MANDHANA INDUSTRIES LIMITED - Edelweiss
MANDHANA INDUSTRIES LIMITED - Edelweiss
MANDHANA INDUSTRIES LIMITED - Edelweiss
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
DRAFT RED HERRING PROSPECTUSPlease read Section 60B of the Companies Act, 1956Dated: December 11, 2007(The Draft Red Herring Prospectus will be updated upon filing with the RoC)100% Book Building Issue<strong>MANDHANA</strong> <strong>INDUSTRIES</strong> <strong>LIMITED</strong>(Our Company was originally incorporated at Mumbai on July 25, 1984 as “Mandhana Textile Mills Private Limited” under the Companies Act, 1956, withregistration number 11- 33553 of 1984. With effect from July 1, 1993, our Company was converted into a deemed public limited company under Section 43A of theCompanies Act, 1956. On April 18, 1995 the name of our Company was changed from “Mandhana Textile Mills Limited” to “Mandhana Industries Limited”. OnMarch 27, 2002, pursuant to Section 43A (2A) of the Companies Act, 1956, our Company was converted from a deemed public limited company to a private limitedcompany. On May 15, 2007, our Company was further converted into a public limited company the name of our Company was changed to “Mandhana IndustriesLimited”. Our Corporate Identity Number is U17120MH1984PLC033553.)Registered Office: 205/214, Peninsula Centre, Dr. S.S. Rao Road, Off Dr. Ambedkar Road, Parel (East), Mumbai – 400 012, Maharashtra, India.(For details of changes to our Registered Office, please refer to the chapter titled ‘History and Other Corporate Matters’ beginning on page no. 106 ofthis Draft Red Herring Prospectus) Tel No.: + 91-22-3040 9261; Fax No.: + 91-22-3040 9218; E-mail: ipo@mandhana.com;Website: www.mandhana.com; Contact Person: Mr. Nayan Kambli, Compliance OfficerTHE ISSUEPUBLIC ISSUE OF 4,025,000 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PRICE OF RS. [•] PER EQUITY SHARE (INCLUDING ASHARE PREMIUM OF RS. [•] PER EQUITY SHARE) FOR CASH ALONG WITH ONE DETACHABLE WARRANT FOR EVERY THREE EQUITYSHARES ALLOTED IN THE PUBLIC ISSUE (OTHER THAN ON THE PRE-IPO PLACEMENT) AGGREGATING RS. [•] MILLION (THE “ISSUE”).THE ISSUE OF EQUITY SHARES WILL CONSTITUTE 26.66 % OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF OUR COMPANYPRIOR TO EXERCISE OF DETACHABLE WARRANTS AND THE ISSUE SHALL CONSTITUTE [•]% OF THE PAID-UP EQUITY SHARE CAPITALOF OUR COMPANY AFTER EXERCISE OF DETACHABLE WARRANTS, ASSUMING FULL EXERCISE OF DETACHABLE WARRANTS.Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares (“Pre-IPO Placement”). Upon the completion of the Pre-IPO placement thenumber of equity shares in the Issue will be reduced by the number of shares in the Pre-IPO Placement. The Issue size offered to the public will remain atleast25% of the post-Issue paid up Equity Share capital.PRICE BAND: RS. [•] TO RS. [•] PER EQUITY SHARE OF FACE VALUE RS. 10/-THE FACE VALUE OF EQUITY SHARES IS RS.10. THE FLOOR PRICE IS [•] TIMES OF THE FACE VALUE AND THE CAP PRICE IS [•]TIMES OF THE FACE VALUE.In case of revision in the Price Band, the Bidding / Issue Period shall be extended for three additional working days after such revision, subject to the Bidding / IssuePeriod not exceeding 10 working days. Any revision in the Price Band and the revised Bidding / Issue Period, if applicable, shall be widely disseminated bynotification to the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”), by issuing a press release, and also byindicating the change on the websites of the Book Running Lead Managers and the terminals of the member(s) of the Syndicate.The Issue is being made through the 100% Book Building Process wherein up to 50% of the Issue shall be allocated on a proportionate basis to Qualified InstitutionalBuyers, of which 5% shall be available for Allocation on a proportionate basis to Mutual Funds only and the remaining QIB portion shall be available for allocationto the QIB bidders including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 35% of the Issue shall be availablefor allocation on a proportionate basis to Retail Individual Bidders and not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders, subject to valid Bids being received at or above the Issue Price.RISK IN RELATION TO THE ISSUEThis being the first Issue of the Equity Shares and Warrants of Our Company, there has been no formal market for the Equity Shares and Warrants of Our Company.The Face Value of the Equity Shares is Rs. 10 and the Issue Price is [•] times of the Face Value and the Warrant Exercise Price is at a fixed premium of [•]% over theIssue Price. The Issue price (as determined by our Company in consultation with the BRLM on the basis of assessment of market demand for the Equity Shares by wayof book building) and the Warrant Exercise Price should not be taken to be indicative of market price of the Equity Shares after the Equity Shares, pursuant to the Issueand exercise of Warrants are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares/Warrants of our Company orregarding the price at which the Equity Shares/Warrants will be traded after listing.GENERAL RISKSInvestments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to takethe risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking aninvestment decision, investors must rely on their own examination of our Company and the Issue including the risks involved. The Equity Shares and Warrantsoffered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy oradequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section “Risk Factors” beginning on page no xii of this DraftRed Herring Prospectus.ISSUER’S ABSOLUTE RESPONSIBILITYThe Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information withregard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true andcorrect in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there areno other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions orintentions misleading in any material respect.LISTINGThe existing Equity Shares and Warrants of our Company offered through this Draft Red Herring Prospectus are proposed to be listed on the Bombay StockExchange Limited (BSE), National Stock Exchange of India Limited (NSE). We have received in-principle approval from the BSE pursuant to letter dated [•] andNSE pursuant to letter dated [•] for the listing of our Equity Shares and Warrants. NSE shall be the Designated Stock Exchange for this Issue.IPO GRADINGThe Issue has been graded [•] as [•] (pronounced [•] indicating [•]. For details, see the section titled “General Information” on page 10 of this Draft RedHerring Prospectus.BOOK RUNNING LEAD MANAGERREGISTRAR TO THE ISSUE<strong>Edelweiss</strong> Capital Limited14 th Floor, Express TowersNariman Point, Mumbai – 400 021.Tel. No.: +91 22 2286 4400, Fax No.: +91 22 2288 2119E-mail: mandhana.ipo@edelcap.com, Website: www.edelcap.comContact Person: Mr. Abhishek GaurBID/ISSUE OPENS ON: [•]ISSUE PROGRAMMEINTIME SPECTRUM REGISTRY <strong>LIMITED</strong>C -13, Pannalal Silk Mills Compound,L.B.S Marg, Bhandup (West), Mumbai - 400 078Tel. No.: +91 22 2595 3838, Fax No.: +91 22 5555 5499Email: isrl@intimespectrum.com, Website: www.intimespectrum.comContact Person: Mr. Kishor ThakkarBID/ISSUE CLOSES ON: [•]
TABLE OF CONTENTSParticularsPage No.Section I – Definitions and Abbreviations ........................................................................................ iiiConventional / General Terms .............................................................................................................. iiiIssue related Terms ............................................................................................................................... ivCompany / Industry related Terms ........................................................................................................ viiAbbreviations ........................................................................................................................................ viiCertain Conventions - Presentation of Financials and Use of Market Data......................................... ixSection II – Risk Factors .................................................................................................................... xiForward looking Statements and Market Data ..................................................................................... xiRisk Factors .......................................................................................................................................... xiiSection III – Introduction .................................................................................................................. 1Summary ............................................................................................................................................... 1Selected Financial Information ............................................................................................................. 8General Information .............................................................................................................................. 10Capital Structure ................................................................................................................................... 18Objects of this Issue .............................................................................................................................. 30Basic Terms of this Issue ...................................................................................................................... 47Basis of Issue Price ............................................................................................................................... 52Statement of Tax Benefits ..................................................................................................................... 55Section IV – About us ......................................................................................................................... 59Industry Overview ................................................................................................................................. 59Business Overview ................................................................................................................................ 72Key Industry Regulations and Policies ................................................................................................. 100History and Other Corporate Matters ................................................................................................... 106Our Management................................................................................................................................... 111Our Promoters and their Background ................................................................................................... 128Related Party Transactions ................................................................................................................... 131Dividend Policy .................................................................................................................................... 132Section V – Financial Statements ...................................................................................................... 133Financial Information............................................................................................................................ 133Our Promoter Group Entities ................................................................................................................ 158Management’s Discussion and Analysis of Financial Condition and Results of Operations ............... 166Section VI – Legal and Other Information ...................................................................................... 185Outstanding Litigation, Material Developments and Other Disclosures.............................................. 185Government / Statutory Approvals ....................................................................................................... 193Section VII – Other Regulatory and Statutory Disclosures ........................................................... 200Section VIII – Issue Related Information......................................................................................... 209Issue Structure ....................................................................................................................................... 209Terms of the Issue ................................................................................................................................. 212Issue Procedure ..................................................................................................................................... 217Section IX – Main Provisions of the Articles of Association of our Company ............................. 242Section X – Other Information .......................................................................................................... 303Material Contracts and Documents for Inspection ............................................................................... 303Declaration ............................................................................................................................................ 305
TMSECTION I – DEFINITIONS AND ABBREVIATIONSUnless the context otherwise requires, the terms and abbreviations stated hereunder shall have the meanings as assignedtherewith.Term“MIL”, “the Company”, “ourCompany”, “Mandhana IndustriesLimited”, “Issuer”, “we”, “us” or “our”“our Promoters”“Promoter Group”“our Promoter Group Entities”“you”, “your” or “yours”DescriptionUnless the context otherwise requires, refers to Mandhana Industries Limited, apublic limited company incorporated under the Companies Act, 1956 having itsregistered office at 205/214, Peninsula Centre, Dr. S.S. Rao Road, Off Dr.Ambedkar Road, Parel (East), Mumbai – 400 012, Maharashtra, India.Unless the context otherwise requires, refers to Mr. Purshottam Mandhana, Mr.Biharilal Mandhana, Mr. Manish Mandhana, Mr. Priyavrat Mandhana andPurshottam Mandhana (HUF).Ms. Prema Mandhana, Ms. Sudha Mandhana, Ms. Sangita Mandhana, Mr. VinayMandhana, Biharilal Mandhana (HUF), Manish Mandhana (HUF), Master ArnavMandhana, Ms. Muskan Mandhana, Ms. Poorvi Jithalia, Ms. Preeti Daga, Ms.Kamlabai Rathi, Ms. Tulsibai Chandak, Ms. Bhagwati Chandak, Ms. Chanda Jaju,Ma. Mangala Somani, Ms. Shakuntala Dargad, Ms. Archana SethUnless the context otherwise requires, refers to Sundhya Chhaya Finvest PrivateLimited; Ashlesha Finvest Private Limited; Dhumketu Finvest Private Limited;Parag Kunj Finvest Private Limited; Mahan Synthetic Textiles Private Limited;Golden Seam Textiles Private Limited; and M/s Balaji Corporation.Prospective investors in this IssueConventional / General TermsTermCompanies ActDepositories ActDepositoryDepository ParticipantFEMAFIIFinancial Year/ Fiscal Year/ FY / FiscalFVCIsI.T. ActNon ResidentNRI/ Non-Resident IndianSEBI GuidelinesSEBI Insider Trading RegulationsU.S. GAAPDescriptionThe Companies Act, 1956, as amended from time to time.The Depositories Act, 1996, as amended from time to time.A depository registered with SEBI under the SEBI (Depositories and Participant)Regulations, 1996, as amended from time to time.A depository participant as defined under the Depositories Act.Foreign Exchange Management Act, 1999, as amended from time to time, and theregulations framed thereunder.Foreign Institutional Investor [as defined under the Foreign Exchange Management(Transfer or issue of Security by a person resident outside India) Regulations, 2000]registered with SEBI under applicable laws in IndiaThe period of twelve months ended March 31 of that particular year.Foreign Venture Capital Investors, defined and registered with SEBI under the SEBI(Foreign Venture Capital Investor) Regulations, 2000 as amended from time to timeThe Income Tax Act, 1961, as amended from time to time.All eligible Bidders, including Eligible NRIs, FIIs and FVCIs who are not personsresident in India.A person resident outside India, as defined under FEMA, and who is a citizen ofIndia or a person of Indian origin, each such term as defined under the FEMA(Deposit) Regulations, 2000, as amended from time to time.The SEBI (Disclosure and Investor Protection) Guidelines 2000, as amended fromtime to time, including instructions, guidelines and clarifications issued by SEBIfrom time to time.The SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from timeto time, including instructions and clarifications issued by SEBI from time to time.Generally accepted accounting principles in the United States of America.iii
Issue Related TermsTMTermAllotment/ Allotment of EquitySharesAllocation/ Allocation of EquitySharesAllotteeApplicable Conversion Price/Warrant Conversion PriceDescriptionUnless the context otherwise requires, allotment of Equity Shares pursuant to this Issue.Unless the context otherwise require, allocation of Equity Shares pursuant to the Issue.The successful Bidders to whom Equity Shares are being /have been allotted.The Applicable Conversion Price / Warrant Conversion Price shall be calculated inthe following manner:The warrant exercise price shall be the price which at a fixed premium of [●] over theIssue Price.Applicable Allotment Date ofWarrantsBanker(s) to this Issue/Escrowcollection banksBidBid AmountBid / Issue Closing DateBid/ Issue Opening DateBid Cum Application FormBidderBidding / Issue PeriodBook Building Process / BookBuildingBRLM / Book Running LeadManagerCAN/ Confirmation of AllocationNoteCap PriceCut off / Cut off PriceDesignated DateDesignated Stock ExchangeDraft Red Herring ProspectusProvided further, that in the event of any share split or issue of bonus shares of ourCompany, the Issue Price stated above shall be adjusted accordingly, for the purposes ofarriving at the Warrant Conversion Price.It will be a period of 10 working days from the date of expiry of the applicable WarrantExercise Period.[●]An indication to make an offer, made during the Bidding Period by a prospective investorto subscribe to the Equity Shares and Warrants of our Company at a price within the PriceBand, including all revisions and modifications thereto.The highest value of the optional Bids indicated in the Bid Cum Application Form andpayable by the Bidder on submission of the Bid for this Issue.The date after which the member(s) of the Syndicate will not accept any Bids for thisIssue, which shall be notified in a widely circulated English national newspaper, a Hindinational newspaper and a regional language newspaper.The date on which the member(s) of the Syndicate shall start accepting Bids for this Issue,which shall be the date notified in a widely circulated English national newspaper, a Hindinational newspaper and a regional language newspaper.The form in terms of which the Bidder shall make an offer to subscribe to the EquityShares of our Company and which will be considered as the application for Allotment interms of the Red Herring Prospectus and Prospectus.Any prospective investor who makes a Bid pursuant to the terms of the Red HerringProspectus and the Bid Cum Application Form.The period between the Bid / Issue Opening Date and the Bid / Issue Closing Dateinclusive of both days and during which prospective Bidders can submit their Bids.Book building mechanism as provided under Chapter XI of the SEBI Guidelines, in termsof which this Issue is made.Book Running Lead Managers to this Issue, in this case being <strong>Edelweiss</strong> Capital Limited.The note or advice or intimation of Allocation of Equity Shares sent to the Bidders whohave been allocated Equity Shares and Warrants in accordance with the Book BuildingProcess.The upper end of the Price Band, above which the Issue Price will not be finalised andabove which no Bids will be accepted.The Issue Price finalised by our Company in consultation with the BRLM and it shall beany price within the Price Band. A Bid submitted at the Cut off Price by a RetailIndividual Bidder is a valid Bid at all price levels within the Price Band.The date on which funds are transferred from the Escrow Account to the Public IssueAccount after the Prospectus is filed with the RoC following which the Board of Directorsshall allot Equity Shares to successful Bidders.NSE is the designated stock exchange for the purpose of this IssueThis Draft Red Herring Prospectus issued in accordance with Section 60B of theCompanies Act, which does not have complete particulars on the price at which theEquity Shares are offered and size of this Issue.iv
TermDescriptionEligible NRIsNRIs from such jurisdiction outside India where it is not unlawful for our Company tomake this Issue or an invitation under this Issue and in relation to whom this Draft RedHerring Prospectus constitutes an invitation to subscribe to the Equity Shares allottedherein.Equity SharesEquity Shares of our Company of face value of Rs. 10/- each unless otherwise specified inthe context thereof.Escrow Account(s)Account opened with Escrow Collection Bank(s) and in whose favour the Bidder willissue cheques or drafts in respect of the Bid Amount when submitting a Bid.Escrow AgreementAgreement to be entered into between our Company, the Registrar to this Issue, theEscrow Collection Banks and the BRLM in relation to the collection of Bid Amounts anddispatch of refunds (if any) of the amounts collected, to the Bidders.Escrow Collection Bank(s) The banks, which are registered with SEBI as Banker (s) to the Issue at which the EscrowAccount for the Issue will be opened, in this case being [•].First BidderThe Bidder whose name appears first in the Bid Cum Application Form or Revision Form.Floor PriceThe lower end of the Price Band, below which the Issue Price will not be finalised andbelow which no Bids will be accepted.Indian GAAPGenerally Accepted Accounting Principles in India.IssueThis Issue of 4,025,000 Equity Shares of Rs. 10 each fully paid up at the Issue Priceaggregating Rs. [•] million by our Company along with one detachable warrant for everythree Equity Shares of our Company.Issue PriceThe final price at which Equity Shares will be issued and allotted in terms of the RedHerring Prospectus. The Issue Price will be decided by our Company in consultation withthe BRLM on the Pricing Date.Margin Amount The amount paid by the Bidder at the time of submission of the Bid, being 10% to 100%of the Bid Amount.Mutual FundsMeans mutual funds registered with SEBI pursuant to the SEBI (Mutual Funds)Regulations, 1996, as amended from time to time.Mutual Fund PortionUpto 5 % of the QIB portion, being [●] Equity Shares and [●] Warrants, available forAllocation on proportionate basis to Mutual Funds only. The remainder of the QIBportion shall be available for Allocation on a proportionate basis to all QIB bidders,including Mutual Funds.Issue or Issue to the Public or 4,025,000Equity Shares of Rs. 10 each fully paid up at the Issue Price aggregating to Rs.Public Issue[•] millionNon Institutional BiddersAll Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders andwho have Bid for Equity Shares for an amount more than Rs. 100,000/-.Non Institutional Portion/ Non The portion of this Issue being not less than 15% of the Issue consisting upto [●] EquityInstitutional Bidders Portion Shares of Rs. 10 each and [●] Warrants for cash at a price of Rs. 10/- per Equity Shareaggregating Rs. [•] million available for Allocation to Non Institutional Bidders.OCB / Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly tothe extent of at least 60% by NRIs, including overseas trust in which not less than 60% ofbeneficial interest is irrevocably held by NRIs directly or indirectly as defined underForeign Exchange Management (Deposit) Regulations, 2000. OCBs are not allowed toinvest in this Issue.Pay-in DateBid / Issue Closing Date or the last date specified in the CAN sent to Bidders receivingAllocation, who pay less than 100% Margin Amount at the time of Bidding, as applicable.Pay-in-PeriodMeans:(i) With respect to Bidders whose Margin Amount is 100% of the Bid Amount, the periodcommencing on the Bid/ Issue Opening Date and extending until the Bid/Issue ClosingDate; and(ii) With respect to other Bidders, whose Margin Amount is less than 100% of the BidAmount, the period commencing on the Bid/Issue Opening Date and extending until theclosure of the Pay-in Date.Pre-IPO PlacementProposed Pre-IPO placement upto 250,000 Equity Shares of our Company.Price BandThe price band of a minimum price (“Floor Price”) of Rs. [•] and the maximum price(“Cap Price”) of Rs. [•] and includes revisions thereof, if any.Pricing DateThe date on which our Company in consultation with the BRLM finalizes the Issue Price.ProspectusThe Prospectus, to be filed with the RoC in accordance with the provisions of thevTM
TermPublic Issue AccountQIB Margin AmountQIB PortionQualified Institutional Buyers orQIBsRed Herring ProspectusRefund Account(s)Refund Banker(s)Registrar/ Registrar to this IssueRetail Individual BiddersDescriptionCompanies Act containing, inter alia, the Issue Price that is determined at the end of theBook Building Process, the size of this Issue and certain other information.Account opened with the Banker(s) to this Issue to receive monies from the EscrowAccount for this Issue on the Designated Date.An amount representing at least 10% of the Bid Amount.Consists of at least [●] Equity Shares and [●] Warrants for cash at a price of Rs. [●] perEquity Shareaggregating Rs. [•] million being upto 50% of the Issue, available forAllocation to QIBs. 5% of the QIB Portion shall be available for Allocation on aproportionate basis to Mutual Funds only.Public financial institutions as specified in Section 4A of the Companies Act, FIIsregistered with SEBI, scheduled commercial banks, mutual funds registered with SEBI,multilateral and bilateral development financial institutions, venture capital fundsregistered with SEBI, foreign venture capital investors registered with SEBI, stateindustrial development corporations, insurance companies registered with InsuranceRegulatory and Development Authority, provident funds with minimum corpus of Rs.2,500 million (subject to applicable law) and pension funds with minimum corpus of Rs.2,500 million (subject to applicable law).The Red Herring Prospectus issued in accordance with Section 60B of the CompaniesAct, which does not have complete particulars on the price at which the Equity Shares andWarrants are offered and size of this Issue. The Red Herring Prospectus will be filed withthe RoC at least three days before the opening of this Issue and will become a Prospectusafter filing with the RoC, the copy that includes the details of pricing and Allocation andfinal size of this Issue.Account(s) to which subscription monies to be refunded to the investors shall betransferred from the Public Issue Account[•]Intime Spectrum Registry LimitedIndividual Bidders (including HUFs and NRIs) who have Bid for an amount less than orequal to Rs. 100,000 in any of the bidding options in this Issue.Retail Portion Consists of upto [●] Equity Shares of Rs. 10 each and [●] Warrants at a price of Rs. 10/-per Equity Share aggregating Rs. [•]million , being not less than 35% of the Issue,available for Allocation to Retail Individual Bidder(s).Revision FormStock ExchangesSyndicateSyndicate AgreementSyndicate Member(s)Transaction Registration Slip/ TRSUnderwritersUnderwriting AgreementWarrant(s)The form used by the Bidders to modify the quantity of Equity Shares or the Bid price inany of their Bid Cum Application Forms or any previous Revision Form(s).Bombay Stock Exchange Limited and National Stock Exchange of India LimitedThe BRLM and the Syndicate Member(s).The agreement to be entered into between our Company and the members of theSyndicate, in relation to the collection of Bids in this Issue.Intermediaries registered with SEBI and Stock Exchanges and eligible to act asunderwriters. Syndicate Member(s) is / are appointed by the BRLM, in this case being [•]The slip or document issued by the members of the Syndicate to the Bidders as proof ofregistration of the Bid.The BRLM and the Syndicate Member(s).The agreement between the Underwriters, the Registrar and our Company to be enteredinto on or after the Pricing Date.The detachable warrant(s) being issued to every Person to whom Equity Share(s) shall beallotted pursuant to the Issue in the ratio of one detachable Warrant for every three EquityShares allotted, in accordance with the terms and conditions laid out in section titled“Terms of Issue” beginning on page [●] of this Draft Red Herring Prospectus.Warrant Exercise Period Warrant Exercise Period shall be the period commencing from the completion of the 16months and be open up to the completion of the 18 months from the date of Allotment ofthe Equity Shares and Warrants in the Issue.Warrant Allotment DateTen (10) working days from the date of expiry of the Warrant Exercise Period.TMvi
Company / Industry Related TermsTMTermEmbellishmentMandhana Dyeing UnitMandhana Weaving House UnitDelhi Sales OfficeMandhana Industries ExportDivision (Bangalore Unit)Mandhana Weaving House(Shirting Division)Mandhana EuropeRegistered OfficeSurface OrnamentationTirupati ApparelTurnaround TimeAbbreviationsAbbreviationA/cAGMASATCAEPCBIFRbnBSECADCAGRCAMCBRCDRCDSLCENVATCHFCINDEPBDPDRHPECSEBIDTAEGMEPSERPFCNR AccountEUFIPBFIsFYGATTGBPGDPGIR NumberGoI/ GovernmentHUFDescriptionPrinting and embroidery performed on the garment.E-25, MIDC, Tarapur , Boisar – 401 506, Maharashtra, IndiaE-33, MIDC, Tarapur , Boisar – 401 506, Maharashtra, India410, Chirinjiv Tower, 43, Nehru Place, New Delhi-110019, India26/A, Peenya II Phase, Peenya Industrial Area, Banglore -560058, IndiaC-2, MIDC, Tarapur , Boisar – 401 506, Maharashtra, India15 Rule da la banque, Escailer B entresol, 750002 Paris, FranceOffice of our Company established under Section 146 of the Companies Act, situated at205/214, Peninsula Centre, Dr. S.S. Rao Road, Off Dr. Ambedkar Road, Parel (East),Mumbai – 400 012, Maharashtra, India.Printing and embroidery performed on the fabric / garment.Mehra Estate, Asha Usha Compound, LBS Marg, Vikhroli-400078, IndiaTime taken in converting raw material to finished goods.Full FormAccountAnnual General Meeting.Accounting Standards issued by the Institute of Chartered Accountants of India.Agreement on Textiles and ClothingApparel Export Promotion CouncilBoard for Industrial and Financial ReconstructionBillionBombay Stock Exchange Limited.Computer Aided DesignCompounded Annual Growth Rate.Computer Aided MachiningContinuous Bleaching RangeContinuous Dyeing RangeCentral Depository Services (India) Limited.Central Value Added TaxSwiss FrancCorporate Identity NumberDuty Entitlement Pass BookDepository Participant.Draft Red Herring ProspectusElectronic Clearing SystemEarnings before Depreciation, Interest, Tax, Amortisation and extraordinary items.Extraordinary General Meeting.Earnings per Equity Share.Enterprise Resource PlanningForeign Currency Non Resident Account.European UnionForeign Investment Promotion Board.Financial Institutions.Financial YearGeneral Agreement on Trade and TariffGreat Britain PoundGross Domestic ProductGeneral Index Registry Number.Government of India.Hindu Undivided Family.vii
AbbreviationFull FormIPOInitial Public OfferI. T. Act The Income Tax Act, 1961, as amended from time to time.I. T. Rules The Income Tax Rules, 1962, as amended from time to time, except as stated otherwise.KgKilogramMFAMulti-Fiber AgreementM HaMillion hectaresMICRMagnetic Ink Character RecognitionMoAMemorandum of AssociationmnMillionMNCMulti National CompanyNAVNet Asset ValueNBFCNon-Banking Finance CompanyNEFTNational Electronic Fund TransferNoCNo Objection CertificateNRE AccountNon-Resident External Account.NRO AccountNon-Resident Ordinary Account.NSDLNational Securities Depository Limited.NSENational Stock Exchange of India Limited.NTANet Tangible Assets.p.a.Per annumPANPermanent Account Number.PATProfit after taxPBTProfit before taxP/E RatioPrice/Earnings Ratio.R & DResearch and DevelopmentRBIThe Reserve Bank of India.RBI ActThe Reserve Bank of India Act, 1934, as amended from time to time.RHPRed Herring ProspectusRMGReady Made GarmentRoC/Registrar of Companies, The Registrar of Companies located at Everest Building, 100, Marine Drive,MaharashtraMumbai – 400 002, Maharashtra, India.RoCEReturn on Capital EmployedRoNWReturn on Net Worth.Rs./ Rupees / INRIndian Rupees, the legal currency of the Republic of India.RTGSReal Time Gross SettlementSCRAThe Securities Contracts (Regulation) Act, 1956, as amended from time to time.SCRRThe Securities Contracts (Regulation) Rules, 1957, as amended from time to time.SEBIThe Securities and Exchange Board of India.SEBI ActThe Securities and Exchange Board of India Act, 1992, as amended from time to time.SICASick Industrial Companies (Special Provisions) Act, 1995, as amended from time to timeSq Mts.Square MetersTUFSTechnology Upgradation Fund SchemeUINUnique Identification Number issued in terms of SEBI (Central Database of Market Participants)Regulations, 2003, as amended from time to time.UoIUnion of India.UKUnited KingdomUSD/ $/ US$The United States Dollar, the legal currency of the United States of America.U.V.Ultra VioletWTOWorld Trade OrganizationWTRWorld Trade RegimeNotwithstanding the foregoing,(i) In the section titled ‘Main Provisions of the Articles of Association of our Company’ beginning on page no. [•] of this DraftRed Herring Prospectus, defined terms shall have the meaning given to such terms in that section;(ii) In the section titled ‘Financial Statements’ beginning on page no. [•] of this Draft Red Herring Prospectus, defined termsshall have the meaning given to such terms in that section;(iii) In the paragraphs titled ‘Disclaimer Clause of Bombay Stock Exchange Limited’ and ‘Disclaimer Clause of National StockExchange of India Limited’ beginning on page nos. [•] and [•] respectively of this Draft Red Herring Prospectus, definedterms shall have the meaning given to such terms in those paragraphs.TMviii
CERTAIN CONVENTIONS - PRESENTATION OF FINANCIALS AND USE OF MARKET DATATMUnless stated otherwise, in table no. [●] and [●] under the heading ‘Quantitative Factors’ in the chapter titled ‘Basis of IssuePrice’ beginning on page no. [●] of this Draft Red Herring Prospectus, the financial data in this Draft Red Herring Prospectusis derived from our restated financial statements for the three months ended June 30, 2007 and financial years ended March31, 2007; 2006; 2005; 2004 and 2003; prepared in accordance with Indian GAAP and the Companies Act restated inaccordance with SEBI Guidelines, as stated in the report of our statutory Auditors, Vishal H. Shah & Associates, CharteredAccountants, beginning on page no. [●] of this Draft Red Herring Prospectus.Our fiscal year commences on April 1 and ends on March 31 of a particular year. Unless stated otherwise, references hereinto a fiscal year (e.g., fiscal 2007), are to the fiscal year ended March 31 of a particular year.In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sum of the amounts listed aredue to rounding-off.All references to “India” contained in this Draft Red Herring Prospectus are to the Republic of India.All references to “Rupees” or “Rs.” or “INR” are to Indian Rupees, the official currency of the Republic of India.All references to “USD”; “U.S. Dollar” or “US Dollars” are to United States Dollars, the official currency of the United States ofAmerica. All references to “EURO”, “euro” or “Euro”, are to the official currency of the European Union. All references to“CHF” or “Swiss Franc” are to the official currency of the Switzerland. All references to “Yen” are to the official currency of theJapan.For additional definitions, please see the section titled “Definitions and Abbreviations” on page [●] of the Draft Red HerringProspectus.Market and industry data used throughout this Draft Red Herring Prospectus has been obtained from publications (includingwebsites) available in public domain and internal Company reports. These publications generally state that the informationcontained in those publications has been obtained from sources believed to be reliable but that their accuracy andcompleteness are not guaranteed and their reliability cannot be assured. Although we believe that the market data used in thisDraft Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, whilebelieved to be reliable, have not been verified by any independent source.ix
EXCHANGE RATESTMThe following table sets forth, for each period indicated, information concerning the number of Rupees for which one US dollar,Euro, GBP, CHF, Yen could be exchanged. The row titled ‘average’ in the table below is the average of the daily rate for eachday in the period.Fiscal year endedPeriod Average (In Rupees)March 31 Euro USD GBP CHF Yen2003 48.18 48.49 75.00 32.90 0.4054.10 46.03 77.89 35.00 0.412005 56.56 44.94 82.95 36.76 0.412006 53.93 44.28 79.06 34.78 0.312007 58.03 45.25 85.62 36.57 0.38As at June 30, 2007 55.69 41.31 82.01 33.81 0.34(Source: www.oanda.com)x
SECTION II – RISK FACTORSTMFORWARD-LOOKING STATEMENTSWe have included statements in this Draft Red Herring Prospectus which contain words or phrases such as “will”, “aim”, “islikely to result in”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”,“future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are“forward-looking statements”. Similarly, statements that describe our objectives, strategies, plans or goals are also forwardlookingstatements.All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results todiffer materially from those contemplated by the relevant forward-looking statement. Important factors that could causeactual results to differ materially from our expectations include but are not limited to:• General economic and business conditions in the markets in which we operate and in the local, regional, national andinternational economies;• Changes in laws and regulations relating to the sectors/areas in which we operate;• Increased competition in these sectors/areas in which we operate;• Our ability to successfully implement our growth strategy and expansion plans;• Our ability to meet our capital expenditure requirements;• Fluctuations in operating costs;• Our ability to attract and retain qualified personnel;• Changes in technology;• Changes in political and social conditions in India, the monetary and interest rate policies of India and other countries,inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;• The performance of the financial markets in India and globally; and• Any adverse outcome in the legal proceedings in which we are involved.For a further discussion of factors that could cause our actual results to differ, please refer to the chapters titled ‘RiskFactors’, ‘Business Overview’ and ‘Management’s Discussion and Analysis of Financial Condition and Results ofOperations’ beginning on page nos. [•], [•] and [•] of this Draft Red Herring Prospectus respectively. By their nature, certainmarket risk disclosures are only estimates and could be materially different from what actually occurs in the future. As aresult, actual future gains or losses could materially differ from those that have been estimated. Neither our Company nor themember(s) of the Syndicate, nor any of their respective affiliates have any obligation to update or otherwise revise anystatements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if theunderlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company and the BRLM willensure that investors in India are informed of material developments until such time as the grant of listing and tradingpermission by the Stock Exchanges.xi
RISK FACTORSTMAn investment in Equity Shares involves a high degree of risk. You should carefully consider all of the information in thisDraft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in ourCompany’s Equity Shares and Warrants. To obtain a complete understanding of our Company, you should read this chapterin conjunction with the chapters titled ‘Business Overview’ and ‘Management’s Discussion and Analysis of FinancialCondition and Results of Operations’ beginning on page nos. [●] and [●], respectively, of this Draft Red Herring Prospectusas well as the other financial and statistical information contained in this Draft Red Herring Prospectus. If any of thefollowing risks occur, our business, financial condition and results of operations could suffer, the trading price of our EquityShares and Warrants could decline, and you may lose all or part of your investment.These risks are not the only ones that we face. Our business operations could also be affected by additional factors that arenot presently known to us or that we currently consider being not material to our operations. Unless otherwise stated in therelevant risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of anyof the risks mentioned herein. The numbering of the Risk Factors has been done to facilitate ease of reading and referenceand does not in any manner indicate the importance of one risk factor over another.Materiality:The risk factors have been determined on the basis of their materiality. The following factors have been considered fordetermining their materiality:1. Some events may not be material individually but may be found material collectively.2. Some events may have a material impact qualitatively instead of quantitatively.3. Some events may not be material at present but may have material impacts in the future.Company Related Risk Factors/ Object Related Risk Factors.1. Litigation of our Company, Promoters/Directors, Promoter Group Entitiesa. Litigation against / by our Company.Our Company is involved in various legal proceedings, which are pending at various stages of adjudication before the CityCourts, High Courts and various Tribunals. Any rulings by appellate courts or tribunals against us would have a material impacton our cash flows which may affect our operations. Classification of these legal and other proceedings instituted by and againstour Company are given in the following table:Following are the cases filed against our Company.Sr. Case Type No. ofAmount (to the extentNo.Cases quantifiable) (Rs. In million)1. Excise Cases 40.602. Income Tax 3Cases6.093. Labour Cases 3 Not quantifiable4. Civil Cases 2 39.21Following are the cases filed by our Company.Sr.No.Case TypeNo.ofCasesAmount (to the extentquantifiable) (Rs. In million)1. Excise Cases 1 31.282. Income Tax 2 0.19Cases3. Criminal Cases 2 2.744. Civil Cases 2 0.18xii
