The Board of Directors of M&M and PTL unanimously approved a scheme of amalgamation of Punjab

Tractors Limited (PTL), an M&M subsidiary, with Mahindra & Mahindra Ltd. Mahindra owns a majority stake
in Punjab Tractors Limited and had earlier acquired 63.33% stake in PTL in July 2007. MHFL, a wholly
owned subsidiary of M&M, currently holds 1.31% of PTL, and is also in the process of being merged into
M&M.

Under this amalgamation scheme, pursuant to provisions of Sections 391 to 394 and other relevant
provisions of the Companies Act, 1956, PTL will be merged into M&M and all its assets and liabilities will be
transferred to M&M at book values. The Appointed Date under this scheme is 1st August 2008. Upon the
scheme becoming effective, M&M will transfer all the equity shares held by it in PTL to a Trust, of which
M&M is the beneficiary. M&M will issue its shares to PTL shareholders as on record date, based on the
swap ratio determined by independent valuers.

Mr. Anand Mahindra, Vice-Chairman and Managing Director, Mahindra Group, said, “PTL is a strategic fit for
M&M and its amalgamation with M&M will significantly add to shareholder value. Bringing these two
businesses under a single entity will also result in a common management focus, help achieve greater
integration benefits and reduce overall administrative costs.”

An independent valuation exercise has been conducted jointly by Ernst & Young and N. M. Raiji &
Company. Based on this exercise, the share exchange ratio for the amalgamation has been arrived at.
Equity shares of M&M will be issued to the shareholders of PTL in the ratio of 1 (one) equity share of
Rupees 10 each of M&M for every 3 (three) equity shares of Rupees 10 each held in PTL.

The Scheme as approved by the Board is subject to such consents and approvals, as may be required
including that of the shareholders and the High Courts of Bombay and Punjab & Haryana.

Mahindra and Mahindra has decided to merge the tractor maker with itself. Ernst and Young made
an independent valuation of the company. M&M said it will issue shareholders one Mahindra share
for every three PTL shares held, upon advice from E&Y. They used methods similar to when they
recommended swap ratio for IPCL merger into Reliance Industries and recently for Centurion Bank
of Punjab merger into HDFC bank. Business Line caught up with Mr Sanjiv Agarwal, National
Director,

Valuation & Business Modelling Services from E&Y. “To value the shares on a relative basis, we
relied upon the past and current financial statements and traded share prices data of both the
companies. We also obtained, and relied upon other information and explanations, from the
management of both companies including their respective intangible assets, extra-ordinary/non-
recurring items, outstanding ESOPs and warrants and existing shareholding pattern,” Mr Agarwal
said in a quick email interaction. To find out how they did the valuation, simply read on…

What was your role?

Our mandate at E&Y was to conduct the relative valuation of the equity shares of Mahindra &
Mahindra Ltd (M&M) and Punjab Tractors Ltd (PTL) for recommending a fair and reasonable share
exchange ratio for possible merger of PTL into M&M.

Decision to consider the merger was taken by management of the companies concerned. It may
also be mentioned that as in other cases, the board of the respective companies considered our
recommendation and accepted our recommendation about the ratio. It is their prerogative to
accept or reject valuer’s recommendation in this regard.

What factors did you consider while valuing the two companies?

To value the shares on a relative basis, we relied upon the past and current financial statements
and traded share prices data of both the companies. We also obtained, and relied upon other
 information and explanations, from the management of both companies including their respective
intangible assets, extra-ordinary/non-recurring items, outstanding ESOPs and warrants and
existing shareholding pattern. In our effort to arrive at a fair and reasonable share exchange ratio,
we focussed on objective information available about both the companies, e.g. their respective
track record in financial and non-financial performance, as well as their latest financial position.

We also considered the diversified nature of operations of M&M vis-à-vis PTL with its focus on farm
equipments. In fact, M&M also carries a number of investments (in listed and unlisted group
companies’ shares) on its balance sheet and that was also taken into account. Another factor to
note is the relative stability of earnings of both the companies. M&M has displayed greater stability
of EPS versus PTL over last many years.

M&M, PTL stock prices have fallen in the recent market downturn. Was it a factor in the
valuation exercise?

Both companies like the rest of Indian economy have suffered from ongoing world economic
problems (sub-prime issue and crude oil inflation with resultant economic slowdown across the
world). These events have affected share prices of both the companies (as well as other companies
listed in India) and so have affected value under market price method in our valuation analysis as
well. It is difficult to factor future course of these events directly in valuation analysis. Since both
companies are affected by these events, future impact of these events becomes less relevant in a
relative valuation exercise.

How did you arrive at the 3:1 ratio in favour of M&M?

For arriving at the swap ratio, we used the three widely prevalent methods applied for mergers in
India: Net Assets Value (NAV) method, Earnings method and Market Price method. For the Market
Price method, we considered price quotations of both companies on NSE and BSE for last 2 years,
6 months, 3 months and 2 weeks. We used the financial information available to arrive at a value
under the other two methods.

We then arrived at a weighted average value per share for both companies using widely popular
weightages prevalent for such valuation cases. For example, we ourselves have used identical
weightages when we were appointed to recommend swap ratio for IPCL merger into Reliance
Industries Ltd, and recently for Centurion Bank of Punjab merger into HDFC bank. Swap ratio of
one M&M share for every three PTL shares was arrived at by us based on these weighted average
values per share.

We therefore recommended boards of both M&M and PTL to consider this swap ratio and we are
satisfied to learn that both boards have accepted our recommendation.

M&M fixes Record Date for merger of Punjab Tractors

Mahindra & Mahindra Ltd has announced further to announcements dated January 30, 2009 &
February 16, 2009 regarding the Scheme of Amalgamation of Punjab Tractors Ltd with Mahindra
and Mahindra Ltd and their respective Shareholders ("the Scheme"). We wish to inform you that
the Company has fixed Wednesday, the March 04, 2009 as the 'Record Date' for the purpose of
ascertaining the Shareholders of the erstwhile Punjab Tractors Ltd ("PTL") who would be entitled
to receive Equity Shares of the Company in terms of the Scheme.
In accordance with the Scheme, the Company will issue and allot to those Shareholders of PTL
whose names appear in the Register of Members of PTL on the record date, 1 (One) equity share
of Rs 10 each fully paid up in the capital of the Company for every 3 (Three) equity shares of Rs
10 each fully paid up held in the equity share capital of PTL. The equity share certificate(s) of PTL
will not be called back by the Company for exchange with the equity shares of the Company. The
equity shares issued by PTL will not be tradable or negotiable on and from the Record Date or
such other earlier date as may be fixed by the Stock Exchanges in this regard.

The Equity Shares, proposed to be issued by the Company, will be submitted for listing with the
Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd and they shall rank pari-
passu with the then existing Equity Shares of the Company".

The Punjab Tractors stock closed the day at Rs.95.35, down by Rs.4.05 or 4.07%. The stock hit
an intraday high of Rs.98.50 and low of Rs.94.

The total traded quantity was 2665 compared to 2 week average of 5451.

The Mahindra & Mahindra stock closed the day at Rs.298.70, down by Rs.15.75 or 5.01%. The
stock hit an intraday high of Rs.310.80 and low of Rs.294.30.

The total traded quantity was 159462 compared to 2 week average of 148817