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History of Hatsun Agro Products Ltd.

Mr. R.G CHANDRAMOGAN, one of Promoters of Company established a Partnership firm in the year 1970 under the name M/s.CHANDRAMOHAN and CO., for manufacture & sale of Ice Creams & Milk & Dairy based Products . The facilities were set up at Madras. The business grew rapidly and the Firm turnover increased from Rs.1.00 lakh in 1970 to Rs.29.52 lakhs in the year 1986.

M/s. Hatsun Foods Private Limited was incorporated on 4th March 1986. On 01.04.86 the Comp. was admitted as a Partner in M/s. CHANDRAMOHAN and CO. In terms of Deed of Dissolution dt.30.04.1986 M/s. CHANDRAMOHAN and CO. was dissolved & all the assets & liabilities of Firm [except the Brand Name 'ARUN' vested with the Company. The Brand Name 'ARUN' vested with Mr. R.G. CHANDRAMOGAN.

In 1987, Mr. R.G. CHANDRAMOGAN allowed the Comp. to register the Brand Name 'ARUN', in the name of Company subject to a payment of 1% Royalty on the Company Gross Ice Cream Sales Turnover. The Comp. has not paid any other consideration for brand.

Till April '95 [04.04.95s] the Comp. was carrying on its manufacturing activities. The Comp. scrapped its manufacturing facilities at its Tolgate Unit, since the facilities became old & outlived its utilities The Company is now concentrating only on marketing of Ice Cream and Milk & Dairy based products under the brand name 'ARUN'

The Comp. has changed its Name to HATSUN MILK FOOD PRIVATE LIMITED & Certificate to this effect was obtained from the Registrar of Companies, Tamil Nadu, Madras on 07.08.95 and subsequently converted into Public Limited Comp. by passing Special Resolution in Extra Oridinary General Meeting held on 09.08.95 and Certificate to that effect has been issued on 11th August 1995 by Registrar of Companies, Tamil Nadu. Since it is a Private Limited Company, Converted into Public Limited Comp. it doesn't require a Certificate of commencement of Business.

BUSINESS OF THE COMPANY:

Since incorporation in the year 1986 the Comp. has been engaged in the manufacturing & marketing of Ice Cream and Milk & Dairy based products under the brand name 'ARUN'.

Mr. R.G. CHANDRAMOGAN, the owner of brand name permitted the use of brand name subject to a payment of royalty @ 1% of Gross Ice Cream Turnover achieved by the company. In 1987 the Comp. was also allowed to register the brand name in the name of Comp. subject to the same terms. Except the royalty payable by Company, no other consideration was paid in 1987.

The Comp. decided to reorganise its operations by closing down its / manufacturing operation & hiving of leather division & retaining only marketing operations. As part of the strategy, the Comp. closed down its manufacturing activity on 4th April 1995, since the facility at its Tolgate Unit has out lived its utility. The Comp. has also put up Wind Mill of 250 KVA for generation of power to meet part of power requirements.

The Comp. also operated a Leather Division for export of leather garments. The division has since been sold.

The Comp. proposes to focus its efforts only on marketing of Ice Cream & Milk & Dairy based Products. For Sourcing Ice cream & other Ice Cream based products, the company has entered into a contractual arrangement with its Group/Associate concerns.

PRESENT PLAN AND PROPOSAL OF THE COMPANY:

The Comp. proposes to focus its activities purely on marketing Ice cream & Milk & Dairy based products Marketing is critical to the industry & bigger Companies have already entered the field in a large way. Therefore the Comp. felt that it should have a focussed approach and an undiluted attention towards marketing. The Company has therefore decided to concentrate only on marketing, leaving the production to their associates/group Companies from where it can source the Ice Cream & Milk & Dairy based products.

Further it also proposes to take advantage of Brand Name 'ARUN' which has been an established Brand for more than a Decade. The Comp. has agreed to discharge the annual obligation attached to the Brand name 'ARUN' by making lumpsum payment of Rs. 363 lakhs.

The Comp. also felt it necessary that its market should be protected from any competition from the promoters. In order to ensure this the Comp. has entered into strategic arrangement with the promoters. This arrangement prohibits any competition from them for a period of 20 years from the date of this agreement. For this the Comp. proposes to pay a lumpsum consideration of Rs. 400 lacs.

Further to this, the Comp. has made an arrangement for the supply of entire production of Atlantic Foods and Hatsun Foods Company, concerns belonging to the group The Sales Turnover achieved by Atlantic Foods & Net Profit Figures are given below to indicate the potential benefit of the tie-up:

[Rs. in lacss] 31.03.95 31.03.94 31.03.93 Sale of Ice Cream 552.60 369.58 248.05 Other Income 6.38 4.71 20.36 Total Expenditure 520.63 329.78 257.18 Net Profit 38.35 44.51 11.23

To sum up, the Comp. as part of its strategy to focus only on marketing of Ice Cream & other Milk & Dairy based products, has entered into 3 major agreements viz:

[is] Agreement for payment of lumpsum consideration in lieu of royalty payable for usage of Brand Name.

[iis] Agreement for Non-Competition from Promoters and

[iiis] Agreement for sourcing Ice Cream & other Milk and Dairy based products.