TMb. Litigation against / by our Promoters.Our Promoter Mr. Biharilal Mandhana is involved in various legal proceedings, which are pending at various stages ofadjudication before the City Courts, High Courts and various Tribunals. Any rulings by appellate courts or tribunals against ourpromoters would have a material impact our operations. Classification of these legal and other proceedings instituted by andagainst our Promoter are given in the following table:Cases filed by Mr. Purshottam MandhanaSr. CaseNo. Type1. ExciseCasesNo. ofAmount (to the extentCasesquantifiable) (Rs. In million)2 31.28Cases filed againt Mr. Biharilal MandhanaAmount (tothe extentquantifiable)(Rs. Inmillion)NotQuantifiableSr.No.CaseType2. LabourCasesNo. of Cases3c. Litigation against / by our Promoter Group Entities.One of our Promoter Group Entities Mahan Synthetic Textiles Private Limited is involved in various legal proceedings, which arepending at various stages of adjudication before the City Courts, High Courts and various Tribunals. Classification of these legaland other proceedings instituted by and against Mahan Synthetic Textiles Private Limited are given in the following table:Cases filed againt Mahan Synthetic Textiles Private LimitedSr. CaseNo. Type1. LabourCasesNo. ofAmount (to the extentCasesquantifiable) (Rs. In million)1 Not QuantifiableFor further details of outstanding litigation pending against us, please refer to the section titled “Outstanding Litigation and MaterialDevelopments” beginning on page [●] of this Draft Red Herring Prospectus.In the event of any legal proceedings being decided against us, our business, reputation and results of operations could be adverselyaffected.2. Delay or non-receipt of certain regulatory approvals may delay our proposed expansion plans and would adverselyaffect our growth plans.Except for the existing licenses for our shirting division at Trapur, which will be also applicable on the expansion of ourshirting division, our Company has not received not applied for any approvals / licences/ permissions for the other projectsproposed by our company through this Issue. Any delay/non-receipt of the above licenses and/ or approvals that may berequired for the proposed additional facilities could result in a cost and time over run, and accordingly adversely affect ouroperations and profitability.Following are licences / approvals / permission pending application by our Company:Garment Manufacturing Uniti : (Banglore ) 3 Unitxiii
1. Factory Licence application for 3 unites at Bangalore before the Chief Superintendent, Department of Factories and Boiler,Bangalore;2. Industrial Entrepreneur Memorandum for 3 Unites at Bangalore before Secretariat for Industrial Assistance, New Delhi;3. Electricity Supply / Power Sanction from Bangalore Electricity Supply Company Limited, Bangalore;4. Consent for Water (Prevention and Control of Pollution) Act, 1974 issued before the Regional Officer, Peenya;5. Consent for Air (Prevention and Control of Pollution) Act, 1981 issued by the Regional Officer, Peenya; and6. Water Supply sanction letter from Concern Authority.TMSampling Unit at Mumbai (Garment)1. Factory License application before the Joint Director Industrial Safety and Health, Mumbai;2. Industrial Entrepreneur Memorandum before Secretariat for Industrial Assistance, New Delhi;3. Power Sanction (Electric) from concern authority;4. NOC from BMC for running the manufacturing activity;5. Service Tax Certificate issued by the Superintendent (Service Tax) Division VI, Mumbai; and6. Contract labour License issued by the Licensing officer permitting the unit to employ contract labour.Fabric Processing Plant (Tarapur)1. Factory Licence application before the Joint Director Industrial Safety and Health, Vasai;2. Industrial Entrepreneur Memorandum issued by the Secretariat for Industrial Assistance, New Delhi in the name of ourCompany for carrying out the activities of• Bleaching, dyeing and printing of cotton textiles;• Bleaching, dyeing and printing of cloth other than by hand; and• Bleaching, dyeing and printing of artificial synthetic textiles other than by hand;3. Consent issued by the Maharashtra Pollution Control Board granting consent to operate under section 26 of the Water(Prevention and Control of Pollution) Act, 1947 and under section 21 of the Air (Prevention and Control of Pollution) Act,1981 and Authorisation / Renewal of Authorisation under Rule 5 of the Hazardous Wastes (Management & Handling) Rules1989 and Amendment Rules, 2003;4. Licence for Existing Petroleum Class B&C Installation at plot no. C-3 , M.I.D.C., Tarapur District, Thane, issued by JointChief Controller of Explosives, Ministry of Commerce and Industry, Mumbai;5. Service Tax Certificate issued by the Superintendent (Service Tax) Division VI, Mumbai;6. Boiler Certificate issued by the Deputy Director of Steam, Boilers, Maharashtra, permitting the unit to use smoke tubes;7. Power Sanction (Electricity) from Maharashtra State Electricity Board;8. Water Supply sanction letter from Maharashtra Industrial development Corporation; and9. Sanctioning Factory Plan from Maharashtra Industrial development Corporation.For further details, please refer to the chapter titled ‘Government /Statutory Approvals’ beginning on page no. [●] of thisDraft Red Herring Prospectus.3. We have not yet placed order for some of the machinery required for our objects of the issueNo orders have been placed for 98.70% of the machinery in value terms, required for our units pursuant to our object of theissue. Delay in placing the order for these machineries required for the objects could result in a cost and time over run, whichwould adversely affect the operations and profitability of our Company. For further details, please refer to the chapter titled‘Objects of the Issue’ beginning on page no. [●] of this Draft Red Herring Prospectus.4. 71.94% of the machinery required pursuant to the Objects of the Issue will be imported.More than 71.94% of the machinery in value terms, required for our units pursuant to the Objects of the Issue will beimported. Delay in delivery of the said machinery or damage or loss in transit will adversely affect our business, operationsand profitability. Further we will also be exposed to the risk on account of fluctuation in the currency rate.5. Working capital requirement for the objects not tied up.As on date our Company has not tied up for incremental working capital requirements for proposed projects stated in theObjects of the Issue. In case we are not able to tie up for the working capital requirement, our operation will be adverselyaffected.xiv
6. We are subject to the restrictive covenants enumerated in the allotment letter dated December 21, 2006 fromKarnataka Industrial Areas Development Board for acquisition of 5 acres of land at plot no. SW-49 & SW-50 ofApparel Park Industrial Area, II Phase, Doddaballapur on a lease-cum-sale basis.TMAs enumerated in the chapter titled ‘Objects of this Issue’ beginning on page no. [●] of this Draft Red HerringProspectus, we intend to acquire land at plot no. SW-49 & SW-50 of Apparel Park Industrial Area, II Phase,Doddaballapur, Bangalore, Karnataka on a lease-cum-sale basis for which we have received an allotment letter datedDecember 21, 2006.The restrictive covenants as stated therein are as follows:• All the necessary clearances shall be obtained by our Company before execution of the lease agreement;• Our Company shall create maximum possible additional employment opportunities and provide a minimum of80% of the employment to the local people on an overall basis;• The personnel officer to be employed should be a Kannadiga;• Our Company shall provide employment to at least one person in each displaced family of the erstwhile landowners in respect of the said land leased to our Company;• Our Company shall, in consultation with the Ecology and Environment Department, make arrangements forrainwater harvesting and groundwater recharging on the said premises; and• The plans of our proposed factory or any structure to be constructed on the said premises shall be approved bythe Karnataka Industrial Areas Development Board.For further details please refer to the chapters titled ‘Business Overview’ and ‘Objects of this Issue’ beginning on page nos.[●] and [●] of this Draft Red Herring Prospectus.7. The plot of land on which our Ammonia Plant is to be constructed is not owned by us.The plot of land on which our Ammonia Plant is to be constructed has been acquired by our Company on the basis of a longterm lease from Maharashtra Industrial Development Corporation.There can be no assurance that this lease will be renewed upon expiry or on terms and conditions acceptable to us. Anyfailure to renew this lease agreement or procure new premises thereof will increase our costs or force us to look out foralternative premises which may not be available or which may be available at more expensive prices. Any or all of thesefactors may have a material adverse effect upon our business, results of operations and financial condition.For further details please refer to the chapters titled ‘Business Overview’ and ‘Objects of this Issue’ beginning on page nos.[●] and [●] of this Draft Red Herring Prospectus.8. Our premises used by our Company as Mandhana Weaving House, Yarn Dying and Weaving Unit, MandhanaDyeing Unit, Garment Production Unit, Delhi Branch Office (Sales), Godown and Sampling Unit and Show Roomfor Textiles at Paris is not owned by us.Premises used by our Weaving House, Yarn Dying and Weaving Unit, Dyeing Unit, Garment Production Unit, Delhi BranchOffice (Sales), Godown and Sampling Unit and Show Room for Textiles at Paris are taken on the basis of various long termlease agreements and short-term leave and license agreements. There can be no assurance that these agreements will berenewed upon expiry or on terms and conditions acceptable to us. Any failure to renew these said agreements or procure newpremises will increase our costs or force us to look out for alternative premises which may not be available or which may beavailable at more expensive prices. Any or all of these factors may have a material adverse effect upon our business, resultsof operations and financial condition.For further details please refer to the chapter titled ‘Business Overview’ beginning on page no. [●] of this Draft Red HerringProspectus.9. We have not yet identified or entered into any specific written agreements or arrangements for acquisition of land forour Garment unit at Hubli as specified in the chapter titled ‘Objects of this Issue’.We have not yet identified or entered into any written agreement or arrangement for acquisition of land required for ourgarment unit at Hubli. Identification of suitable land may take longer than anticipated and such delay(s) may affect ourtimelines as well as our operations. Moreover, in time land prices may also shoot up and the increased cost may put pressureon our financial resources, thereby adversely affecting our financial position and growth plans, and requiring us to avail ofxv
further financial resources to achieve our existing growth plans. While, we have entered into a MoU for our garment unit atYeshwantpur, Bangalore, we are yet to sign a binding agreement for acquisition of the land.TMFor further details please refer to the chapters titled ‘Business Overview’ and ‘Objects of this Issue’ beginning on page nos.[●] and [●] of this Draft Red Herring Prospectus.10. Our Company’s indebtedness could adversely affect our Company’s financial condition and results of operationsOur Company has entered into various loan agreements with Andhra Bank, State Bank of Patiala, Corporation Bank andBank of Maharashtra for long term borrowings. The short term credit availed off as on June 30, 2007 amounts to Rs. 424.01million and the long term credit availed off as on June 30, 2007 amounts to Rs. 1245.99 million. These agreements containcertain restrictive covenants which require us to take the prior written consent of the said banks before undertaking thefollowing activities throughout the currency of the agreement including but not limited to:1. Effecting changes in our Company’s capital structure;2. Formulating any scheme of amalgamation/re-constitution;3. Entering into borrowing arrangements, either secured or unsecured, with any other bank, financial institution, company orperson;4. Undertaking guarantee obligations on behalf of any other company, firm or person;5. Creating any further charge, lien or encumbrance over the assets and properties of the Company, which are charged to theaforesaid banks, in favour of any bank, financial institution, company, firm or person;6. Selling, assigning, mortgaging or otherwise disposing off any of the fixed assets charged to the banks;7. Effecting any material change in the composition of Board of Directors, management structure or equity pattern of ourCompanyThere can be no assurance that our Company will be able to comply with these financial or other covenants or that ourCompany will be able to obtain the consents necessary to take the actions our Company believes are necessary to operate andgrow our Company’s business. Further, if we default on the repayment of the aforesaid loans, the said banks could enforcetheir security interests on our assets limiting our ability to carry out operations. For further details, please refer to the chaptertitled ‘Restrictive Covenants in Loan Agreements’ beginning on page no. [●] of this Draft Red Herring Prospectus.11. Any delay or inability in renewing our existing permits and licenses may have an adverse effect on our business.We require certain statutory and regulatory permits and licenses to operate our business, some of which our Company haseither received, applied for or is in the process of application. Such permits and /or licenses may be granted for a fixed periodof time. Non renewal of the said permits and licenses would adversely affect our Company’s operations, thereby having amaterial adverse effect on our business, results of operations and financial condition.Following are the approvals pending renewal:• Application dated April 07, 2007 for renewal of Boiler Certificate bearing no. MR/11608 dated June 22, 2006 issued by theDeputy Director of Steam, Boilers, Maharashtra, permitting the unit to use HORZ smoke tubes.• Application dated May 28, 2007 for renewal of Registration-Cum-Membership Certificate bearing registration no. 101073issued by Deputy Director (Acting), Apparel Export Promotion Council.• Application dated September 03, 2007 Renewal of Contract Labour License nos. DC/THN/CLA/002/19 dated March 03,1997 and DC/THN/CLA/012/23 dated March 16, 2000.• Application dated October 22, 2007 for renewal of IS/ISO 9001:2000 bearing license no. QMS/WR/L – 7002712 datedOctober 29, 2004 issued by the Bureau of Indian Standards.For further details please refer to the chapter titled ‘Government / Statutory Approvals’ beginning on page no. [●] of thisDraft Red Herring Prospectus.12. The name and logo of our Company have not been registered under the Trade Marks Act, 1999. We have applied forthe registration of the same along with other mark CANVAS, with the Trade Marks Registry, Mumbai.xvi
We have filed applications for registering the name and logo of our Company and mark CANVAS under various classesunder the Trade Marks Act, 1999 and these applications are pending with the Indian Trade Mark Registry. There is noassurance that our trade mark applications will be approved by the said Indian Trade Mark Registry. In addition, ourapplications for the registration of our name and logo may be opposed by third parties. In the event we are not able to obtainregistrations in respect of our name and logo, we may not be able to avail of the statutory protection available under the TradeMarks Act, 1999, as otherwise available for registered marks.TMFor further details please refer to the chapter titled ‘Business Overview’/ ‘Government / Statutory Approvals’ beginning onpage no. [●] of this Draft Red Herring Prospectus.13. The premises used as our Registered and Corporate Office are not owned by our Company.The premises used by our Company as its Registered and Corporate Office are taken on a short-term leave and license basisfrom our Promoters, their relatives and third parties. There can be no assurance that these leave and license agreements willbe renewed upon expiry or on terms and conditions acceptable to us. Any failure to renew our existing leave and licenseagreements or procure new premises will increase our costs or force us to look out for alternative premises which may not beavailable or which may be available at more expensive prices. Any or all of these factors may have a material adverse effectupon our business, results of operations and financial condition.For further details please refer to the chapters titled “Business Overview”, ‘Our Management’ and ‘Related PartyTransactions’ beginning on page nos. [●], [●] and [●] of this Draft Red Herring Prospectus respectively.14. There are certain non-compliances and late filings by us.We were not compliant with certain requirements of the Companies Act as regards appointment of a Company Secretaryunder section 383A of the Companies Act, 1956, which we are currently complying with. For further details, please refer tothe chapter titled ‘Our Management’ beginning on page no. [●] of this Draft Red Herring Prospectus.15. Our Company does not have any long term sales contracts with any customer.Our Company’s sales take place on the basis of purchase orders. We do not have any long term sales contracts with ourcustomers and hence are unable to bind them in a long term relationship with us. Our ability to receive the initial order aswell as repeat orders from a customer is dependent on our ability to manufacture products of acceptable quality, at acompetitive price and to deliver such products on a timely basis. In case a customer is not satisfied with our product, price ordelivery and does not place repeat orders with us, this could adversely affect our sales and financial results.. Further, ourinability to add new buyers to our sales portfolio may hamper growth of our business and profitability.16. Our Promoters have Interest in our Company other than reimbursement of expenses incurred or normalremuneration or benefit. .Our Promoters may be deemed to be interested to the extent of the Equity Shares held by them, their friends or theirrelatives or our Promoter Group Entities, and benefits arriving from their directorship in our Company. Our Promotersare interested in the transactions entered into between our Company and themselves as well as between our Companyand our Promoter Group Entities. For further details, please refer to the chapters titled ‘Business Overview’ and ‘OurPromoters and their Background’, beginning on page nos. [●] and [●], respectively and the section titled ‘FinancialStatements’ beginning on page no. [●] of this Draft Red Herring Prospectus.17. Our Promoters have interest in certain companies, which may engage in similar businesses, which may create aconflict of interest.Three of our Promoter Group Entities viz. Mahan Synthetic Textile Private Limited, Golden Seam Textiles PrivateLimited and M/s. Balaji Corporation are involved in a similar line of business as that of our Company i.e. including butnot limited to manufacturing, export, sale, trading and earning commission from trading in textile. Currently MahanSynthetic Textile Private Limited and Balaji Coporation are in the business of trading and commission income arisingthere from in textile and Golden Seam Textile Private Limited is in the business of manufacturing, export, sale andtrading of textile (men’s bottom wear). Further, as on date our Company is neither involved in to manufacturing /trading in men’s bottom wear nor into commissioning income arising from textile. As per the object clauses of theseentites, they are authorised to expand their business as that of our Company. As on date, Our Company has not signedany non-compete or such other agreement / document with our Promoter Group Entities. The interests of these entitiesxvii
may conflict with our Company’s interests and / or with each others. For further details, please refer to the chapterstitled, ‘Business Overview’ ‘Our Promoter Group Entities’, beginning on page nos. [●] and [●], respectively and thesection titled ‘Related Party Transactions’ beginning on page no. [●] of this Draft Red Herring Prospectus.TM18. Changes in technology may impact our business by making our plants less competitiveAdvancement in technology may require us to make additional capital expenditure for upgrading our manufacturingfacilities so as to compete with our various competitors. In the event that we are not able to respond to suchtechnological advancement in a timely manner, we may lose our competitive edge thereby adversely affecting ourprofits.19. Our inability to effectively implement our growth strategies or manage our growth could have an adverse effect onour business, results of operations and financial condition.As a part of our growth strategy, we are planning to make investments designed to increase sales of our products, especiallythose where our presence is currently limited. Our success over the period of 23 years has enabled us to achieve growth interms of sales from Rs. 676.96 million for the financial year 2003 to Rs. 2412.17 million in the financial year 2007 and1054.28 million for the quarter ended June 30, 2007. Further our profitability has increased from Rs. 19.34 million in thefinancial year 2003 to Rs. 194.31 million in the financial year 2007 and 79.46 million for the quarter ended June 30, 2007.However, there can be no assurance that we will be able to execute our strategy on time and within the estimated budget inthe future. Our growth strategy is subject to and involves risks and difficulties, many of which are beyond our control and,accordingly, there can be no assurance that we will be able to implement our strategy or growth plans, or complete themwithin the budgeted cost and timelines. Any inability on our part to manage our growth or implement our strategy effectivelycould have a material adverse effect on our business, results of operations and financial condition. Further, we operate in ahighly dynamic industry, and on account of changes in market conditions, industry dynamics, technological improvements orchanges and any other relevant factors, our growth strategy and plans may undergo changes or modifications, and suchchanges or modifications may be substantial, and may even include limiting or foregoing growth opportunities if the situationso demands.20. Our insurance policies do not cover all risks, specifically risks like product defect / liability risk, loss of profits andworkmen’s compensation, In the event of the occurrence of such events, our insurance coverage may not adequatelyprotect us against possible risk of loss.In addition to risks arising from natural disasters and risks to properties and personnel (like personal injury/loss of life),in the course of our business, our operations are also subject to the risks arising from or as a result of use of pesticidesand other hazardous substances. These risks include, but are not limited to accidental release or discharge of hazardoussubstances, explosions, poisoning, spills/leaks, insect/snake bites, environmental pollution etc. One or more of theaforesaid factors may result in closure or suspension of operations and imposition of civil and/or criminal penalties.While we believe that we maintain insurance coverage in amounts consistent with industry norms in each of ourregions, our insurance policies do not cover all risks, specifically risks like product defect/liability risk, loss of profitsand workmen’s compensation, and are subject to exclusions and deductibles. There can be no assurance that ourinsurance policies will be adequate to cover the losses in respect of which the insurance had been availed. If we suffera significant uninsured loss or if insurance claim in respect of the subject-matter of insurance is not accepted or anyinsured loss suffered by us significantly exceeds our insurance coverage, our business, financial condition and results ofoperations may be materially and adversely affected. For details on the insurance policies taken by our Company,please refer to the chapter titled ‘Business Overview’ beginning on page no. [●] of this Draft Red Herring Prospectus.21. Our success largely depends on our key managerial personnel and our ability to attract and retain them. Any loss ofour key managerial personnel could adversely affect our business, operations and financial condition.We depend significantly on the expertise, experience and continued efforts of our key managerial personnel. If one ormore members of our key managerial personnel are unable or unwilling to continue in his/her present position, it couldbe difficult to find a replacement. Our business could thereby be adversely affected. Opportunities for key managerialpersonnel in our industry are intense and it is possible that we may not be able to retain our existing key managerialpersonnel or may fail to attract/ retain new employees at equivalent positions in the future. As such, any loss of keymanagerial personnel could adversely affect our business, operations and financial condition. For further details on thekey managerial personnel of our Company please refer to the chapter titled ‘Our Management’ beginning on page no.[●] of this Draft Red Herring Prospectus.xviii
22. Our employees may unionize in the future, thereby restricting the flexibility of our labour policies.TMAs on date, our employees are not represented by any labour union. However, our employees may unionise in the future.While we consider our current labour relations to be satisfactory there can be no assurance that we will not experience futuredisruptions to our operations due to disputes including strikes, work stoppages, or increase wage demands by our employeesor other problems with work force which may adversely effect our business or operations. In that case, there may berestrictions on the flexibility of our labour policies.23. Our Promoter Group Entities have incurred losses in the past.The following Promoter Group Entities have incurred losses in the last three years.a. Sundhya Chhaya Finvest Private Limited;b. Ashlesha Finvest Private Limited;c. Dhumketu Finvest Private Limited; andd. Vicky Jhunjhunwala Resort Private Limited.(Amount in Rs.)OUR PROMOTER GROUP ENTITIESLOSS INCURRED FOR THE LAST THREE FYSFor the yearended March31, 2007For the yearended March31, 2006For the yearended March31, 2005Sundhya Chhaya Finvest Private Limited (2,600) (2,110) (6,321)Ashlesha Finvest Private Limited (6,210) (1,510) (6,320)Dhumketu Finvest Private Limited (6,210) (1,510) (6,328)Vicky Jhunjhunwala Resort Private Limited (14,360) (10,972) (9,526)Parag Kunj Finvest Private Limited(39,469)NotApplicableNotApplicableFor further details, please refer to the chapter titled “Our Promoter Group Entities” beginning on page no. [●] beginning onpage no. [●] of this Draft Red Herring Prospectus24. The fund requirement and deployment mentioned in the said chapter have not been appraised by any bank orfinancial institution.The deployment of funds as described in the chapter titled ‘Objects of this Issue’ beginning on page no. [●] of this Draft RedHerring Prospectus is at the discretion of our Company’s Board of Directors. The fund requirement and deployment is basedon internal management estimates and has not been appraised by any bank or financial institution. Accordingly, within theparameters as mentioned in the chapter titled ‘Objects of this Issue’ beginning on page no. [●] of this Draft Red HerringProspectus, the management will have significant flexibility in applying the proceeds received by our Company from thisIssue. Our Board of Directors will monitor the utilization of the proceeds of this Issue.25. We may face a risk on account of not meeting our export obligations.We have obtained licenses under Export Promotion Capital Goods scheme (“EPCG”) as listed below. As per the licensingrequirement under the said scheme, we are required to export goods of a defined amount, failing which, we have to make paymentto the Government of India equivalent to the duty benefit enjoyed by us under the said scheme along with interest. As onNovember 10, 2007 our export obligation is 90.49 millionFor further information please refer to the chapter Government / Statutory Approvals beginning at page [●] of the Draft RedHerring Prospectus.26. Our business is subject to ever-changing fashion trendsWe operate in a highly creative and dynamic fashion industry. The ever-changing nature of the fashion industry subjects us touncertainties associated with the ever-changing market trends. Any inability on our part to understand the prevailing worldwidetrend or to forecast changes from time to time may affect our growth prospects. The product mix in our garmentbusiness changes according to season and therefore the business is seasonal to that extent.xix
27. Volatility in prices and non availability of raw materials may have an adverse impact on our operations.TMWe do not have any agreement with suppliers with respect to supply of raw materials purchased by us from them. Anysignificant increase in the prices of these raw materials and our inability to pass on increased costs or raw material toour customers, may adversely affect our sales and profitability. Further, in the event of any disruption in raw materialsupply in terms of requisite quantities and qualities our production schedule may also be adversely affected. Howeverbeing equipped with vertically integrated manufacturing facilities we manufacture greige fabric and finished fabricwhich are used as raw materials by our fabric and garmenting divisions.28. Our future funds requirements, in the form of fresh issue of capital or securities and or loans taken by us, may beprejudicial to the interest of the shareholders depending upon the terms on which they are eventually raised.We may require additional capital from time to time depending on our business needs. Any fresh issue of shares orconvertible securities would dilute the shareholding of the existing shareholders and such issuance may be done on terms andconditions, which may not be favourable to the then existing shareholders. If such funds are raised in the form of loans ordebt, then it may substantially increase our interest burden and decrease our cash flows, thus prejudicially affecting ourprofitability and ability to pay dividends to our shareholders.29. We have in the last 12 months issued Equity Shares at a price which may be lower than the Issue Price.On incorporation of our Company, our Company has issue 575,000 Equity Shares which may be less then the Issue Price. Theprice at which the Equity Shares are being issued in the last twelve months is not indicative of the price which may be offered inthis Issue.For further details please refer to the chapter titled “Capital Structure” beginning at page [●] of the Draft Red HerringProspectus.30. Any future issuance of Equity Shares or Warrants by our Company or sales of the Equity Shares or Warrants by anyof its significant shareholders may adversely affect the trading price of the Equity Shares.Any future issuance of our Equity Shares or Warrants could dilute your shareholding. Any such future issuance of our EquityShares or sales of our Equity Shares by any of our significant shareholders may also adversely affect the trading price of ourEquity Shares. In addition, any perception by investors that such issuances or sales might occur could also affect the tradingprice of our Equity Shares.31. Post this Issue, our Promoters and Promoter Group will continue to hold majority shares in our Company.Post this Issue, prior to the exercise of the Warrants, our Promoters and Promoters Group will own 66.28 % of our fullydiluted Equity Share capital. Post exercise of the Warrants (assuming full exercise) our Promoters and Promoters Group willown 60.87 % of our fully diluted Equity Share capital. Accordingly, our Promoters will continue to have control over ourbusiness including matters relating to any sale of all or substantially all of our assets, the timing and distribution of dividendsand the election, termination or appointment of our officers and directors. This control could delay, defer, or prevent a changein control in our Company, impede a merger, consolidation, takeover or other business combination involving our Company,or discourage potential acquirers from making an offer or otherwise attempting to obtain control over our Company even if itis in its best interest. Our Promoters may also influence our material policies in a matter that could conflict with the interestsof our other shareholders.32. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect ashareholder’s ability to sell, or the price at which it can sell, Equity Shares at a particular point in time.Once listed, we would be subject to circuit breakers imposed by all stock exchanges in India, which does not allowtransactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operatesindependently of the index-based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. Thepercentage limit on our circuit breakers is set by the stock exchanges based on the historical volatility in the price and tradingvolume of the Equity Shares. The stock exchanges do not inform us of the percentage limit of the circuit breaker in effectfrom time to time, and may change it without our knowledge. This circuit breaker limits the upward and downwardmovements in the price of the Equity Shares. As a result of this circuit breaker, no assurance may be given regarding yourability to sell your Equity Shares or the price at which you may be able to sell your Equity Shares at any particular time.xx
33. Our Company’s contingent liabilities could adversely affect our financial condition.TMAs of March 31, 2007 and June 30, 2007, our Company had an aggregate amount of Rs. 304.16 million and 128.82 millionrespectively as contingent liabilities outstanding. If any of these contingent liabilities were to materialize, it may have anadverse impact on our financial condition.Rs. In millionParticulars June 30, 2007 March 31, 2007Export Invoice backed by Letter of Credit 29.33 41.87Income Tax Demand 11.94 11.94Corporate Guarantee 0 162.80Custom Duty liability if Export obligation not fulfilled 0-Excise Duty Demand 31.28 31.28Water Charges Demand 51.85 51.85Bank Guarantee 4.42 4.42Total 128.82 304.16III. External Risk Factors1. The market price of our Equity Shares may fluctuate due to the volatility of the Indian securities market.There may not be an active or liquid market for our Equity Shares, which may cause the price of the Equity Shares to fall andmay limit your ability to sell the Equity Shares. The Issue Price of the Equity Shares in this Issue will be determined by ourCompany in consultation with the BRLM, and it may not necessarily be indicative of the market price of the Equity Sharesafter this Issue is complete. You may be unable to resell your Equity Shares at or above the Issue Price and, as a result, youmay lose all or part of your investment. The price at which the Equity Shares will trade after this Issue will be determined bythe marketplace and may be influenced by many factors, including:• our financial results and the financial results of the companies in the businesses we operate in;• the history of, and the prospects for, our business and the sectors and industries in which we compete;• an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenuesand cost structures;• the present state of our development; and• the valuation of publicly traded companies that are engaged in business activities similar to ours.In addition, the Indian stock market has from time to time experienced significant price and volume fluctuations that haveaffected the market prices for the securities of Indian companies. As a result, investors in the Equity Shares may experience adecrease in the value of the Equity Shares regardless of our operating performance or prospects. The market price of ourEquity Shares may fluctuate due to the volatility of the Indian securities market and may be more volatile than the securitiesmarkets in other countries. Stock exchanges in India have, in the past, experienced substantial fluctuations in the prices oflisted securities. The stock exchanges in India have experienced problems, including broker defaults and settlement delays,which, if were to continue or recur, could affect the market price and liquidity of the securities of Indian companies,including our Equity Shares. In addition, the governing bodies of the various Indian stock exchanges have from time to timeimposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore,from time to time disputes have occurred between listed companies and stock exchanges and other regulatory bodies, whichin some cases may have had a negative effect on market sentiment.2. Our business and activities will be regulated by the Competition Act, 2002 as and when it is notified. It is unclear as tohow the said Competition Act and Competition Commission of India will affect industries in India.The Parliament has enacted the Competition Act, 2002 for the purpose of preventing practices having an adverse effect oncompetition under the auspices of the Competition Commission of India, which has not yet come into force. Under the saidCompetition Act, any arrangement, understanding or action whether or not formal or informal which causes or is likely tocause an appreciable adverse effect on competition is void and attracts substantial penalties. Any agreement inter alia whichdirectly or indirectly determines purchase or sale prices, limits or controls production, shares the market by way ofgeographical area or market or number of customers in the market is presumed to have an appreciable adverse effect oncompetition. It is unclear as to how the said Competition Act and Competition Commission of India will affect industries inIndia.xxi
TM3. Hostilities with neighbouring countries and civil unrest in India may have material adverse impact on the market forsecurities in India.India has from time to time experienced instances of hostilities from neighbouring countries, including Pakistan and China.In recent years, military confrontations between India and Pakistan have occurred in Kashmir and along the India-Pakistanborder, although the Governments of India and Pakistan have recently engaged in conciliatory efforts. Military activity orterrorist attacks in the future could influence the Indian economy by disrupting communications and making travel moredifficult. Such political tensions could create a greater perception that investments in Indian companies involve a high degreeof risk. Events of this nature in the future, as well as social and civil unrest, could influence the Indian economy and couldhave material adverse effect on the market for securities of Indian companies.4. Political, Economic and Social developments in India and acts of violence or war could adversely affect our business.Since 1991, the Government has pursued policies of economic liberalization, including significantly relaxing restrictions onthe private sector. The new Government that has been formed as a result of 2004 general elections in India consists of acoalition of political parties. Any change in the economic policies by the new Government could change specific laws andpolicies affecting mining companies, pace of deregulation, foreign investment, currency exchange rates and other matterswhich could adversely affect the investment in our Equity Shares. Acts of violence, terrorist activity or war could affect theindustrial and commercial operations in the country create a perception that investments in Indian companies involve a higherdegree of risk which could have a material adverse effect on the market for securities of Indian companies.5. A slowdown in economic growth in India and other unfavourable changes in political and economic factors mayadversely affect our business and results of operations.All our business facilities are located in India. Our Company, the market price and liquidity of our Equity Shares, may beadversely affected by fluctuations in foreign exchange rates and controls, interest rates, changes in Government policy,taxation, social and civil unrest and other negative political developments like any abrupt change in the Central or any StateGovernment wherever we have business interests, etc., economic developments like very high rate of inflation, slow down ingrowth, decrease in foreign investments, etc. or other developments in or affecting India. Particularly slow down in economicgrowth may make the Governments spend relatively less on agriculture and agricultural growth is also linked to overalleconomic growth, which may ultimately be unfavourable to the Company’s business. During the past decade, theGovernment has pursued policies of economic liberalization, including significantly relaxing restrictions on the privatesector. Nevertheless, the role of Government and State Governments in the Indian economy in relation to producers,consumers and regulators has remained significant. It cannot be assured that the liberalization policies will continue in future.For example, because of the change in Central Government certain liberalization policies like disinvestment in public sectorenterprises, capital account convertibility etc. have been put on hold. The Government may also pursue other policies whichcould have a material adverse effect on our business. The rate of economic liberalization could change, and specific laws andpolicies affecting our business, suppliers, foreign investment, currency exchange rates and other matters affecting ourbusiness are also subject to change. A significant change in the Government’s or Indian State Governments’ economicliberalization and deregulation policies could adversely affect business and economic conditions in India generally and ourbusiness and financial condition and prospects in particular.6. Any downgrading of India’s debt rating by an international rating agency could have an unfavorable impact on ourbusiness.Any adverse revisions to India’s credit rating for domestic and international debt by international rating agencies mayadversely impact our ability to raise additional financing, and the interest rates and other commercial terms at which suchadditional financing is available. This could have a material adverse effect on our business and future financial performance,our ability to obtain financing for capital expenditures and the trading price of our Equity Shares.7. India is vulnerable to natural disasters that could severely disrupt our normal operations of business and adversely affectour earnings.India is susceptible to tsunamis and earthquakes. On December 26, 2004, Southeast Asia, including the Eastern coast ofIndia, experienced a tsunami that caused significant loss of life and property damage. On January 26, 2001, the Kutch regionin the State of Gujarat suffered a major earthquake causing significant loss of life and property. Substantially all of ourfacilities and employees are located in India. If our facilities are damaged by an earthquake, tsunami or other natural disaster,xxii
