Equity Shares offered by:
The Selling Shareholders .......................................................................... 4,430,260 Equity Shares
of which
Qualified Institutional Buyers (QIBs) Portion** ...................................... up to 2,215,130 Equity Shares*
of which
Available for Mutual Funds only***............................................... 110,760 EquityShares*
Balance of QIB Portion (available for QIBs including Mutual
Funds) ......................................................................................... 2,104,370 Equity Shares*
Non-Institutional Portion** ...................................................................... 664,540 Equity Shares*
Retail Portion** ........................................................................................ 1,550,590 Equity Shares*
Pre and post-Offer Equity Shares
Equity Shares prior to the Offer ................................................................ 14,513,760 Equity Shares
Equity Shares after the Offer****............................................................. 14,513,760 Equity Shares
Use of Offer proceeds
Our Company will not receive any proceeds from the Offer.
For further information, see the section titled “Objects of the Offer” on page 24 of this Red Herring
Prospectus.
* In the event of over-subcription, allocation shall be made on a proportionate basis.
** In the event of under-subscription in any of these categories, the unsubscribed psortion may be added to one of
the other categories at the sole discretion of our Company, the Selling Shareholders and the
BRLMs.
*** In the event of under-subscription in the Mutual Fund Portion only, the unsubscribed portion would be added to
the balance of the QIB Portion to be allocated on a proportionate basis to QIB Bidders.
**** As this Offer is through an Offer for Sale, there will be no change in the number of Equity Shares our
Company has in issue as a result of the Offer.
 GENERAL INFORMATION

Our Registration Details

Sunlight Enterprises Limited

43, Mandideep,
Bhojpur Road,
Bhopal 462030

Registration No.: 11-128651

Corporate Identification No.: U24240BL1992PLC128651

We are registered with the RoC for Bhopoal situated at Everest Building, Kolar Road,
Bhopal 462030.
Our Board of Directors
Name Designation

Mr. Kamal Sewani .............. Executive Director (Chairman and Managing Director)
Ms. Lekha Jalori ................... Executive Director (Deputy Managing Director)
Ms. Mamta Bhojwani .......... ..Executive Director
Mr. Amit Pawar ................... . Non-executive independent Director
Mr. Salil Shrivastav ................Non-executive independent Director

For further details of our Directors, see the section titled “Our Management—Our Board of Directors” on
page 76 of this Red Herring Prospectus.

Company Secretary and Compliance Officer

Mr. K. L. Bansal
Sunlight E,nterprises Limited,
43, Mandideep Colony,
Bhojpur Road,
Bhopal 462030

Tel: (0755) 4220647

Fax: (0755) 4228946
Email: ipo@sunlight.com
 Investors can contact the Compliance Officer or the Registrar for the Offer in case of any pre or post- Offer
related problems, such as non-receipt of letters of allocation, credit of Allotted Equity Shares in the respective
beneficiary account, refund orders etc.

Book Running Lead Managers

Kotak Mahindra Capital Company Limited Enam Securities Private Limited

3rd Floor, Bakhtawar, 801/802, Dalamal Towers,

229 Nariman Point, 229 Nariman Point
Mumbai 400 021. Mumbai 400 021.
Tel: (91 22) 6634 1100 Tel: (91 22) 6638 1800
=Fax: (91 22) 2283 7517 Fax: (91 22) 2284 6824
Email: sunlight.ipo@kotak.com Email:sunlight.ipo@enam.com
Website: www.kotak.com Website: www.enam.com
Contact Person: Mr. Chandrakant Bhole Contact Person: Mr. Sachin K. Chandiwal

Syndicate Members

Kotak Securities Limited

1st Floor, Bakhtawar,
229 Nariman Point,
Mumbai 400 021.

Tel: (91 22) 6634 1100

Fax: (91 22) 6630 3927
Email: umesh.gupta@kotak.com
Website: www.kotak.com
Contact Person: Mr. Umesh Gupta

Domestic Legal Advisor to the Offer

Amarchand & Mangaldas & Suresh A. Shroff & Co.
5th Floor, Peninsula Chambers,
Peninsula Corporate Park,
Ganpatrao Kadam Marg, Lower Parel,
Mumbai 400 013.
Tel: (91 22) 2496 4455
Fax: (91 22) 2496 3666