The major Terms of these agreements are

A. Brand Name:

a. It is agreed between the Comp. & Shri R.G. Chandramogan that in consideration of lumpsum payment of Rs.363 Lacs to Shri.R G Chandramogan, his right to receive the amount of 1% per annum on the gross turnover is fully discharged & that he won't make any further claim in respect of this.

b. With a view to making the present agreement effective, Mr. R. G. Chandramogan undertakes not to use the name 'Arun' or any variation thereof in any of his business.

c. It is agreed that the Comp. as registered owner have all rights over the brand name without any encumberance.

d. It is agreed that there is no other agreement or arrangement regarding the ownership & use of brand name 'ARUN' & that the Comp. is the sole & absolute owner thereof as before with the only modification that there would be no longer any obligation to make any further

payment to Mr.R.G. Chandramogan.

f. It is agreed that in the event of breach of any of the terms by either party, the other party would be entitled to compensation based upon the extent of loss as liquidated damages & such other cost & expenses as may be found to be incidental.

B. Non-Competition Agreement

a. Shri R. G. Chandramogan & Shri Raja K.S.P. Ganesan agreed that during the currency of agreement, the Promoters shall not directly or indirectly without the prior consent in writing of Company, manufacture or market or deal in Ice Creams any where in the world, either by himself, or in association with others nor shall he involve himself in such manufacture & marketing of Ice Creams either as an employee, agent, representative or through the medium of company, partnership, or association of persons or in any other form.

b. This agreement shall be in force for a period of 20 years from the date hereof & shall extend throughout the union of India & rest of world.

c. It is specifically agreed that the restriction herein contained shah cease to be of effect & operation on the expiry of aforesaid period of 20 years.

d. In consideration of restrictive covenant herein contained, & of undertaking by Promoters the Company shall pay to Shri R.G. Chandramogan Rs.300 Lacs and to Shri Raja K.S.P. Ganesan Rs.100 Lacs totalling a sum of Rs.400 lacs.

PAYMENT TERMS: [RS. IN LAKHSs]

On or Before R.G. CHANDRAMOGAN RAJA K.S.P. GANESAN

30.08.95 1.00 1.00 31.12.95 149.00 49.00 After 01.01.96 but before 31.03.96 150.00 50.00 300.00 100.00

e. It is agreed that in the event of breach of any of the terms by either party, the other party would be entitled to compensation based upon the extent of loss as liquidated damages & such other cost & expenses as may be found to be incidental,

As said in the above clause, the compensation, in case of breach, will be based upon the loss incurred by either party. The methodology will be based on the actual losses incurred at a future date depending on substantiation.

f. In the event of any default by Comp. in making the payment of consideration it shall be open to Promoters to treat the agreement as cancelled or alternatively at their option to extend the time for payment on such terms and conditions as may be agreed to between parties.

C. Sourcing of Ice cream:

The Comp. has entered into arrangement for supply of Ice Creams with M/s. ATLANTIC FOODS, Salem a Proprietorship concern of Mr. R.G. CHANDRAMOGAN & M/s. HATSUN FOODS COMPANY a Partnership Firm in which Mr. R. G. Chandramogan, MR. Raja K.S.P. Ganesan, Mr, C. Satyan and Ms. C.Deviga are partners. These two concerns have contracted to supply their entire production only to the company. The production facilities available with these concerns & the relevant background of these concerns are given below:

Name Of the Unit Location Installed Capacity In lakh liters Atlantic foods Ramalingapuram Salem 24

Hatsun Foods Co. Nallur Village Ponneri Taluk, Near Madras 30

The principal terms of arrangement are as below:

a. The Suppliers shall manufacture Ice Cream strictly in accordance with the Quality, specifications of Company.

b. The Supplier shall procure under supervision of the Company required raw materials, packing materials etc. for the manufacture of Ice cream.

c. The supply will be effected to the Comp. at rates mutually agreed from time to time, but will be computed on the basis of Total Cost + Profit Margin not exceeding 10% overall cost. The Profit margin agreed for this year is 7%. of the overall cost.

d. The Comp. has agreed to take-up a minimum of 12 lacs litres from M/s. ATLANTIC FOODS annualy. In the event of any shortfall the Comp. will have to pay Rs.1.50/- per litre as compensation for such shortfall.

The Comp. has agreed to take-up a minimum of 15 lacs litres from M/s. HATSUN FOODS COMPANY annually. In the event of any shortfall the Comp. will have to pay Rs.1.50/- per litre as compensation for such shortfall.

In all the above arrangements the promoters are interested. These arrangements have been included under Material Contracts.

2000 - The Comp. is set to acquire an 81-per cent stake in the Rs. 40-crore Ajith Dairy Industries Ltd.

- The Chennai-based Hatsun Agro Product, which has successfully launched Arun ice creams & Arokya milk in south India, has now launched a branded popcorn, Hatsun `Noosa'.

2001 - The Comp. has allotted 2,50,000 preference shares of Rs 100/- each to Mr. R.G. Chandramogan, Managing Director pursuant to the approval of share holders at the meeting of 2000.

2003 - Delisting of shares from Madras & Coimbatore Stock Exchanges.

2008

- The Comp. has splits its face value from Rs10/- to Rs2/-.