its global capability could be interrupted or delayed. As a result, a natural disaster in India could have a material adverseeffect on our financial condition and results of operations.TM8. The volatility that the Rupee-Dollar exchange rates has witnessed in recent times requires timely and appropriate hedgingto avoid any adverse impact on the profitability of our Company.The exchange rate between the Indian Rupee and the US Dollar has changed substantially in recent years and may continueto fluctuate substantially in the future. Our operating and financial results would be adversely impacted when the rupeeappreciates against dollar.Notes to risk factors1. Public Issue of 4,025,000Equity Shares of Rs. 10 each at a price of Rs. [•] per Equity Share for cash along with one detachableWarrants for every three Equity Shares including a share premium of Rs. [•] per Equity Share aggregating Rs. [•] million. TheIssue would constitute 26.66 % of the Post Issue paid-up capital of our Company prior to exercise of detachable Warrants and theissue shall constitute [●] % of the paid-up equity share capital of our company after exercise of detachable warrants, assuming fullexercise of detachable warrants...2. The net worth of our Company, before the Issue (as per our restated financial statements as at March 31, 2007 and June 30,2007) was Rs. 542.32 million and Rs. 703.98 million respectively and the book value per Equity Share (as per our restatedfinancial statements as at March 31, 2007 and June 30 2007) was Rs. 51.65 and Rs. 67.05 per share respectively.3. The following table represents average cost of acquisition of Equity Shares by our Promoters as on November 30, 2007. Fordetails please refer to the table titled ‘Capital built up of Promoters’ on page no. [●] under the chapter titled ‘CapitalStructure’ beginning on page [●] of this Draft Red Herring Prospectus.Sr.No Name of the Promoter Average cost ofacquisition (in Rs.)1. Mr. Biharilal C. Mandhana Rs. 10/-2. Mr. Purushottam C. Mandhana Rs. 10/-3. Mr. Manish B. Mandhana Rs. 10/-4. Mr. Purushottam C. Mandhana (HUF) Rs. 10/-5. Mr. Priyavrat P. Mandhana Rs. 10/-4. The net asset value of our Equity Shares of Rs. 10/- each was Rs. 51.65 /- and Rs. 59.22 /- of March 31, 2007 and June 30,2007 as per our restated financial statements included in this Draft Red Herring Prospectus.5. Any clarification or information relating to the Issue shall be made available by the BRLM and our Company to the publicand investors at large and no selective or additional information would be made available only to a section of the investors inany manner. Investors may contact the BRLM i.e. <strong>Edelweiss</strong> Capital Limited, and, Company Secretary and ComplianceOfficer and/or Intime Spectrum Registry Limited, Registrar to the Issue for any complaints pertaining to the Issue at the pre-Issue or post-Issue stage.6. For details regarding our related party transactions, please refer to the section titled ‘Financial Statements’ beginning on pageno. [•] of this Draft Red Herring Prospectus.7. For interests of our Promoters, Directors and Key Managrial Persnnels, please refer to the chapters titled ‘Risk Factors’,‘Business Overview’ and ‘Our Management’ beginning on page nos. [•], [•] and [•] of this Draft Red Herring Prospectus.8. Investors are advised to refer to the paragraph on ‘Basis of Issue Price’ on page no. [•] of this Draft Red Herring Prospectusbefore making an investment in this Issue.9. The Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue will be allotted on aproportionate basis to QIBs, of which 5% shall be reserved for Mutual Funds. Further, at least 35% of the Issue will beavailable for allocation on a proportionate basis to Retail Individual Bidders and at least 15% of the Issue will be availablefor allocation on a proportionate basis to Non-Institutional Bidders, subject to valid bids being received at or above the IssuePrice.xxiii
10. Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon the completion ofthe Pre-IPO placement, the number of equity shares in the Issue will be reduced by the number of shares in the Pre-IPOPlacement. The Issue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Share capital.TM11. In the event of the Issue being oversubscribed, the allocation shall be on a competitive basis to Bidders in the QIBs, RetailIndividual Bidders and Non-Institutional Bidders. For further details, please refer to the chapter titled ‘Issue Procedure’beginning on page no. [•] of this Draft Red Herring Prospectus.12. Trading in Equity Shares of our Company for all the investors shall be in dematerialized form only.13. Under subscription, if any, in any category shall be allowed to be met with spillover from the other categories, at the solediscretion of our Company in consultation with the BRLM. Allocation in all the categories shall be on a proportionate basis.14. Except as disclosed in the chapter titled ‘Capital Structure’ beginning on page no. [•] of this Draft Red Herring Prospectus,we have not issued any shares for consideration other than cash.15. Summarised details of related party transactions are as given below:(Rs. In Million.)Nature Of TransactionJune 30,2007March31, 2007March31, 2006March31, 2005March31, 2004March31, 2003Sale of Fabrics 4.18 15.82 5.66 10.82 29.36 105.74Purchase of Fabric / Auxillary Material 0.02 0.26 1.22 24.67 55.47 51.29Directors Remuneration & Perquisites 3.60 14.40 7.25 2.05 2.00 4.01Salary 0.00 0.20 0.24 0.00 0.00 0.00Rent 0.71 21.06 18.38 17.98 4.02 0.0016. For change in name of the Company and changes in Memorandum of Association of the Company please refer to the sectiontitled “History and Corporate Structure” beginning on page [•] of this Draft Red Herring Prospectus.17. Except, as disclosed in the section titled “Capital Structure” beginning on page [•] of this Draft Red Herring Prospectus, ourPromoters nor our Directors have purchased or sold any Equity Shares, during a period of six months preceding the date onwhich this Draft Red Herring Prospectus is filed with SEBIWe and the BRLM are obliged to keep this Draft Red Herring Prospectus updated and inform the public of any materialchange / development until the listing and trading of the Equity Shares offered under the Issue commences.xxiv
SECTION III - INTRODUCTIONTMSUMMARYINDUSTRY OVERVIEWThe information presented in this section, some of which is produced in this Draft Red Herring Prospectus has been extracted frompublicly available documents and reports prepared by professional organizations and analysts and from other external sources. Thesesources have not been prepared or independently verified by the Company, the Book Running Lead Manager or any of their respectiveaffiliates or advisors and the Company and the Book Running Lead Managers make no representation as to the accuracy orcompleteness of the information provided in these sources.Overview of the Global Textile IndustryIn the year 2005, the global trade in textile and clothing industry was at USD 203 billion and USD 276 billion, respectively. Themajor trade flows in the textile industry were Intra-Europe at USD 59.2 billion, Intra- Asia at USD 45.6 billion, Asia to Europe atUSD 16.4 billion and Asia to North America at USD 15.5 billion. In the same year, Asia and Europe had the largest market share inworld textile and clothing exports and imports respectively.Among the main features of the international trade in textiles and clothing, one can point to the enhanced role of China, India andPakistan. These countries increased their exports of textiles and clothing between 16% and 26% in 2005. At USD 479 billion theinternational trade in textile and clothing comprised of 4.72 % of the total international merchandise trade in 2005.(Source WTO – International Trade Statistics 2006)The labour intensive nature of the textile industry has caused it to shift its manufacturing base several times in the last 50 yearsultimately concentrating on those countries that offered the most competitive labour cost structure. These changes have given anopportunity to the developing countries to enhance their presence in the developed markets by increasing their exports.Overview of the Indian Textile IndustryThe textile industry is one of the significant industries of the Indian Economy. The textile sector accounts for nearly 7% of the GDPand 17% of the manufacturing output. It is also a significant foreign exchange earner, contributing to around 25% of India’s totalexports. The textile sector is also the second largest employment generator after agriculture, employing nearly 82 million people – 35million directly and 47 million in allied sectors.(source: CRISIL RESEARCH – CRISIL RESEARCH READYMADE GARMENTS ANNUAL REVIEW)The major contributors for the growth of the textile industry are a buoyant domestic economy, a substantial increase in cottonproduction, the conducive policy environment provided by the Government and the expiration of the Multi Fibre Agreement (MFA)on 31st December’2004.The Indian textile industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. A significant increase incotton production during the last two – three years has increased the availability of raw cotton to the domestic textiles industry atcompetitive prices, providing it with a competitive edge in the global market.The Government has also provided industry a conducive policy environment and initiated schemes which have facilitated the growthof the industry. The Technology Mission on Cotton has increased cotton production and reduced contamination levels. TheTechnology Upgradation Fund Scheme (TUFS) has facilitated the installation of the state-of-the-art / near state-of-the-art machinery atcompetitive capital cost. The rationalization of fiscal duties has provided a level playing field to all segments, resulting in the holisticgrowth of the industry.(report of the working group on textile and jute industry for 11 th five year plan – 2007-2012, Ministry of Textiles.)1
Outlook for the Indian Textile IndustryTMThe projected value of the Indian textile industry is estimated to grow from 52.5 billion in the year 2005-2006 to 110 billion by theyear 2012, comprising domestic market of 60 billion and exports of 50 billion. The CAGR of the industry for the domesticconsumption and exports is expected to be 10.0% and 19.0% respectively between the year 2006 and 2012.Ready Made Garments Market (RMG)According to CRISIL Research, overall sales of Ready Made Garments (domestic and exports) would grow at a compounded annualgrowth rate (CAGR) of 14.4 per cent to touch Rs 2,234 billion ($50.4 billion) in 2010-11, from Rs 1,141 billion ($25.8 billion) in2005-06.Domestic Ready Made Garments market size to cross Rs 1,400 billion by 2010-11India's domestic RMG sales is expected to grow at a CAGR of 12.6 per cent to touch Rs 1,420 billion ($32.1 billion) in 2010-11, fromRs 785 billion ($17.7 billion) in 2005-06, primarily due to increasing income levels. This is mainly driven by the increasingpenetration of credit cards, consumer finance and personal loans. Besides, ‘mall-culture' and ‘window-shopping' are also contributingto the spendthrift psychology of the domestic consumer. Additionally, with the increasing penetration of brands, the consumptionpattern is gradually shifting from tailormade garments to RMG, thanks to the increased availability of the latter in various designs,colours, sizes and patterns.Garment exports to touch $18.4 billion by 2010-11India's garment exports are expected to grow at a CAGR of 18 per cent to Rs 814 billion ($18.4 billion) in 2010-11, from Rs. 356billion ($8 billion) in 2005-06, primarily on account of the abolition of quotas, which has resulted in increasing outsourcingopportunities from global retail giants to low-cost producers such as India.(CRISIL Research Readymade Garments Annual Review –2007)BUSINESS OVERVIEWWe are a vertically integrated textile and garment manufacturing company in India. Our operations and facilities enable us tomanufacture a wide variety of value-added fabrics and garments through our integrated operations comprising of dyeing ofyarns and fabrics, weaving operations for fabrics, processing solutions for both fabrics and garments, garment manufacturing,domain expertise in providing sampling and designing for both fabrics and garments. Our operations and facilities enable usto provide a number of textile products / processes for our customers.We are focused towards capitalizing on the vertical integration of our operations which gives us the advantage of higherprofit margins from our garment business. We have achieved a high level of self-sufficiency in producing new designs andsamples for our clients which has helped us in enhancing our product offering portfolio and improved our adaptability to thelatest trends in fashion. We have positioned ourselves as a multi-product, multi-fibre and multi-market player ensuring thatour target market is a diverse mix of domestic fabrics and garments as well as the international garment markets.In the FY ended March 31, 2007, 2006, 2005 and 2004 our total sales were Rs.2412.17 million, Rs.1820.05 million, andRs.1272.51 million respectively. Further for quarter ended June 30, 2007 were able to achieve sales of Rs.1054.28 million.The following table gives the breakup of revenues from our two main business segments, textiles and garments: for the lastthree fiscal years:Particulars FY 2005 FY 2006 FY 2007 CAGR (%) Quarter endedJune 30, 2007Textile 777.89 1206.46 1679.46 46.94 771.83Garments 4,94.62 6,13.59 7,32.71 21.71 282.45Total 1272.51 1820.05 2412.17 37.68 1054.282
TMWe have Textile manufacturing facility at Tarapur which comprises of yarn dyeing, weaving and fabric processing. Undertextiles we derive major share of our revenues from the sale of greige and finished fabrics. Textiles contributed 69.62% ofour total revenues, for FY 2007 and 73.21% of our total for revenue the quarted ended June 30, 2007. For textiles we cater tothe domestic market which includes clients like Aditya Birla Nuvo( manufacturers of brands like Louis Phillipe, Van Heusen,Peter England, Allen Solly), Vogue Vesture( manufacturer of brand Levis), Pantaloon Retail, ITC(manufacturer of brandWills LifeStyle), Turtle.We export a major component of our garment production world wide across 25 countries and 5 continents. The EuropeanUnion markets constitute more than 85% of the total export sales of garments for the FY2006 and FY2007. Our exportclientele constitutes more than 94 customers (as on March 31June 30, 2007), which includes brands/labels and retail chainsfor garments including FCUK, Teddy Smith, PROMOD, RIP CURL, All Saints, Artman, Simint Spa, Gintonic, No Excess,Pepe Jeans, OXBOW, LAFUMA, Sixty Spa, O’neil, Jam Session. Our integrated manufacturing operations help us control amajor portion of our supply chain thereby offering substantial value addition to our products through our sampling anddesigning expertise. Our ability to consolidate our position and develop new clients in the European Union market is atestimony to our efforts.OUR COMPETITIVE STRENGTHSDiversified Domestic and International Customer baseWe have over three decades of experience in the textile industry and have developed long standing relations with ouroverseas and domestic customers. We have long standing relationships with number of top retailers / customers for fabrics/garments. For the year ended March 31, 2007, our total clientele consisted of more than 800 customers. We enjoy theconfidence of customers because of our ability to offer in-house designs and samples, timely responsiveness, and capacity tocater to various order sizes.Our overseas customers include brands like FCUK, Teddy Smith, PROMOD, RIP CURL, All Saints, Artman, Simint Spa,Gintonic, No Excess, Pepe Jeans, OXBOW, LAFUMA, Sixty Spa, O’neil, Jam Session. In the domestic market ourcustomers include Pantaloon, Wrangler, Arrow, Spykar, Lee Cooper, Aditya Birla Nuvo and others.Our lower dependence on few customers increases our competitive position and helps us in maintaining our operatingmargins thus reducing the volatility of revenues and margins on account of loss of few customers.FY 2005 FY 2006 FY 2007Sales from top 3 Customers % 8.98% 16.65% 11.23%Sales from top 5 Customers % 18.52% 23.81% 22.09%Sales from top 10 Customers % 29.31% 34.34% 31.93%Our export sales are invoiced in a mix of currencies as depicted in the table below, and because of such diversification we areable to reduce the adverse impact of depreciation in any particular currency.CurrenciesFY % FY 2006 % FY 2007 %2005Euro 143.08 33.08 245.88 42.67 347.16 52.89USD 253.22 58.54 287.25 49.85 240.54 36.65Other foreign currencies 36.27 8.38 43.11 7.48 68.64 10.46Growth in average Sales Realization per unit:Our Company specializes in manufacturing fashion garments involving styles and numerous processes requiring skilledhuman intervention. For our Garment segment we focus on fashion conscious domestic centers and European markets. Wehave been able to achieve growth in average sales realization per unit of Garment manufactured as shown below:3
TMAverage Realisation Per Piece400282.16312.37329.50388.64300(In Rupees)2001000FY2004 FY2005 FY2006 FY2007In-house Product designingDesigning is an important element in the production of fabrics and garments. The ability to produce innovative designs is oneof our major strengths and improves our competitiveness in the market. Our in-house designing team focuses on providingvalue-added design products by understanding the current fashion trends thus helping us in procuring new as well as repeatorders. We have created a Style Lab & Textile Studio which comprises of the CAD/CAM software. On an average 50 newdesigns are developed on a daily basis for fabrics and 10 new designs for garments. As on September 2007 we have anarchive of over 75,000 designs in garments and more than 1,00,000 designs in woven fabrics, especially in the yarndyed variety of fabrics. We also publish a half-yearly magazine showcasing more than 1,000 designs.With our designing and sampling capacity, we have the capability to serve customers who launch upto 12 fashion seasonsglobally every year. The design and sampling team continuously interacts with the clients to understand their requirementsand provides the designs based on their requirements. Our design team offers a diverse product range of garmenting solutionsincluding shirts, ladies tops, dresses, skirts, kids wear, sports wear and jeans wear using various types of fabric enabling us toprovide a range of garments to our customers.R&D Focus on Product DevelopmentCustomer satisfaction is the focus of our product development. Our company focuses on R&D to provide better qualityproducts to our domestic and international customers. It has also been our endeavour to continuously upgrade and improveour production processes which have resulted in quality assurance at each level of production. We have developed R&Dcenters for our yarn dyeing, fabric dyeing, weaving and garmenting operations each of which has a dedicated team for thesame.We have developed competency in the processing of fabrics. This is evident from our ability to produce a variety of finisheslike water / oil / mosquito repellent finishes to anti- bacterial / takara finish including stain free / U.V. protector / quick dryfinish etc.Cost and Time savings through Vertically Integrated OperationsOur manufacturing operations are vertically integrated encompassing designing of fabrics and garments, dyeing of yarns,weaving and processing of fabrics, manufacturing of garments, surface ornamentation and embellishments.This has helped us in rationalizing our operations as follows:• Improving efficiency and productivity;• Savings in manufacturing and logistics costs;• Lower turnaround time; and• Improving quality of products.Project Management and Implementation SkillsOur Management team has technical and commercial experience in the textile industry. We have successfully implemented new textile4
projects which include processing, weaving and garmenting facilities. The same can be illustrated from the fact that we havesuccessfully commissioned various units over each of the past three FYs. capex plan which our Company has embarked upon over thepast three years (Rs. 304.56 million in 2004-05, Rs. 1011.16 million in 2005-06, Rs. 226.27 million in 2006-07 and Rs.229.56 in June30, 2007.TMFYUnits Commission2004 – 2005 Garment unit at Bangalore and weaving unit expansion at Tarapur2005 – 2006 Weaving and yarn processing unit at Tarapur2006 - 2007 Garment unit at MumbaiEstablished Overseas Marketing BaseOur Company, in the year 2005, set up a liaison office at Paris, France, which has been established to consolidate our position in theEuropean markets and serve our customers more effectively. This setup helps us to closely interact with our Customer, showcase ourlatest product offerings and solicit new customers.Process and Quality CertificationOur Garment unit located at No. 26A, II Stage, Peenya Industrial Area, Bangalore is certified ISO 9001 - 2000.The certification body of TUV SUD Management Service GmbH Trading as TUV South Asia Private Limited has issued a certificatethat our above mentioned facility at Bangalore has established and applies a Quality Management System for manufacture and exportof garments as per ISO 9001 -2000.Our Bangalore unit mentioned above is also SA 8000:2001 certified whereby the certification body of TUV SUD Group has issued acertificate that the above garment manufacturing facility at Bangalore has established and applies a social accountability managementsystem for manufacture and export of garments.OUR STRATEGYFocus on garment business in overseas and domestic markets including female garments business.We believe that the readymade garment segment has grown rapidly over the period of last 10 years Further, the Government isoffering initiatives for the Textile Industry, such as, TUFS, Increase in Duty Drawback/DEPB and Reduction in Bank Interest Rate onWorking Capital Loan. In order to derive benefit from these opportunities, we have drawn up a plan to enhance our garmentmanufacturing capacity from the current 3.0 million pieces per annum to 14.23 million pieces per annum by 2008-09. We believe thatthe increased scale of operations would improve our ability to execute large size orders, thus becoming the vendor of choice forgreater number of customers.We believe that female garment segment is an important area of growth for our business. Over the last three years we have diversifiedinto women wear in a planned manner. We believe that female garment segment offers comparatively higher margins as well asconstitutes a larger market as compared to men’s segment. . Our designing skills have helped us in transforming our garment businessfrom male centric to a combination of both and we intent to further implement this strategy.Maintain operational efficiency through Multilocational Facilities.Our current manufacturing facilities includes 3 locations at Tarapur in Thane district of Maharashtra, 1 location at Mumbai inMaharashtra and 3 locations at Bangalore in Karnataka. We propose to setup our new manufacturing facilities at Yeshwanthpur,Doddballapur and Hubli in Karnataka and Mumbai in Maharashtra and expand existing facilities at Tarapur in Thane district ofMaharashtra.Our strategy is to set up facilites at multiple locations in order to maintain operational efficiency in terms of management of workforce,administrative efficiency and at the same time optimizing logistics. Further, this strategy also helps us to mitigate any risk/ losses onaccount of operational factors.5
Focus on apparel design and product developmentDesign and related product development is an important focus area for our growth. Our strategy is to focus on the development of newdesigns and samples for our fabrics and garments. This activity is supported by our in-house design studio which is equipped withdesign capabilities including software like CAD/CAM, thus enabling us to successfully convert our designs into fabrics and samplesinto final products. Improved ability to create samples would help our customers in placing orders well in advance of a particularseason. We plan to strengthen our capabilities in designing by continuously upgrading our design studios both in terms ofhuman resources and technology. We plan to tap the hi-end readymade garment segment which will help us in maintaining highersales realization for our final products.While our focus would continue to be the casual wear segment, we also plan to expand into other segments where we can providevalue added products. Our strategy would be to identify potential areas for expansion like formal wear, linen wear etc. Subsequent tothe implementation of our ammonia processing plant we plan to enter the high-end formal wear segment. Our expansion into newproducts would benefit us in terms of additional and diversified sources of revenue.Value accretion through backward integration and capacity expansion.In order to increase our self – sufficiency with respect to the various inputs to supplement the growth of our garment business, we planto scale up our manufacturing output across the value chain preceding final garment to the levels as stated hereunder:• Yarn Dyeing capacity from 1.8 million kgs. per annum to 3.0 million kgs. per annum.• Weaving capacity from 18.0 million meters per annum to 30.0 million meters per annum• Fabric processing capacity from 20.4 million meters per annum to 51.6 million meters per annumOur Company proposes to set-up a process plant which would be operating on CDR/CBR and Ammonia process technologies,enabling us to offer value-added processing/ finishing in fabrics which plays an important role in giving the right texture/feel to thefabric/garment. The said proposed plant would help us in securing additional sources of revenue for the processes / finishes ourCompany can offer and provide further value addition for our products. This plant would have a processing capacity of 31.2 millionmeters of fabric per annum.Our current expansion through the proposed project /envisages strengthening our presence across the textile and garment value chainthrough multi-locational integrated operations, catering to greater number of customers across geographies and maintaining focus onhigh quality and value added high-margin products. Besides offering greater scale in operations, our expansion would help us inreducing our reliance on out-sourcing for part of our operations and add to our value-added products portfolio through betterprocessing/ finishing facilities.For further detail on our proposed projects, refer to the section titles “Objects of the Present Issue” beginning at page [●] of this DraftRed Herring Prospectus.Mine Global / Domestic Relationships for New and Existing BusinessWe believe that strong and sustainable relationships with our customers are the key to our success. We aim to continue to developour relationships with our clients not only in terms of increased sales but also in terms of increased variety in products.We aim to achieve this by adding value to our client through quality, speed and reliability of our product delivery.We also aim at developing relationships with new clients as well. This helps us in not only entering new markets but also indiversifying the sources of our revenues and reducing our dependence on a given set of customers.As a measure of the said strategy we plan to expand our business in domestic as well as overseas market through our marketingoffices in India and abroad.Cost cutting through improved efficiency of our operationsWe believe that as we grow and expand our operations, controlling costs becomes a critical factor for us in order to stay competitive.Our strategy to control our costs includes the following:• Identify separate cost centers so as to monitor each of the major costs• Benchmarking our costs with the international industry standards• Controlling Raw Material costs through bulk purchases and negotiations with suppliers.• Controlling consumption and wastage through effective supervision of the shop floorImplement an ERP system across our different offices, facilities so that all our facilities are on the same platform. This will enable usto effectively monitor our systems and processes and identify those areas which need to be streamlinedTM6
THIS ISSUETMEquity Shares and Warrants Offered:4,025,000Equity Shares in the Issue along with [●]Warrants, that is one Warrant for every three EquitySharesOf whichA) Qualified Institutional Buyers Portion (1) Upto [●] Equity Shares along with [●] Warrants, that isone Warrant for every three Equity Shares in the Issuebeing 50% of the Issue, allocation on a proportionatebasis out of which 5% of the QIB portion or [●] EquityShares and [●] Warrants in the Issue shall be available forallocation on a proportionate basis for Mutual Funds only(Mutual Funds Portion) and the balance Equity Shares inthe Issue (shall be available for allocation to all QIBbidders, including Mutual Funds).B) Non-Institutional Portion (1) Minimum of [●] Equity Shares along with [●] Warrantsaggregating Rs. [•] million, constituting not less than15% of the Issue that will be available for allocation on aproportionate basis to Non-Institutional Bidders.C) Retail Portion (1) Minimum of [●] Equity Shares along with [●] Warrantsaggregating Rs. [•] million constituting not less than 35%of the Issue that will be available for allocation on aproportionate basis to Retail Individual Bidders.11,075,000 Equity SharesEquity Shares outstanding prior to the IssueEquity Shares outstanding after the Issue [●] Equity Sharesprior exercise of the WarrantsEquity Shares outstanding after the Issue postexercise of the WarrantsUse of Proceeds[●] Equity SharesPlease refer to the chapter titled ‘Objects of this Issue’beginning on page no. [●] of this Draft Red HerringProspectus for additional information.(1)Under-subscription, if any, in any of the above categories would be allowed to be met with spillover inter-sefrom any other categories, at the sole discretion of our Company in consultation with the BRLMs.Note:Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon thecompletion of the Pre-IPO placement the number of equity shares in the Issue will be reduced by the number of shares in thePre-IPO Placement. The Issue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Sharecapital.7
SECLECTED FINANCIAL INFORMATIONTMThe following table sets forth summary financial information derived from our financial statements as of and for the Fiscal years endedMarch 31, 2007, March 31, 2006, March 31, 2005, March 31, 2004 and March 31, 2003 and the three months ended June 30, 2007. Asrequired by the SEBI Guidelines, our financial statements as of and for the Fiscal years ended March 31, 2007, March 31, 2006, March 31,2005, March 31, 2004 and March 31, 2003 and the three months ended June 30, 2007 have been restated. The summary financial informationpresented below should be read in conjunction with the financial statements included in this Draft Red Herring Prospectus, the notes theretoand the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page [*].Summary Statement of Profit and Loss as Restated(Rs. In Mn.)Quarter Year Year Year Year YearParticulars Ended ended ended ended ended ended30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03IncomeOperational Income 1054.28 2,412.17 1,820.05 1,272.51 870.73 676.96Other Income 2.48 4.38 11.45 5.48 1.95 2.48Increase/ (Decrease) in Inventories 72.71 202.63 33.45 0.07 (19.98) 32.27Total (A) 1129.47 2,619.18 1,864.95 1,278.06 852.70 711.71ExpenditureRaw Materials consumed 802.11 1,536.96 1,166.73 742.70 490.32 472.74Manufacturing Expenses 56.39 277.85 242.75 212.91 151.30 75.31Employees' Remuneration & Benefits 44.50 147.60 98.98 58.41 19.94 16.39Administrative and Other Expenses 53.76 166.63 133.61 103.30 74.03 61.09Selling & Distribution Expenses 1.84 35.01 21.87 17.10 16.31 8.52(Profit) / Loss on sale of Assets 0.17 2.89 (46.69) (0.04) 8.51 3.60Total (B) 958.77 2,166.94 1,617.25 1134.38 760.41 637.65EBIDTA 170.70 452.24 247.7 143.68 92.29 74.06Interest and Financial Charges 29.12 79.44 28.43 23.06 26.57 27.42Profit before depreciation, Tax &141.58 372.80 219.27 120.62 65.72 46.64Extraordinary Items (A-B)Depreciation 20.24 74.29 31.64 26.64 19.73 16.56Profit before Tax 121.34 298.51 187.63 93.98 45.99 30.08Provision for Taxation - - - - -Current Tax 36.68 31.72 16.09 11.08 2.09 2.28Deferred Tax 4.56 70.48 48.88 18.83 6.86 8.50Fringe Benefit Tax 0.64 2.00 1.40 - - -Profit after Tax 79.46 194.31 121.26 64.07 37.04 19.30Previous Years Adjustments - - - 0.04 (0.04) 0.04Profit available for Appropriations 79.46 194.31 121.26 64.11 37.00 19.348
Summary Statement of Asset and Liabilities as RestatedTMParticularsAs at30.06.07As at31.03.07As at31.03.06As at31.03.05As at31.03.04(Rs. In Mn.)As at31.03.03Fixed AssetsGross Block 1858.27 1,632.78 1,452.73 548.48 332.89 333.83Less: Depreciation 232.95 212.98 144.24 114.60 89.11 79.54Net Block 1625.32 1,419.80 1,308.49 433.88 243.78 254.29Capital Work in Progress 185.35 184.81 166.76 92.86 7.02 -Total (A) 1810.67 1,604.61 1,475.25 526.74 250.80 254.29Investment (B) 0.01 0.01 0.01 0.01 0.03 0.05Current Assets, Loans and AdvancesInventories 610.15 494.87 252.35 144.77 121.91 155.80Sundry Debtors 275.41 293.61 196.97 189.73 197.85 141.98Cash and Bank Balances 50.00 23.40 17.39 12.99 14.80 9.83Loans and Advances 250.08 164.16 159.40 102.92 68.53 29.20Total (C ) 1185.64 976.04 626.11 450.41 403.09 336.81Total Assets (A+B+C) = D 2996.32 2,580.66 2,101.37 977.16 653.92 591.15Liabilities and ProvisionsSecured Loans 1599.55 1,564.74 1,364.85 458.67 316.81 300.27Unsecured Loans 70.44 47.88 50.71 11.30 50.78 1.55Deferred Tax Liability 188.29 183.73 113.25 64.37 45.54 38.68Sundry Creditors 260.18 172.62 98.70 51.83 50.23 63.84Other Current Liabilities 135.86 59.68 101.16 115.20 12.17 41.43Provisions 38.02 9.69 0.75 4.15 7.79 4.00Total Liabilities (E) 2292.34 2,038.34 1,729.42 705.52 483.32 449.77Net Worth (D-E) 703.98 542.32 371.95 271.64 170.60 141.38Represented ByEquity Share Capital (I) 105.00 105.00 105.00 105.00 57.40 32.50Share Application Money (II) 5.75 - - - 0.01 24.90Reserves and Surplus 516.78 437.32 266.95 166.64 113.19 83.98Share Premium 76.45 - - - - -Net Reserves and Surplus (III) 593.23 437.32 266.95 166.64 113.19 83.98Misc. Expenditure (IV) - - - - - -Net worth (I+II+III-IV) 703.98 542.32 371.95 271.64 170.60 141.389
GENERAL INFORMATIONTMName and Registered & Corporate Office of our CompanyMandhana Industries Limited205/214, Peninsula Centre,Dr. S.S. Rao Road,Off Dr. Ambedkar Road,Parel (East),Mumbai – 400 012,Maharashtra,India.Tel No.: +91 22-30409191Fax No.: +91 22-30409218Email: ipo@mandhana.comOur Company is registered with the Registrar of Companies, Mumbai at Maharashtra with Registration Number 11-33553 of1984 and CIN is U17120MH1984PLC033553.The address of the RoC is as follows:Registrar of Companies, MumbaiEverest Building,100, Marine Drive,Mumbai – 400 002,Maharashtra,India.Board of DirectorsOur Board of Directors as on the date of filing this Draft Red Herring Prospectus with SEBI is as follows:Sr. Names of the DirectorsDesignationNo.1. Mr. Purshottam Mandhana Chairman-cum-Managing Director2. Mr. Manish Mandhana Executive Joint Managing Director3. Mr. Biharilal Mandhana Executive Director4. Mr. Gyanendra Bajpai Independent Director5. Mr. Sanjay Asher Independent Director6. Mr. Robin Cornelius Independent Director7. Mr. Khurshed Thananwala Independent DirectorFor a detailed profile of our Board of Directors, please refer to the chapter titled ‘Our Management’ beginning on page no.[•] of this Draft Red Herring Prospectus.Company Secretary and Compliance OfficerCompany SecretaryMr. Benzamin Menezes205/214, Peninsula Centre,Dr. S.S. Rao Road, Off Dr. Ambedkar Road,Parel (East), Mumbai – 400 012,Maharashtra, India.Tel No.: + 91 22 3040 9261Fax No.: + 91 22 3040 9218Email: cs@mandhana.com10
TMCompliance OfficerMr. Nayan Kambli205/214, Peninsula Centre,Dr. S.S. Rao Road, Off Dr. Ambedkar Road,Parel (East),Mumbai – 400 012,Maharashtra,India.Tel No.: + 91 22 3040 9261Fax No.: + 91 22 3040 9218Email: ipo@mandhana.comInvestors can contact the Compliance Officer and / or the Registrar to the Issue and/or the Book Running Lead Managersto the Issue i.e. Mr. Nayan Kambli and / or Intime Spectrum Registry Limited and / or <strong>Edelweiss</strong> Capital Limited,, in caseof any pre-Issue or post-Issue problems such as non-receipt of letters of allocation, credit of allotted Equity Shares in therespective beneficiary account or refund orders, etc.Legal Advisors to this IssueM/s. Crawford Bayley & Co.State Bank Buildings,4th floor N. G. N. Vaidya MargFort, Mumbai - 400 023,Maharashtra, IndiaTel No.: +91 22 2266 8000Fax No.: +91 22 2266 0355E-mail: sanjay.asher@crawfordbayley.comBook Running Lead Manager to the Issue<strong>Edelweiss</strong> Capital Limited14th Floor, Express TowersNariman Point, Mumbai – 400 021,Maharashtra, IndiaTel. No: +91 22 2286 4400Fax No: +91 22 2288 2119E-mail : mandhana.ipo@edelcap.comContact Person: Mr. Abhishek GaurWebsite: www.edelcap.comSEBI Registration Number: INM000010650Registrar to this IssueIntime Spectrum Registry LimitedC-13, Pannalal Silk Mills CompoundLBS Road, Bhandup (West)Mumbai – 400 078,Maharashtra, IndiaTel No.: +91 22 2595 3838Fax No.: +91 22 5555 5499Email: isrl@intimespectrum.comWebsite: www.intimespectrum.comContact Person: Mr. Kishor ThakkarSEBI Registration No.: INR00000376111
TMBankers to our Company1. State Bank of PatialaCommercial Branch,Atlanta, Nariman Point,Mumbai – 400 021,Maharashtra,IndiaTel No.: +91 22 5630 1006 / 5637 5701Fax No.: +91 22 2283 2448/ 5637 5703Contact Person: Mr. VankatnarayanE-mail: sbop313@rediffmail.com3. Bank of MaharashtraOverseas BranchMittal Court, A Wing,Nariman Point,Mumbai – 400 021,Maharashtra,IndiaTel No.: +91 22 2204 5010 / 2288 0451Fax No.: +91 22 2288 1845Contact Person: Mr. Atul BhatiaE-mail: bom1006@vsnl.com5. Corporation BankIndustrial Finance BranchBahrat House, No. 104,Ground Floor,Mumbai Samachar Marg,Fort, Mumbai – 400 023Maharashtra,IndiaTel No.: +91 22 2267 7088 / 2267 2476Fax No.: +91 22 2267 5309Contact Person: Mr. K. Giridhar ShenoyE-mail: cb443@corpbank.co.in7. Oriental Bank of CommerceMahatma Gandhi ,Seva Mandir Trust Bldg,S.V. Road, Opp. TalaoBandra (W),Mumbai – 400 050Maharashtra,IndiaTel No.: +91 22 2643 8786 / 2641 0855Fax No.: +91 22 2643 8789Contact Person: Mr. Mohan PrasadE-mail: mohan.prasad @obcmail.co.in9. Andhra BankFort Branch,Nanavati Mahalaya,18, Homi Modi Street,Fort, Mumbai – 400 023Maharashtra,India2. State Bank of TravancoreMumbai Main Branch,N.M. Wadia Building,125 M.G. Road,Mumbai – 400 021Maharashtra,IndiaTel No.: +91 22 2263 3164 / 22676941Fax No.: +91 22 2267 4263Contact Person: Mr. M. DeviprasadE-mail: mumbai@sbt.co.in4. HDFC Bank LimitedKamala Mill Compound,S.B. Marg, Lower Parel,Mumbai – 400 013Maharashtra,IndiaTel No.: +91 22 2496 1616Fax No.: +91 22 2496 1636Contact Person: Mr. Vishal,E-mail: www.hdfcbank.com6. Axis Bank Limited.Maker Towers ‘F’, 11 th Floor,Cuffe Parade,Coloba,Mumbai 400 005Tel No.: +91 22 6707 1720Fax No.: +91 22 6707 1264Contact Person: Mr. AnirbanChakrabortyE-mail: a.chakraborty@axisbank.com8. Standard Chartered Bank2 nd Floor,270, D.N. Road,Fort, Mumbai – 400 001Maharashtra,IndiaTel No.: +91 22 2219 8646Fax No.: +91 22 2201 9208Contact Person: Mr. Niraj KhowalaE-mail:niraj.khowala@instandardchartered.com10. ICICI Bank Limited.ICICI Bank TowersBandra – Kurla Complex,Mumbai – 400 051Maharashtra,IndiaTel No.: +91 22 2653 898712
Tel No.: +91 22 2204 7626 / 2204 6160Fax No.: +91 22 2204 4535Contact Person: Mr. V. SatryaramE-mail: bmmum051@andhrabank.co.in11. DBS Bank Limited.3 rd Floor, Fort House,221, D.N. Road,Fort, Mumbai – 400 001Maharashtra,IndiaTel No.: +91 22 5638 8888Fax No.: +91 22 5638 8899Contact Person: Mr. Adhidev RoyE-mail: adhidev@dbs.comFax No.: +91 22 2653 1089Contact Person: Mr. Amit SinghalE-mail: amit.singhal@icicibank.com12. INDUS IND Bank Limited.Ground Floor, Maker chamber,Fort,Nariman Point,Mumbai 400 021Tel No.: +91 22 2202 3744Fax No.: +91 22 2202 2387Contact Person: Mr. G. S. KrishnanE-mail: krishnan.gs@indusind.comTMBankers to this Issue and Escrow Collection BanksThe Bankers to this Issue and Escrow Collection Bank shall be finalized prior to filing of the RHP with RoC.Syndicate Member(s)<strong>Edelweiss</strong> Securities Limited14th Floor, Express TowerNariman PointMumbai - 400 021Tel No.: 91 22 22864400Fax No.: 91 22 22882119Email: mandhana.ipo@edelcap.comBrokers to this IssueAll the members of the recognised stock exchanges would be eligible to act as brokers to the Issue.Statutory AuditorsVishal H. Shah & Associates, Chartered AccountantsA-302, Kailas Esplanade,LBS Marg,Opp. Shreyas Cinema,Ghatkopar West,Mumbai – 400086Maharashtra,IndiaTel No.: +91 22 32516269E-mail: vishalhs@rediffmail.comStatement of Responsibilities of BRLM• Capital structuring with the relative components and formalities such as type of instruments etc.• Due diligence of the Company’s operations/management/business plans/legal etc. Drafting and design of the Draft RedHerring Prospectus, the Red Herring Prospectus and the Prospectus and of statutory and non-statutory advertisementincluding memorandum containing salient features of the Prospectus and any other publicity material. The BRLM shallensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges,ROC and SEBI including finalization of the prospectus and filing with the Stock Exchanges/ROC.• Appointment of other intermediaries viz. Registrar to the Issue, printers, advertising agency and Bankers to the Issue.• Retail and Non-Institutional marketing strategy, which will cover inter alia:13
o Formulating marketing strategies, preparation of publicity budget;o Finalize media and public relations strategy;o Finalize centers for holding conferences for press and brokers;o Finalize collection centers;o Follow-up on distribution of publicity and issue material, including Bid cum Application Forms, Red HerringProspectus and deciding on the quantum of the Issue material.• Institutional marketing strategy, which will cover inter alia:o Finalize the list and division of investors for one-on-one meetings;o Managing the book, co-ordination with Stock Exchanges and pricing and institutional allocation in consultationwith the Company;o Finalize roadshow presentations.• The post bidding activities including management of Escrow Accounts, coordination of non-institutional allocation,intimation of allocation and dispatch of refunds to Bidders etc.TM• The post Issue activities will involve essential follow up steps, including finalization of trading and dealing instrumentsand dispatch of certificates and demat delivery of Equity Shares or Warrants, with the various agencies connected withthe work such as the Registrar to the Issue and Bankers to the Issue and the banks handling refund business. The BRLMshall be responsible for ensuring that these agencies fulfill their functions and enable them to discharge thisresponsibility through suitable agreements with the CompanyCredit RatingAs this is an Issue of Equity Shares, credit rating is not required for this Issue.IPO GradingThis Issue being has been graded by [•] as (pronounced [•]), indicating [•]. The rationale furnished by the credit rating agency for itsgrading will be updated at the time of filing the Red Herring Prospectus with the Designated Stock Exchange.TrusteesAs this is an Issue of Equity Shares, the appointment of Trustees is not required.Monitoring AgencyA monitoring agency is not required to be appointed in terms of Clause 8.17 of the SEBI Guidelines. The Board of Directorsof our Company will monitor the use of the proceeds of this Issue.Appraisal EntityThe objects of this Issue have not been appraised by any agency. The objects of this Issue and means of finance therefore arebased on internal estimates of our Company.Book Building ProcessBook Building refers to the process of collection of Bids from investors on the basis of the Red Herring Prospectus, which isbased on the Price Band. The Issue Price is fixed after the Bid/Issue Closing Date. The principal parties involved in the BookBuilding Process are:(1) Our Company,(2) Book Running Lead Manager in this case being <strong>Edelweiss</strong> Capital Limited,(3) Syndicate Member(s) who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible toact as Underwriters. The BRLM shall appoint the Syndicate Members,(4) Registrar to this Issue, and(5) Escrow Collection Bank(s).14