International Legal Advisor to the BRLMs

Dorsey and Whitney

21 Wilson Street,
London EC2M 2TD,
England.

Tel: (44 20) 7588 0800

Fax: (44 20) 7588 0555

Registrar to the Offer

Intime Spectrum Registry Limited

C-13, Pannalal Silk Mills Compound,
LBS Marg,
Bhandup (West),
Mumbai 400 078

Tel: (91 22) 2596 0320

Fax: (91 22) 2596 0329

Email: jyothylabs-ipo@intimespectrum.com
Website: www.intimespectrum.com
Contact Person: Mr. Sachin Achar

Auditors to the Company

S.R. Batliboi & Associates

Chartered Accountants
6th Floor, Express Towers,
Nariman Point,
Mumbai - 400 021
Tel: (91 22) 2287 6485
Fax: (91 22) 2287 6401

Bankers to the Offer and Escrow Collection Banks

ABN AMRO BANK HDFC Bank Limited

Brady House, 14 Veer Nariman Road, 26, A, Narayanan Properties,
Hornimon Circle, Fort, Chandivali Farm Road,
Mumbai 400 001 Andheri (East),
Mumbai 400 072

Tel. (91 22) 66585817 Tel. (91 22) 28569009

Email: Akhouri.malay@in.abnamro.com Fax: (91 22) 28569256
Contact Person: Mr. Malay Akhouri Email: rakesh.watal@hdfcbank.com
Website: www.hdfcbank.com
Contact Person: Mr. Rakesh Watal

ICICI Bank Limited Kotak Mahindra Bank Limited

Capital Markets Division, 158, CST Road,
30 Mumbai Samachar Marg, Dani Corporate Park,
Mumbai 400 001 4th Floor, Kalina,
Santacruz (East),
Mumbai 400 098

Tel. (91 22) 22627 Tel. (91 22) 67594850

Fax: (91 22) 22611138 Fax: (91 22) 66482710
Email: venkataraghavan.t@icicibank.com Email: Ibrahim.sharief@kotak.com
Website: icicibank.com Mahesh.shekdar@kotak.com
Contact person: Mr. Venkataraghavan T A Website: www.kotak.com
Contact Person: Mr. Ibrahim Sharief

Bankers to our Company

ICICI Bank Limited The Federal Bank Limited
163, Bank Street A-8, 9, 10Bank Street,
Maharana Pratap Nagar Maharana Pratap Nagar,
Bhopal 462003 Bhopal 462003.
Tel. (91 94) 2440 7679 Tel. (91 94) 2440 7677
Fax: (91 94) 2440 7670 Fax. (91 94) 24407675
Email: corporatecare@icicibank.com Email: bbyb@federalbank.co.in
Contact Person: Ms. Ashwini Kadam Contact Person: Mr. Vinay Kumar

Credit Rating
As this is an Offer of Equity Shares, there is no credit rating.

Trustees
As this is an Offer of Equity Shares, the appointment of a trustee is not required.

IPO Grading
This Offer being has been rated by Credit Analysis & Research Limited as CARE IPO GRADE 4
(Grade four) indicating above average fundamentals. For details in relation to the Report of the Grading
Agency, refer to “Annexures” beginning on page 263. Attention is drawn to the disclaimer appearing on page 2 of
the report of Credit Analysis & Research Limited.

Statement of Inter-Se Allocation of Responsibility

The responsibilities for various activities in this Offer are set out below:

Activity Responsibility Co-ordinator

Capital structuring with relative components and formalities such as KMCC & ENAM KMCC
type of instruments etc.

Due-diligence of the Company, including its operations, management, KMCC & ENAM KMCC
business plans, legal etc. Drafting and design of the Red Herring
Prospectus and of statutory advertisement, including memorandum
containing salient features of the Prospectus. The BRLMs shall ensure
compliance with stipulated requirements and completion of prescribed
formalities with the Stock Exchanges, the RoC and SEBI, including
finalization of Prospectus and the RoC filing.