The SEBI Guidelines, have permitted an issue of securities to the public through the 100% Book Building Process, whereinupto 50% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (QIBs) including upto 5 %of the QIB portion that shall be available for Allocation on a proportionate basis to Mutual Funds only and the remainder ofthe QIB portion shall be available for Allocation on a proportionate basis to all QIB bidders, including Mutual Funds.Further, at least 15% of the Issue shall be available for Allocation on a proportionate basis to Non Institutional Bidders and atleast 35% of the Issue shall be available for Allocation on a proportionate basis to Retail Individual Bidders, subject to validBids being received at or above the Issue Price.TMOur Company will comply with the SEBI Guidelines for this Issue. In this regard, our Company has appointed the BRLM tomanage and procure subscriptions to the Issue.QIBs are not allowed to withdraw their Bid after the Bid/ Issue Closing Date and are required to pay 10% Margin Amountupon submission of their Bid. For further details, please refer to the chapters titled ‘Terms of this Issue’ and ‘IssueProcedure’ beginning on page nos. [•] and [•], respectively, of this Draft Red Herring Prospectus.Steps to be taken by the Bidders for bidding:• Check is eligiblility for making a bid (for further details, please refer to the paragraph on ‘Who can Bid’ beginning onpage no. [●] of this Draft Red Herring Prospectus);• Bidders necessarily need to have a demat account and ensure that the demat account details are correctly mentioned inthe Bid Cum Application Form;• Ensure that the Bid Cum Application Form is duly completed as per instructions given in this Draft Red HerringProspectus and in the Bid Cum Application Form;• Bids by QIBs will only have to be submitted to the BRLM• Ensure that the Bid Cum Application Form is accompanied by the Permanent Account Number or by Form 60 or Form61 as may be applicable, together with necessary documents providing proof of address. For further details, please referto the chapter titled ‘Issue Procedure’ beginning on page no. [•] of this Draft Red Herring Prospectus. Bidders arespecifically requested not to submit their GIR number instead of the PAN as the Bid is liable to be rejected.Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purposeof illustration and is not specific to this Issue)Bidders can bid at any price within the price band. For instance, assuming a price band of Rs. 200 to Rs. 240 per share, issuesize of 3,000 equity shares and receipt of five bids from bidders details of which are shown in the table below. A graphicalrepresentation of the consolidated demand and price would be made available at the website of the BSE (www.bseindia.com)and NSE (www.nseindia.com) during the bidding period. The illustrative book as shown below shows the demand for theshares at various prices and is collated from bids from various investors.Number ofEquity SharesBid forBid Price(Rs.)CumulativeEquity SharesBid forSubscription500 240 500 16.67%1000 230 1500 50.00%1500 220 3000 100.00%2000 210 5000 166.67%2500 200 7500 250.00%The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desiredquantum of shares is the price at which the book cuts off i.e., Rs. 220 in the above example. The Issuer, in consultation withthe BRLM will finalize the issue price at or below such cut off price i.e. at or below Rs. 220. All bids at or above this issueprice and cut off bids are valid bids and are considered for Allocation in respective category.Bid/IssueBidding /Issue PeriodBID/ISSUE OPENS ON [●], 2007BID/ISSUE CLOSES ON [●], 200715
Bids and any revision in Bids shall be accepted only between 10:00 hrs and 15:00 hrs (Indian Standard Time) during theBidding Period as mentioned above at the bidding centres mentioned on the Bid Cum Application Form except that on theBid/Issue Closing Date, the Bids shall be accepted only between 10:00 hrs and 13:00 hrs (Indian Standard Time) and uploadedtill such time as permitted by the BSE and the NSE on the Bid/Issue Closing Date. In case of Bids by Retail Individual Bidders,where the Bid Amount is up to Rs. 100,000. Due to limitation of time available for uploading the Bids on the Bid/Issue ClosingDate, the Bidders are advised to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no later than1.00 p.m (Indian Standard Time) on the Bid/Issue Closing Date. Bidders are cautioned that in the event a large number of Bidsare received on the Bid/Issue Closing Date, as is typically experienced in public offerings, which may lead to some Bids notbeing uploaded due to lack of sufficient time to upload, such Bids that cannot be uploaded will not be considered for allocationunder the Issue. Bids will only be accepted on working days, i.e., Monday to Friday (excluding any public holiday).TMOn the Bid/Issue Closing Date, extension of time will be granted by the Stock Exchanges only for uploading the Bids receivedby Retail Bidders after taking into account the total number of Bids received upto the closure of timings for acceptance of Bidcum-ApplicationForms as stated herein and reported by the BRLMs to the Stock Exchange within half an hour of such closure.Our Company reserves the right to revise the Price Band during the Bidding Period in accordance with SEBI Guidelines. Thecap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with theimmediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of thePrice Band.In case of revision in the Price Band, the Issue Period will be extended for three additional days after revision of Price Bandsubject to the Bidding /Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release,and also by indicating the change on the web sites of the BRLM and at the terminals of the Syndicate.Withdrawal of the IssueOur Company in consultation with the BRLM, reserves the right not to proceed with the Issue at anytime after the Bid / IssueClosing Date, without assigning any reason thereof. Nothwithstanding the foregoing, the Issue is also subject to obtaining (i)the final listing and trading approvals of the Stock Exchanges, which the Company shall apply for after Allotment; and (ii)the final RoC approval of the Prospectus after it is filed with the RoC. In terms of the SEBI Guidelines, QIB Bidders shall notbe allowed to withdraw their Bid after the Bid/Issue Closing Date.UnderwritingAfter the determination of the Issue Price but prior to filing of the Prospectus with RoC, we will enter into an UnderwritingAgreement with the Underwriters for the Equity Shares proposed to be issued through this Issue. It is proposed that pursuantto the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the eventthat the Syndicate Member(s) do not fulfill their underwriting obligations.The Underwriters have indicated their intention to underwrite the following number of Equity Shares:Name and Address of theUnderwriters<strong>Edelweiss</strong> Capital Limited14th floor, Express Towers,Nariman Point,Mumbai – 400 021Tel No.: +91 22 4086 3535Fax No.: +91 22 2288 2119E-mail:mandhana.ipo@edelcap.com<strong>Edelweiss</strong> Securities Limited14th floor, Express Towers,Nariman Point,Mumbai – 400 021Indicated Number ofEquity Shares to beUnderwritten[•][•]AmountUnderwritten (Rs.Million)[•][•]16
Name and Address of theUnderwritersIndicated Number ofEquity Shares to beUnderwrittenAmountUnderwritten (Rs.Million)Tel No.: +91 22 2286 4400Fax No.: +91 22 2288 2119E-mail:mandhana.ipo@edelcap.comTotal [•] [•]TM(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with RoC)The above-mentioned amount is an indicative underwriting and would be finalised after pricing and actual Allocation. Theabove underwriting agreement is dated [•].In the opinion of the Board of Directors of our Company (based on a certificate given by the Underwriters), the resources ofall the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations infull. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act or registered asbrokers with the Stock Exchange(s). The above Underwriting Agreement will be presented for acceptance to the Board ofDirectors and our Company will issue letters of acceptance to the Underwriters.Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstandingthe above table, the BRLM and the Syndicate Member(s) shall be severally responsible for ensuring payment with respect toEquity Shares allocated to investors procured by them. In the event of any default in payment, the respective underwriter inaddition to other obligations to be defined in the Underwriting Agreement, will also be required to procure/subscribe to theextent of the defaulted amount, as specified in the underwriting agreement.17
CAPITAL STRUCTURETMThe share capital of our Company as on the date of filing of this Draft Red Herring Prospectus with SEBI is as set forthbelow.Share Capital as on the date of filing of this Draft Red Herring ProspectusA. Authorised Capital19,990,000 Equity Shares of the face value of Rs. 10/- each10,000 Preference Shares of Rs. 10/- eachAggregate Valueat Face Value199,900,000100,000Amount in Rs.AggregateValue at IssuePriceB. Issued, Subscribed and Paid-Up Capital before this Issue11,075,000 Equity Shares of the face value of Rs. 10/- each 110,750,000C. Present Issue to the public in terms of this Draft Red Herring Prospectus4,025,000 Equity Shares of the face value of Rs. 10/- each as Issue to the Public* [●] [•][●]Warrants [●] [●]Of WhichQIB portion of upto [●] Equity shares of Rs. 10/- each and [●]Warrants* [●] [●]Non-Institutional portion of at least [●]Equity shares of Rs. 10/- each and [●][●][●]Warrants**Retail portion of at least [●]Equity shares of Rs. 10/- each and [●]Warrants** [●] [●]D. Issued, Subscribed and Paid-Up Capital after this Issue15,100,000 Equity Shares of the face value of Rs. 10/- each outstanding after theIssue before the Warrant Exercise[●] Equity Shares of Rs. 10 each outstanding after the Issue and after WarrantExercise[●][●][•][●]F. Securities Premium Account (1)Before this Issue 82,012,500After this Issue - [•]* Public Issue includes Pre-IPO Placement upto 250,000 shares.**prior to exercise of Warrants into equity shares(1) The amount standing in the Securities Premium Account, on a pre-Issue basis, is Rs. 82,012,500. The increase in the SecuritiesPremium Account as a result of the Issue will be completed only after the Issue Price is determined.Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon the completion ofthe Pre-IPO placement the number of equity shares in the Issue will be reduced by the number of shares in the Pre-IPO Placement.The Issue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Share capital.Notes to the Capital Structure1. Details of increase in Authorised Share Capital since incorporationSr.No.Particulars of increase1. 50,000 equity shares of Rs. 100 eachaggregating to Rs. 5,000,000Date of AGM/EGMShareholders’meetingIncorporation -18
TM2. Changed from 50,000 equity shares of Rs. 100each aggregating to Rs, 5,000,000/- to 100,000equity shares of Rs. 100 each aggregating to Rs.10,000,000/-3. Changed from 100,000 equity shares of Rs. 100each aggregating to Rs, 10,000,000/- to 300,000equity shares of Rs. 100 aggregating to Rs.30,000,000/-4. The Nominal value of the equity share wassubdivided from Rs. 100 each to Rs. 10 each5. changed from 300,000 equity shares of Rs. 100/-each aggregating to Rs, 30,000,000/- to5,000,000 equity shares of Rs 10 eachaggregating Rs. 50,000,000/-6. Changed from 5,000,000 equity shares of Rs. 10each aggregating to Rs. 50,000,000/-by addition740,000 equity shares of Rs. 10 each and 10,000redeemable preference shares of Rs. 10 eachaggregating to Rs. 57,500,000/-7. Changed from 5,740,000 equity shares of Rs. 10each and 10,000 redeemable preference shares ofRs. 10 each aggregating to Rs. 57,500,000/- to99,90,000 equity shares of Rs. 10 each and10,000 redeemable preference shares of Rs. 10each aggregating to Rs. 100,000,000/-8. Changed from 99,90,000 equity shares of Rs. 10each and 10,000 redeemable preference shares ofRs. 10 each agreegating to Rs. 100,000,000/- to14,990,000 equity shares of Rs. 10 and 10,000redeemable preference shares of Rs. 10 eachaggregating to Rs. 150,000,000/-9. Changed from14,990,000 equity shares of Rs.10 each and 10,000 redeemable preferenceshares of Rs. 10 each Rs. 150,000,000/- to19,990,000 equity shares of Rs. 10 and 10,000redeemable preference shares of Rs. 10 eachaggregating to Rs. 200,000,000/-2. Share Capital History of our CompanyOctober 29, 1993June 20, 1994January 28, 1995January 28, 1995March 6, 2003October 25, 2004February 18,2005July 2, 2007EGMEGMEGMEGMEGMEGMEGMEGMDate ofAllotment ofthe EquitySharesJuly 25,1984October 21,1985September15, 1992October 05,1993February 02,1994No. ofEquitySharesCumulativeNumber ofSharesFaceValueIssuePriceNature ofpayment ofconsiderationReasons forAllotment70 70 100 100 Cash SubscriptiontoMemorandum19,000 19,070 100 100 Cash Furtherallotment110 19,180 100 100 Cash FurtherAllotment30,820 50,000 100 100 Cash FurtherAllotment50,000 100,000 100 100 Cash FurtherAllotmentCumulativeSecuritiesPremiumAccountCumulative Paid -up Capital- 7,000- 1,907,000- 1,918,000- 5,000,000- 10,000,00019
Date ofAllotment ofthe EquitySharesJune 20,1994No. ofEquitySharesCumulativeNumber ofSharesFaceValueIssuePriceNature ofpayment ofconsiderationReasons forAllotment100,000 200,000 100 100 Cash FurtherAllotmentCumulativeSecuritiesPremiumAccountCumulative Paid -up Capital- 20,000,000TMSub-division of nominal value of Equity shares of our Company from Rs. 100 per Equity Share to Rs. 10 perEquity Share vide EGM dated January 28, 1995.March 27,19951,000,000 3,000,000 10 10 Cash FurtherAllotmentMarch 250,000 3,250,000 10 10 Cash Further31,2001AllotmentMarch 2,490,000 5,740,000 10 10 Cash Further30,2004AllotmentFebruary 18, 4,760,000 10,500,000 10 10 Cash Further2005AllotmentJuly 25, 37,500 10,537,500 10 10 Cash at a Preferential2007premium Allotmentof Rs.165/- each.526,000 11,063,500 10 10 Cash at apremiumof Rs.140/- each11,500 11,075,000 10 10 Cash at apremiumof Rs.190/- each.PreferentialAllotmentPreferentialAllotment- 30,000,000- 32,500,000- 574,00,000- 105,000,0006,187,500 105,375,00079,827,500 110,635,00082,012,500 110,750,0003. Details of Promoters Contribution and Lock-InThe details of Promoter Contribution and Lock-In have been calculated assuming allotment 4,025,000 Equity Shares and1,341,667 Warrants (each convertible into one Equity Share in the Issue)a. Capital built up of PromotersName of thePromoterMr. BiharilalMandhanaDate ofAllotmentConsideration(cash,bonus,considerationotherthancash)NumberofEquitySharesFaceValueperEquityShare(inRs)Issue/Transferprice perEquityShare inRs.Mode ofacquisition(Allotment/Transfer)June 20, 1994 Cash 100,000 10 10 AllotmentMarch 23, 1995 Cash 35,000 10 10 TransferCash 15,000 10 10 TransferJune 30, 2003 Cash 62,500 10 10 TransferCash 20,000 10 10 TransferMarch 30, 2004 Cash 2,00,000 10 10 AllotmentFebruary 18, 2005 Cash 4,08,500 10 10 AllotmentTOTAL (A) - 8,41,000 - - -20
TMMr. Purushottam June 20, 1994 Cash 92,500 10 10 AllotmentMandhana March 27, 1995 Cash 50,000 10 10 AllotmentJune 30, 2003 Cash 62,500 10 10 TransferCash 75,000 10 10 TransferMarch 30, 2004 Cash 185,000 10 10 AllotmentFebruary 18, 2005 Cash 415,500 10 10 AllotmentTOTAL (B) - 8,80,500 - - -Mr. ManishMandhanaJune 20, 1994 Cash 80,000 10 10 AllotmentMarch 23, 1995 Cash 5,000 10 10 TransferCash 2,500 10 10 TransferMarch 27, 1995 Cash 2,500 10 10 AllotmentJune 30, 2003 Cash 65,000 10 10 TransferMarch 30, 2004 Cash 3,37,310 10 10 AllotmentFebruary 18, 2005 Cash 4,49,690 10 10 AllotmentTOTAL (C) - 9,42,000 - - -Mr. PriyavratMandhanaMarch 23, 1995 Cash 25000 10 10 TransferCash 20000 10 10 TransferCash 10000 10 10 TransferCash 10000 10 10 TransferCash 5000 10 10 TransferMarch 31, 2001 Cash 17500 10 10 AllotmentJanuary 10, 2004 Cash 140000 10 10 TransferCash 187500 10 10 TransferCash 170000 10 10 TransferCash 25000 10 10 TransferCash 52500 10 10 TransferMarch 30, 2004 Cash 220000 10 10 AllotmentFebruary 18, 2005 Cash 740500 10 10 AllotmentNovember 06,2006Cash 20000 10 30 TransferTOTAL (D) - 16,43,000 - - -PurushottamMandhana(HUF)March 31, 2001 Cash 15000 10 10 AllotmentJanuary 10, 2004 Cash 85000 10 10 TransferCash 160000 10 10 TransferMarch 30, 2004 Cash 595000 10 10 AllotmentFebruary 18, 2005 Cash 752000 10 10 AllotmentTOTAL (E) - 16,07,000 - - -Grand Total(A+B+C+D)- 59,13,500 - - -21
TMb. Details of Promoters contribution locked in for three yearsName of thePromoterMr. BiharilalMandhanaMr.PurshottamMandhanaMr. ManishMandhanaMr. PriyavratMandhanaPurshottamMandhana(HUF)Date ofAllotmentFebruary 18,2005March 30,2004February 18,2005March 30,2004February 18,2005Date onwhichEquitySharesweremadefully paidupFebruary 18,2005March 30,2004February 18,2005March 30,2004February 18,2005March 30, 2004 March 30,2004November06, 2006February 18,2005February 18,2005November06, 2006February 18,2005February 18,2005Mode ofacquisition(Allotment/transfer)NumberofEquitySharesFaceValueperEquityShare(inRs)Issue/Transferprice perEquityShare inRs.Consideration (cash,bonus,consideration otherthancash)Percentageof pre-Issuepaid-upcapitalPercentageof post-Issuepaid-upcapitalAllotment 408,500 10 10 Cash 3.69% 2.48%Allotment 200,000 10 10 Cash 1.81% 1.22%Allotment 415,500 10 10 Cash 3.75% 2.53%Allotment 185,000 10 10 Cash 1.67% 1.13%Allotment 449,690 10 10 Cash 4.06% 2.74%Allotment 137,310 10 10 Cash 1.24% 0.84%Transfer 20,000 10 10 Cash 0.18% 0.12%Allotment 740,500 10 10 Cash 6.69 % 4.50%Allotment 752,000 10 10 Cash 6.79% 4.57%TOTAL 3,308,500 29.87% 20.12%We confirm that the minimum Promoters’ contribution of 20% which is subject to lock-in for three years does not consist of:(a) Equity Shares acquired for consideration other than cash and revaluation of assets or capitalization of intangible assets orbonus shares out of revaluation reserves or reserves without accrual of cash resources.(b) Securities issued during the preceding one year, at a price lower than the price at which Equity Shares are being offeredto public.(c) Private placement made by solicitation of subscription from unrelated persons either directly or through anyintermediary.(d) Equity Shares issued to Promoters on conversion of partnership firms into limited company.(e) Equity Shares with a contribution less than Rs. 25,000/- per application from each individual and contribution less thanRs.100, 000/- from firms and companies.As per Clause 4.13.1 of the SEBI Guidelines, Equity Shares locked in for a period of three years have been locked in onLIFO basis (that is shares have been issued last shall be locked in first) from the date of Allotment in this Issue.20% of the post-Issue paid-up equity share capital, as determined after the book-building process from the above mentionedfour Promoters i.e., Mr. Biharilal Mandhan, Mr. Purshottam Mandhana, Mr. Manish Mandhana, Mr. Priyavrat Mandhana andPurshottam Mandhana (HUF) would be locked-in for a period of three years from the date of allotment in the present Issueand the balance Pre-Issue Paid-up Equity Share Capital would be locked-in for a period of one year from the date ofallotment in the present Issue.22
TMc. Details of Promoters’ contribution locked-in for 1 year:Name ofthePromoterMr.BiharilalMandhanaDate ofAllotmentDate onwhichEquityShares weremade fullypaid upJune 20, June 20,1994 1994March 23, March 23, 19951995June 30, 2003 June 30, 2003Mode ofacquisition(Allotment/transfer)Number ofEquitySharesFaceValueperEquityShare(in Rs)Issue/Transferprice perEquityShare inRs.Consideration(cash,bonus,considerationotherthancash)% ofpre-Issuepaid-upcapital% ofpost-Issuepaid-upcapitalAllotment 100,000 10 10 Cash 0.90 0.61TransferTransfer35,000 10 10 Cash 0.32 0.2115,000 10 10 Cash 0.14 0.0920,000 10 10 Cash 0.18 0.1262,500 10 10 Cash 0.56 0.38Mr.PurshottamMandhanaTOTAL (A)June 20, June 20,1994 1994March 27, March 27,1995 1995June 30, 2003 June 30, 2003TOTAL (B)2,32,500 2.10 1.41Allotment 92,500 10 10 Cash 0.84 0.56Allotment 50,000 10 10 Cash 0.45 0.30Transfer 62,500 10 10 Cash 0.56 0.3875,000 10 10 Cash 0.68 0.462,80,000 2.53 1.70Mr. ManishMandhanaJune 20, 1994 June 20, 1994 Allotment 80,000 10 10 Cash 0.72 0.49March 23,1995March 23, 1995 Transferredfrom GajadharMandhana5,000 10 10 Cash 0.05 0.03Transferred 2,500 10 10 Cash 0.02 0.02from Ms.ShailaMandhanaMarch 27, March 27, 1995 Allotment 2,500 10 10 Cash 0.02 0.021995June 30, 2003 June 30, 2003 Transfer from 65,000 10 10 Cash 0.59 0.40Mr. AshokMandhanaMarch 30, March 30, 2004 Allotment 2,00,000 10 10 Cash1.2220041.81TOTAL (C)387,310 3. 21 2.16Mr.PriyavratMandhanaMarch 23,1995March 31,2001March 23,1995March 31,2001Transfer 70000 10 10 Cash 0.63 0.43Allotment17,500 10 10 Cash 0.16 0.1123
Name ofthePromoterDate ofAllotmentJanuary 10,2004March 30,2004Date onwhichEquityShares weremade fullypaid upMode ofacquisition(Allotment/transfer)Number ofEquitySharesFaceValueperEquityShare(in Rs)Issue/Transferprice perEquityShare inRs.Consideration(cash,bonus,considerationotherthancash)% ofpre-Issuepaid-upcapital% ofpost-Issuepaid-upcapitalJanuary 10, Transfer 575000 10 10 Cash 5.19 3.502004March 30, 2004 Allotment 220,000 10 10 Cash 1.99 1.34TMTOTAL (D)882500 7.97 5.37PurshottamMandhana(HUF)March 31,2001January 10,2004March 30,2004March 31, 2001 Allotment 15,000 10 10 Cash 0.14 0.09January 10,2004March 30,2004Transfer fromNarayandasMandhana(HUF)160,000 10 10 Cash 1.44 0.97Transfer from 85,000 10 10 Cash 0.77 0..52Ms. NirmalaMandhanaAllotment 595,000 10 10 Cash 5.37 3.62TOTAL (E)855000 7.72 5.20GRAND TOTAL(A+B+C+D+E)2,605,000 23.52 15.84We confirm that the specific written consents have been obtained from all of the Promoters for inclusion of their shares forcomputation of minimum Promoters’ contribution subject to lock-in.Shares held by any person other than our Promoters, prior to this Issue, which are subject to lock in as per the relevantprovisions of Chapter IV of SEBI Guidelines, may be transferred to any other person holding shares which are locked in,subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities andExchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable.Shares held by our Promoters which are locked in as per the relevant provisions of Chapter IV of the SEBI Guidelines, may betransferred to and amongst Promoters/Promoter Group Entities or to a new promoter or persons in control of our Company,subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and ExchangeBoard of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable. The locked-in Equity Sharesheld by our Promoters can be pledged only with banks or financial institutions as collateral security for loans granted by suchbanks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan.4. Except as described below, our Promoters and our Promoter Group Entities, the Directors of our Company, the Directors ofour Promoter Group Entities have not purchased, neither have they sold any Equity Shares, during a period of six monthspreceding the date of filing this Draft Red Herring Prospectus with SEBI.24
TMNameMs. MangalaSomaniMr.GyanendranathBajpaiMs. ShakuntalaDargadMs. TulsibaiChandakMs. BhagwatiChandakMr. Sanjay AsherDate ofAllotmentJuly 25, 2007October 05,2007October 05,2007October 05,2007October 05,2007October 05,2007December 04,2007ConsiderationCashCashCashCashCashCashCashNo. ofEquitySharesFaceValue(Rs.)Issue Price /AcquisitionPrice (Rs.)1000 10/- 150/-10,000 10/- 40/-500 10/ 150/-1000 10/ 150/-1000 10/ 150/-10,000 10/ 30/-10,000 10/ 30/-Purchase / SalePurchasePurchasePurchasePurchasePurchasePurchasePurchase5. None of our Directors or key managerial personnel hold Equity Shares in the Company, other than as follows:Sr.No.Names of our DirectorsNo. of Equity Shares% of Pre-Issue ShareCapital1. Mr. Purshottam Mandhana 880500 7.952. Mr. Biharilal Mandhana 841000 7.593. Mr. Manish Mandhana 942000 8.514. Mr. Gyanendra Bajpai 10000 0.095. Mr. Sanjay Asher 20000 0.186. Other than as set out in “Capital Structure- Notes to Capital Structure - Share Capital History of the Company”, ourPromoters have not been issued Equity Shares for consideration other than cash.7. Our Company, our Directors, our Promoters and the BRLM to this Issue have not entered into any buy-back, standby orsimilar arrangements for purchase of Equity Shares of our Company from any person.8. An over-subscription to the extent of 10% of this Issue size can be retained for the purpose of rounding off whilefinalizing the basis of Allotment of Equity Shares and Warrants. All fractional allotments of Warrants would be roundedoff to the next higher integer, as a consequence of which the number of Warrrants allotted could exceed the number ofEquity Shares allotted in terms of this Draft Red Herring Prospectus.9. As on date of filing of this Draft Red Herring Prospectus there are no outstanding Warrants, options or rights to convertdebentures loans or other financial instrument into our Equity Shares. The shares locked-in by our Promoters are notpledged to any party.10. As per RBI regulations, OCBs are not allowed to participate in this Issue.11. Since the entire money of Rs. [●]/- per share (Rs. 10/- face value + Rs. [●]/- premium) is being called on application, allthe successful applicants will be issued fully paid-up Equity Shares.12. The Equity Shares of our Company are fully paid up and there are no partly paid up Equity Shares as on date.13. In case of over-subscription in all categories, upto 50% of the Issue to the Public shall be allocated on a proportionatebasis to Qualified Institutional Buyers, of which 5% shall be reserved for Mutual Funds. Further, at least 15% of theIssue to the Public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and at least 35%25
of the Issue to the Public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject tovalid bids being received at or above the Issue Price.TM14. Under-subscription, if any, in any portion would be met with spill over from other categories at the sole discretion of ourCompany in consultation with the BRLM and the Designated Stock Exchange.15. (a) Particulars of the top ten shareholders 2 years prior to the date of filing of the Draft Red Herring Prospectus withSEBI.Sr. No. Name of Shareholders Number of Equity Shares Percentage of Total Paid-Up Capital1. Purshottam C.Mandhana (HUF) 1,657,000 15.78%2. Mst.Priyavrat P.Mandhana 1,633,000 15.55%3. Mr.Manish Biharilal Mandhana 992,000 9.45%4. Mr.Purshottam C.Mandhana 918,000 8.74%5. Mrs.Sudha B.Mandhana 873,000 8.31%6. Mrs.Prema P.Mandhana 997,000 9.50%7. Mr.Biharilal C. Mandhana 901,000 8.58%8. Mrs.Sangita M. Mandhana 604,000 5.75%9. Biharilal C. Mandhana (HUF) 599,000 5.70%10. Mst.Arnav M.Mandhana 407,000 3.88%(b) Particulars of top ten shareholders ten days prior to the filing this Draft Red Herring Prospectus with SEBISr. No. Name of Shareholders Number of Equity Percentage of TotalShares Paid-Up Capital1. Mr. Priyavrat Mandhana Jt. Mr. Purushottam1,643,000 14.48%Mandhana2. Purushottam Mandhana Jt. Ms. Prema Mandhana 1,607,000 14.51%(HUF)3. Mr. Manish Mandhana Ms. Sangita Mandhana 942,000 8.51%4. Mr. Purushottam Mandhana Ms. Prema Mandhana 880,500 7.95%5. Ms. Sudha Mandhana Mr. Biharilal Mandhana 870,500 7.86%6 Ms. Prema Mandhana Mr. Purushottam Mandhana 869,500 7.85%7. Ms. Biharilal Mandhana Ms. Sudha Mandhana 841000 7.598 Ms.Sangeeta Mandhana Ms. Manish Mandhana 554000 5%9 Biharilal Mandhana HUF Ms. Sudha Mandhana 549000 4.96%10 Master Arnav Mandhana Through Natural GuardianManish Mandhana407,000 3.67%26
TM(c) Particulars of the top ten shareholders as on the date of filing of this Draft Red Herring Prospectus with SEBISr. No. Name of Shareholders Number of Equity Percentage of TotalShares Paid-Up Capital1. Mr. Priyavrat Mandhana Jt. Mr. Purushottam1,643,000 14.48%Mandhana2. Purushottam Mandhana Jt. Ms. Prema Mandhana 1,607,000 14.51%(HUF)3. Mr. Manish Mandhana Ms. Sangita Mandhana 942,000 8.51%4. Mr. Purushottam Mandhana Ms. Prema Mandhana 880,500 7.95%5. Ms. Sudha Mandhana Mr. Biharilal Mandhana 870,500 7.86%6 Ms. Prema Mandhana Mr. Purushottam Mandhana 869,500 7.85%7. Ms. Biharilal Mandhana Ms. Sudha Mandhana 841000 7.598 Ms.Sangeeta Mandhana Ms. Manish Mandhana 554000 5%9 Biharilal Mandhana HUF Ms. Sudha Mandhana 549000 4.96%10 Master Arnav Mandhana Through Natural GuardianManish Mandhana407,000 3.67%16. Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon thecompletion of the Pre-IPO placement the number of equity shares in the Issue will be reduced by the number of shares in thePre-IPO Placement. The Issue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Sharecapital.17. Shareholding pattern of our Company prior and post this IssueName of theShareholdersPre-Issue EquityCapitalNumber ofEquitySharesPost-Issue EquityCapital beforeconversion of Warrantsinto Equity Shares% Number ofEquity SharesPost – Issue Capital onConversion of 1,258,333Warrants into EquityShares% Number ofEquity SharesPost – Issue Capital onConversion of 1,341,667Warrants into Equity Shares% Number ofEquity SharesPromotersMr. Biharilal 8,41,000 7.59 8,41,000 5.57 8,41,000 5.14 841000 5.12MandhanaMr. Purshottam 8,80,500 7.95 8,80,500 5.83 8,80,500 5.38 880500 5.36MandhanaMr. Manish Mandhana 9,42,000 8.51 9,42,000 6.24 9,42,000 5.76 942000 5.73Mr. Priyavrat 16,43,000 14.84 16,43,000 10.88 16,43,000 10.04 1643000 9.99MandhanaPurshottam Mandhana 16,07,000 14.51 16,07,000 10.64 16,07,000 9.82 1607000 9.77(HUF)Sub Total (A) 59,13,500 53.40 59,13,500 39.16 59,13,500 36.15 5913500 35.97Promoter GroupBiharilal Mandhana 5,49,000 4.96 5,49,000 3.64 5,49,000 3.36 549000 3.34(HUF)Manish Mandhana 3,92,000 3.54 3,92,000 2.60 3,92,000 2.40 392000 2.38(HUF)Ms. Sudha Mandhana 8,70,500 7.86 8,70,500 5.76 8,70,500 5.32 870500 5.29Ms. Prema Mandhana 8,69,500 7.85 8,69,500 5.76 8,69,500 5.32 869500 5.29Ms. Sangita Mandhana 5,54,000 5.00 5,54,000 3.67 5,54,000 3.39 554000 3.37Master Arnav 4,07,000 3.68 4,07,000 2.70 4,07,000 2.49 407000 2.48Mandhana%27
Pre-Issue EquityCapitalPost-Issue Equity Post – Issue Capital onCapital before Conversion of 1,258,333conversion of Warrants Warrants into Equityinto Equity SharesSharesTMPost – Issue Capital onConversion of 1,341,667Warrants into Equity SharesMr. Vinay Mandhana 2,39,500 2.16 2,39,500 1.59 2,39,500 1.46 239500 1.46Ms Muskan Mandhana 2,05,000 1.85 2,05,000 1.36 2,05,000 1.25 205000 1.25Other relatives of thePromoters individuallyholding less than 1% ofpre Issue capital.8,000 0.07 8,000 0.05 8,000 0.05 8000 0.05Sub Total (B) 40,94,500 36.97 40,94,500 27.12 40,94,500 25.03 4094500 24.90Promoter & Promoter 10,008,000 90.37 10,008,000 66.28 10,008,000 61.18 10,008,000 60.87Group Total (A+B)Non-PromoterInvestorsBody Corporates 249,000 2.52 249,000 1.65 249,000 1.52 249,000 1.51Individuals1) Individual - - - -Shareholders holdingnominal share capitalexceeding Rs. 1million2) Individual 6,97,900 6.03 6,97,900 4.62 6,97,900 4.27 6,97,900 4.24shareholders holdingnominal share capitalup to Rs 1 millionAny other (HUF) 120,100 1.08 120,100 0.80 120,100 0.73 120,100 0.73Sub Total (C) 1,067,000 9.63 1,067,000 7.07 1,067,000 6.52 1,067,000 6.49Total Pre Issue 11,075,000 100 11,075,000 73.34 11,075,000 67.70 11,075,000 67.36Capital (A+B+C)= (D)1. Public Issue - - 4,025,000 26.66 3,775,000 ** 23.08 4,025,000 *** 24.482. Equity Shares1,258,333 7.69 1341667 8.16arising on exercise ofWarrantsPublic Issue (F) 4,025,000 26.66 5,033,333 30.77 5,366,667 32.64Total Post Issuecapital (D+E+F)- - 15,100,000 100 16,358,333 100 16,441,667 100.00* Public Issue including proposed Pre-IPO placement upto 250,000 equity shares.** In case of a Pre IPO placement taking place, the maximum possible number of warrants to be allotted would get calculatedon the public issue portion of 3,775,000 equity shares, excluding 250,000 for Pre IPO placement.*** In case of a Pre-IPO placement of upto 250,000 equity shares of the company does not take place, the same shall be addedto the net issue to the public.18. The total number of members of our Company as on the date of filing this Draft Red Herring Prospectus is 225.19. Our Company has not raised any bridge loan against the proceeds of this Issue.20. Subject to the Pre-IPO Placement, we presently do not intend or propose to alter our capital structure, whether by way ofissue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing fromsubmission of this Draft Red Herring Prospectus with SEBI until the Equity Shares offered through this Draft RedHerring Prospectus have been listed.28
TM21. We presently do not have any intention or proposal to alter our capital structure for a period of six months from the dateof opening of this Issue, by way of split/ consolidation of the denomination of Equity Shares or further issue of EquityShares (including issue of securities convertible into exchangeable, directly or indirectly, for our Equity Shares) whetherpreferential or otherwise, except that if we enter into acquisition(s) or joint venture(s), we may consider additionalcapital to fund such activities or to use Equity Shares as a currency for acquisition or participation in such joint ventures.22. There shall be only one denomination of Equity Shares, unless otherwise permitted by law. We shall comply with suchdisclosure and accounting norms as may be specified by SEBI from time to time.23. An investor cannot make a Bid for more than the number of Equity Shares offered through the Issue, subject to themaximum limit of investment prescribed under relevant laws applicable to each category of investor.24. Our Company has not revalued its assets since its incorporation.25. Our Company has not issued any Equity Shares out of revaluation reserves or for consideration other than cash exceptfor bonus issue made out of free reserves.26. Our Company has not made any public issue since its incorporation.27. The shares locked in by our Promoters are not pledged to any party. The locked-in Equity Shares held by our Promoterscan be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financialinstitutions, provided the pledge of shares is one of the terms of sanction of such loan.28. Our Company does not have any employee stock option plan or scheme.29. No payment, direct or indirect in the nature of discount, commission, and allowance or otherwise shall be made eitherby us or our Promoters or Directors to the persons who receive allotments, if any, in this Issue.30. The Equity Shares which are subject to lock-in shall carry the inscription “non-transferable” and the non-transferabilitydetails shall be informed to the depositories. The details of lock-in shall also be provided to the stock exchanges, wherethe shares are to be listed, before the listing of the securities.31. Our Promoters and Promoter Group will not participate in this Issue.32. Allotment of Equity Shares at a price lower than the Issue Price within the last 12 months.Date Number of Shares Face Value Issue Price DetailsJuly 25, 2007 526,000 10 150 Allotment of EquityShares to the PromoterGroup and other BodyCorporate andIndividualsJuly 25, 2007 37,500 10 175 Allotment of EquityShares to the otherIndividuals (nonPromoter / PromoterGroup)July 25, 2007 11,500 10 200 Allotment of EquityShares to the otherIndividuals (nonPromoter / PromoterGroup)29
TMOBJECTS OF THIS ISSUEThe Objects of the Issue are the following:• Setting up of garment manufacturing facilities at:• Yeshwanthpur, Bangalore.• Doddballapur, Bangalore.• Hubli in Karnataka State.• Setting up of a garment sampling unit at Sewree, Mumbai.• Setting up of the Ammonia Process plant and Continuous Dyeing Range / Continuous Bleaching Range plant (together“Fabric Processing Plant”) at Thane.• Setting up of a Marketing and Sales office at Parel, Mumbai• Expansion of Weaving Facility: Implementation of second phase of Expansion of weaving facility at Thane.• Margin Money for Working Capital• General Corporate Purpose• Meeting issue expensesThe main Object clause of our Memorandum of Association and the objects incidental to the main objects enable us to undertakeexisting activities and the activities for which the funds are being raised by us through this present Issue.REQUIREMENTS OF FUNDSThe total estimated fund requirement is as follows.Details of Fund Requirement (Table I)(Rs. In Mn.)Sr. ParticularsTotal CostNo.A. Setting up of garment manufacturing facilities:i. At Yeshwanthpur, Bangalore in Karnataka state 470.00ii. At Doddballapur, Bangalore in Karnataka state 400.00iii. At Hubli in Karnataka state 400.00B. Setting up of a garment sampling unit at Sewree, Mumbai in Maharashtra state 156.00C. Setting up of Fabric Processing Plant at C-2, MIDC, Tarapur, Boisar, Taluka Palghar, 1360.00Thane in Maharashtra stateD. Setting up of a Marketing and Sales office at Parel, Mumbai in Maharashtra state 44.00E. Expansion of Weaving Facility: Implementation of second phase of Expansion of weaving 500.00facility at C-2, MIDC, Tarapur, Boisar, Taluka Palghar, Thane in Maharashtra state.F. Margin Money for Working Capital 247.10G. General Corporate Purpose [●]H. Issue Related Expenses [●]TOTAL[●]Detailed Cost of the Project (Table II) -ParticularsApparel Manufacturing facilitiesYeshwanth DoddballapurpurHubliSamplingUnit atMumbaiFabricProcessingPlantMarketingand Salesoffice atMumbaiExpansionof WeavingFacilityTotalLand 105.00 22.00 20.00 - 63.60 - - 210.60Civil Work 95.00 110.00 110.00 105.00 150.00 44.00 40.00 654.00& Building30
ParticularsApparel Manufacturing facilitiesYeshwanth DoddballapurpurHubliSamplingUnit atMumbaiFabricProcessingPlantMarketingand Salesoffice atMumbaiExpansionof WeavingFacilityFurniture,20.00 18.00 20.00 2.50 20.40 - 7.50 88.4Fixtures &OfficeEquipments#Plant &250.00 250.00 250.00 48.50 1126.00 - 452.50 2377.00Machinery(incl.Erection /Commissioning &Miscellaneous Expenses)Margin forWorking- - - - - - -247.10CapitalTotal 470.00 400.00 400.00 156.00 1360.00 44.00 500.00 3577.1# The expense for furniture, fixtures & office equipments is based on Management estimates.TotalTMMEANS OF FINANCEOur requirement of funds is proposed to be financed through this proposed Issue and internal accruals, as detailed below:(Rs. In Mn.)ParticularsTotalPublic Issue of Equity Shares[●]Term Loan under TUFS (Technology Upgradation Fund Scheme) 2770.00TOTALThe fund requirement and deployment are based on internal management estimates and vendor quotations. These are based on currentconditions and are subject to change in light of changes in external circumstances or cost, other financial conditions, business strategy.In case of variations of actual utilization of funds allocated for the purpose set forth above, increase fund requirements for a particularpurpose may be financed by surplus, surplus funds available if any, available in respect of the other purposes for which funds arebeing raised in this issue. If surplus funds are unavailable, the required financing will be through our internal accruals and/or debt.We may have to revise our expenditure and fund requirements as a result of variations in the cost structure, changes in estimates andexternal factors, which may not be within the control of our management. Any such change in our plans may require rescheduling,revising or cancelling the planned expenditure at the discretion of the management of the Company. The project has not beenappraised by external agencies and as such all the fundrequirements are based on management estimate.In case of any shortfall or cost overruns, we intend to meet our estimated expenditure from our internal accruals and debt. Excessfunds, if any would be utilized for general corporate purpose including but not limited to the repayment of loans or working capitalrequirement. We undertake that firm arrangements of finance through verifiable means have been made towards 75% of the statedmeans of finance excluding the amount to be raised through this Issue.[●]DETAILS OF THE EXPENDITURE TO BE INCURRED TOWARDS THE OBJECTS OF THE ISSUE:A. Garment manufacturing facility at :i. Yeshwanthpur, Bangalore;ii. Dodballapur, Bangalore; andiii. Hubli, Karnataka.31
We intend expand our garment manufacturing business by setting up three new garment manufacturing units at Yeshwanthpur inBangalore, Doddballapur in Bangalore and Hubli in Karnataka State. Our total garment manufacturing capacity is expected to increasefrom 3.00 million pieces per annum to 14.23 million pieces per annum subsequent to the expansion.TMi. Garment Manufacturing facility at Yeshwanthpur, BangaloreOur Company proposes to manufacture 3.75 million pieces of garment per annum at this facility.LandOur new garment manufacturing facility will be set up at No. 4B, Phase I, Peenya Industrial Area, Survey No. 12 and 15,Yeshwanthpur, Bangalore admeasuring 64260 sq. ft. and the structure there upon. B. R. Machine Tools Private Limited, videAgreement for Sale dated September 20, 2007 has agreed to sell the said premises to our Company for a consideration of Rs. 105.0million including stamp duty and registration charges.Civil Work & BuildingThe total built up area of the civil works comprising of factory building including ground plus three floors, admeasuring 0.16 millionsq. ft. at an estimated cost of Rs. 95 million.Following are the details of the Civil Work:DetailsBuildingofActivitiesEstimatedBuilt-up Area(million in sq.ft.)Estimated Cost(In RupeesMillions)FactoryBuildingConsisting ofground plus 3floorsSiteDevelopmentThis includes RCC Framed structure, Aluminum Glazedwindows, Galvanized rolling shutter, RCC Trimixflooring, plinth protection and other constructionactivities.Consisting of boundary wall, leveling & Murrum fillingin the plot with Murrum brought from out side in theplot. Development of internal road in the plot.0.16 88.00Lumpsum 7.00Total 95.00NOTE : The cost of the factory building and the site development at various locations has been estimated based on thecertificate dated September 12, 2007 issued by M/s U.A. Babre & Associates (Architects & Consulting Engineers), 11, PetheWadi, 1 st Floor, Jambali Galli, S.V.Road, Borivli (West), Mumbai – 400092.Plant & Machinery:Each of the Garment manufacturing facilities proposed to be set up at Yeshwanthpur, Doddballapur and Hubli would involve thepurchase of the following plant and machinery. The details of Plant and Machinery required are as follows:Sr.NoDetails of Machineries, spares,consumables, etc.No.ofunitsDate oftheQuotationCostName of Vendor (country) / quotationsreceivedCad / Cutting Department1. Spot Fusing Machine** 4 - 4.712. Air Floatation Table 8 October 9, 4.13 Eastman (Hong Kong)200732
Sr.NoDetails of Machineries, spares,consumables, etc.No.ofunitsDate oftheQuotationCostName of Vendor (country) / quotationsreceived3. Fabric Spreading Machine 4 October 9, 4.10 Eastman (Hong Kong)20074. Automatic Cuff Pressing Machine 4 October 9, 2.45 System Brilca (Italy)20075. Laminated Table 8 October 9, 2.18 Eastman (Hong Kong)20076. Collar Press With Trimming And 4 October 9, 2.16 System Brilca (Italy)Turning Part20077. Pocket Creasing Machine 4 October 9, 1.97 System Brilca (Italy)20078. Front Placket Creasing Machine 4 October 9, 1.78 System Brilca (Italy)20079. Shirt Packing Machine 15 October 9, 1.68 System Brilca (Italy)200710. Straight Liner Fusing Machine 4 October 9, 1.47 Hashima (Japan)200711. Sleeve Placket Machine 4 October 9, 1.46 System Brilca (Italy)200712. Other Machinery** 50 20.44Total 48.53Sewing Department1. Direct Drive Single NeedleLockstitch Machine– Model: S 7200B-3032. Single Needle Lockstitch Flat BedMachine– Model: SL 777B-31-643. Electronic Button Hole MachineModel: HE 800A-02500 October10, 2007250 October10, 200735 October10, 200720.50 BROTHER International Singapore Pte.(Singapore)11.48 BROTHER International Singapore Pte.(Singapore).7.32 BROTHER International Singapore Pte.(Singapore) .TM4. Electronic Lock Stitch ButtonStitch MachineModel: BE 438 C – 015. Class Feed of the Arm MachineModel: DA 9270A – 364M35 October10, 200728 October10, 20076.31 BROTHER International Singapore Pte.(Singapore)4.82 BROTHER International Singapore Pte.(Singapore)6. Two Needle five thread safetystitch machineModel : FB-N310-5020-35S3F100 October10, 20077. Others Machinery** - - 35.71 -Total 90.24Finishing, Packing & Accessories Department1. Auto Shirt Body Press 6 October 9, 3.70 Malavasi (Italy)20072. Vacuum Table 5*4 Feet** 50 - 1.22 -3. Others Machinery** - - 7.54 -Total 12.46Training & Sampling Unit4.10 BROTHER International Singapore Pte.(Singapore)33
Sr.NoDetails of Machineries, spares,consumables, etc.No.ofunitsDate oftheQuotationCostName of Vendor (country) / quotationsreceived1. Single Needle – S 7200 A -403- 45 October 4.43 BROTHER International Singapore Pte.022, UBT & DD10, 2007(Singapore).2. Single Needle – 7340 Basic 50 OctoberBROTHER International Singapore Pte.10, 2007 2.05 (Singapore)3. Other Machinery** - - 01.92 -Total 8.4Embroidery Unit1. Embroidery Machine with Sequinattachments on each head.RPE-D-FN-912-400*7502. Embroidery Machine with Sequinattachments on each head.RPE-D-FN-906-400*7506 October12, 20076 October12, 2007Total 21.28Utilities1. Water Treatment Plant**1 - 5.00 -Model: Reverse Osmosis2. Sewage Water Treatment Plant** 1 - 7.20 -3. Effluent Treatment Plant** 1 - 17.00 -Total 29.20Washing Department1. Tumble Drier – RTD 120** 15 - 4.13 -2. Washing Machine – RHW 200** 7 - 2.58 -Capacity – 200 Kgs.3. Hydro Extractor – RNC 100** 10 - 2.25 -4. Washing Machine – RHW10 - 1.97 -100**Capacity – 100 Kgs.5. Other Machinery - - 8.92 -Total 19.8515.57 China Embroidery Net Limited (China)5.71 China Embroidery Net Limited (China)TMErection, Commissioning & Miscellaneous Expenses1. Custom Duty @5.2% on Imported - - 9.00 -Machinery2. Vat @12.50 % on- - 7.20 -IndigenousMachinery3. Erection / Commissioning- - 1.20 -Expenses4. Pre- Operative Expenses @ - - 2.60 -Total 20.00Grand Total• Conversion Rates: 1 Euro = Rs. 56.00 ; 1 CHF = Rs. 34.00 ; 1 JPY = Rs. 00.35 ; 1 USD = Rs. 41.00• (source: www.rbi.org, www.realtimeforex.com)** Based on our internal estimates.@ Preoperative expenses include expenses incurred before the commercial production like wages / salaries paid to employees, watercharges, electricity charges, fees paid to professionals, and other miscellaneous charges.# The rates of the machinery includes the forward premium on foreign exchange. The forex rates are based on the six monthsaverage spot rate upto November 30, 2007. These quotations are applicable to all imported machinery under the objects of the issue.250.0034
TMFunds Deployment scheduleActivityAlready To be DeployedTOTALDeployedFY 2008 FY 2008 FY 2009Land purchase agreement 94.78 10.22 0.00 105.00completionFactory Building construction - 95.00 0.00 95.00Machinery selection, order placing- 250.00 0.00 250.00and LC openingMachinery Installation - 0.00 0.00 0.00Furniture, Fixtures & Office- 10.00 10.00 20.00EquipmentsTOTAL 94.78 365.22 10.00 470.00ii. Garment Manufacturing facility at Doddballapur, BangaloreOur Company proposes to manufacture 3.74 million pieces of garment per annum at this facility.LandOur new garment manufacturing facility will be set up at Plot No. SW 49-50, admeasuring 5 acres in Apparel Park, Phase –II,Doddballapur, Bangalore. Karnataka Industrial Areas Development Board, vide Allotment Letter dated December 12, 2006 hasagreed to allot the said premises on lease – cum – sale basis for a consideration of Rs. 4.015 million per acre aggregating to Rs. 22.0million including stamp duty and registration charges. At the end of 6 years, the said leased premises will be converted into sale, onfulfillment of terms and conditions as stated in the Allotment Letter.Civil Work & BuildingThe total built up area of the civil works comprising of factory building including ground plus three floors,, admeasuring 0.2 millionsq. ft. at an estimated cost of Rs. 110 million.Following are the details of the Civil Work:DetailsBuildingofFactoryBuildingConsisting ofground plusone floorActivitiesThis includes RCC Framed structureAluminum Glazed windows, Galvanized rollingshutter, Trimix flooring, plinth Protection and otherconstruction activities.EstimatedBuilt-up Area(million in sq.ft.)EstimatedCost (InRupeesMillions)0.2 100.00SiteDevelopmentConsisting of boundary wall, levelling & Murrumfilling in the plot with Murrum brought from out sidein the plot. W.B.M. road in the plot.Lumpsum 10.00Total 110.00Note : The cost of the factory building and the site development at various locations has been estimated based on the certificatedated September 12, 2007 issued by M/s U.A. Babre & Associates (Architects & Consulting Engineers), - 11, Pethe Wadi, 1 stFloor, Jambali Galli, S.V.Road, Borivli (West), Mumbai – 400092.35
TMPlant & Machinery:For details on the machinery for setting up this manufacturing facility please refer to the table in the Sub-section titled “Plant andMachinery” beginning on page [●] of this Draft Red Herring Prospectus.Funds Deployment ScheduleActivityLand purchaseagreement completionFactory BuildingconstructionMachinery selection,order placing and LCopeningFurniture, Fixtures &Office EquipmentsAlreadyDeployedTo be Deployed TOTALFY 2008 F.Y.2008 FY200920.00 2.00 - 22.00- 80.00 30.00 110.00- 30.00 220.00 250.00- - 18.00 18.00TOTAL 20.00 112.00 268.00 400.00iii. Garment Manufacturing facility at Hubli, Karnataka.Our Company proposes to manufacture 3.74 million pieces of garment per annum at this facility.LandOur Company intends to set up a garment manufacturing facility at Hubli in the State of Karnataka by acquiring 10 acres of land. Ason date our Company has not yet identified a suitable premises for the said facility. According to the report of Muzoomdar AssociatesPrivate Limited, Chartered Engineers, Corporate Valuers and Surveyors, dated 24 th September,2007, the estimated value for 10 acresland in Hubli would be Rs. 1.8 million excluding the stamp duty and registration charges. The total cost of the land including thestamp duty and registration charges is expected to be Rs 20.0 million.Civil Work & Building:The total built up area of the civil works comprising of factory building, admeasuring 0.2 million sq. ft. at an estimated cost of Rs. 110million.Following are the details of the Civil Work:DetailsBuildingofActivitiesEstimatedBuilt-up Area(million in sq.ft.)Estimated Cost(In RupeesMillions)FactoryBuildingConsistingground floorSiteDevelopmentofThis includes RCC Framed structure,Aluminium Glazed windows, Galvanized rolling shutter,M.S. Truss, Trimix flooring, Plinth protection and otherconstruction activities.Consisting of boundary wall, leveling & Murrum filling inthe plot with Murrum brought from out side in the plot,W.B.M. road in the plot0.2 90.00Lumpsum 20.00TOTAL 110.0036
TMNOTE : The cost of the factory building and the site development at various locations has been estimated based on the certificatedated September 12, 2007 issued by M/s U.A. Babre & Associates (Architects & Consulting Engineers),- 11, Pethe Wadi, 1 st Floor,Jambali Galli, S.V.Road, Borivli (West), Mumbai – 400092. Details of the estimated cost are given below.Plant & Machinery:For details on the machinery for setting up this manufacturing facility please refer to the table in the Sub-section titled “Plant andMachinery” beginning on page [●] of this Draft Red Herring Prospectus.Funds Deployment scheduleActivityLand purchaseagreementcompletionFactory BuildingconstructionMachinery selection,order placing andLC openingFurniture, Fixtures&OfficeEquipmentsAlreadyDeployedTo be Deployment TOTALFY 2008 FY 2008 FY 2009- 20.00 - 20.00- 60.00 50.00 110.00- 55.00 195.00 250.00- - 20.00 20.00TOTAL - 130.00 270.00 400.00B. Sampling Unit at MumbaiOur company plans to set up a dedicated sampling unit at Sewree, Mumbai wherein we plan to have the facilities like CAD, stitching,embroidery etc to garment samples as per designs developed by our design studio.Civil Work & BuildingOur Company intends to set up the above mentioned Sampling Unit at ground and first floor in the B-wing of the Factory building,situated at Ganapati Baug, Sewree Road, Sewree, Mumbai admeasuring 14523 sq.ft. Our Company has purchased the said premisesvide MoU dated July 09, 2007 from Mr. Ketan Sanghvi, Ms. Alpa Sanghvi, Mr. Ritesh Chedda, Mr. Mukesh Chedda and Ms.Maniben Chedda for a consideration of Rs. 105.00 million.Plant & Machinery:Following are the details of the plant and machinery proposed to be acquired for the sampling unit.Sr.NoDetails of Machineries,spares,consumables, etc.No.ofunitsDate oftheQuotationCost*Name of Vendor (country) / quotationsreceivedCad / Cutting Department1. Air Floatation Table 3 October 9, 1.54 Eastman (Hong Kong)20072. Automatic Cuff Pressing Machine 2 October 9, 1.22 System Brilca (Italy)20073. Collar Press With Trimming And 4 October 9, 2.18 System Brilca (Italy)37
Sr.NoDetails of Machineries,spares,consumables, etc.No.ofunitsDate oftheQuotationCost*Name of Vendor (country) / quotationsreceivedTurning Part 20074. Front Placket Creasing Machine 2 October 9, 0.90 System Brilca (Italy)20075. Shirt Packing Machine 10 October 9, 1.12 System Brilca (Italy)20076. Straight Liner Fusing Machine 2 October 9, 0.74 Hashima (Japan)20077. Sleeve Placket Machine 2 October 9, 0.74 System Brilca (Italy)20078. Others** - - 3.00 -Total 11.44Sewing Department8. Direct Drive Single NeedleLockstitch Machine– Model: S 7200B-3039. Single Needle Lockstitch Flat BedMachine– Model: SL 777B-31-6410. Electronic Button Hole MachineModel: HE 800A-02100 October10, 200775 October10, 200710 October10, 20074.15 BROTHER International Singapore Pte.(Singapore)3.44 BROTHER International Singapore Pte.(Singapore)2.10 BROTHER International Singapore Pte.(Singapore)TM11. Electronic Lock Stitch ButtonStitch MachineModel: BE 438 C – 0112. Class Feed of the Arm MachineModel: DA 9270A – 364M10 October10, 200712 October10, 20071.80 BROTHER International Singapore Pte.(Singapore)2.06 BROTHER International Singapore Pte.(Singapore)13. Two Needle five thread safetystitch machineModel : FB-N310-5020-35S3F30 October10, 200714. Others** - - 5.00 -Total 19.78Finishing, Packing & Accessories Department4. Auto Shirt Body Press 2 October 9, 1.23 Malavasi (Italy)20075. Vacuum Table 5*4 Feet 25 - 0.61 -6. Others** - - 2.00 -Total 3.85Embroidery Unit3. Embroidery Machine with Sequinattachments on each head.RPE-D-FN-906-400*7506 October12, 20074. Others** - - 2.96 -Total 8.67Erection, Commissioning & Miscellaneous Expenses5. Custom Duty @5.2% on Imported - - 3.00 -Machinery6. Vat @12.50 % on - - 2.25 -1.23 BROTHER International Singapore Pte.(Singapore)5.71 China Embroidery Net Limited (China)38
Sr.NoDetails of Machineries,spares,consumables, etc.No.ofunitsDate oftheQuotationCost*IndigenousMachinery7. Erection / Commissioning- - 1.00 -Expenses**Total 4.75Grand Total48.50Name of Vendor (country) / quotationsreceivedTM** Based on our internal estimatesFund Deployment Schedule:ActivityPurchase of premises at Anchor House,William Sox Building, T. J. Road, Nr.Skoda Service Centre, Sewree – 15.Machinery selection, order placing and LCopeningAlreadyDeployedTo be Deployed TOTALFY 2008 FY 2008 FY 200990.00 15.00 0.00 105.005.9 12.60 30.00 48.50Furniture, Fixtures & Office equipments - 1.00 1.50 2.5TOTAL 95.90 28.60 31.50 156.00C. Fabric Processing PlantThe Fabric Processing Plant consists of Liquid Ammonia Treatment Plant, Continuous Dyeing Range / Continuous Bleaching Rangeplant. This facility will have a capacity to process 31.20 million meters of fabric per annum.• Liquid Ammonia Treatment Plant: Liquid Ammonia Treatment is a processing technique, whereby the cellulose fibre in thefabric is modified from their characteristics upon contact with ammonia through chemical processes, giving a silk finish,permanent press and easy care property to 100% cotton and yarn dyed fabric.• Continuous Dyeing Range / Continuous Bleaching Range plant: Continuous Dyeing Range is a process of fixing dye stuff into cellulose fibre in one step by drying in control steam or air fixture. Continuous Bleaching Range is a process whereby thefabric is scoured and bleached continually one in operation under control humidity and temperature conditions in bleachingsteamer. The fabric is washed, neutralized and dried thus ready for printing and dyeing.Land:Our Company proposes to set up a Fabric Processing Plant at C-3, MIDC, Tarapur, Boisar, Taluka Palghar, Thane, admeasuring46,250 sq. meters. Our Company has acquired the said land on long term lease from Maharashtra Industrial Development Corporation(MIDC) for consideration of Rs. 63.60 million including stamp duty and registration charges, vide an agreement dated October 31,2006.Civil Work & Building:The total built up area of the civil works comprising of factory building including ground plus three floors, admeasuring 0.2 millionsq. ft. at an estimated cost of Rs. 150 million.Following are the details of the Civil Work:Details of Building Activities EstimatedBuilt-upEstimatedCost (In39
Area(millionsq. ft.)inRupeesMillions)TMFactory Buildingconsisting of GroundFloorUtilitiesSite DevelopmentThis includes Factory Building RCC framedstructure, Aluminium Glazed windows,Glazed window, Structural Steel Trusses,Galvanized rolling shutter, Trimix flooring,R.A. Trench, plinth protection and othernecessary civil works.0.2Boiler Unit and other utility building andcivil 0.01Effluent Treatment Plant, Under Groundtank and other construction utilities.Consisting of boundary wall, leveling &Murrum filling in the plot with Murrumbrought from out side in the plot. W.B.M.road in the plot110.005.00Lumpsum 10.00Lumpsum25.00TOTAL 150.00NOTE : The cost of the factory building and the site development at various locations has been estimated based on thecertificate dated September 12, 2007 issued by M/s U.A. Babre & Associates (Architects & Consulting Engineers),-11, Pethe Wadi, 1 st Floor, Jambali Galli, S.V.Road, Borivli (West), Mumbai – 400092.Plant & Machinery:Following are the details of the plant and machinery proposed to be acquired for the processing units.Sr. Details of Machineries, No. Date of the Cost* Name of VendorNo. spares, consumables, of Quotation(country)/ quotationsetc.unitsreceived1. KYOTO Liquid 1 August 10, 2007 251.94 ITOCHU TexmacAmmonia TreatmentCorporation (Japan)Range2. Continuous Open Width 1 July 27, 2007Benninnger AGPre -Treatment Range169.70 (Switzerland)3. Bruckner – High 2 June 18, 2007 145.38 Bruckner TextileCapacity Single LayerTechnologies (Germany)Stenter4. Mercerizing Range 1 July 27, 2007 123.62 Benninnger AG(Switzerland)5. Continuous Dyeing 1 July 27, 2007Benninnger AGRange Pad Steam119.46 (Switzerland)6. Rotary Screen Printing 2 July 7, 2007 72.22 Reggiani MacchineMachine(Italy)7. Bruckner - Power 2 June 18, 2007 52.12 Bruckner TextileCompressive ShrinkingTechnologies (Germany)Range8. Washing Range 1 June 23, 2007 21.00 Menzel Germany &Menzel EngineeringIndia Pvt. Ltd.(Germany)40
Sr. Details of Machineries,No. spares, consumables,etc.9. Caustic RecoveryPlant**10. 3-Bowl Nipco – LCalender Syatem11. MENZEL – After PrintWasher12. Combined Raising /Emerizing and Brush-Sueding MachineMultisystem XREB13. Combined Emerizing andBrush-Sueding MachineOptisystem XEB –AdvancedTOTALNo.ofunitsDate of theQuotationErection, Commissioning & Miscellaneous ExpensesCost* Name of Vendor(country)/ quotationsreceived21.00July13,200719.04 Ramisch Guarneri NipcoTechnology1 June 23, 2007 18.23 Menzel Germany &Menzel EngineeringIndia Pvt. Ltd.(Germany)October 7, 200718.29 Xetma Vollenweider(Germany)October 7, 2007 6.55 Xetma Vollenweider1028.50Custom Duty @5.2% on - - 40.0 -Imported Mch.Vat @12.50 % on - - 32.0 -Indigenour Mch.Erection / - - 10.0 -CommissioningExpensesPre- Operative Exp. - - 15.0 -TOTAL 97.50GRAND TOTAL** Based on our internal estimates1126.00TMFund Deployment ScheduleActivityLand purchaseagreementcompletionFactoryBuildingconstructionMachineryselection, orderplacing and LCopeningFurniture,Fixtures &OfficeequipmentsAlreadyDeployedTo be DeploymentTOTALFY 2008 FY 2008 FY 200963.60 - - 63.60- 120.00 30.00 150.00- 440.00 686 1126.00- 13.00 7.40 20.4041
Activity Already To be DeploymentTOTALDeployedFY 2008 FY 2008 FY 2009TOTAL 63.00 573.00 723.40 1360.00TMD. Marketing and Sales office at Peninsula Centre, Parel, MumbaiLand:Our Company intends to set up a Marketing and Sales office at Peninsula Centre unit no. 207-A and 207-B, Mumbai 400 012,admeasuring 1746 sq.ft. For this our Company has purchased the said premises vide MoU dated 8 th August,2007- from Mr.Rajni P.Jhunjhunwala and Ms. Nita S. Jhunjuhnwala for a consideration of Rs. 30 million including stamp duty and registration charges .Peninsula Centre unit no. 014 Mumbai 400 012 admeasuring 741 sq.ft.. Our Company has purchased the said premises vide MoUdated 8 th August,2007 from Mr. Yogen A Jerajani and Ms. Punita Y Jerajani for a consideration of Rs. 14 million including stampduty and registration charges.E. Expansion of Weaving Facility at TarapurLand :Our Company proposes to implement second phase of expansion of weaving facility at C-2, MIDC, Tarapur, Boisar, Taluka Palghar,Thane admeasuring 40565 sq. meters. Our Company had purchased the said premises from MIDC for consideration of Rs. 20.10million, vide sale deed dated June 24, 2004.Civil Work & Building:The total built up area of the civil works comprising of factory building including ground plus three floors, admeasuring 0.08 millionsq. ft. at an estimated cost of Rs. 40 million.Following are the details of the Civil Work:DetailsBuildingofActivitiesEstimatedBuilt-up Area(million in sq.ft.)EstimatedCostRupeesMillions)(InFactoryBuildingconsisting ofGround FloorThis includes RCC Framed structureAluminium Glazed windows, M. S. Truss, Galvanizedrolling shutter, Trimix flooring, R. A. Trench &Plinth protection and other construction activities.0.08 40.00Total 40.00NOTE : The cost of the factory building and the site development at various locations has been estimated based on thecertificate dated September 12, 2007 issued by M/s U.A. Babre & Associates (Architects & Consulting Engineers),- 11,Pethe Wadi, 1 st Floor, Jambali Galli, S.V.Road, Borivli (West), Mumbai – 400092. Details of the estimated cost are givenbelow.Plant and Machinery:Following are the details of the plant and machinery proposed to be acquired for the weaving unit.Sr. No.Details of Machineries,spares, consumables,etc.No.unitsofDateQuotationofCost Name of Vendor(country)/ quotationsreceived42
Sr. No.Details of Machineries,spares, consumables,etc.01 Dye Springs MachineryNo. of Date of Cost Name of Vendorunits Quotation(country)/ quotationsreceived20000 August 30, 2007 1.50 Bakubhai Ambalal –Division of SarabhaiMachinery P. L. (India)April 1, 2007 23.22 Staubli Textile(Switzerland)1 March 15, 2007Staubli Textile1.46 (Switzerland)July 12, 2006Picanol N.V. (Belgium)166.6228 July 12, 2006Picanol N.V. (Belgium)89.2602Automatic Drawing –IN Installation 103 Beam KnottingMachineRapier Shuttless04 Weaving Loom 4405 Air Jet ShuttlessWeaving Loom06 Sizing Machine 1 August 29, 2007 19.83 Jupiter EngineeringCo.(India)07 Direct Warping 1 August 29, 2007Jupiter Engineering Co.Machine6.50 (India)08 High Speed Cone 1 September 1,Paeass IndustrialWinder Mac.2007 5.90 Engineers (India)09 Soft Package Winder 1 September 1,Paeass Industrial2007 5.99 Engineers (India)10 Centrifugal Air 1 December 6,Ingersoll Rand (India)Compressor2007 7.88 Ltd. (India)11 Auto Control 1 December 6,Luwa Textile AirHumidification Plant2007 11.30 Engineering (India)12 Water Softner Plant 1 September 6, 0.65 Parchem Enterprise2007(India)13 Textile Effluent Plant 1 May 20, 2007 1.40 Kunal Enviro Engineers(India)14 Hydro Extractor &March 5, 2007Fongs National Dyeing &Computer Yarn Dyeing 1118.73 Finishing MachineryMachine(China)15 Overhead TravelingDecember 6,Simta Machinery PrivateCleaner Bus 4 2007 0.52 Limited (India)16 Magnetic VortexSeptember 6,Advanced GraphicDyeing / Winding / 3 2007System (India)Drying Machine4.25- June 13, 2007Voltamp Transformers,17 Electrical & Utility44.59 Technocraft Switchgear,ExpensesTeknik Electricaletc.(India)18 Other **10.40TMErection, Commissioning & Miscellaneous Expenses1. Custom Duty @5.2%on Imported Mch.2. Vat @12.50 % onIndigenour Mch.3. Erection /CommissioningExpenses420.00- - 16.4 -- - 13.1 -- - 2.1 -43
Sr. No. Details of Machineries, No. of Date of Cost Name of Vendorspares, consumables, units Quotation(country)/ quotationsetc.received4. Pre- Operative Exp. - - 0.9 -TOTAL 32.5Grand Total 484.8452.50TM** Based on our internal estimatesFund Deployment Schedule:ActivityFactory BuildingconstructionMachinery selection,order placing andLC openingFurniture, Fixtures&OfficeEquipmentsAlreadyDeployedTo be Deployment TOTALFY 2008 FY 2009 FY 2010- 40.00 - 40.0029.0425.00 452.50398.46- 2.5 5.0 7.50TOTAL29.04 440.9630.00 500.00SUMMARY OF FUNDS DEPLOYED IN THE EXPANSION PROJECTAccording to the certificate dated 10 th November, 2007 issued by AHS & Co, Chartered Accountants , following are theexpenses incurred from our internal accruals:(Rs. In Mn. )Sr. No. Particular s Amount1. Garmenting unit At Yeshwanthpur, Bangalore in Karnataka state 94.782. Garmenting unit At Doddballapur, Bangalore in Karnataka state 20.083. Garment Sampling unit & office at Mumbai 95.904. Fabric Processing Unit (Continuous Dyeing Range / Continuous Bleaching 63.60Range) ( Ammonia Process Plant) at C-2, MIDC, Tarapur, Boisar, TalukaPalghar, Thane in Maharashtra state5. Marketing and sales office at Parel, Mumbai 39.726. Weaving (implementation of 2nd phase of Expansion in respect ofMandhana Weaving House) at C-2, MIDC, Tarapur, Boisar, Taluka 29.04Palghar, Thane in Maharashtra state.7. Issue Related Expenses 2.00Total344.9544
SCHEDULE OF IMPLEMENTATION:TMSr.No.Activity Yeshwanthpur Doddballapur Hubli Sampling ShirtingDivisionPhase II1 Land purchaseagreementcompletion2 Machineryselection, orderplacing and LCopening3 Buildingconstructioncompletion4 MachineryInstallation5 MachineryProcurement &Trial Runs6 CommercialProductionF. MARGIN MONEY FOR WORKING CAPITALCDR / CBRDec' 07 Dec' 07 Jan' 08 Feb’08 Completed CompletedJan’08 Mar' 08 Mar' 08 Mar’08 Dec' 07 Feb' 08Feb' 08 Apr' 08 Apr' 08 NA Jan' 08 Apr' 08Feb-Mar’ 08 May' 08 May' 08 May’08 Feb' 08 June' 08Mar’08 June'08 June'08 June’08 Mar’08 Sept' 08Apr’08 July' 08 July'08 July’08 Apr' 08 Oct'08The working capital margin requirement has been calculated on the basis of additional working capital required over a period of nexttwo-years based on the expansions planned under the Objects. Raw Material (RM), Work in Progress (WIP), Finished Goods (FG) andAuxiliary material have been taken at various levels, which is in consonance with the industry practice and past trends.Nature ofExpensesHoldinglevel inperiod ofdaysNewGarmentmanufacturingfacilitiesRawMaterial60 Days 254.5Work in 10 Days 63.6ProgressFinished 30 Days 127.3GoodsAuxiliary 15 Days 12.7MaterialDebtors 45 Days 369.5(LessCreditors)20 Days 42.4Expansionof weavingfacilityFabricProcessingfacilityTotalBankFinance *(Rs. In million)Margin485.9 402.6 83.31,05.7 1,25.793.4 79.6 13.88.8 20.9269.4 221.1 48.379.3 62.824.3 20.1 4.25.3 6.3658.4 549.2 109.21,99.1 89.811.6 71.7 60.1 11.617.6Total 785.2 380.6 293.8 1459.7 1212.5 247.1Bank finance has been calculated as 90% against export current assets (new garment manufacturing facilities ) and 75% againstdomestic business current assets ( Expansion of weaving facility & Fabric Processing facility).The capacity utilisation for the first year of commercial operation is expected to be 85% for the Weaving unit, 70% for the Processingunit and 80% for the Garmenting units.45
TMAll of the above projections are based on management estimate and have not been appraised by any bank.G. GENERAL CORPORATE PURPOSEExcess funds, if any would be utilized for general corporate purpose including but not limited to the repayment of loans, workingcapital requirement, expansion of our operations domestically and/or internationally through organic or inorganic route, as may beavailable.H. ISSUE EXPENSESThe expenses for this Issue include lead management fees, underwriting and selling commissions, printing anddistribution expenses, legal fees, advertisement expenses, registrar fees, depository charges and listing fees to the Stock Exchanges,among others. The total expenses for this Issue are estimated to be approximately Rs. [●] million as per the following break up:Issue ExpensesLead Management, Underwriting and selling commissionAdvertising and marketing expensesPrinting and stationery (including courier and transportation charges)Others (Registrar fees, legal fees, listing costs, etc.)Fees paid to rating agencyTotalAmount (Rs. In million)[●][●][●][●][●][●]*Will be incorporated after finalization of the Issue Price.INTERIM USE OF PROCEEDSPending utilization for the purposes described above, we intend to invest the funds in high quality liquid instruments including moneymarket mutual funds, deposits with banks, for the necessary duration or for reducing overdrafts. Our management, in accordance withthe policies established by our Board of Directors from time to time, will have flexibility in deploying the Net Proceeds of the Issue.MONITORING OF UTILIZATION OF FUNDSOur Board will monitor the utilization of the Net Proceeds of the Issue. We will disclose the details of the utilization of the Issueproceeds, including interim use, under a separate head in our financial statements for fiscal 2008, and fiscal 2009, specifying thepurpose for which such proceeds have been utilized or otherwise disclosed as per the disclosure requirements of our listing agreementswith the Stock Exchanges and in particular Clause 49 of the Listing Agreement. No part of the proceeds from the Issue will be paid byus as consideration to our Promoters, our Directors, Promoter Group individuals and key managerial employees, except in the normalcourse of our business.46
TMBASIC TERMS OF THIS ISSUEThe Equity Shares being issued are subject to the provisions of the Companies Act, our Memorandum and Articles of Association, theterms of the Red Herring Prospectus and other terms and conditions as may be incorporated in the Prospectus, Bid-cum-ApplicationForm, allotment advices and other documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also besubject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading ofsecurities issued from time to time by SEBI, the Government of India, the Stock Exchange, the RBI, RoC and/or other authorities, asin force on the date of the Issue and to the extent applicable.Authority for the IssueThe Board of Directors have, pursuant to a resolution passed at its meeting held on August 06, 2007 authorised the Issue, subject tothe approval of the shareholders of our Company under Section 81 (1A) of the Companies Act.The Issue of Equity Shares has been authorized by a special resolution adopted pursuant to Section 81(1A) of the Companies Act,1956 at the Annual General Meeting of shareholders held on August 28, 2007.Ranking of Equity SharesThe Equity Shares being issued shall be subject to the provisions of our Memorandum and Articles and shall rank pari passu in allrespects with the existing Equity Shares of our Company including rights in respect of dividend. The allottees will be entitled todividend or any other corporate benefits, if any, declared by our Company after the date of Allotment. See the section titled ‘MainProvisions of Articles of Association of our Company’ beginning on page [●] of this Draft Red Herring Prospectus for a description ofthe Articles of Association.Mode of Payment of DividendThe payment of dividend will be as per the provisions of the Companies Act.Face Value and Issue PriceThe Equity Shares with a face value of Rs. 10/- each are being issued in terms of this Draft Red Herring Prospectus at a price of Rs.[●] per share. At any given point of time, there shall be only one denomination for the Equity Shares of our Company, subject toapplicable laws. The Issue Price is [●] times the face value of the Equity Shares.Compliance with SEBI GuidelinesWe shall comply with all applicable disclosure and accounting norms as specified by SEBI from time to time.Rights of the Equity ShareholdersSubject to applicable laws, the equity shareholders shall have the following rights:• Right to receive dividend, if declared;• Right to attend general meetings and exercise voting powers, unless prohibited by law;• Right to vote on a poll either in person or by proxy;• Right to receive offers for rights shares and be allotted bonus shares, if announced;• Right to receive surplus on liquidation;• Right of free transferability; and• Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and Articles ofAssociation of our Company.For further details on the main provisions of our Company’s Articles of Association dealing with voting rights, dividend, forfeitureand lien, transfer and transmission and/or consolidation/splitting, please refer section titled ‘Main Provisions of Articles of Associationof our Company’ beginning on page [●] of this Draft Red Herring Prospectus.47
Joint HoldersTMWhere two or more persons are registered as the holders of any Equity Shares and Warrants, they shall be deemed to hold the same asjoint tenants with benefits of survivorship.Market Lot and Trading LotIn terms of Section 68B of the Companies Act, the Equity Shares of our Company shall be allotted only in dematerialized form. Interms of existing SEBI Guidelines, the trading in the Equity Shares of our Company shall only be in dematerialized form for allinvestors. Since trading of our Equity Shares will be in dematerialized mode, the tradable lot is one Equity Share. Allocation andAllotment of Equity Shares through this Issue will be done only in electronic form in multiples of one Equity Share to the successfulBidders subject to a minimum Allotment of [●] Equity Shares.JurisdictionExclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Mumbai, Maharashtra, India.Exercise of WarrantsEvery Allottee of Equity Shares under the Issue shall receive a Warrant in the ratio of one Warrant for three Equity Shares. EachWarrant shall be convertible into one equity share of a face value of Rupees Ten (10) each, of our Company during the WarrantExercise Period.In the event that there is any share split of the Equity Shares of our Company, prior to the exercise of Warrants, then, the Warrantholder, who exercises his right to exercise the Warrant, shall be entitled to such number of Equity Shares in order for the aggregateface value of the number of Equity Shares issued to the Warrant holder be equal to Rupees Ten (10).Two Warrants shall entitle the Warrant holder to receive one Equity Share upon exercise. The Warrants can be freely and separatelytraded till the same are tendered for exercise. The market lot for the Warrants is one.Exercise of Warrants during the Warrant Exercise Period will be carried out without the need for our Company to take any furtherapprovals, however the Warrant holders should independently check if they require any approvals.The Board subject to the terms of the Draft Red Herring Prospectus, our Memorandum and Articles of Association, the approvals fromthe Government of India and RBI and provisions of the Companies Act, any other legislative enactments and rules as may beapplicable will proceed within the process of exercise the Warrants in accordance with the applicable laws.Warrant Exercise PriceWarrant Exercise Price shall be the price which is at a fixed premium of [●]% over the Issue Price.Warrant Exercise PeriodWarrant Exercise Period shall be the period commencing from the completion of the 16th month and be open up to the completion ofthe 18th month from the date of Allotment of the Equity Shares and Warrants.Warrant holders can exercise their right to apply for the Exercise of Warrants into Equity Shares at the Warrant Exercise Price at anytime during the Warrant Exercise Period. The Warrants not tendered for exercise during the Warrant Exercise Period at the WarrantExercise Price shall lapse.The Warrant Exercise Price valid during the Warrant Exercise Period would be advertised by us in an English national daily, Hindinational daily with wide circulation and a Regional Language Daily circulated at the place where our Registered Office is situated.Such an advertisement would appear on the day of the commencement of the Warrant Exercise Period.Our Company shall fix a record date 15 days prior to the commencement of the Warrant Exercise Period to determine the Warrantholderseligible for exercising the Warrants held by them.48
Allotment of shares arising from Warrant ExerciseTMThe application for the exercise of Warrants can be made at any time immediately after the announcement of Warrant Exercise Price.Activity Time Period as defined herein Indicative Relevant DateActivity Time Period as defined herein Indicative Relevant DateAllotment of Equity Shares and [●][●]Warrants in the IssueCommencement Of Warrant From the completion of the 16 th Month [●]Exercise PeriodAdvertisement for Warrant Exercise On the day of the commencement of the [●]PriceWarrant Exercise PeriodWarrant Exercise Period - Warrant Two Months[●]Exercise Price would be applicableuptoAllotment DateTen (10) working days from the date ofexpiry of the Warrant[●]Procedure for ExerciseThe Registrar to our Company, Intime Spectrum Registry Limited, will before the Warrant Exercise Period open a special depositoryaccount with NSDL called, ["[●]"] with a Depository Participant (the "Special Depository Account"). Beneficial owners (holders ofWarrants) having their beneficiary account with the CDSL must use the inter-depository delivery instruction slip for the purpose ofcrediting their Warrants in favour of the Special Depository Account with the NSDL.Beneficial owners (holders of Warrants) who wish to tender their Warrants for exercise will be required to send their application forexercise on the prescribed application form accompanied by a cheque / demand draft favoring [“[●]”] payable at Mumbai for therequisite amount along with a photocopy of the delivery instruction in "Off-market" mode, or counterfoil of the delivery instructionsin "Off-market" mode, duly acknowledged by the Depository Participant ("DP"), in favour of the Special Depository Account to theRegistrar to our Company.Shares allotted on Exercise of WarrantsShares allotted on exercise of valid Warrants will be dispatched/credited to the applicant’s electronic account within 10 working daysfrom the day of expiry of the Warrant Exercise Period.The Application Form will be sent by our Company to all the Warrant holders along with the letter of Allotment.The Application Form would also be available to all Warrant holders on request with the Registrar during the Warrant Exercise Periodand can be downloaded from our Company’s website [●]. During the Warrant Exercise Period, the Warrant holder should send hisapplication to Intime Spectrum Registry Limited, C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup (West), Mumbai 400078, India, the Registrar to the Issue by filling up the said application form. It should be accompanied by a cheque / demand draftfavoring [“[●]”] payable at Mumbai for the requisite amount.In case the Warrants along with the cheque/demand draft towards full payment of the Exercise Price do not reach the Registrar bythe end of Warrant Exercise Period i.e. by the end of the 18 th month from the date of allotment in this Issue, the same shall lapse.Rights of Warrant holdersa. The Warrants shall be transferable and transmittable in the same manner and to the same extent and be subject to the samerestrictions and limitations and other related matters as in the case of Equity Shares of our Company.b. Save and except the right of subscription to our Company's Equity Shares as per the terms of the Issue, the holders of theWarrants in their capacity as Warrant holders shall have no other rights or privileges.49
c. The Warrants shall be transferable and transmittable in the same manner and to the same extent and be subject to same restrictionsand limitations and other related matters as in the Equity Shares of our Company. The Warrant holder’s inter-se, shall rank paripassu without any preference or priority of one over the other or others.TMAll the above rights of the Warrant holders shall lapse automatically if it is not exercised within the Warrant Exercise Period and theunexercised Warrant shall be automatically treated as cancelled. On exercise and subsequent allotment of Equity Shares, the Warrantholders shall enjoy the rights and privileges of shareholders of our Company and not of Warrant holders. The Warrants shall notconfer upon the holders thereof any right to receive any notice of the meeting of the Shareholders of our Company or Annual Reportof our Company and or to attend/vote at any of the General Meetings of the Shareholders of our Company.The Warrant holders shall not be entitled to any dividend or any other corporate benefits, which may be declared or announced by ourCompany from time to time, till such time that the Warrants are exercised into the underlying Equity Shares of our Company inaccordance with the terms contained herein and full payment of the Exercise Price.Variance in the terms of the WarrantsThe rights, privileges and conditions attached to the Warrants may be modified or varied or abrogated with the consent of the holdersof theWarrants by a Special Resolution passed at a meeting of the Warrant holders, provided that nothing in such resolution shall beoperative against our Company when such resolution modifies or varies the terms and conditions governing the Warrants if the sameis not acceptable to our Company. At a meeting of the Warrant holders, every Warrant holder, and in the case of joint holders firstholder of the Warrant,, shall be entitled to vote, either in person or by proxy, in respect of such Warrants. The Warrant holder will beentitled to one vote on a show of hands and his / her voting rights on a poll shall be in proportion to the outstanding number of theWarrants held by him / her. The quorum for such meetings shall be at least five Warrant holders present in person. The proceedings ofthe meeting of the Warrant holders shall be governed by the provisions contained in our Articles regarding meetings of shareholdersand such other rules in force for the time being to the extent applicable and in relation to matters not otherwise provided for in termsof the Issue.Register of Warrant holdersThe Register of Warrant holders shall be maintained by the Registrar in the same manner as the Register and Index of beneficialowners is maintained under Section 11 of the Depositories Act.Arrangement for disposal of Odd LotsThere are no arrangements for disposal of odd lots.Nomination Facility to the InvestorsIn accordance with Section 109A of the Companies Act, the sole or First Bidder, along with other joint Bidder(s), may nominate anyone person in whom, in the event of the death of the sole Bidder or in the case of joint Bidders, death of all the Bidders, as the casemay be, the Equity Shares and Warrants allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reasonof the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantagesto which he or she would be entitled if he or she were the registered holder of the Equity Share(s) and Warrant(s). Where the nomineeis a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to EquityShare(s) and Warrant(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon asale/transfer/alienation of Equity Share(s) and Warrant(s) by the person nominating. A buyer will be entitled to make a freshnomination in the manner prescribed. A fresh nomination can be made only on the prescribed form available on request at theregistered office of our Company or from the Registrar and transfer agent of our Company.In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section109A of the Companies Act, shall, upon the production of such evidence as may be required by our Board, elect either:a. to register himself or herself as the holder of the Equity Shares and Warrants; orb. to make such transfer of the Equity Shares and Warrants, as the deceased holder could have made.Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transferthe Equity Shares and Warrants, and if the notice is not complied with within a period of 90 days, our Board may thereafter withhold50