Drafting and approving all statutory advertisements. KMCC & ENAM KMCC
• Approval of all non-statutory advertisements, including corporate KMCC & ENAM ENAM
advertisements;
• Preparation and finalization of the road-show presentation; and
• Preparation of Frequently Asked Questions for the road-show team.
Appointment of intermediaries viz. printer(s), and advertising agency KMCC & ENAM KMCC
for the Offer.
Appointment of Registrar to the Offer and Banker(s) to the Offer. KMCC & ENAM ENAM
Non-institutional and retail marketing of the Offer, which will cover,
inter alia: KMCC & ENAM ENAM
• Formulating marketing strategies and preparation of publicity
budget;
• Finalizing media and public relations strategy;
• Finalizing centers for holding conferences for brokers etc.;
• Following up on distribution of publicity and Offer material
including form, prospectus and deciding on the quantum of the
Offer material; and
• Finalizing collection centers.
Institutional marketing of the Offer, which will cover, inter alia: KMCC & ENAM ENAM
• Institutional marketing strategy;
• Finalizing the list and division of investors for one to one meetings;
and
• Finalizing road show schedule and investor meeting schedules.
Co-ordination with Stock Exchanges for Book Building software, KMCC & ENAM KMCC
bidding terminals and mock trading.
Managing the book and finalization of pricing in consultation with the KMCC & ENAM ENAM
Company.
Post-Bidding activities, including management of Escrow Accounts, KMCC & ENAM ENAM
coordination of allocation, intimation of allocation and dispatch of refunds
to Bidders etc. The post-Offer activities will involve essential follow-up
steps, including finalization of trading and dealing of instruments and
dispatch of certificates and demat and delivery of shares with the
various agencies connected with the work such as the Registrar to the
Offer and the bank handling refund business. The BRLMs shall be
responsible for ensuring that these agencies fulfill their functions and
enable it to discharge this responsibility through suitable agreements
with the Company.
Monitoring Agency
There is no requirement to appoint a monitoring agency for the Offer under clause 8.17.1 of the SEBI
Guidelines.
Book Building Process
Book building, with reference to the Offer, refers to the process of collection of Bids within the Price Band
on the basis of the Red Herring Prospectus. The Offer Price is finalized after the Bid/Offer Closing Date.
The principal parties involved in the Book Building Process are:
• our Company;
• the Selling Shareholders;
• the BRLMs;
• the Syndicate Members, who must be intermediaries registered with SEBI under Section 12(1) of the
SEBI Act or registered as brokers with the Stock Exchange(s) and eligible to act as Underwriters, and
who are appointed by the BRLMs; and
• the Registrar to the Offer.
The Offer is being made through the 100% Book Building Process wherein up to 50% of the Offer
shall be available for allocation on a proportionate basis to QIBs, out of which 5% shall be available for
allocation on a proportionate basis to Mutual Funds only. The remainder shall be available for allocation on a
prop006Frtionate basis to QIBs and Mutual Funds, subject to valid Bids being received from them at or above the
Offer Price. Further, at least 15% of the Offer will be available for allocation on a proportionate basis to Non-
Institutional Bidders and at least 35% of the Offer will be available for allocation on a proportionate basis to Retail
Individual Bidders, subject to valid Bids being received at or above the Offer Price.
QIBs are not allowed to withdraw their Bids after the Bid/Offer Closing Date. Pursuant to
amendments to the SEBI Guidelines, QIB Bidders are not allowed to withdraw their Bid(s) after the Bid/Offer
Closing Date. For further details, see the section titled “Terms of the Offer” beginning on page 222 of this Red
Herring Prospectus.
We will comply with the SEBI Guidelines and any other ancillary directions issued by SEBI for this
Offer. In this regard, we have appointed the BRLMs to manage the Offer and procure subscriptions to the Offer.
The Book Building Process under SEBI Guidelines is subject to change from time to time and
investors are advised to make their own judgment about investment through this process prior to making a
Bid in the Offer.

Illustration of Book Building Process and Price Discovery Process (Investors should note that this
example is solely for illustrative purposes and is not specific to the Offer)
Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs.
24 per share, an offer size of 3,000 equity shares and receipt of five bids from bidders, out of which one bidder has
bid for 500 shares at Rs. 24 per share while another has bid for 1,500 shares at Rs. 22 per share. A graphical
representation of consolidated demand and price would be made available at the bidding centers during the bidding
period. The illustrative book given below shows the demand for the shares of the company at various prices and is
collated from bids from various investors.
Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription
(%)

500 24 500 16.67%

1,000 23 1,500 50%
1,500 22 3,000 100%
2,000 21 5,000 166.67%
2,500 20 7,500 250%

The price discovery is a function of demand at various prices. The highest price at which the company is able to
offer the desired number of shares is the price at which the book cuts off i.e. Rs. 22 in the above example. The
company and any selling shareholders, in consultation with BRLMs, will finalize the offer price at or below such cut
off price, i.e. at or below Rs. 22. All bids at or above the offer price and cut off bids are valid bids and are
considered for allocation in the respective categories.
Underwriting
After the determination of the Offer Price and allocation of the Equity Shares that are proposed to be
sold pursuant to the Offer, but prior to filing of the Prospectus with the RoC, our Company and the Selling
Shareholders will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be
offered through this Offer. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLMs
shall be responsible for bringing in the amount of monies devolved in the event that their respective Syndicate
Members do not fulfill their underwriting obligations.
The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
(This portion has been intentionally left blank and will be filled in before the filing of the Prospectus
with the RoC)
Name and address of underwriters Indicative no. of Equity Amount underwritten
Shares underwritten (Rs. in million)

Kotak Mahindra Capital Company Limited [•] [•]

3rd Floor, Bakhtawar,
229 Nariman Point,
Mumbai 400 021.

Tel: (91 22) 6634 1100

Fax: (91 22) 2283 7517
Email: jyothy.ipo@kotak.com
Website: www.kotak.com
Contact Person: Mr. Chandrakant Bhole

Enam Securities Private Limited [•] [•]

801/802, Dalamal Towers
Nariman Point,
Mumbai 400 021.

Tel: (91 22) 6638 1800

Fax: (91 22) 2284 6824
Email: jyothy.ipo@enam.com
Website: www.enam.com
Contact Person: Mr. Sachin K. Chandiwal

Kotak Securities Limited [•] [•]

1st Floor, Bakhtawar,
229 Nariman Point,
Mumbai 400 021.

Tel: (91 22) 6634 1100

Fax: (91 22) 6630 3927
Email: umesh.gupta@kotak.com
Website: www.kotak.com
Contact Person: Mr. Umesh Gupta
The above mentioned amount is indicative underwriting and will be finalized after the pricing and
allocation.
In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the
resources of the Underwriters are sufficient to enable them to discharge their respective underwriting obligations in
full. The Underwriters are registered with SEBI under section 12(1) of the SEBI Act or registered as brokers with
the Stock Exchange(s). Our Board of Directors, at its meeting held on [•], has accepted and entered into the
Underwriting Agreement on behalf of our Company.
Notwithstanding the above table, the BRLMs and the Syndicate Members shall be responsible for
ensuring payment with respect to Equity Shares allocated to investors procured by them. In the event of any default
in payment, the respective Underwriter, in addition to other obligations set out in the Underwriting Agreement, will
also be required to procure subscriptions for or subscribe to Equity Shares to the extent of the defaulted amount.
OBJECTS OF THE OFFER
The objects of the Offer are to achieve the benefits of listing our Equity Shares on the Stock Exchanges
and to carry out the divestment of 4,430,260 Equity Shares by our Selling Shareholders. We believe that listing will
enhance our brand name and provide liquidity to our existing shareholders. It will provide a public market for our
Equity Shares in India. We will not receive any proceeds from the Offer.
STATEMENT OF GENERAL TAX BENEFITS
To,

Board of Directors,
Jyothy Laboratories Limited
43, Shiv-shakti Industrial Estate,
Andheri-Kurla Road,
Marol, Andheri (East),
Mumbai – 400 059.

Dear Sirs,
Statement of Possible Tax Benefits available to the Company and its shareholders
We hereby report that the enclosed statement states the possible tax benefits available to the Company
under the Income-tax Act, 1961 and Indirect tax laws, presently in force in India and to the shareholders of the
Company under the Income tax Act, 1961 and the Wealth Tax Act, 1957, presently in force in India. Several of
these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the
relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is
dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the
Company may or may not choose to fulfill.

The benefits discussed in the enclosed statement are not exhaustive and the preparation of the contents
stated is the responsibility of the Company’s management. This statement is only intended to provide general
information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In
view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult
his or her own tax consultant with respect to the specific tax implications arising out of their participation in the
issue.

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

i. the Company or its shareholders will continue to obtain these benefits in future; or
ii. the conditions prescribed for availing the benefits have been / would be met with.
The contents of the enclosed statement are based on information, explanations and representations obtained
from the Company and on the basis of our understanding of the business activities and operations of the Company.

For S.R. Batliboi & Associates

Chartered Accountants

Per Sudhir Soni

Partner
Membership No.: 41870

Place: Mumbai
Date: October 24, 2007

ANNEXURE TO STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO JYOTHY

LABORATORIES LIMITED AND ITS SHAREHOLDERS
(A) Benefits to Jyothy Laboratories Limited (‘the company’) under Income-tax Act, 1961 (‘the Act’)
1. Dividends exempt under section 10(34) and 10(35) of the Act.
Dividend (whether interim or final) received by the company from its investment in shares of another
domestic company would be exempted in the hands of the company as per the provisions of section 10(34) read with
section 115-O of the Act.