payment of all dividends, bonuses or other monies payable in respect of the Equity Shares and Warrants, until the requirements of thenotice have been complied with.TMSince the Allotment of Equity Shares and Warrants in the Issue will be made only in dematerialised mode, there is no requirementto make a separate nomination with us. Nominations registered with the respective Depository Participant of the applicant wouldprevail. If the investors wish to change the nomination, they will have to inform their respective Depository Participants.Minimum SubscriptionIf we do not receive the minimum subscription of 90% of the Issue to the extent of the amount including devolvement of the membersof the Syndicate, if any, within 60 days from the Bid/Issue Closing Date, we shall forthwith refund the entire subscription amountreceived. If there is a delay beyond eight days after we become liable to pay the amount, our Company, shall be liable to repay theamount with interest as per Section 73 of the Companies Act. Further, in accordance with Clause 2.2.2A of the SEBI Guidelines weshall ensure that the number of prospective Allottees to whom the Equity Shares will be allotted will be not less than 1,000.The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”)or any state securities laws in the United States and may not be offered or sold except pursuant to an exemption from, or in atransaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares may be offered and soldonly outside the United States in compliance with Regulation S under the Securities Act and the applicable laws of the jurisdictionwhere those offers and sales occur.The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India andmay not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicablelaws of such jurisdiction.Notice To QIB Bidders: Allotment ReconciliationAfter the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar to the Issue on the basis of Bids received. Basedon the electronic book, QIB Bidders will be sent a CAN indicating the number of Equity Shares that are being allocated to them.However, within a few days thereafter but prior to the Board meeting for final Allotment of Equity Shares in the Issue, the Registrar tothe Issue will also prepare a physical book, which may be different from the electronic book. This is because certain applications inthe Non-Institutional Portion and Retail Portion may be rejected due to non-receipt of funds, cancellation of cheque, cheque-bouncing,incorrect details, technical rejections, etc, and these rejected applications may not be reflected in the electronic book but will bereflected in the physical book. As a result, additional Equity Shares may be available for allocation in the QIB Portion provided theQIB Portion is over-subscribed and the Non-Institutional Portion and Retail Portion are not fully subscribed. In such event, QIBBidders may receive an increased allocation of Equity Shares and such increase in allocation will be reflected in a revised CAN that issent to QIB Bidders.Restriction on transfer of sharesThere are no restrictions on transfers and transmission of shares/debentures and on their consolidation/splitting except as provided inour Articles. See further details; see the section titled “Main Provisions of our Articles of Association” beginning on page [●] of theDraft Red Herring Prospectus.51
TMBASIS OF ISSUE PRICEThe issue price will be determined by the company, in consultation with BRLM, on the basis of assessment of market demand for theEquity Shares by the Book Building Process. The face value of the Equity Shares is Rs.10 and the Issue Price is [.] times the facevalue at the lower end of the Price Band and [●] times the face value higher end of the Price Band.Qualitative FactorsFor some of the qualitative factors, which form the basis for computing the price refer to “Business Overview – Our CompetitiveStrengths” beginning on page [●] and “Risk Factors” beginning on page [●] of this Draft Red Herring Prospectus.Quantitative Factors1. Earnings Per share (“EPS”)Financial Period EPS (Rs.) WeightYear ended March 31, 2005 10.19 1Year ended March 31, 2006 11.55 2Year ended March 31, 2007 18.51 3Quarter ended June 30, 2007* 7.57Weighted Average 14.80* Not annualizedNote:(i) The Earning per Share has been computed on the basis of the adjusted profits and losses of the respective years drawn afterconsidering the impact of accounting policy changes and material adjustments but before adjustment of extra ordinary items ofincome.(ii) The denominator considered for the purpose of calculating Earning Per Share is the weighted average number of potential EquityShares during the year arising from advance against equity.(iii) EPS calculations have been made in accordance with the Accounting Standard-20 – “Earning per Share” issued by the Institute ofChartered Accountants of India.2. Price/Earnings Ratio (“P/E Ratio”)(i) Based on the diluted EPS of Rs. 18.51 for the Fiscal 2007, P/E ratio based on the above EPS is [●] at the Floor Price and [●] atthe Cap Price.(ii) Based on the weighted average EPS of Rs. 14.80, the P/E ratio is [●] at the Floor Price and [●] at the Cap Price:Industry P/ETextile – Products & ProcessHighest 94.8Lowest -Industry Composite 19.5Source: Capital Market, December 03-16, 2007(Industry: Textiles – Processing and Textiles – Products)52
TM* P/E computed assuming trailing twelve month earnings and closing price as on March 05, 2007.^ Computed as median of the P/E of benchmark companies enlisted under “Comparison with Industry3. Average Return on Networth (RoNW)Financial Period Return on Net Worth (%) WeightYear ended March 31, 2005 23.60 1Year ended March 31, 2006 32.60 2Year ended March 31, 2007 35.83 3Three ended June 30, 2007 * 11.29Weighted Average 32.72Note: The RoNW has been computed by dividing net profit after tax as restated, by Net Worth as at theend of the year.* Not Annualised4. Minimum Return on Increased Net Worth Required to Maintain Pre-issue EPSThe Minimum Return on Increased Net Worth Required to Maintain Pre-issue EPS is [●] %.5. Net Asset Value (“NAV”) *• NAV per Equity Share as of March 31, 2007 is Rs. 51.65• NAV per Equity Share after the Issue is Rs. [●]• Issue Price per Equity Share is Rs. [●]*NAV per equity share has been calculated as shareholder’s equity less miscellaneous expenses as divided by restated weightedaverage number of equity shares.6. Comparison with Industry PeersWe have chosen the companies which we believe are our peers for the Company’s operations:EPS P/E Return on NAV per Sales (Rs.(Rs.) (times) Net Worth Equity Million)(%) Share (Rs.)Mandhana Industries 18.51 [●] 35.83 51.65 2412LimitedBombay Rayon Fashions 8.4 22.6 17.1 76.7 4894LimitedIndus Fila Limited 13.4 16.2 35.8 68.0 2689Gokaldas Exports Limited 20.00 15.0 18.7 118.6 9998Alok Industries Limited 9.2 6.2 17.9 60.4 18059Note 1 : Figures of the Industry Peers and the company are for the year ended March 31, 2007.Source: Our EPS, NAV and RONW have been calculated from our audited financial statements for the year endedMarch 31, 2007.53
TMAll figures for industry peers are from Capital Market, December 03-16, 2007(Industry: Textile – Products , Textile –Processing)The Issue Price of Rs. [●] per Equity Share has been determined by us, in consultation with the BRLM, on the basis of assessment ofmarket demand for the offered securities by way of Book Building Process and is justified based on the above accounting ratios. Forfurther details, see the section titled “Risk Factors” beginning on page [●] of this Draft Red Herring Prospectus and the financials ofour company including profitability and return ratios out in the auditors report in the section titled “Financial Statements” beginningon page [●] of this Draft Red Herring Prospectus.54
STATEMENT OF TAX BENEFITSTMTo,The Board of Directors,Mandhana Industries Limited,205 / 214, Peninsula Centre,Dr. S.S Rao Road,Parel , Mumbai - 400012STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND TO ITS SHAREHOLDERSBENEFITS UNDER THE INCOME TAX ACT, 1961The information provided below sets out the possible tax benefits available to the Company and its shareholders under the tax lawspresently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditionsprescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependentupon fulfilling conditions, as may be necessary, and is based on business imperatives the Company faces in the future. It may be alsokept in mind that the Company may or may not choose to fully utilize the benefits. It may be also noted that the benefits discussedbelow are not exhaustive and this statement is only intended to provide general information to the investors and is neither designed norintended to be substitute for professional tax advice.I) INCOME TAXa) To the Company1. Under Section 10(34) of the Act, income earned by way of dividend from another domestic company is exempt from tax in thehands of the Company.2. Capital gains arising on transfer of long-term capital assets, being equity shares in a company or units of equity oriented mutualfund on sale, on which securities transaction tax is paid, are exempt under Section 10(38) of the Act, whereas short-term capital gainsare subject to a concessional rate of tax under Section 111A of the Act at the rate of 10% (plus applicable surcharge and educationcess). However, minimum alternate tax of 10% (plus applicable surcharge and education cess) of book profit is payable under Section115JB on such long term capital gains if 10% of book profit computed as per provision of Section 115JB is higher than the totalincome as per normal provision of the Act.3. The benefit of exemption from tax under Section 10(38) of the Act on long-term capital gains, or, concessional rate of tax underSection 111A of the Act on short-term capital gains will not be available, where no securities transactions tax is applicable. In suchcases, under the provisions of Section 112 of the Act, taxable long-term capital gains, if any, on sale of listed securities or units wouldbe charged to tax at the concessional rate of 20% (plus applicable surcharge and education cess), after considering indexation benefits,or at 10% (plus applicable surcharge and education cess) without indexation benefits in accordance with and subject to the provisionof Section 48 of the Act. Under Section 48 of the Act, the long-term capital gains arising out of sale of capital assets excluding bondsand debentures (except Capital Indexed Bonds issued by the Government) will be computed after indexing the cost ofacquisition/improvement.4. As per the provisions of Sec 32 (1) (iia) the company is entitled to claim depreciation at the rate of 20% of the actual cost of theeligible plant and machinery in addition to normal depreciation. However such depreciation would be restricted to 50% of the eligibleamount in case the asset is used for a period of less than 182 days.5. As per Section 54EC of the Act, subject to the conditions specified therein, tax on capital gains arising from the transfer of a longtermcapital asset (other than those covered by Section 10 (38)) is exempt from tax, provided that the Company has, at any time withina period of six months after the date of the transfer, invested the whole of the capital gains in any specified long-term asset for thepurposes of Section 54EC of the Act. If only a portion of the capital gains is so invested, then the exemption would be availableproportionately.55
TMb) To the resident shareholders of the CompanyAs per section 10(34) of the Act, dividends declared, distributed or paid by the Company are exempt from income tax in the hands ofthe recipient shareholders.Section 94(7) of the Act provides that losses arising from the sale/transfer of shares purchased up to three months prior to the recorddate and sold within three months after such date, will be disallowed to the extent dividend on such shares are claimed as tax exemptby the shareholder.3. As per Section 54EC of the Act, subject to the conditions specified therein, capital gains arising from the transfer of a long-termcapital asset (including Equity Shares of the Company) is exempt from tax, provided that the shareholder has, at any time within aperiod of six months after the date of the transfer, invested the whole of the capital gains in any specified long-term asset for thepurposes of Section 54EC. If only a portion of capital gains is so invested, then the exemption is available proportionately.4. As per the provisions of Section 54F of the Act, subject to the conditions specified therein, long-term capital gains accruing to ashareholder, not owning more than one house, being an individual or a Hindu undivided family, on transfer of shares of the Company,shall be exempt from tax, provided the net consideration is utilized in the purchase of a residential house within a period of one yearbefore or two years after the date of transfer of such shares, or in the construction of a residential house within a period of three yearsfrom the date of transfer of such shares of the Company. If only a portion of the net consideration is so invested, then the exemption isavailable proportionately. The exemption is subject to other conditions specified in Section 54F of the Act.5. Long-term capital gains would accrue to resident shareholders, where the Equity Shares are held for a period of more than 12months prior to the date of their transfer. In accordance with and subject to the provisions of Section 48 of the Act, in order to arrive atthe quantum of capital gains, the following amounts would be deductible from the full value of the consideration:(i) Cost of acquisition/improvement of the shares, as adjusted by the Cost Inflation Index notified by the Central Government and(ii) Expenditure incurred wholly and exclusively in connection with the transfer of the shares.6. Capital gains arising on transfer of long-term capital assets, being equity shares in a company, on sale of which securitiestransaction tax is paid, are exempt under Section 10(38) of the Act, whereas short-term capital gains are subject to tax under Section111A of the Act at the rate of 10% (plus applicable surcharge and education cess). However, shareholders being companies arerequired to pay minimum alternate tax of 10% (plus applicable surcharge and education cess) of book profit under Section 115JB onsuch long term capital gains if 10% of their book profit computed as per provisions of Section 115JB is higher than the total income asper normal to provisions of the Act. If the shares on which securities transaction tax has been paid are treated as stock-in-trade, liableto tax as business profits at the maximum marginal rate, rebate can be claimed in accordance with provisions of Section 88E of the Acttowards such securities transaction tax.7. The benefit of exemption from tax under Section 10(38) of the Act, on long-term capital gains or, concessional rate of tax underSection 111A of the Act, on short-term capital gains, will not be available, where no securities transactions tax is applicable. In suchcases, under the provisions of Section 112 of the Act, taxable long-term capital gains, if any, on sale of listed securities would becharged to tax at the concessional rate of 20% (plus applicable surcharge and education cess) after considering indexation benefits orat 10% (plus applicable surcharge and education cess) without indexation benefits, in accordance with and subject to the provision ofSection 48 of the Act. In respect of capital gains not chargeable under section 111A, the short term capital gains in respect of sharesheld for a period of less than 12 months, is added to the total income. Total income, including short-term capital gains, is chargeable totax as per the relevant rate applicable to the assessee, plus applicable surcharge and education cess.c) To the Non-resident Shareholders, including NRIs, OCBs and FIIs.1. As per section 10(34) of the Act, dividends declared, distributed or paid by the Company are exempt from income tax in the handsof the recipient shareholders. Section 94(7) of the Act provides that losses arising from the sale/transfer of shares purchased up tothree months prior to the record date and sold within three months after such date, will be disallowed to the extent dividend on suchshares are claimed as tax exempt by the shareholder.2. As per Section 54EC of the Act, subject to the conditions specified therein, tax on capital gains arising from the transfer of a longtermcapital asset (including Equity Shares of the Company) is exempt from tax, provided that the shareholder has, at any time within56
a period of six months after the date of the transfer, invested the whole of the capital gains in any specified long-term asset for thepurposes of Section 54EC. If only a portion of capital gains is so invested, then the exemption is available proportionately.TM3. As per the provisions of Section 54F of the Act, subject to the conditions specified therein, long-term capital gains accruing to ashareholder, not owning more than one house, being an individual or a Hindu undivided family, on transfer of shares of the Company,shall be exempt from tax, provided the net consideration is utilised in the purchase of a residential house within a period of one yearbefore or two years after the date of transfer of such shares, or in the construction of a residential house within a period of three yearsfrom the date of transfer of such shares of the Company. If only a portion of the net consideration is so invested, then the exemption isavailable proportionately. The exemption is subject to other conditions specified in Section 54F of the Act.4. Long-term capital gains would accrue to non-resident shareholders, where the equity shares are held for a period of more than 12months prior to the date of their transfer. In accordance with and subject to the provisions of Section 48 of the Act, in order to arrive atthe quantum of capital gains, the following amounts would be deductible from the full value of consideration:(i) Cost of acquisition/improvement of the shares as adjusted by the Cost Inflation Index notified by the Central Government and(ii) Expenditure incurred wholly and exclusively in connection with the transfer of the shares As per the provisions of the first provisoto Section 48 of the Act, capital gains arising from the transfer of equity shares acquired by nonresidents in foreign currency are to becomputed by converting the cost of acquisition/improvement, expenditure incurred wholly and exclusively in connection with suchtransfer and the full value of the consideration received or accruing into the same foreign currency, as was initially utilised in thepurchase of equity shares, and the capital gains so computed in such foreign currency shall then be re-converted into Indian currency.Cost indexation benefits will not be available in such cases.5. Capital gains arising on transfer of long-term capital assets, being equity shares in a company, on sale of which securitiestransaction tax is paid, are exempt under Section 10(38) of the Act, whereas short-term capital gains are subject to tax under Section111A of the Act at the rate of 10% (plus applicable surcharge and education cess). However, shareholders being companies arerequired to pay minimum alternate tax of 10% (plus applicable surcharge and education cess) of book profit under Section 115JB onsuch long term capital gains if 10% of their book profit computed as per provisions of Section 115JB is higher than the total income asper normal to provisions of the Act. Where securities transaction tax has been paid on shares, which are treated as stock-in-trade,liable to tax as business profits at the maximum marginal rate, rebate can be claimed in respect of such securities transaction tax inaccordance with provisions of Section 88E of the Act.6. The benefit of exemption from tax under Section 10(38) of the Act on long-term capital gains or, concessional rate of tax underSection 111A of the Act on short-term capital gains, will not be available where no securities transactions tax is applicable. In suchcases, under the provisions of Section 112 of the Act, taxable long-term capital gains, if any, on sale of listed securities or units wouldbe charged to tax at the concessional rate of 10% (plus applicable surcharge and education cess).7. As per the provisions of Section 115-I of the Act, Non-Resident Indians have an option to be governed by Chapter XII-A of the Act,according to which:-i) Under section 115E of the Act, capital gains arising to a Non-Resident on transfer of shares in a Company, subscribed to inconvertible foreign exchange and held for a period exceeding 12 months (not covered under Sections 10(38) of the Act) would betaxed at a concessional rate of 10% (without indexation benefit plus surcharge and education cess as applicable).ii) Under section 115F of the Act, long-term capital gains accruing to a Non-Resident on transfer of shares in a company, subscribedto in convertible foreign exchange (not covered under Sections 10(38) of the Act) would be exempt from income tax, if the netconsideration is invested in specified assets as defined in Section 115C(f), or in any saving certificates specified under Section 10(4B),within six months of the date of transfer. If only part of the consideration is so invested, the exemption would be proportionatelyreduced. The amount so exempted would be chargeable to tax, if the specified assets are transferred or converted within three yearsfrom the date of their acquisition.iii) The aforesaid benefits will apply only in case of transfer of shares of the Company, which is not subject to STT, and hence notexempt from tax under section 10(38).iv)As per the provisions of Section 115G of the Act, a non-resident Indian is not required to furnish a return of income under Section139(1) of the Act, if his total income consists only of investment income and / or long term capital gains, arising from investment inshares subscribed to or purchased in convertible foreign exchange and tax has been deducted at source from such income.57
v) As per the provisions of Section 115H of the Act, where a non-resident Indian becomes assessable as a resident in India in anyprevious year, he may furnish a declaration in writing to the Assessing Officer along with his return of income under Section 139 ofthe Act to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to income derived for that year andfor subsequent years from the shares acquired with convertible foreign exchange, until such assets are converted into money.TMvi) As per the provisions of Section 115-I of the Act, a non-resident Indian may elect not to be governed by the provisions of ChapterXII-A for any assessment year by furnishing his return of income for that assessment year under Section 139 of the Act, declaringtherein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for thatassessment year will be computed in accordance with the other provisions of the Act.8. Capital gains arising to Foreign Institutions Investors (FIIs) on sale of shares on which securities transaction tax is not paid isgoverned by Section 115AD of the Act. As per Section 115AD of the Act, long-term capital gains arising on transfer of sharespurchased by FIIs, are taxable at the rate of 10% (plus applicable surcharge and education cess). Short-term capital gains are, however,taxable at the rate of 30% (plus applicable surcharge and education cess). Cost indexation benefits will not be available. Further, theprovisions of the first proviso of Section 48 of the Act, as stated in para 5 above, will not apply.9. Where any Double Taxation Avoidance Agreement (DTAA) entered into by India with any other country or agreement entered intoby specified association in India with any specified association in the specified territory outside India which is notified by the CentralGovernment under Section 90 and 90A provides for a concessional tax rate or exemption in respect of income from the investment inthe Company’s shares, those beneficial provisions shall prevail over the provisions of the Act in that regard.d) Mutual FundsAs per the provisions of Section 10(23D) of the Act, any income from investments in the shares of the Company, or income by way ofshort term or long term capital gains arising from transfer of such shares, earned by mutual funds registered under the Securities andExchange Board of India Act, 1992, or Regulations made thereunder, or mutual funds set up by Public Sector Banks or PublicFinancial Institutions and Mutual Funds authorised by the Reserve Bank of India, would be exempt from income tax, subject to theconditions as the Central Government may, by notification in the Official Gazette, specify in this behalf.FOR VISHAL H. SHAH & ASSOCIATESCHARTERED ACCOUNTANTS----------------------------VISHAL H. SHAHPROPRIETORMembership No.-101231Mumbai : 2 nd December, 200758
SECTION IV – ABOUT USTMINDUSTRY OVERVIEWThe information presented in this section, some of which is produced in this Draft Red Herring Prospectus has been extracted frompublicly available documents and reports prepared by professional organizations and analysts and from other external sourcesincluding WTO – International Trade Statistics 2006 , Ministry of Textiles, Government of India, National ManufacturingCompetitiveness Council (Government of India, 2006 ), CRISIL Annual review on Cotton Yarn, May 2007, CRISIL ResearchReadymade Garments Annual Review –2007), Ministry of Textiles, Annual Report – 2006-07, Foreign Trade Statistics of India(PC&C) DGCIS, Kolkata, Office of Textiles and Apparel (Otexa, USA), Report of the working group on textile and jute industry for11th five year plan – 2007-2012,Ministry of Textiles and CRISIL-CITI : Outlook on the Indian Textile Industry. These sources havenot been prepared or independently verified by the Company, the Book Running Lead Manager or any of their respective affiliates oradvisors and the Company and the Book Running Lead Managers make no representation as to the accuracy or completeness of theinformation provided in these sources.Overview of the Global Textile IndustryIn the year 2005, the global trade in textile and clothing industry was at USD 203 billion and USD 276 billion, respectively. Themajor trade flows in the textile industry were Intra-Europe at USD 59.2 billion, Intra- Asia at USD 45.6 billion, Asia to Europe atUSD 16.4 billion and Asia to North America at USD 15.5 billion. In the same year, Asia and Europe had the largest market share inworld textile and clothing exports and imports respectively.The phase out of the WTO Agreement on Textiles and Clothing (ATC) and the end of the quantitative restrictions in early 2005 had amajor impact on international trade in textiles and clothing, even though some restrictions were re-introduced on China’s textiles andclothing exports in the second half of 2005. The expiry of the ten-year transition period of ATC implementation meant that trade intextile and clothing products was no longer subject to quotas under a special regime outside normal WTO/GATT rules but was thengoverned by the general rules and disciplines embodied in the multilateral trading system. One of the major repercussions of the liftingof the last textile quotas in Canada, the EU and the United States was a shift among principal suppliers to these markets.Overall, in 2006, the least-developed countries increased their share of developed countries’ textile imports. As shown in the WTR2006, China and India have made significant inroads in the market share while many other suppliers have lost market share. The factthat China, India and Bangladesh performed well also meant that millions of low-income workers benefited.Among the main features of the international trade in textiles and clothing, one can point to the enhanced role of China, India andPakistan. These countries increased their exports of textiles and clothing between 16% and 26% in 2005. At USD 479 billion theinternational trade in textile and clothing comprised of 4.72 % of the total international merchandise trade in 2005.The labour intensive nature of the textile industry has caused it to shift its manufacturing base several times in the last 50 yearsultimately concentrating on those countries that offered the most competitive labour cost structure. These changes have given anopportunity to the developing countries to enhance their presence in the developed markets by increasing their exports.Overview of the Indian Textile IndustryThe textile industry is one of the significant industries of the Indian Economy. The textile sector accounts for nearly 7% of the GDPand 17% of the manufacturing output. It is also a significant foreign exchange earner, contributing to around 25% of India’s totalexports. The textile sector is also the second largest employment generator after agriculture, employing nearly 82 million people – 35million directly and 47 million in allied sectors.The Indian textiles industry is extremely varied, with the hand-spun and handwoven sector at one end of the spectrum, and the capitalintensive, sophisticated mill sector at the other.59
The major contributors for the growth of the textile industry are a buoyant domestic economy, a substantial increase in cottonproduction, the conducive policy environment provided by the Government and the expiration of the Multi Fibre Agreement (MFA)on 31st December’2004.TMThe Indian textile industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. A significant increase incotton production during the last two – three years has increased the availability of raw cotton to the domestic textiles industry atcompetitive prices, providing it with a competitive edge in the global market.The Government has also provided industry a conducive policy environment and initiated schemes which have facilitated the growthof the industry. The Technology Mission on Cotton has increased cotton production and reduced contamination levels. TheTechnology Upgradation Fund Scheme (TUFS) has facilitated the installation of the state-of-the-art / near state-of-the-art machinery atcompetitive capital cost. The rationalization of fiscal duties has provided a level playing field to all segments, resulting in the holisticgrowth of the industry.The Indian textile industry is fragmented with a few large players and numerous small and medium sized companies. The Indiantextile industry is a vertically integrated industry which covers a large gamut of activities ranging from production of its own rawmaterial namely, cotton, jute, silk and wool to providing to the consumers high value added products such as fabrics and garments.India also produces large varieties of synthetic and man made fibres such as filaments and spun yarns from polyester, viscose, nylonand acrylic which are used to manufacture fabric as well as garments.The Cotton/Man-made fibre textiles industry is the largest organized industry in our country in terms of employment nearly 1 millionworkers.As on January 31, 2007 there were 1818 cotton/man made fibre textile mills (non-SSI) with an installed capacity of 35.37 millionspindles and 0.45 million rotors. During 2006-07(E), the total production of cloth is estimated to be 54,260 mn. sq. mtrs., showing anannual growth of 5.24% during the last five years. Cloth production in the decentralised powerlooms sector during the last five yearshas shown a significantly higher annual growth rate of 5.4%.Outlook for the Indian Textile IndustryThe projected value of the Indian textile industry is estimated to grow from USD 52.5 billion in the year 2005-2006 to USD 110billion by the year 2012, comprising domestic market of USD 60 billion and exports of USD 50 billion. The CAGR of the industryfor the domestic consumption and exports is expected to be 10.0% and 19.0% respectively between the year 2006 and 2012.(In USD billions)2006 2012 CAGR(%)ParticularsDomestic34.6 60 10ConsumptionExports 17.9 50 19Total 52.5 110 13(Source: CRISIL-CITI : Outlook on the Indian Textile Industry)*Domestic household consumption is measured as the final expenditure of households on textile and clothing items at retail levelsOur country has the advantage of availability of relatively inexpensive and skilled workforce, design expertise, a large production baseof basic raw materials, yarn and fabric and availability of a wide range of textiles. India has the advantage of being the second-largestproducer of cotton across the globe. In conjunction with low labour costs, India is the cost producer of cotton yarn fabrics and thesecond least cost producer of woven cotton fabrics worldwide. According to CRISIL-CITI Outlook on Indian Textile Industry, thetotal investment need of the Textile Industry by 2012 would be Rs. 1,94,000 crores.Trends in ProductionYarn production has been growing annually at 3.92%, since 2003. Yarn production has increased from 3,081 mn kg in 2002- 03 to3458 mn kg in 2005-06. Production of Cotton yarn, Blended yarn and Non-Cotton yarn has been growing annually at 5.01%, 0.17%and 3.04% respectively since 2003.60
Fabric production has been growing at 5.71% annually between 2003 and 2006, driven primarily by the small scale, independentpowerloom sector. Compound annual Growth rate in the 100% non-cotton segment touched 4.92%, along with cotton fabric at 7.35%and blended fabric at 2.34%. Fabric production touched a peak 49,577 million sq mtrs in 2005-06, recording a robust 9% growthcompared to the corresponding previous year.TMThe apparel industry has around 27,700 domestic manufacturers, over 48,000 fabricators, and around 1,000 manufacturer-exporters.Production Trend in Fabrics:300002500020000150002004-052005-062006-071000050000Cotton Blended 100% Non CottonSource: Website of Office of the Textile CommissionerFabric Industry StructureThe fabric industry comprises handlooms, powerlooms, mill and hosiery(knitting) units. It can be divided into organized andunorganized sectors.Sector-wise cotton fabric productionProduction of the cotton fabric mainly comes from the power loom sector, closely followed by the hosiery sector, with 37.6% of thecotton fabric production in 2006-07 coming from the powerloom sector and 36.2% coming from the hosiery sector.Growing share of powerlooms in the total fabric production:The share of powerloom in the total cloth production increased from 56% in 1997-98 to 62% in 2006-07. The cost-effectiveness ofthe powerlooms segment is chiefly responsible for the increased share of this segment.Forward Integration: The way aheadTextile units are moving up the value chain to better guard their revenues against the commodity cycle. Over the years the companieshave been expanding by adding more spindles, along with weaving, processing and printing facilities. The weaving divisions of thesecompanies fulfill their yarn requirement through their in-house production facilities, and the rest of the yarn is sold in the market.Bargaining power of the players is dependent upon the amount of value addition they offer in their products.Ready Made Garments Market (RMG)According to CRISIL Research, overall sales of Ready Made Garments (domestic and exports) would grow at a compounded annualgrowth rate (CAGR) of 14.4 per cent to touch Rs 2,234 billion ($50.4 billion) in 2010-11, from Rs 1,141 billion ($25.8 billion) in2005-06.61
TMRMG market: An outlook2500(Rs. Billion)2000150010005000Total CAGR 14.4%814CAGR 18%356CAGR 12.6% 14207852005-06 2010-11Domestic SalesExports(Source: CRISIL Research)Broad trends in the Ready Made Garments segmentDomestic Ready Made Garments market size to cross Rs 1,400 billion by 2010-11India's domestic RMG sales is expected to grow at a CAGR of 12.6 per cent to touch Rs 1,420 billion ($32.1 billion) in 2010-11, fromRs 785 billion ($17.7 billion) in 2005-06, primarily due to increasing income levels. This is mainly driven by the increasingpenetration of credit cards, consumer finance and personal loans. Besides, ‘mall-culture' and ‘window-shopping' are also contributingto the spendthrift psychology of the domestic consumer. Additionally, with the increasing penetration of brands, the consumptionpattern is gradually shifting from tailormade garments to RMG, thanks to the increased availability of the latter in various designs,colours, sizes and patterns.Garment exports to touch $18.4 billion by 2010-11India's garment exports are expected to grow at a CAGR of 18 per cent to Rs 814 billion ($18.4 billion) in 2010-11, from Rs. 356billion ($8 billion) in 2005-06, primarily on account of the abolition of quotas, which has resulted in increasing outsourcingopportunities from global retail giants to low-cost producers such as India.India's apparel exports to the US are expected to grow from Rs 139 billion ($3.1 billion) in 2005-06 to Rs 310 billion ($7 billion) in2010-11, translating into a CAGR of 17.4 per cent for the said period. Apparel exports to the EU-25 are expected to grow from Rs 179billion ($4.1 billion) in 2005-06 to Rs 469 billion ($10.6 billion) in 2010-11, signifying a CAGR of 21.2 per cent during the saidperiod.62
The opportunities for Indian apparel exporters are further amplified by the imposition of restrictions on the growth of exports fromChina on certain key apparel categories by both the EU-25 and the US till 2007 and 2008, respectively. This small period of enhancedopportunity has given the Indian textile industry the time to gear up and take on its key competitor, China, in the unrestricted textileand apparel trade regime post-2008.TMApparel exports to the US grew from $1.71 billion during January-September 2004 to $2.27 billion during January-September 2005,witnessing a 33 per cent jump. However, garment exports from India increased by only 11 per cent to $2.51 billion during January-September 2006.Similarly, apparel exports to the EU increased from € 2.1 billion during January-September 2004 to € 2.65 billion during January-September 2005, witnessing a 26 per cent growth. However, garment exports from India increased by only 13 per cent to € 3 billionduring January-September 2006.Region-wise size exports of Ready Made GarmentsOthers , 11%US, 39%EU 25, 50%(Source: CRISIL Research Readymade Garments Annual Review –2007)Larger scale required in garment exports segmentThe removal of quotas in 2005 has favoured larger players who can build efficiency in the supply chain. The weaving and processingsegment continue to be largely fragmented. This has resulted in large garment exporters importing fabrics. In this scenario, exportershaving integrated operations with inhouse weaving and processing facilities would have a better competitive position vis-à-vis thosewhich do not.Growth Factors for the Ready Made Garments segment• Domestic Apparel MarketRising income levels and increasing retail penetration - the domestic apparel market's key growth driversHigher disposable incomes have increased the purchasing power of the average consumer. Moreover, with the trend of risingpreference for readymade garments vis-à-vis tailored garments, the growing predilection for branded apparels and the increasingpenetration of organised retail.Increasing retail penetration - driving sales of apparelsIndia's organised retail is expected to grow by 25-30 per cent per annum in the next 5-6 years. Rising disposable incomes,demographic changes, change in the perception of branded products and growing number of retail malls and availability of cheapfinance are providing a fillip to the industry. Within the retail market, apparels, footwear and consumer durables are segments withhighest organised retail penetration. This vertical also has the highest brand penetration. Of the organised retail of Rs 530 billion,clothing and textiles have the largest share at 37 per cent.Growing share of private labelsOrganised retailers, who initially stored national brands for attracting footfalls and generating a stable revenue stream, have nowbegun to increase the shelf-space for their in-store labels, also known as private labels. These own-labeled garments are manufacturedeither by the retailer himself or on a job-work basis. This helps attract footfalls over the years, which is important, especially forformats such as departmental stores.63
TMRising income levels is the primary demand driverThe major determinant of expenditure on clothing and apparels is the income level of a household. Thus, higher the level of income,higher is the purchasing power. Hence, higher is the quantum of amount spent on basic essentials such as clothing and apparels. Theconsumption pattern of Indian households reveals that 3.8-4 per cent of the income earned is spent on clothing, including RMG.According to a study undertaken by the National Council of Applied Economic Research (NCAER), the households in the incomebrackets of above Rs 500,000 (at 2001-02 constant prices) are expected to increase almost twofold from 4.9 million in 2005-06 to 10million in 2009-10. The households in the income brackets between Rs 90,000 and Rs. 1,000,000 (at 2001-02 constant prices), themain consuming class, are expected to increase from 70.3 million in 2005-06 to 103.7 million in 2009-10 - a CAGR of 8.1 per centduring the said period. The households with income above Rs 1 crore or the super-rich are expected to increase from around 53,000 in2005-06 to nearly 141,000 in 2009-10 - a CAGR of 27.7 per cent during the said period.Pattern of expenditure in India (2005-06)Recreation,education andcultural services,4Micellaneousgoods andservices, 10Transport andcommmunication,18Medical services,6Furniture,furnishing, etc., 3Rent, fuel andpower, 12Food and Edibles,42Clothing andFootwear, 5Source: CRISIL Research Readymade Garments Annual Review –2007Increasing proportion of working femalesThe proportion of working females to the total female population is growing. A working female in the house would mean higherdisposable income for the entire household. This translates into higher consumption expenditure, including clothing and apparel. Theworking females also purchase additional garments in the form of formal dresses or office-wear, besides regular household-wear andleisure-wear.64
TMRising proportion of working womenPer cent of working females to totalfemale population3025201510501961 1971 1981 1991 2001 2005(E)(Source: CRISIL Research Readymade Garments Annual Review –2007)Rising preference for ready-to-wear apparels against tailored garmentsThe consumption pattern of Indians is shifting gradually from tailor-made garments (stitched by a tailor out of fabrics or cut-piecepurchased/chosen by the customer) to ready-to-wear garments. The transition is primarily driven by the increasing availability ofRMG, increasing number of shopping malls. Furthermore, the consumers' aspiration to own branded garments has also pulled themtowards RMG over tailor-made garments. Additionally, the removal of mandatory CENVAT (now optional) in apparel manufacturinghas reduced the price gap between RMG and tailor-made garments.(Source: CRISIL Research Readymade Garments Annual Review –2007)Currently, apparel sales through organised retail amount to Rs 150-160 billion ($3.4-3.6 billion), thereby accounting for 19-20 per centof the total domestic RMG sales of Rs 785 billion ($17.7 billion).Apparel Export MarketBroad Trends:Quota abolition changed the apparel exports growth trajectory65