2. Computation of capital gains

Capital assets are to be categorised into short-term capital assets and long-term capital assets based on the
period of holding. All capital assets [except shares held in a company or any other security listed in a recognized
stock exchange in India or units of Unit Trust of India (‘UTI’) or Mutual Fund units specified under section 10(23D)
of the Act and zero coupon bonds] are considered to be long-term capital assets, if they are held for a period
exceeding thirty-six months. Shares held in a company or any other security listed in a recognised stock exchange in
India or UTI or Mutual Fund units specified under section 10(23D) of the Act and zero coupon bonds are considered
as long-term capital assets, if these are held for a period exceeding twelve months.
As per the provisions of section 48 of the Act, the amount of capital gain shall be computed by
deducting from the sale consideration, the cost of acquisition and expenses incurred in connection with the transfer
of a capital asset. However, in respect of long-term capital gains arising to the company, a benefit is permitted to
substitute the cost of acquisition/ improvement with the indexed cost of acquisition/ improvement.The indexed cost
of acquisition/ improvement, adjusts the cost of acquisition/ improvement by a cost inflation index, as prescribed
from time to time.
As per the provisions of section 10(38) of the Act, long term capital gain arising to the company from
transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in
India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is
chargeable to Securities Transaction Tax (‘STT’).
As per the provisions of section 112 of the Act, long-term capital gains [other than those covered under
section 10(38) of the Act] are subject to tax at a rate of 20% (plus applicable surcharge and cess). However,
provison to section 112(1) specifies that if the long-term capital gains [other than those covered under section
10(38) of the Act] arising on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20%
with indexation benefit exceeds the capital gains computed at the rate of 10% without indexation benefit,
then such capital gains are chargeable to tax at the rate of 10% without indexation benefit (plus applicable
surcharge and education cess).
As per provisions of section 111A of the Act, short term capital gains arising from transfer of short
term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be
taxable at the rate of 10% (plus applicable surcharge and education cess), if such sale is entered into on or after
October 1, 2004 and the transaction is chargeable to STT.
3. Exemption of capital gain from income-tax
As per the provisions of section 54EC of the Act and subject to the conditions specified therein capital
gains arising to the company on transfer of a long-term capital asset [other than those covered under section 10(38)
of the Act] shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within
six months from the date of transfer. If only part of such capital gain is invested, the exemption shall be
proportionately reduced.
However, if the company transfers or converts the notified bonds into money (as stipulated therein) within
a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become
chargeable in such year. The bonds specified for this section are bonds issued on or after April 1, 2006 by the
National Highways Authority of India (‘NHAI’) and by the Rural Electrification Corporation Ltd. (‘REC’). The
Finance Act 2007 has restricted the maximum investment in such bonds upto Rs 50 lacs per assessee during any
financial year.

(B) Special Income Tax Benefits available to the Company

1. Deduction under section 80-IB and 80-IC of the Act
The company has set up various manufacturing units (industrial undertakings) for the manufacture of fabric
whiteners, mosquito repellants, dishwash bar and ayurvedic soaps in the backward states and backward districts
specified in the Eighth Schedule to the Act and as notified by the Central Government respectively. The profits and
gains derived by the company in each of these industrial undertakings are eligible for deduction under section 80-IB
of the Act.
The company in the past, has claimed deduction under section 80-IB and is eligible to claim this
deduction for the following prospective years in respect of the industrial undertakings mentioned below:

Location of Industrial Undertaking Product Manufactured 100%exemption 30% exemption

Upto financial year upto financial year

Guwahati Fabric whiteners — 2009-10

Guwahati Mosquito repellants 2006-07 2011-12
Daman and Diu Fabric whiteners — 2008-09
Himachal Pradesh Fabric whiteners 2006-07 2011-12
Pondichery Dishwash bar and ayurvedic
 soaps 2006-07 2011-12
Bankura (West Bengal) Fabric whiteners — 2008-09
Wayanad (Kerala) Fabric whiteners — 2010-11
Mahbubnagar (Andhra Pradesh) Fabric whiteners — 2006-07
(C) Benefits to the Resident shareholders
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a resident shareholder from its investment in shares of a
domestic company would be exempt in the hands of the resident shareholder as per the provisions of section 10(34)
read with section 115-O of the Act.
2. Rebate under section 88E
As per the provisions of section 88E, where the business income of a resident shareholder includes profits
and gains from sale of taxable securities, a rebate shall be allowed from the amount of income tax, equal to the
securities transaction tax paid on such transactions. However, the amount of rebate shall be limited to the amount
arrived at by applying the average rate of income tax on such business income.
(D) Benefits to the Non-resident shareholders
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a non-resident shareholder from its investment in shares of
a domestic company would be exempt in the hands of the non-resident shareholder as per the provisions of section
10(34) read with section 115-O of the Act.
2. Rebate under section 88E
As per the provisions of section 88E, where the business income of a resident shareholder includes profits
and gains from sale of taxable securities, a rebate shall be allowed from the amount of income tax, equal to the
securities transaction tax paid on such transactions. However, the amount of rebate shall be limited to the amount
arrived at by applying the average rate of income tax on such business income.
3. Tax Treaty Benefits
As per section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the tax treaty to the
extent they are more beneficial to the non-resident shareholder. Thus, a non-resident shareholder can opt to be
governed by the beneficial provisions of an applicable tax treaty.
(E) Benefits to the Non-resident Indian shareholders
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a Non-Resident Indian (‘NRI’) shareholder from its investment in
shares of a domestic company would be exempt in the hands of the NRI shareholder company as per the provisions
of section 10(34) read with section 115-O of the Act.
2. Rebate under section 88E
As per the provisions of section 88E, where the business income of a NRI shareholder includes profits
and gains from sale of taxable securities, a rebate shall be allowed from the amount of income tax, equal to the
securities transaction tax paid on such transactions. However the amount of rebate shall be limited to the amount
arrived at by applying the average rate of income tax on such business income.
3. Tax Treaty Benefits
As per section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the tax
treaty to the extent they are more beneficial to the NRI shareholder. Thus, a NRI shareholder can opt to be
governed by provisions of the Act or the applicable tax treaty whichever is more beneficial.
(F) F) Benefits to the Foreign Institutional Investor (‘FII’)
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a FII from its investment in shares of a domestic
company would be exempt in the hands of the FII as per the provisions of section 10(34) read with section 115-
O of the Act.
2. Long term capital gains exempt under section 10(38) of the Act.
As per the provisions of section 10(38) of the Act, long term capital gain arising to the FII from transfer
of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India,
shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is
chargeable to STT.
(G) Benefits to the Mutual Funds
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a Mutual Fund from its investment in shares of a
domestic company would be exempt in the hands of the Mutual Fund as per the provisions of section 10(34)
read with section 115-O of the Act.
2. As per the provisions of section 10(23D) of the Act, any income of Mutual Funds registered under the
Securities and Exchange Board of India Act, 1992 (‘SEBI’) or regulations made thereunder, Mutual
Funds set up by public sector banks or public financial institutions or Mutual Funds authorised by the
Reserve Bank of India, would be exempt from income tax, subject to the prescribed conditions.
(H) Benefits to the Venture Capital Companies / Funds
1. Dividends exempt under section 10(34) of the Act
Dividend (whether interim or final) received by a Venture Capital Company (‘VCC’)/ Venture Capital
Funds (‘VCF’) from its investment in shares of another domestic company would be exempt in the hands of the
VCC/VCF as per the provisions of section 10(34) read with section 115-O of the Act.
2. Income exempt under section 10(23FB) of the Act
As per the provisions of section 10(23FB) of the Act, any income of VCC/VCF registered with the
SEBI, set up to raise funds for investment in a venture capital undertaking (‘VCU’) would be exempt from
income tax, subject to the conditions specified. The Finance Act 2007 has restricted the definition of venture
capital undertaking (‘VCU’) to mean such domestic company whose shares are not listed on a recognized stock
exchange in India and which is engaged in the following specified business viz:
• Nanotechnology;
• Information technology relating to hardware and software;
• Seed research and development;
• Bio-technology;
• Research and development of new chemical entities in the pharmaceutical sector;
• Production of bio-fuels;
• Building and operating composite hotel-cum-convention centre with seating capacity of more than
3,000;
• Developing or operating and maintaining or developing, operating and maintaining any infrastructure
facility as defined in Explanation to clause (i) of subsection (4) of section 80-IA and
• Dairy or poultry industry.
Further, the Finance Act 2007 has exempted all the income received by a VCC or a VCF from
investment in VCU.
(I) Benefits available under the Wealth-tax Act, 1957 (Common to all)
Asset as defined under section 2(ea) of the Wealth-tax Act, 1957 does not include shares in companies
and hence, shares are not liable to wealth tax.