In 2005-06, India's garment exports accounted for Rs 356 billion. The quotas under the multi-fiber agreement (MFA) had restrictedthe growth of textile exports from low-cost producer countries, including India, till 2004. As a result, RMG exports grew by amoderate CAGR of 6.6 per cent from 217.7 billion in 2000-01 to Rs 281.2 billion in 2004-05. However, with the quotas beingabolished from January 2005, RMG exports have shown a staggering growth of 28 per cent from Rs 281 million in 2004-05 to Rs 356million in 2005-06. Thus, the abolition of quotas has acted as a key growth driver for apparel exports from our country and expectedto be a major driver going forward in the next 4-5 years.TM(Rs.Billion)India:Trajectory of apparel exports4003503002502001501005002000-01 2001-02 2002-03 2003-04 2004-05 2005-06USA EU Others(Source: CRISIL Research Readymade Garments Annual Review –2007)Restrictions on China - additional opportunity for Indian garment industryThe Agreement on Textiles and Clothing (ATC), signed under the governance of the World Trade Organisation (WTO), provided forthe complete abolition of textile quotas from 2005. However, China voluntarily agreed to allow such restrictions until 2008 under theterms of its entry into the WTO. Accordingly, the EU-25 imposed restrictions on the imports of a few garment categories from China.The restrictions imposed by the EU-25 restrict the growth of imports from China at 10 per cent per annum until 2007. Later, the US,too, imposed restrictions on the growth of Chinese imports in the categories till 2008. This will help Indian manufacturers in the shortterm.1000800CAGR 18%Rs. Billion60040081420003562005-06 2010-11(Source: CRISIL Research Readymade Garments Annual Review –2007)Outsourcing by major international players to boost India's garment exports66
TMThe abolition of quota restrictions has opened the doors of outsourcing opportunities for India. Big international players such as Wal-Mart, JC Penney, Banana Republic, Marks and Spencer, Nike, Lee, and DKNY have identified India as one of the outsourcingdestinations with a view to taking advantage of its low production costs. Besides, these players deal in large volumes. In fact, some ofthese companies are already sourcing garments to India. This would swell the RMG exports from our country.Strong cotton base, integrated structure and designing skills to support export growthIndia is the second-largest manufacturer of cotton. This, in conjunction with low labour costs and a presence across the entire valuechain, makes our country highly competitive in cotton-based apparels. Unlike Bangladesh and Sri Lanka, India has end-to-endcapabilities in spinning, weaving, knitting, processing and garment manufacturing. Thus, it enjoys a presence across the entire textilevalue chain. This has led to cost efficiencies on account of synergies. Besides, a presence across the value chain enables garmentmanufacturers to source their material locally, thereby reducing the lead-time and investment in inventories.Moreover, Indians are renowned for their creativity in the work of art since ancient times. This artistic skill is displayed even in thedesigning of garments. The garments designed by Indian designers have a worldwide appeal and have acquired the recognition ofbeing unique. This has provided numerour export opportunities for designer garments from our country.Outlook on garment exports to the USIn 2005, India enjoyed a 3.6 per cent market share in US apparel imports (volume). It improved to 3.9 per cent in 2006 (January-September). Indian garment exporters' realisation stands at $3.8 per square metre higher than the world average of $3.2 per squaremetre in 2005. Thus, India's market share in value terms was higher at 4.3 per cent in 2005.In 2005-06, apparel exports to the US amounted to Rs 139 billion ($3.1 billion). CRISIL Research expects it to grow at a CAGR of17.4 per cent to Rs 310 billion ($7 billion) by 2010-11.India’s apparel exports to US: A forecast(Rs. In billion)Apparel category 2005-06 2010-11 CAGRMen’s’ and boys’ cotton knit shirts 19.1 47.0 19.7Women’s’ and girls’ cotton knit shirts/blouses 10.8 43.6 32.3Men’s’ and boys’ cotton woven shirts 11.6 18.5 9.8Women’s’ and girls’ cotton woven shirts/blouses 16.7 23.6 7.2Cotton shirts 14.5 27.5 13.6Men’s and boys’ cotton bottom-wear 7.1 19.9 22.8Women’s and girls cotton bottom-wear 7.5 24.4 26.7Cotton apparels 109.2 261.1 19.1MMF dresses 1.6 2.5 8.9Women’s and girls’ MMF knit shirts/blouses 1.6 3.6 18.2Women’s and girls’ MMF woven shirts/blouses 4.2 5.4 5.5MMF skirts 3.1 4.5 2.7Men’s and boys’ MMF bottom-wear 1.8 2.8 9.0MMF apparels 21.7 33.6 9.2Silk and veg fibres apparels 5.4 8.9 10.5Total apparel 139.1 309.8 17.4(Source: CRISIL Research Readymade Garments Annual Review –2007)Outlook on cotton apparelsCotton-based apparels account for around 78 per cent of India's total apparel exports to the US. Out of Rs 139-billion worth exports tothe US, cotton garments accounted for Rs 109 billion in 2005-06. However, the share of cotton apparels in US imports is only 58-60per cent. India's market share in US cotton apparel imports improved from 3.8 per cent in 2004 (last year under quota) to 5.4 per centduring January-September 2006. It has the advantage of being the second-largest producer of cotton across the globe. In conjunction67
with low labour costs, India is one of the least cost producer of cotton yarn and knitted fabrics and the second least cost producer ofwoven cotton fabrics worldwide.TMSegment-wise size of the export market 2005-06RMG made fromMMF, 12RMG made fromsilk, 3RMG made fromcotton, 79RMG made fromwool, 5RMG made fromother material,1(Source: CRISIL Research Readymade Garments Annual Review –2007)In CRISIL’s opinion, India would manage to corner a 9-10 per cent share in US cotton apparel imports (volume terms) in 2010-11. Itscotton apparel exports to the US are expected to grow at a CAGR of 19.1 per cent from Rs 109 billion ($2.5 billion) in 2005-06 to Rs261 billion ($5.9 billion) in 2010-11.Industry StructureThe domestic RMG industry is highly fragmented in nature. There are more than 7,500 exporters registered with the ApparelPromotion Council (AEPC). Of these, the turnover of more than 4,000 exporters is less than Rs.5 million. The strength of apparelmanufactures is estimated to be more than 100,000 in organized and unorganized sectors.Degree of fragmentation in the apparel industry: FY 2004-05Turnover (Rs, Million)No.of exporters>1000 15500-1000 29200-500 180100-200 30650-100 46730-50 46920-30 40610-20 76205-10 761
Outlook on garment exports to the EU-25TMIndia enjoyed a 5.3 per cent market share in EU apparel imports (volume) in 2005. It improved to 5.9 per cent during January-August2006. On account of better realisations, India's market share in value terms was higher at 6.2 per cent in 2005 and 7.2 per cent duringJanuary-August 2006.Apparel exports to the EU amounted to Rs 179.4 billion (€ 3.3 billion) in 2005-06. CRISIL Research expects the same to grow to Rs468.6 billion (€ 8.7 billion) by 2010-11 at a CAGR of 21.2 per cent.India’s apparel exports to EU: A forecastRs. billionApparel category 2005-06 2010-11 CAGRMen’s and boys’ woven bottom-wear of cotton 12.5 18.6 8.4Men’s and boys’ woven apparels 22.3 33.2 8.3Women’s and girls’ woven dresses 9.1 14.7 10.1Women’s and girls’ woven skirts 18.7 44.6 19.0Women’s and girls’ woven bottom-wear 6.5 15.9 19.6Women’s and girls’ woven blouses/shirts 23.0 45.0 14.4Women’s and girls woven apparels 62.4 183.7 24.1Men’s and boys’ knitted bottom-wear-cotton 3.8 8.0 15.9Men’s and boys’ knitted night-wear 3.8 8.2 16.8Men’s and boys’ knitted apparels 12.2 25.4 15.8Women’s and girls knitted blouses/shirts 5.0 8.6 11.6Women’s and girls’ knitted night-wear 6.2 9.3 8.3Women’s and girls’ knitted apparels 19.7 32.0 10.2Jerseys/pullovers 10.6 23.8 17.6T-shirts and vests 34.0 78.1 18.1Unisex knitted apparels 44.6 101.9 18.0Total apparel 179.4 468.6 21.2Source: Annual review of Readymade garments -2007: CRISILExportsTextile ExportsTextile exports contribute 16.63% to our country's total export earnings, and India's share in the global textiles and apparel market is3.9% and 3%, respectively. The textile exports basket consists of readymade garments, cotton textiles, textiles made from man-madefibre, wool and woollen goods, silk, handicrafts, coir, and jute.According to data provided by the Directorate General of Commercial Intelligence and Statistics (DGCI&S), Kolkata textiles exportswere US $ 14 billion in 2004-05, and increased to US $ 17 billion in 2005-06, registering an increase of about 22%. Textiles exportsduring April-October 2006, increased by 6.47% in dollar terms, and 11.43% in Rupee terms, and are expected to reach 19.73 billionby March 31, 2007.Except for man-made textiles, all segments in the textile industry, including handicraft carpets, wool and silk, have recorded a growthin exports during 2005-06 -- the first year since the phasing out of the quota system in the global market.Major export destinations for India’s textile and apparel products are the US and EU, which together accounted for over 75% ofdemand. Exports to the US have further increased since 2005, post the termination of the MFA. Analysis of trade figures by the USCensus Bureau shows that post-MFA, imports from India into the US have been nearly 27% higher than in the corresponding period in2004-05.69
Segment-wise exports, FY 2004-2006TMExport of Textile Items (Value US mn $)Group Description 2003-04 2004-052005-06FIBREYARNRaw silk 2.9 2.4 9.3Raw Cotton 205.7 94.2 657.2Man-made staple fibre 71.0 105.6 92.7Others 23.3 32.5 33.0Total 302.9 234.7 792.1Silk 8.1 9.7 10.6FABRICSRMGMADEUPS /CARPETSOTHER TEXTILEITEMSCotton yarn (incl cotton sewing thread) 1308.7 1258.3 1485.7Man-made filament yarn 210.3 268.8 307.7100% non-cotton yarn (incl 100% noncotton sewing thread)347.5 368.4 370.1Others 84.8 115.3 96.1Total 1959.4 2020.4 2270.1Silk fabrics 330.7 355.4 373.2Wooven fabrics of cotton 957.9 914.9 846.8Man-made woven fabrics 965.5 1048.5 972.6Others 248.4 254.3 312.0Total 2502.4 2573.1 2504.6Apparel and clothing accessories 6259.0 6586.7 8642.2Total 6259.0 6586.7 8642.2Made up textile articles 2365.3 2806.4 3508.1Total 2365.3 2806.4 3508.1Other Textile Items 124.7 125.0 165.6Total 124.7 125.0 165.6Grand Total 13513.8 14346.4 17882.7Source: Office of Textile Commissioner, CRISIL ResearchSource: Office of the Textile Commissioner, CRISIL ResearchAnalysis of Exports of Readymade Garments from IndiaReady made garments account for around 48 per cent of the total textile exports of the country in 2005-06. For the year 2006-07,RMG exports from India have increased at a marginal rate of 1 per cent from $ 8.6 Bn to $ 8.7 Bn. Cotton based apparels have fared alittle better growing at a y-o-y rate of 3 per cent from $ 6.5 bn in 2005-06 to $ 6.8 bn in 2006-07.Source: Foreign Trade Statistics of India (PC&C) DGCIS, KolkataThe export market can be subdivided on the basis of raw material from the which the apparel is manufactured into RMG madefrom cotton, man-made fibres, silk wool and other materials. The largest segment in the export market is the RMG made from70
cotton; the exports made from segment amounted to Rs. 281 billion ($6.3 billion) out of total garment exports of Rs. 356 billion($8.04 billion). Thus, this segment accounts for nearly 79 percent of apparel exports from India.TMCountry Wise analysisUSA holds around 39 per cent share in the RMG exports of the country at Rs.139 bn in 2005-06 whereas EU holds around 50.4 percent share. The other important countries where Indian RMG exports have a wide presence are Saudi Arabia, UAE, Japan, China etc.As per Office of Textiles and Apparels (OTEXA), India share in total US apparel imports in the calendar year 2006 was at 4.4 per cent(value terms). For the period Jan-July 2007, this share has increased to 4.9 per cent. For the comparable period, China holds around29 per cent share in the total US apparel imports.Distribution channels in Indian RMG industryA distribution channel is a network of outlets through which a product is sold. The company can sell its products through one or moredistribution channels. The selection of a distribution channel or channels is one of the management strategies on which the costs andrevenues of the company are dependent. Apparel manufacturers either sell their garments in India or export them.SWOT Analysis for the Indian Textile IndustryStrengths• Cost advantages of manufacturing textiles and garments in India derive from abundant supply of raw material at competitiveprices and lower labour cost• Vertical and Horizontal integrated textile value chain• Strong presence in entire textile value chain from raw material to finished goods• Flexible production system• Diverse Design baseWeakness• Structural weakness in weaving and processing• Highly fragmented and technology backward textile processing sector• Highly fragmented garment industry• Inadequate capacity of the domestic textile machinery manufacturing sector• Big demand and supply gap in the training facilities in the textile sector• Infrastructural bottlenecks in terms of power, utility, road transport etcOpportunities• Increase in disposable income levels• Increase in working female population• Consumption of Apparels and made-ups expected to increase on account of growth in organized retailingThreats• Higher competition specially after 2008 when China cannot be restrained under WTO• Non-availability of indigenous textile machinery71
TMBUSINESS OVERVIEWWe are a vertically integrated textile and garment manufacturing company in India. Our operations and facilities enable us tomanufacture a wide variety of value-added fabrics and garments through our integrated operations comprising of dyeing ofyarns and fabrics, weaving operations for fabrics, processing solutions for both fabrics and garments, garment manufacturing,domain expertise in providing sampling and designing for both fabrics and garments. Our operations and facilities enable usto provide a number of textile products / processes for our customers.We are focused towards capitalizing on the vertical integration of our operations which gives us the advantage of higherprofit margins from our garment business. We have achieved a high level of self-sufficiency in producing new designs andsamples for our clients which has helped us in enhancing our product offering portfolio and improved our adaptability to thelatest trends in fashion. We have positioned ourselves as a multi-product, multi-fibre and multi-market player ensuring thatour target market is a diverse mix of domestic fabrics and garments as well as the international garment markets.In the FY ended March 31, 2007, 2006 and 2005 our sales figures were Rs.2412.17 million, Rs.1820.05 million, andRs.1272.51 million respectively. Further for quarter ended June 30, 2007 were able to achieve sales of Rs.1054.28 million.The following table gives the breakup of revenues from our two main business segments, textiles and garments::(Rs. In million)Particulars FY 2005 FY 2006 FY 2007 CAGR (%) Quarter endedJune 30, 2007Textile 777.89 1,206.46 1,679.46 46.94 771.83Garments 494.62 613.59 732.71 21.71 282.45Total 1,272.51 1,820.05 2,412.17 37.68 1,054.28We have Textile manufacturing facility at Tarapur which comprises of yarn dyeing, weaving and fabric processing. Undertextiles we derive major share of our revenues from the sale of greige and finished fabrics. Textiles contributed 69.62% ofour total revenues, for FY 2007 and 73.21% of our total for revenue the quarter ended June 30, 2007. For textiles we cater tothe domestic market which includes clients like Aditya Birla Nuvo (manufacturers of brands like Louis Phillipe, Van Heusen,Peter England, Allen Solly), Vogue Vesture (manufacturer of brand Levis), Pantaloon Retail, ITC (manufacturer of brandWills LifeStyle), Turtle.We export a major component of our garment production world wide across 25 countries and 5 continents. The EuropeanUnion markets constitute more than 85% of the total export sales of garments for the FY2006 and FY2007. Our exportclientele constitutes more than 94 customers (as on June 30, 2007), which includes brands/labels and retail chains forgarments including FCUK, Teddy Smith, PROMOD, RIP CURL, All Saints, Artman, Simint Spa, Gintonic, No Excess, PepeJeans, OXBOW, LAFUMA, Sixty Spa, O’neil, Jam Session. Our integrated manufacturing operations help us control a majorportion of our supply chain thereby offering substantial value addition to our products through our sampling and designingexpertise. Our ability to consolidate our position and develop new clients in the European Union market is a testimony to ourefforts.We believe that the increase in disposable incomes of the middle class in India has given a major boost to retailing and put iton a high growth trajectory. This offers us with opportunities in the domestic garment segment, given our domain expertise inthis area. Currently we supply our garment products to Pantaloon, Wrangler, Arrow, Spykar, Lee Cooper, Aditya Birla Nuvoand others.72
OUR BACKGROUNDTMOur Company’s operations started in 1984 with trading in textiles. In 1994 our Company started our first processing andprinting unit for manufacturing fabrics at Tarapur. Thereafter in 1998, our Company started export of garments to theEuropean Union countries. The weaving unit of our Company was set up in the year 1999 in order to manufacture greigefabrics at Tarapur which helped our Company to reduce our input cost of fabrics and meet our internal requirement forfabrics.In the year 2004, our Company established a well equipped garment manufacturing facility at Bangalore and set up a salesoffice in Chennai so as to facilitate our expansion into the southern region of India.In 2005, our Company set up a new unit at Tarapur for yarn dyeing and for manufacturing various fabrics like cotton, andcotton blends. Subsequently, a liaison office at Paris was set up for attaining a global image, strengthening our foothold in theEuropean market and having proximity to the customers and enabling us to predict the latest fashion trends worldwide.In 2006, our Company set up a garment manufacturing and sampling unit at Vikhroli, Mumbai with a design studio. InJanuary 2007 our Company also started selling garments to the domestic retailers.Over the years, we have adopted a strategy of backward as well as forward integration for our growth plans. We currentlyhave 6 factories located over an area of five lakh square feet employing over 3248 employees.Our garment manufacturing facilities are located at Vikhroli, Mumbai and Bangalore with a capacity of manufacturing 3million pieces per annum. Our yarn dyeing, fabric processing and weaving facilities are located at Tarapur with a capacity of1.8 million Kg. per annum, 20.4 million meters per annum and 18.0 million meters per annum respectively. In the FY 2006-07, our Company manufactured 1.96 million units of garments, processed 12.87 million meters of fabrics and produced 14.78million meters of greige cloth.For further details please refer to the chapter titled ‘History and Other Corporate Matters’ beginning on page no. [●] of thisDraft Red Herring Prospectus.BUSINESS SEGMENTSWe operate in two Business Segments namely Textiles and Garments.• TextilesIn the Textile segment we derive revenue mainly from sale of fabrics. We produce greige and finished fabrics like cottontextiles, yarn dyed fabrics, embroidered, embellished and blended cotton fabrics including cotton blends with nylon, lycra,viscose, mélange etc. for our customers as well as for our captive consumption.The total quantity of yarn processed for FY 2007 was 14.45 million kgs. Out of which 12.27 million kgs was used for internalconsumption and 2.18 million kgs was processed on job work basis.For the FY ending 2007, our company was operating 183 weaving looms. The total production of greige fabric 14.78 millionmeters and respectively. Of the total greige fabric produced, 8.89 million metres was sold to customers and 4.04 millionmetres was used for our internal consumption.The total quantity of finished fabric processed for FY 2007 was 12.87 million meters. Out of which 5.11 million meters wasused for internal consumption and 7.76 million meters was processed on job work basis.In addition to above we also derive revenue from sale of yarn and cotton, our processing capacity of finished fabric is 20.4million meters per annum and our yarn dyeing capacity is 18.0 million kg per annum.• GarmentsOur Company produces readymade garments for men, women and children. Our garment products include shirts, ladies tops,dresses, skirts, kids wear, sports wear and jeans wear. Our Company has installed machineries imported from manufacturerslike Brother from Singapore, Juki from Singapore, Hashima from Japan and Modsu from Germany.73
TMCurrently our Company carries out garment manufacturing operation with 1150 sewing machines with an overall productioncapacity of 3.0 million pieces per annum. Our Company is also well equipped to perform embellishment and surfaceornamentation processes like embroidery, printing & washing.OUR COMPETITIVE STRENGTHSDiversified Domestic and International Customer baseWe have over three decades of experience in the textile industry and have developed long standing relations with ouroverseas and domestic customers. We have long standing relationships with number of top retailers / customers for fabrics/garments. For the year ended March 31, 2007, our total clientele consisted of more than 800 customers. We enjoy theconfidence of customers because of our ability to offer in-house designs and samples, timely responsiveness, and capacity tocater to various order sizes.Our overseas customers include brands like FCUK, Teddy Smith, PROMOD, RIP CURL, All Saints, Artman, Simint Spa,Gintonic, No Excess, Pepe Jeans, OXBOW, LAFUMA, Sixty Spa, O’neil, Jam Session. In the domestic market ourcustomers include Pantaloon, Wrangler, Arrow, Spykar, Lee Cooper, Aditya Birla Nuvo and others.Our lower dependence on few customers increases our competitive position and helps us in maintaining our operatingmargins thus reducing the volatility of revenues and margins on account of loss of few customers.FY 2005 FY 2006 FY 2007Sales from top 3 Customers % 8.98% 16.65% 11.23%Sales from top 5 Customers % 18.52% 23.81% 22.09%Sales from top 10 Customers % 29.31% 34.34% 31.93%Our export sales are invoiced in a mix of currencies as depicted in the table below, and because of such diversification we areable to reduce the adverse impact of depreciation in any particular currency.CurrenciesFY % FY 2006 % FY 2007 %2005Euro 143.08 33.08 245.88 42.67 347.16 52.89USD 253.22 58.54 287.25 49.85 240.54 36.65Other foreign currencies 36.27 8.38 43.11 7.48 68.64 10.46Growth in average Sales Realization per unitOur Company specializes in manufacturing fashion garments involving styles and numerous processes requiring skilledhuman intervention. For our Garment segment we focus on fashion conscious domestic centers and European markets. Wehave been able to achieve growth in average sales realization per unit of Garment manufactured as shown below:74
TMAverage Realisation Per Piece388.64400282.16312.37329.50300(In Rupees)2001000FY2004 FY2005 FY2006 FY2007In-house Product designingDesigning is an important element in the production of fabrics and garments. The ability to produce innovative designs is oneof our major strengths and improves our competitiveness in the market. Our in-house designing team focuses on providingvalue-added design products by understanding the current fashion trends thus helping us in procuring new as well as repeatorders. We have created a Style Lab & Textile Studio which comprises of the CAD/CAM software. On an average 50 newdesigns are developed on a daily basis for fabrics and 10 new designs for garments. As on September 2007 we have anarchive of over 75,000 designs in garments and more than 1,00,000 designs in woven fabrics, especially in the yarndyed variety of fabrics. We also publish a half-yearly magazine showcasing more than 1,000 designs.With our designing and sampling capacity, we have the capability to serve customers who launch upto 12 fashion seasonsglobally every year. The design and sampling team continuously interacts with the clients to understand their requirementsand provides the designs based on their requirements. Our design team offers a diverse product range of garmenting solutionsincluding shirts, ladies tops, dresses, skirts, kids wear, sports wear and jeans wear using various types of fabric enabling us toprovide a range of garments to our customers.R&D Focus on Product DevelopmentCustomer satisfaction is the focus of our product development. Our company focuses on R&D to provide better qualityproducts to our domestic and international customers. It has also been our endeavor to continuously upgrade and improve ourproduction processes which have resulted in quality assurance at each level of production. We have developed R&D centersfor our yarn dyeing, fabric dyeing, weaving and garmenting operations each of which has a dedicated team for the same.We have developed competency in the processing of fabrics. This is evident from our ability to produce a variety of finisheslike water / oil / mosquito repellent finishes to anti- bacterial / takara finish including stain free / U.V. protector / quick dryfinish etc.Cost and Time savings through Vertically Integrated OperationsOur manufacturing operations are vertically integrated encompassing designing of fabrics and garments, dyeing of yarns,weaving and processing of fabrics, manufacturing of garments, surface ornamentation and embellishments.This has helped us in rationalizing our operations as follows:• Improving efficiency and productivity;• Savings in manufacturing and logistics costs;• Lower turnaround time; and• Improving quality of products.75
Project Management and Implementation SkillsTMOur Management team has technical and commercial experience in the textile industry. We have successfully implemented new textileprojects which include processing, weaving and garmenting facilities. The same can be illustrated from the fact that we havesuccessfully commissioned various units over each of the past three financial years.FYUnits Commission2004 – 2005 Garment unit at Bangalore and weaving unit expansion at Tarapur2005 – 2006 Weaving and yarn processing unit at Tarapur2006 - 2007 Garment unit at MumbaiEstablished Overseas Marketing BaseOur Company, in the year 2005, set up a liaison office at Paris, France, which has been established to consolidate our position in theEuropean markets and serve our customers more effectively. This setup helps us to closely interact with our Customer, showcase ourlatest product offerings and solicit new customers.Process and Quality CertificationOur Garment unit located at No. 26A, II Stage, Peenya Industrial Area, Bangalore is certified ISO 9001 - 2000.The certification body of TUV SUD Management Service GmbH Trading as TUV South Asia Private Limited has issued a certificatethat our above mentioned facility at Bangalore has established and applies a Quality Management System for manufacture and exportof garments as per ISO 9001 -2000.Our Bangalore unit mentioned above is also SA 8000:2001 certified whereby the certification body of TUV SUD Group has issued acertificate that the above garment manufacturing facility at Bangalore has established and applies a social accountability managementsystem for manufacture and export of garments.OUR STRATEGYFocus on garment business in overseas and domestic markets including female garments business.We believe that the readymade garment segment has grown rapidly over the period of last 10 years. Further, the Government isoffering initiatives for the Textile Industry, such as, TUFS, Increase in Duty Drawback/DEPB and Reduction in Bank Interest Rate onWorking Capital Loan. In order to derive benefit from these opportunities, we have drawn up a plan to enhance our garmentmanufacturing capacity from the current 3.0 million pieces per annum to 14.23 million pieces per annum by 2008-09. We believe thatthe increased scale of operations would improve our ability to execute large size orders, thus becoming the vendor of choice forgreater number of customers.We believe that female garment segment is an important area of growth for our business. Over the last three years we have diversifiedinto women wear in a planned manner. We believe that female garment segment offers comparatively higher margins as well asconstitutes a larger market as compared to men’s segment. . Our designing skills have helped us in transforming our garment businessfrom male centric to a combination of both and we intent to further implement this strategy.Maintain operational efficiency through Multilocational Facilities.Our current manufacturing facilities includes 3 locations at Tarapur in Thane district of Maharashtra, 1 location at Mumbai inMaharashtra and 3 locations at Bangalore in Karnataka. We propose to setup our new manufacturing facilities at Yeshwanthpur,Doddballapur and Hubli in Karnataka and Mumbai in Maharashtra and expand existing facilities at Tarapur in Thane district ofMaharashtra.Our strategy is to set up facilities at multiple locations in order to maintain operational efficiency in terms of management ofworkforce, administrative efficiency and at the same time optimizing logistics. Further, this strategy also helps us to mitigate any risk/losses on account of operational factors.76
Focus on apparel design and product developmentTMDesign and related product development is an important focus area for our growth. Our strategy is to focus on the development of newdesigns and samples for our fabrics and garments. This activity is supported by our in-house design studio which is equipped withdesign capabilities including softwares like CAD/CAM, thus enabling us to successfully convert our designs into fabrics and samplesinto final products. Improved ability to create samples would help our customers in placing orders well in advance of a particularseason. We plan to strengthen our capabilities in designing by continuously upgrading our design studios both in terms ofhuman resources and technology. We plan to tap the hi-end readymade garment segment which will help us in maintaining highersales realization for our final products.While our focus would continue to be the casual wear segment, we also plan to expand into other segments where we can providevalue added products. Our strategy would be to identify potential areas for expansion like formal wear, linen wear etc. Subsequent tothe implementation of our ammonia processing plant we plan to enter the high-end formal wear segment. Our expansion into newproducts would benefit us in terms of additional and diversified sources of revenue.Value accretion through backward integration and capacity expansion.In order to increase our self – sufficiency with respect to the various inputs to supplement the growth of our garment business, we planto scale up our manufacturing output across the value chain preceding final garment to the levels as stated hereunder:• Yarn Dyeing capacity from 1.8 million kgs. per annum to 3.0 million kgs. per annum.• Weaving capacity from 18.0 million meters per annum to 30.0 million meters per annum• Fabric processing capacity from 20.4 million meters per annum to 51.6 million meters per annumOur Company proposes to set-up a process plant which would be operating on CDR/CBR and Ammonia process technologies,enabling us to offer value-added processing/ finishing in fabrics which plays an important role in giving the right texture/feel to thefabric. The said proposed plant would help us in securing additional sources of revenue for the processes / finishes our Company canoffer and provide further value addition for our products. This plant would have a processing capacity of 31.2 million meters offabric per annum.Our current expansion through the proposed project /envisages strengthening our presence across the textile and garment value chainthrough multi-locational integrated operations, catering to greater number of customers across geographies and maintaining focus onhigh quality and value added high-margin products. Besides offering greater scale in operations, our expansion would help us inreducing our reliance on out-sourcing for part of our operations and add to our value-added products portfolio through betterprocessing/ finishing facilities.For further detail on our proposed projects, refer to the section titles “Objects of the Present Issue” beginning at page [●] of this DraftRed Herring Prospectus.Mine Global / Domestic Relationships for New and Existing BusinessWe believe that strong and sustainable relationships with our customers are the key to our success. We aim to continue to developour relationships with our clients not only in terms of increased sales but also in terms of increased variety in products.We aim to achieve this by adding value to our client through quality, speed and reliability of our product delivery.We also aim at developing relationships with new clients as well. This helps us in not only entering new markets but also indiversifying the sources of our revenues and reducing our dependence on a given set of customers.As a measure of the said strategy we plan to expand our business in domestic as well as overseas market through our marketingoffices in India and abroad.Cost cutting through improved efficiency of our operationsWe believe that as we grow and expand our operations, controlling costs becomes a critical factor for us in order to stay competitive.Our strategy to control our costs includes the following:• Identify separate cost centers so as to monitor each of the major costs• Benchmarking our costs with the international industry standards• Controlling Raw Material costs through bulk purchases and negotiations with suppliers.77
• Controlling consumption and wastage through effective supervision of the shop floor• Implement an ERP system across our different offices, facilities so that all our facilities are on the same platform. This willenable us to effectively monitor our systems and processes and identify those areas which need to be streamlined.TMOUR BUSINESS PROCESSESThe entire supply chain can be broadly classified into the following four segments:a) Yarn procurement and Dyeingb) Weavingc) Fabric processing which includes dyeing, washing, bleaching etc.d) Production of GarmentApart from the main activities mentioned above, parallel activities which are critical for our manufacturing includes yarn dyeing,design and sampling, embroidery, client approvals and quality checks. The span of our processes includes yarn dyeing, textile design,weaving (shirting), dyeing and processing, garment designing, manufacturing, finishing and garment exporting.YARN DYEINGYarn is a major raw material and is the prime requirement for manufacturing a variety of fabrics and garments. The machines installedby our Company can serve a variety of yarn qualities such as 100% cotton, cotton/polyester blends, 100% Polyester filament yarns,texturised yarn, viscose, cotton viscose blends and other yarns.The entire Yarn Dyeing process can be summarized as under:Raw Material Procurement:The raw material for weaving is readily availableand is procured from the spinning mills across thecountry with a delivery time of 7-10 days.WindingThis process is important to achieve a high level ofcolour variation consistency in the yarn. A highlevel of humidity is maintained in the winding roomwhich helps in reducing the hairiness of yarn andhelps in minimizing yarn breakage.Dyeing in HT / HP vesselsWe have installed machines with technology toensure consistency in the quality of dyeing.Machines installed have high temperature and highpressure vessel of various capacities with Air Padsystem which enables to maintain the same liquorratio even if the machines are used for reducedcapacity which will reduce the cost of production.Fully automatic machines installed are equippedwith very high precision turbo pumps, whichensures very precise flow rate of liquor across theyarn package.RRAAWW MMAATTEERRI IAALL ((YYAARRNN) ( ))SSOOFFTTDDYYEEI INNGG INN I HHTT // / HHPPDDRRYY II INNGGRREEWWI INNDDI INNGG INNTTOO I FFI INNAALLPPAACCKKAAGGEESS RREEAADDYY FFOORR WWEEAAVVI INNGG // /DDEESSPPAATTCCHHPPAACCKKI INNGGChart: Yarn Dyeing processDryingExcess water is removed from the yarn by the hydro extractor by means of centrifugal action. After hydro extraction, approximately50-55% of water still remains in the yarn package. This is followed by Radio Frequency drying which reduces the moisture to thedesired level.78
PreparatoryThis process makes the yarn ready for weaving. Both dyed as well as greige yarn are used as per the requirements of the design andparameters of fabric. Based on the production schedule, three kinds of machines can be used which includes, one direct warpingmachine and two sectional warping machines. This combination gives flexibility is use of any type of yarn for warpingTMFor the next operation of sizing, both beam to beam sizing as well as beam from the direct warping is considered which will giveadditional capacity to run single yarn pattern beam with sizing.FABRIC WEAVINGThe entire Fabric Weaving process can be summarized as under:Grey Yarn on ConesNormally yarn received for weaving is in cone form either from ring spinning or from open end spinning in single or double fold asrequired. The yarn used for weaving is categorized into:a. Warp yarnb. Weft yarnNormally for Weaving, yarn used as warp should have higher Counter Strength Product (CSP) and further sized to withstand stressand strains exerted during Weaving Operations. The Weft yarn is directly used on weaving machines and in some cases, if required, isrewound so as to enhance its performance in weaving.Warping on Sectional / Direct WarpingThe warp yarn is required to be presented into sheet form to the weaving machines. In warping, the individual cones are put into creel(the number of cones depends upon fabric construction) and yarn from individual cones is pulled together in sheet form, wound on abarrel called warping beams (for Direct warping) or on weaving beams (for Sectional Warping). Normally if warp sheet is withpatterns of different colored yarns, it is processed on sectional warping machine.Sizing of yarn in set/Beam to beam positionThe object of sizing is to improve the strength of yarn by chemically binding the fibers with each other and also improve upon itsfriction resistance capacity by chemically coating the surface of yarn/fibres.WEAVINGWeaving is basically interlacing oftwo sets i.e. warp and weft threads indesired sequence and pattern. Toobtain this interlacement, warp yarnsheet is bifurcated & opened in formof two layers/sheet and weft thread isinserted between the so opened, twowarp sheets by means of a suitablecarrier i.e. Shuttle, Projectile, Rapier,Air current, Water current, etc.,depending upon the type of theweaving machines.During subsequent cycle, the sheetforming upper layer is lowered andmade to form lower layer and vis-àvisfor opposite sheet. Thus theinterlacement is formed. In order toget this sheet separation and their upand down movement, each warpthread is to be drawn through heads,reeds and drop pins. This operation iscalled “Drawing - in”.LLOOOOMMSS DDOOBBBBYY 119900CCMMSSWWEEAAVVI INNGGINNSSPPEECCTTI I IOONNMMEENNDDI INNGGPPAACCKKI INNGGFFI INNAALLDDEESSPPAATTCCHHChart : WeavingLLOOOOMMSS JJAACCQQUUAARRDD334400 CCMMSS TTWWI INN BBEEAAMM79
TMThe drawn Weavers Beams are fixed on weaving machines, threads are tied and held shafts are coupled. This operation is called BeamGaiting. If undrawn warp threads are directly knotted to the threads of finished beams, it is called Knotting. These operations areessential because normally weavers beam can carry only certain length of warp sheets on it and when so woven, whole length isconverted to the fabric by weaving machine.We are using two types of Shuttle less weaving Looms ie. Air jet and RapierAir jet LoomsIn these types of looms the weft insertion is done with the help of compressed air. A very high weft insertion rate up to 1800 meter perminute is achieved. Compared to rapier and projectile looms, these looms are highly productive and suitable for producing sheetingfabrics up to 600 Thread countRapier LoomsIn this case, weft insertion is achieved with the help of rapiers. These looms are versatile and can be suitable for weaving all types offabrics, including fabrics of different designs. Rate of weft insertion is 900 to 1300 meter /minute. These looms are mainly used foryarn dyed fabrics of size upto 160 cms.Inspection and Quality ChecksThe woven fabric wound on a cloth roll is taken out from weaving machines at certain intervals and checked on inspection machinesfor possibilities of any weaving fault. Mending operations ensure that the loose threads if any left out at fabric body / selvedge areclipped off to improve the overall quality and look of the fabric.FABRIC PROCESSINGSingeing & DesigningUnder Singeing, the fabric is run on gas flame at a speed of about 120 Mtrs /min and the excess protruding fibres on the surface offabrics are burnt during this process. During desizing the fabrics are impregnated with enzyme solution to remove chemicals (usedprior to weaving during sizing process). This fabric is then kept on rotating batches for a period of 6 to 8 hours for effective removalof sizing chemicals.Open width scouring and bleachingDesized fabrics are first washed in water and then treated for scouring and bleaching with caustic soda, good detergent /soap andperoxide with stabilizer. Fabric is then passed through steamer so that reaction takes place with impurities and they are fullydissolved. The fabrics so washed are then clean and absorbent. This process is very important for obtaining good quality results indyeing and printing.Open-width MerceriserFabrics are treated on Merceriser to obtain luster for good appearance and dye absorbency. There are also additional benefits likesavings on dyeing cost and improvement in the strength of fabrics.DyeingFabrics are normally dyed with reactive dyestuffs on PAD/BATCH process and washed subsequently. Pad Batch Process is thewidely accepted process for dyeing cotton fabrics with pigments, vat dyestuffs and certain reactive dyestuffs is called cold pad- batchprocess.PrintingIn order to obtain combination of different designs and colors on fabrics, printing is done. Designs are prepared with the help of CAD- CAM design equipments and then the designs are engraved on rotary screens using photo exposure. They are then checked for anydefects. If the designs are to be printed using Flat Bed Screen printing systems, screens are prepared using bolting cloths separately foreach matching and fixed on frame for use on flat Bed Screen printing machine.Colour Kitchen for printingColour paste used for printing is prepared in a laboratory called “Colour Kitchen”. Dyestuff solution for each dye shade is preparedseparately. Also thickeners / binders solutions are prepared separately and then are mixed with individual dyestuff solutions prior toprinting.80
TMPrint Dryer and SteamerThe Rotary screen-printing machine is connected to dryer in continuous manner so that wet fabric is immediately dried after printing.Drying is done by either using steam or heated thermic oil by means of heat exchangers located near fans of dryer. After printing,colors are fixed on the fabric by using saturated steam.Soaper and DryerLoose colour remaining on fabrics after printing has to be washed out to achieve proper colour consistency in the prints, which is doneby soaping the cloth followed by washing and drying it in continuous machine.FinishingFinishing is done to keep control on width, bow, skew, shrinkage and finish of the fabric. Getting the right finish is very importantfrom the end user perspective. This is one of the important value-additions which we provide in the fabrics we manufacture. Thepenultimate finishing of fabric is always done on a stenter. The cloth to be finished passes through the padder, where finishingchemicals are added and goes through bow and weft correction device before entering the drying chamber.Sanforising is the last process in the fabric finishing where the warp wise and weft wise shrinkage is controlled. Cloth havingundergone this process would not shrink abnormally further after repeated washes thereby maintaining the dimensional stability of thefabric.Garment ProductionFinished fabric is utilized for apparel manufacturing purpose. The various activities are highly labour intensive as majority of themcannot be completely automated. In the stitching section, garment is usually assembled using the Progressive Bundle System (PBS). InPBS, the work is delivered to individual work stations from the cutting department in bundles. Sewing machine operators then processor sew them in batches i.e. first few operation are joining the different parts together and then further amendments related to design arecarried out. The supervisors direct and balance the line activities and check the quality. This involves large work in progress (WIP)inventories and minimal flexibility. For faster apparel production, use of unit production system which reduces the buffer sizesbetween the operations or modular assembly systems, allow a small group of sewing operators to assemble the entire garment.Assembly & DesigningThe fabric manufactured / procured is assembled in the storage department. Garmenting starts with the design of the garment to bemade (usually on the paper called specs). Patterns (usually made up of thicker and stronger paper) are made from the design which isthen used to cut the fabric (cutting usually happens in the form of layers). An efficient layout of the patterns on the layers of fabric iscrucial for reducing the wastage of material. CAD systems are used for pattern layout and are integrated together with cutting systems.SamplingOur Company has a production cum sampling unit at Vikroli Mumbai wherein we have all the facilities like CAD, stitching,embroidery etc. to produce garment samples as per designs developed by our design studio. In the initial stages of the order, thedesign and sampling department continuously interacts with the buyers till the sample is approved. In our dedicatedsampling unit, garment samples are made, remade, design changes are incorporated till the customer finally approves thegarment sample.Cutting DepartmentThe fabric is cut into different portions of a garment. To ensure minimum wastage we use tools such as CAD and others in theprocess. The Production Planning and Control department uses CAD and other design tools, issues draft or diagram of how differentpatterns should be placed on to the layer. The cutting department based on their experience and expertise either accepts the proposedaverage or sometimes gives a better average by few percentage. The department makes production plan for all cutting stations basedon article or style requested. Thereafter, the cut parts of the garment are bundled together.Stitching DepartmentThe department is responsible for stitching different parts of garment together. The process takes place in the assembly line system.The assembly line system is the set of many different stitching machines each for a specific purpose. These machines are arranged inan orderly fashion depending on how different parts of garment should be attached. Assembly line method is used for largeproduction. Production Planning and Control decides on the article or style to be produced with quantity. The stitching departmentmakes necessary production planning i.e. time line in accordance with each article. The stitching process is the most time consuming81
and labour intensive process in the entire garment production. The planning is done weekly.TMFinishing and Packaging DepartmentThis is final stage before the garment is ready to be shipped. As the garment is already finished, it requires a series of quality checks.The garment goes through the quality checks like colour test, washing test, stitching test etc. After which it is steam pressed, labeled,packed into garment bags and finally, put into the cartons. Once all cartons are packed and labeled, external quality check takes placeand goods are shipped. The PPC department gives the details of the Purchase Order to be finished, packed and dispatchedProduction Planning and Control (PPC) DepartmentThe department is responsible for making plans for the entire organization i.e. all the departments. PPC being in the centre of alldepartments also controls their functionality. The PPC sends production plan to different departments on weekly basis and daily forany amendments. The PPC keeps check on different departments by requesting planning and production reports for each day. PPConly receives orders from the Management. With order quantity and dispatch date, it does the planning for product cycle. The topmanagement is in continuous contact with PPC.Merchandising DepartmentThe department acts as a liaison between the buyer and manufacturing division. On one hand, the department is responsible fornotifying changes in the product to the PPC and also to make sure that article is produced as per planning by the PPC and withindispatch time limits. On the other hand, it has to continually update buyer with planning and production status. The department takescare of all correspondence with buyer and is responsible for communicating it to PPC. The department also takes care of necessarysampling such as proto, size set and final which is necessary prior to production.DETAILS OF OUR FACILITIES:Sr. Location Nature of the facility CapacityNo.1. Plot No. C-2, MIDC, Tarapur Industrial Area, Yarn Dyeing Unit 1.8 million Kg. per annumDistrict Thane2. Plot No. C-2, MIDC, Tarapur Industrial Area, Weaving Division 9.6 million meters per annumDistrict3. Plot No. E-33, MIDC, Tarapur Industrial Area, Weaving Division 8.4 million meters per annumDistrict Thane – 4015064. Plot No. E-25, MIDC, Tarapur Industrial Area, Fabric Processing 20.4 million meters per annumDistrict ThaneDivision5. Plot No. 26-A, Peenya II Phase, Peenya Industrial Garment Division 1.56 million pieces per annumArea, Bangalore6. Mehra Compound, L.B.S. Marg, Vikroli (West), Garment Division 0.60 million pieces per annumMumbai7. Plot No. 31, Laggere Gramatana, Dasarahalli, Garment Division 0.48 million pieces per annumYeshwanthpur, Hobli, Bangalore.8. No. 1& 2, Subratho Mukherji Road, Dasarahalli,Bangalore.Garment Division 0.36 million pieces per annumDETAILS OF CAPACITY UTILISATION:Our current capacities and utilisation thereto can be illustrated from the table below:Year ended March 31,Installed capacity ('000 units)Quarter endedJune 30,20072007 2006 2005Yarn Dyeing (in Kgs.) 0.45 1.80 0.15 -Weaving (In mtrs.) 4.50 18.00 9.20 7.20Fabric Processing (In mtrs.) 5.10 20.40 20.40 20.40Garment Stitching (In pcs.) 0.53 2.10 1.80 0.8882
TMProduction ('000 units)Griege Fabric 3.75 14.78 7.94 6.01Finished Cloth 1.32 3.31 2.55 2.66Yarn Processing 0.40 1.45 0.11In-house 0.34 1.23 0.11Jobwork 0.07 0.22 -% of in-house to total 83.73% 84.93% 100%Fabric processing 3.40 12.87 19.21 21.01In-house 2.11 5.11 3.64 2.46Jobwork 1.29 7.75 15.57 18.55% of in-house to total 61.93% 39.74% 18.93% 11.71%Garment 0.85 1.96 1.71 1.44Capacity utilisation (%)Yarn Dyeing 89.65 80.29% 75.19% -Weaving 83.36% 82.09% 86.32% 83.44%Fabric Processing 66.66% 63.07% 94.17% 103.00%Garment Stitching 162.71% 93.24% 94.98% 164.43%CAPACITIES AFTER EXPANSIONActivity Existing Capacity Capacity underExpansion projectCapacity post ExpansionYarn Dyeing 1.8 million kgs per annum 1.2 million kgs per annum 3.0 million kgs per annumWeaving 18.0 million meters perannumProcessing 20.4 million meters perannum12.0 million meters perannum31.2 million meters perannumGarment Manufacturing 3.0 million pieces per annum 11.23 million pieces perannum30.0 million meters perannum51.6 million meters perannum14.23 million pieces perannumHuman ResourcesAs on November 30, 2007, our workforce consisted of 3248 employees. The inspiration for our growth comes from a competent,qualified and motivated workforce at all levels of the business. Our manpower is a prudent mix of the experienced and youth whichgives us the dual advantage of stability and growth. Our work processes and skilled resources together with our strong managementteam have enabled us to successfully implement our growth plans.CompetitionWe face competition both in the domestic as well as the export markets. In the domestic market we face competition in the both thegarment and the textile segment whereas internationally we face competition from the suppliers of readymade garments.83
TMIn the garment segment, countries like Turkey have the advantage of being located in proximity to our main export markets ofEuropean Union countries. We also face competition from garment manufacturers in other countries like China, Pakistan, Bangladeshand Vietnam which have low labour costs. We also face competition from garment exporters in India.We believe that our cost effective - vertically integrated facilities, our focus on customer satisfaction through in house designingcapabilities and our reliability combined with our quality consciousness provides us with competitive advantage in many of ourproducts.MARKETINGSales Process• We have a centralized product development centre for textiles as well as garments. The same product is made available to all oursales points backed by the required information. This enables selling of our products at multiple locations at the same time.• The product mix is then handled by a strong centralized merchandising team which caters to the customers directly, supportsfollow-up and executes their requirements.• The availability of a sampling unit and design studio helps our Company in providing diverse choices to the customer. This keepsthe cost under control and shortens the turnaround time.Marketing & Selling ArrangementsDomestic Markets: Distribution channelsIn the domestic market, we have a network of agents and sales offices located at Delhi, Bangalore, Mumbai and Chennai. We sellour fabrics through our sales offices as well as our agent networks. We have dedicated and experienced in-house marketing teamwhich solicit substantial business and work in close nexus with the buyers to provide them maximum support in terms of quality andtimely delivery.Overseas Markets: Distribution channelsIn the overseas market, we supply our garments across the globe ranging from the European countries to those of the United States.We have a liason office in Paris which takes care of the requirements of our clients in the European Union and Middle East. Wesupply to a large number of countries including Italy, UK, Turkey, France amongst others. We supply to the internationalgarment market through both, buying houses as well as directly to the fashion houses and brands.Key features of our marketing and sales network:• We market our products through the head office in Mumbai, showrooms in Bangalore, Liason office in Paris as well as through anetwork of agents across Europe as well as India. Having multiple sales points gives us a wide distribution network for ourproduct.• We endeavor to still broaden our existing client base by exploring markets and clients in new geographies to prevent clientconcentration. The experienced marketing team devises different strategies to cater to different client requirements to suit theclients’ needs.• We regularly participate in international trade fairs and fashion events to exhibit our innovative designs and build develop newclientele.We established our liaison office called “Mandhana Europe”, on premises admeasuring 10,000 sq ft with our office and showroom inthe heart of the fashion district in Paris, to bring our products closer to all our customers.Design & Design StudioOur Designing ability is an integral part of the marketing process which is supported by a well equipped Product Development /Design division. Our Company’s ability to understand and implement the keep abreast with the fashion trends helps us to cater to thechanging customer requirements and enables us to showcase our capabilities and understanding to the buyers’ requirements. Being anexport oriented apparel manufacturer, tracking the changing fashion trends across different geographies for various end customers iscritical for our success. We have a well equipped Product Development / Design division & team working in-house. Besides, our84
Company has opened a Product Development and Sales office at Paris for better proximity to the customer.TMThe Apparel trade has four basic seasons;• Spring• Summer• Fall/Autumn• Holiday/WinterThe designers along with the marketing team visit various fairs / fashion shows across the globe at regular intervals.MerchandisingOur marketing team endeavors to enhance its share of the business with existing customers as well as expand the customer base.Our company receives orders from customers by:• Growth in business from existing customers• New customers developed through cold calls, trade fair meetings etc.Our experienced marketing team has been able to devise different strategies to suit the needs of both existing & new buyers. For theexisting buyers, our prime focus is to expand the product base and enhance volumes. By leveraging the long standing relationshipswith the buyers, our Company strives to be a preferred partner to the buyers.For the new buyers, based on the understanding of their product range and brand identity /customer identity, we present to them withthe requisite product range. This gives them a good idea of areas of our Company’s expertise and capabilities. Some of our buyersbring their design inputs to us. Our designers along with the sampling department provide the client with prototypes, which undergovarious alterations till the client, finalizes the design.Once the buyer finalizes a particular style it is translated into samples quickly since the business for the fashion season depends ontimely delivery of samples. The costing exercise is done concurrently at this stage. Our manufacturing scale and efficiency and globalmarketing network enables us to compete with international vendors effectively.Quality and ability to deliver the required products on time and competitive pricing enables us to enhance customer satisfaction.Our merchandising team services the requirements of different customers. On receipt of the enquiry, the merchandiser coordinateswith PPC to get an estimate of the raw material consumption, likely suppliers and costs, accessories as well as the conversion efforts.Based on this, the costing sheet is prepared. Modifications are also suggested on apparel design or engineering, on fabric to try andbring the cost to the buyer within their required range. The price setting process thus becomes a collaborative effort with Company’scustomers instead of just a negotiation process, with both our Company and buyer working together in close harmony to meet acommon objective. Therefore, whenever a prospective buyer places his requirement with our Company, we work out an optimal pricequalitycombination for him through various permutations and combination of quality & source of raw materials, along with design.Our Export ObligationsWe have obtained licenses under Export Promotion Capital Goods (EPCG) scheme as listed below. As per the licensing requirementunder the said scheme, we are required to export the finished garments/fabric of a defined amount with a period of 8 years from thedate of the license, failing which, our Company have to payment to the Government of India, an amount equivalent to the duty benefitenjoyed by our Company under the said scheme along with interest. As on date of filing of this Draft Red Herring Prospectus our totalexport obligation is Rs. 90.49 million.For further details please refer to chapter titled “Government / Statutory Approvals” beginning on page [●] of the Draft Red HerringProspectus.PropertiesWe currently own the following properties:a. List of properties owned by our Company85
Sr.No.Date of SaleDeed /Agreement forSaleName of thePurchaser /Transferee /OccupierName of theSeller /TransferorConsideration(Rs.)Particulars of theProperty,Description & AreaExisting UsageTM1. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited155,265/- Flat No. 201, 2 ndfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters2. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited155,265/- Flat No. 203, 2 ndfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters3. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited155,265/- Flat No. 204, 2 ndfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters4. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited103,065/- Flat No. 1, groundfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters5. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited102,265/- Flat No. 2, groundfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters6. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited103,065/- Flat No. 104, firstfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters7. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited155,265/- Flat No. 202, secondfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters8. Transfer deeddatedSeptember 7,2001MandhanaIndustriesLimitedMahanSyntheticTextilesPrivateLimited102,265/- Flat No. 103, firstfloor, L.P. Bhawan,Pasthal Naka, Boiser-Tarapur road, ThaneStaff quarters9. Absolute saledeed datedNovember 21,2005MandhanaIndustriesLimitedMs. MamathaDevi S. V. &Mr. SunilBelagavi1,035,840/- Co-owners of 1/7 thundivided rights andinterest in G-Villalocated at No. 17,CMC Khata No.1801, DefenceCivilians HouseBuilding Society,Residential usage86
Sr.No.Date of SaleDeed /Agreement forSaleName of thePurchaser /Transferee /OccupierName of theSeller /TransferorConsideration(Rs.)Particulars of theProperty,Description & AreaExisting UsageTMBagalagunte, Village,Yeshwanpura Hobli,Bangalore NorthTaluk, Bangalorewhich when dividedwould be 330.174 sq.ft.Full and absoluteowners of G-4, G-Villa, Third flooradmeasuring 1079 sq.ft. (super built uparea) located at No.17, CMC Khata No.1801, DefenceCivilians HouseBuilding Society,Bagalagunte, Village,Yeshwanpura Hobli,Bangalore NorthTaluk, Bangalore.10. Agreement forSale datedOctober 27,2004MandhanaIndustriesLimitedMr. LalitKrishna Jalan2,700,000/- Flat No. 1501, 15 thfloor, Tower – 4,Challenger CooperativeHousingSociety Limited(Unit-IV), ThakurVillage, Kandivali(East), Mumbai –400101 admeasuring768 sq. ft. (superbuilt up) along withOpen Car ParkingSpace No. 202inclusive of clubmembership.Residential use11. Agreement forSale dated July17, 2004MandhanaIndustriesLimitedMr.GopakumarCoratyl2,696,000/- Flat No. 2305, 23 rdfloor, Tower – 3,Challenger CooperativeHousingSociety Limited(Unit-III), ThakurVillage, Kandivali(East), Mumbai –400101 admeasuring960 sq. ft. (superbuilt up) along withOpen Car ParkingSpace No. 352inclusive of clubResidential use87
Sr.No.Date of SaleDeed /Agreement forSaleName of thePurchaser /Transferee /OccupierName of theSeller /TransferorConsideration(Rs.)Particulars of theProperty,Description & AreaExisting UsageTMmembership.12. Agreement forsale datedNovember 3,2006MandhanaIndustriesLimitedPeninsulaLand Limited2,532,000/- Apartment bearingnumber 0405, 4 thfloor, Ashok Tower‘A’, Parel SewriDivision, Mumbaihaving carpet area of29.08 sq. mt. built uparea of 38.55 sq.mt.along with theexclusive right to useone stilt car parkingspaceResidential use13. Agreement forsale datedNovember 3,2006MandhanaIndustriesLimitedPeninsulaLand Limited2,532,000/- Apartment bearingnumber 0404, 4 thfloor, Ashok Tower‘A’, Parel SewriDivision, Mumbaihaving carpet area of29.08 sq. mt. built uparea of 38.55 sq.mt.along with theexclusive right to useone stilt car parkingspaceResidential use14. Sale deeddated June 24,2004MandhanaIndustriesLimitedMr. S.S.Iyer,RecoveryOfficer, DebtsRecoveryTribunal20,100,000/- Plot of land bearingno. C-2 admeasuring40565 sq.mtrs.situated at MIDC,Tarapur, MaharashtraMandhana ShirtingDivision15. MemorandumofUnderstandingdated July 9,2007MandhanaIndustriesLimitedMr. KetanShangvi, Mrs.Alpa Shangvi,Mr. RiteshChheda, Mr.MukeshChheda. Mrs.ManibenChhedaRs. 90,000,000/-bearing theearnest moneyand / or partpayment towardsthe agreedconsiderationamount.Rs. 15,000,000/-beaming thebalance paymenttowards theagreedconsiderationamount shall bepaid immediatelyon thecompletion ofthe transaction.Ganpati Baug, situatelying nd being onwest sede of SewriRoad, Bombayadmeasuring 14,523sq. ft.Sampling unit88
Sr.No.Date of SaleDeed /Agreement forSaleName of thePurchaser /Transferee /OccupierName of theSeller /TransferorConsideration(Rs.)Particulars of theProperty,Description & AreaExisting UsageTM16. Agreement forsale datedAugust 08,2007MandhanaIndustriesLimitedMrs. RajniJhunjhunwalaand Mrs. NitaJhunjhunwalaRs. 2,69,20,000/- Unit 207 – A and 207– B admeasuringapproximately 1746sq. ft. PeninsulaCentre, Dr. S. S. RaoRoad, Parel, Mumbai– 400 012Marketing office17. Agreement forsale datedAugust 08,2007MandhanaIndustriesLimitedMr. YogenJerajani andMrs. PunitJerajaniRs. 12,800,000/- Unit 014admeasuringapproximately 741sq. ft. PeninsulaCentre, Dr. S. S. RaoRoad, Parel, Mumbai– 400 012Marketing officeb. List of leased properties:Sr.No.Date of Deed/ Agreement1. Sale deeddated October31, 20062. Deed ofConfirmationdatedSeptember 5,1995 andIndenturedated July 12,19943. Deed ofConfirmationName ofPartiesMaharashtraIndustrialDevelopmentCorporationLimited andMandhanaIndustriesLimitedJCT LimitedandMandhanaIndustriesLimitedJCT LimitedandParticulars ofthe Property,Description &AreaPlot No. C-3admeasuring46250 sq. mtrs.together withfactorybuilding andstructuresstandingthereon inTarapurIndustrialArea, VillageKolvade &Salvade,TalukaPalghar,Thane,MaharashtraE-33, TarapurIndustrialArea,Tarapore,VillageSalwad,Palghar. Thaneadmeasuring7,800 sq.mtrs.or thereaboutsE-25, TarapurIndustrialTenure95 yearsfromOctober31, 197795 yearsfromAugust12, 198695 yearsfromConsiderationand otherpaymentsRs.61,710,000/-TerminationClauseExistingUsage- AmmoniaPlantRs. 397,800/- - MandhanaWeavingHouseRs.11,950,000/-- MandhanaDyeing89
Sr.No.Date of Deed/ AgreementdatedSeptember 5,1995 andIndenturedated July 12,19944. Leave andlicenseagreementdated April 1,20075. Leave andlicenseagreementdated October16, 2006Name ofPartiesMandhanaIndustriesLimitedMr. DineshC. PathakandMandhanaWeavingHouse(ShirtingDivision)Mr.RashbihariSingh,PramilaSingh andMandhanaWeavingHouseParticulars ofthe Property,Description &AreaArea,Tarapore,VillageSalwad,Palghar. Thaneadmeasuring7,800 sq.mtrs.or thereaboutsand plot nos.RA-15, RB-24,RC-15, R-1,Flat No. 3 andFlat No. 4 atBuilding No.B-4 on PlotNo. R-4 andFlat No. 11 &12 at buildingA-1 at Plot No.R-5 located atTarapurIndustrialArea,Tarapore,VillageSalwad,Palghar. ThaneFlat No. 108,‘A’ Wing,Building No.1, Shiv KalaArcade,Boisar,Palghar, Thanaadmeasuring800 feetGramPanchayatHouse Nos.5075 AzadNagar,(Sanewadi),Boisar (W),Palghar, ThaneTenureMarch18,1986April 1,2007 toFebruary29, 2008Thelicensorand thelicenseecanterminateaftergivingonemonthnoticefromeither side8 monthsfromDecember16, 2007to August15, 2008Considerationand otherpaymentsLicense fees ofRs. 4,000/- permonth andElectricitycharges to beborne by thelicensee.Maintenanceand other taxesshall be borneby the licensorLicense fees ofRs. 152,343/-per month perroomincludingwater chargesand Electricitycharges to beTerminationClauseThe licensor andthe licensee canterminate aftergiving one monthnotice from eithersideExistingUsage(ProcessHouse forfabric)ResidentialoccupationResidentialoccupationTM90
Sr.No.Date of Deed/ Agreement6. Leave andlicenseagreementdated June 7,20077. Leave andlicenseagreementdated April20, 20078. Leave andlicenseagreementName ofPartiesMrs. PritiPrakashSankhe andMandhanaDyeingMr. ManishMandhanaandMandhanaIndustriesLimitedMaster.PriyavratMandhanaParticulars ofthe Property,Description &AreaFlat No. 1,Building No.2, First Floor,Subhyog CoopHousingSociety,Deejay Nagar,Tarapur Road,Boisar,Palghar, Thaneadmeasuring875 sq. ft. (3room kitchen)Unit No. 205,211 andpassagebetween theunits includingthe furnitureand fixtureswithin theunits atPeninsulaCentre,CadastralSurvey No.107, S. S.Road, Off Dr.AmbedkarRoad, Mumbai400 012admeasuring3,599 sq. ft. orthereabouts(built-up area)Unit No. 208including thefurniture andTenure11 monthsfrom June1, 2007 toApril 30,2008.33 monthsfromApril 1,2007 toDecember31, 200933 monthsfromApril 1,Considerationand otherpaymentsborne by thelicensee.Maintenanceand other taxesshall be borneby thelicensor.Eleven monthsadvance rentof Rs. 52,800/-and Electricityand telephonecharges to beborne by thelicensee.Maintenanceand other taxesshall be borneby thelicensor.The licenseeshall bear andpay all presentand futurerates, taxes,levies,assessments,charges,contributionsto buildingrepairs,maintenancecharges andoutgoings(includingnon-occupancycharges, ifany) pertainingto the licensedpremises andthe car parkingspace(s)whetherpayable to theSociety or theMunicipalCorporation orany otherstatutory bodyor authority.Total licensefee of Rs.14,490/- perTerminationClauseThe licensor andthe licensee canterminate aftergiving one monthnotice from eithersideThe licensee shallbe entitled toterminate thisagreement at anytime but only afterthe expiry of 33months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice. Thelicensor shall beentitled toterminate thisagreement at anytime after theexpiry of an initialperiod of 19months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice.The licensee shallbe entitled toterminate thisExistingUsageResidentialoccupationRegisteredOfficeRegisteredOfficeTM91
Sr.No.Date of Deed/ Agreementdated April20, 20079. Leave andlicenseagreementdated April,20, 2007Name ofPartiesandMandhanaIndustriesLimitedMr. BiharilalChhaganlalMandhanaandMandhanaIndustriesLimitedParticulars ofthe Property,Description &Areafixtures withinthe units atPeninsulaCentre,CadastralSurvey No.107, S.S.Road, OffAmbedkarRoad, Mumbai– 400 012admeasuring805 sq. ft. orthereabouts(built-up area)Unit No. 209,210 includingthe furnitureand fixtureswithin theunits atPeninsulaCentre,CadastralSurvey No.107, S.S.Road, OffAmbedkarRoad, MumbaiTenure2007 toDecember31, 2009(both daysinclusive)33 monthsfromApril 1,2007 toDecember31,2009(both daysinclusive)Considerationand otherpaymentsmonthThe licenseeshall depositwith thelicensor afurther sum ofRs.12,100,000/-as securitydeposit and thelicensee shallbear and payall present andfuture rates,taxes, levies,assessments,charges,contributionsto buildingrepairs,maintenancecharges andoutgoings(includingnon-occupancycharges, ifany) pertainingto the licensedpremises andthe car parkingspace(s)whetherpayable to theSociety or theMunicipalCorporation orany otherstatutory bodyor authority.Total licensefee of Rs.36,378/-permonth .Thelicensee shalldeposit withthe licensor afurther sum ofRs.30,300,000/-as securitydeposit and thelicensee shallbear and payTerminationClauseagreement at anytime but only afterthe expiry of 33months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice. Thelicensor shall beentitled toterminate thisagreement at anytime after theexpiry of an initialperiod of 19months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice.The licensee shallbe entitled toterminate thisagreement at anytime but only afterthe expiry of 33months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice. TheExistingUsageRegisteredOfficeTM92
Sr.No.Date of Deed/ Agreement10. Leave andlicenseagreementdated April20, 2007Name ofPartiesMs. PremaPurshottamMandhanaandMandhanaIndustriesLimitedParticulars ofthe Property,Description &Area– 400 012admeasuring2,021 sq. ft. orthereabouts(built-up area)Unit No. 212including thefurniture andfixtures withinthe units atPeninsulaCentre,CadastralSurvey No.107, S.S.Road, OffAmbedkarRoad, Mumbai– 400 012admeasuring1,505 sq. ft. orthereabouts(built-up area)Tenure33 monthsfromApril 1,2007 toDecember31, 2009(both daysinclusive)Considerationand otherpaymentsall present andfuture rates,taxes, levies,assessments,charges,contributionsto buildingrepairs,maintenancecharges andoutgoings(includingnon-occupancycharges, ifany) pertainingto the licensedpremises andthe car parkingspace(s)whetherpayable to theSociety or theMunicipalCorporation orany otherstatutory bodyor authority.Total licensefee of Rs.27,090/- permonth Thelicensee shalldeposit withthe licensor afurther sum ofRs.22,600,000/-as securitydeposit andthe licenseeshall bear andpay all presentand futurerates, taxes,levies,assessments,charges,contributionsto buildingrepairs,maintenancecharges andoutgoingsTerminationClauselicensor shall beentitled toterminate thisagreement at anytime after theexpiry of an initialperiod of 19months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice.The licensee shallbe entitled toterminate thisagreement at anytime but only afterthe expiry of 33months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice. Thelicensor shall beentitled toterminate thisagreement at anytime after theexpiry of an initialperiod of 19months from thedate ofcommencement ofthis license bygiving the licensorExistingUsageRegisteredOfficeTM93
Sr.No.Date of Deed/ Agreement11. Leave andlicenseagreementdated April20, 2007Name ofPartiesMr.PurshottamChhaganlalMandhanaandMandhanaIndustriesLimitedParticulars ofthe Property,Description &AreaUnit No. 213,214 and thepassagebetween theunits includingthe furnitureand fixtureswithin theunits atPeninsulaCentre,CadastralSurvey No.107, S.S.Road, OffAmbedkarRoad, Mumbai– 400 012admeasuring5,385 sq. ft. orthereabouts(built-up area)Tenure33 monthfromApril 1,2007 toDecember31, 2009(both daysinclusive)Considerationand otherpayments(includingnon-occupancycharges, ifany) pertainingto the licensedpremises andthe car parkingspace(s)whetherpayable to theSociety or theMunicipalCorporation orany otherstatutory bodyor authority.Total licensefee of Rs.96,930/- permonth .The licenseeshall depositwith thelicensor afurther sum ofRs.80,900,000securitydeposit andthe licenseeshall bear andpay all presentand futurerates, taxes,levies,assessments,charges,contributionsto buildingrepairs,maintenancecharges andoutgoings(includingnon-occupancycharges, ifany) pertainingto the licensedpremises andthe car parkingspace(s)whetherpayable to theSociety or theTerminationClausenot less than threemonths priorwritten notice.The licensee shallbe entitled toterminate thisagreement at anytime but only afterthe expiry of 33months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice. Thelicensor shall beentitled toterminate thisagreement at anytime after theexpiry of an initialperiod of 19months from thedate ofcommencement ofthis license bygiving the licensornot less than threemonths priorwritten notice.ExistingUsageRegisteredOfficeTM94
Sr.No.Date of Deed/ Agreement12. Leave andlicenseagreementdated October17, 200513. Lease deeddatedFebruary 11,2004Name ofPartiesMr.JugalkishoreMehra & Mr.AnilJugalkishoreMehra andMandhanaIndustriesLimitedMr. H. C.Byre GowdaandMandhanaIndustriesLimitedParticulars ofthe Property,Description &AreaMehra Estate,Vikhroli (W),land orground withbuildingstandingthereoncontainingbasement of4,000 sq. ft.(B.U.), Groundfloor 5,000 sq.ft. 1 st floor and2 nd floor10,000 sq. ft.i.e. a total areaof 29,000 sq.ft. orthereabouts ofbuilt-up areaBuildingconstructed atPeenya IIPhase,IndustrialArea, SurveyNo. 38, 39, 40and 51 ofNellakadar--anhalliVillage,Tenure33 monthsfromOctober 1,2005expiringon June31, 20085 yearsfrom thedate ofhandingoverpossession of theleasedpremises.AftercompletioConsiderationand otherpaymentsMunicipalCorporation orany otherstatutory bodyor authority.a) For the first11 months:Rs. 589,000/-b) For thesecond 11months: Rs.618,000/-c) For the third11 months:647,000/-.Interest-freerefundablesecuritydeposit of Rs.3,708,000/-and thelicensee shallpay to thelicensors, ondemand, allthe charges forgas, electricityand otherilluminantenergy orpowerconsumed onthe licensedpremises asalso the BMCwater (exceptproperty tax)and othercharges of andincidental tothe use andoccupation.Rent of Rs.381,612/- permonth payablefor an initialperiod of 5months andRs. 477,015per monthfrom the 6 thmonth to the36 th month andTerminationClauseExistingUsage- Garmentstitching,goodsdeliveryandcentralizeddeliverytransportationIn the event thatour Company failsto pay the rent tothe lessor for aconsecutive periodof three months,the lessor canterminate the leaseby giving threemonths notice inwriting to the ourGarmentproductionTM95
Sr.No.Date of Deed/ Agreement14. Leave andlicenseagreementdatedFebruary 1,200715. Lease deeddatedDecember 16,2005Name ofPartiesMr. ParasChand Jain &Mr. SureshChand JainandMandhanaIndustriesLimitedMr. RajpalSingh MannandMandhanaIndustriesLimitedParticulars ofthe Property,Description &AreaYeswantpurHobli,Bangaloreadmeasuring68,145 sq. ft.comprising ofground floor +4 floors.Oberoi Garden,OG-II, FlatNo. 302,ThakurVillage,Kandivali (E),Mumbai –400101admeasuring1295 sq. ft.Flat No. 410,ChiranjivTower, 43,Nehru Place,New Delhimeasuring 541sq. ft.Tenuren of thefifth yearand atleast threemonthsbefore theexpiry ofthe termof thelease thepartiesmayexecute afreshleaseagreementforextendingthe lease.11 monthsfromFebruary1, 2007tillDecember31, 2007.Renewalterms maybedecidedupon theacceptance of boththe partiesafter 11months.Two yearsfromDecember16, 2005Considerationand otherpaymentsRs.524,716.50/-per monthfrom the 37 thmonth till the60 th month.Interest-freerefundabledeposit of Rs.5,724,180/-and theCompany shallpay theelectricitycharges, powercharges,maintenanceand repaircharges.License fees ofRs. 32,000/-per month andinterest-freerefundabledeposit of Rs.200,000 andthe licenseefee shall payelectricitycharges, gascharges,telephone bill,cable T.V.charges, themonthly clubfees and othercharges leviedby the societyfor social andculturalactivitiesMonthly rentof Rs. 15,554/-. Interest-freerefundablesecuritydeposit of Rs.46,661/-andelectricity,water andmaintenancecharges.TerminationClauseCompany callingupon the ourCompany to paythe arrears of rent.In the event ofeither partycommitting abreach of either oftheir obligationsand jeopardizingtheir rights, titleand interest ofeither party inrespect of thelicensed flat, theother party shall beentitled toterminate thisagreement bygiving 1 monthsnotice to the partycommitting theaforesaid breaches.ExistingUsageResidentialoccupation- DelhiBranchOffice(Sales)16. Rental Mrs. Radha 2 nd floor, New 33 months Monthly rent If the our Office useTM96
Sr.No.Date of Deed/ AgreementagreementdatedNovember17, 200417. Allotmentletter datedDecember 21,2006 on alease cumsale basisrectified videletter datedJanuary 11,200718. Leave andlicenseagreementdated May7,2007Name ofPartiesVijaykumarandMandhanaIndustriesLimitedKarnatakaIndustrialAreasDevelopmentBoard andMandhanaIndustriesLimitedShri SureshYadav andMandhanaIndustriesLimitedParticulars ofthe Property,Description &AreaNo. 70, OrmesRoad,Kilpauk,Chennai –600010measuringabout 900 sq.ft.5 acres of landin plot no. SW-49 & SW-50 ofApparel ParkIndustrialArea, II Phase,Doddaballapur.Landmeasuring2,200 sq. feet(carpet area)situated at Galano.3Tenurecommencing fromDecember1, 2004A periodof sixyears atthe end ofwhich, thelease willbeconvertedinto asale.33monthsfrom May1, 2007 toJanuary31, 2010(both daysConsiderationand otherpaymentsof Rs. 7,500for the first 11months with a10% escalationafter the first11 months &thereafter theescalationshall be 5%every 11months.Interest-freerefundablesecuritydeposit of Rs.75,000/- andmaintenancecharges of Rs.500/- permonth.Electricity andwater charges.Tentative priceof Rs. 3.65million peracre. Of whichRs.14,600,000/-to be paid onor before June13, 2007.Lease rent ofRs. 1,000/- peracre perannum +Corner plotcharges of Rs,1,825,000/-and Slumdevelopmentcess at Rs.2.50 per sq.mt.amounting toRs. 50,586/-payable on orbefore January14, 2007License fees ofRs. 10,000/-per month.The licenseeshall depositwith theTerminationClauseCompany fails topay the rent fortwo consecutivemonths, the lessorshall be entitled toterminate the leaseforthwith.If the ourCompany fails toobserve or performany of thecovenants of theagreement orbecome insolventor bankruptAllotment lettervalid for a periodof 30 days.In case of failureto pay Rs.14,600,000/- on orbefore June 13,2007 the allotmentstandsautomaticallycancelled.If the balance landcost is not paidwithin 180 daysfrom the date ofexecution of thelease agreement.Non-conformancewith time scheduleThe parties are notentitled toterminate theagreement for anyreason what soever during theExistingUsageProposedProjectGodownandsamplingunitTM97
Sr.No.Date of Deed/ Agreement19. Leave andlicenseagreementdated May22,200620. Lease deeddatedSeptember1,2005Name ofPartiesMandhanaIndustriesLimited andStandardCharteredBankFranceImmobilierGroup andMandhanaIndustriesParticulars ofthe Property,Description &AreaCompound ,Gaondeviroad,Govind NagarBhandup(w)Mumbai -78Flat No.C-15,measuring1,000 sq. ft. onthe first floorof the buildingknown as“MandhanaManor”situated at 18,Moghul Lane,MahimMumbai400016bearing CTSNo. 566 ofMahimDivisionPremiseslocated at Paris(2 nd district) at15 rue de labanque as aTenureinclusive)36 monthsfrom May22, 2006to May21, 2009(both daysinclusive)9 yearsfromSeptember 1, 2005Considerationand otherpaymentslicensor afurther sum ofRs.200,000/-securitydeposit andLicensee shallpay to thelicensors , ondemand all thecharges forgas, electricityor otherilluminantenergy orpowerconsumed onthe licensedpremises asalso the BMCwater (exceptproperty tax )and othercharges of andincidental tothe use andoccupation.License fees ofRs. 32,000/-per month.The licenseeshall depositwith thelicensor afurther sum ofRs.500,000/-asa refundablesecuritydeposit and theLicenseeundertakes topay all bills fortheconsumptionand use oftelephone,electricity,cooking gasand cable TV.Rent to be paidis 51,330 eurosfor first year53,100 for thesecond yearTerminationClauseterm of the license.This agreementshall standterminated and thesaid securitydeposit shallbecome refundablewithin a monthperiod ofdestruction/damages to thelicensed premisesExistingUsageResidentialoccupation- Showroom fortextilesTM98
Sr.No.Date of Deed/ AgreementName ofPartiesPrivateLimitedFranceImmobiliergroupParticulars ofthe Property,Description &Areashowroom fortextiles,TenureConsiderationand otherpaymentsexcludingindex variationand56,640 eurosfor the thirdyear excludingindexvariation.Deposit of12,833 eurosTerminationClauseExistingUsageTMINSURANCE POLICIESOur Company has insured all the units, Boiler House, godowns, warehouses, offices, stocked raw materials, finished goods, stocks inprocess, plant and machinery, computers, laptops, scanners, printers and furniture, residential premises against fire accidents, robbery,burglary, house breaking and such other loss and damage to property. Our Company has also insured its permanent employees and itscontract workers working at these units, godowns and warehouses against any loss and damages caused to them when on duty.Restictive Covenants under Loan AgreementsLoan Agreements executed by our Company with various lenders contain certain restrictive covenants, which prohibit us from thefollowing:1. Our Company shall not declare the dividend without prior approval of the Bank;2. Our Company shall not divert any funds from short term sources to long term uses and an undertaking letter to this effortto be taken from our Company;3. Our Company shall not at any time, borrow or draw against each of the accounts so as to cause the debit balance of suchaccount, at any time to exceed 50% or such other percentage as the Bank from time to time determined;4. Subject to the power of the Bank and the obligations of our Company, our Company may with the approval of the Bankdeal with hypothecated premises in the ordinary course of its business but on the express terms of payment or delivery tothe Bank of the proceeds immediately on receipts thereof;5. Subject to the provisos of the agreements signed with the Bank and the Bank’s powers conferred by the security, ourCompany in its ordinary course of business may sell and dispose of any of the hypothecated goods. But our Companyshall on any or every such sale on receipt of the documents or sale proceeds deliver the documents or pay the netproceeds of sale in satisfaction so far as the same will extend of the balance then due and owing on the account kept bythe bank in respect of such loans provided that our Company shall not make any sale of any of the hypothecated goodsupon being prohibited in writing by the Bank from doing so;6. Our Company shall not without the written consent of the Bank, create in any manner any change, lien or otherencumbrance on movables hypothecated to the Bank in favour of nay other party or person;7. The Company shall not pull down or remove any part or structure (except any temporary structure) on the lands for thetime being forming part of the secured properties or any fixtures or fittings annexed to the same or any of them except inthe ordinary course of repair and maintenance or improvement or replacement or otherwise and our Company will insuch case forthwith restore or procure to be restored such flats, structures, fixtures, fittings as the case may be, or replacethe same or procure the same to be replaced by others of a similar nature and of at least equal value;8. Our Company agrees that it will not compound or release any of the Book Debts nor do anything whereby the recoveryof the same may be impeded, delayed or prevented without the consent of the Bank and further agrees to keep properbooks of account of its business and will at all times as and when required produce such books of account and allvouchers, papers and documents relating thereto for the inspection of the Bank and any of its officers or agents and allowfree access to them without any demur; and9. Our Company shall not remove or dismental any of the hypothecated assets without the consent in writing of the Bankexcept in any case where such removal or dismanting shall in the opinion of our Company be rendered necessary byreason of the same being worn out, obsolete, discarded, injured, damaged or broken an din such case will replace thoseworn out, obsolete, discarded, injured, damaged or broken by other of a similar nature and of at least equal value andshall also whenever necessary renew or replace all such assets to be used for the purpose of or in connection with thebusiness of our Company when and as the same shall be worn out, obsolete, injured, damaged or broken.99
TMKEY INDUSTRY REGULATIONS AND POLICIESThe Multi Fiber Arrangement (MFA) & the WTO Agreement on Textiles & Clothing (ATC)The Multi Fiber Arrangement governed world trade in textiles and garments from 1974 through 1994, imposing quotarestrictions on the textile exports form developing countries to developed countries.Though the MFA was signed in 1974, its roots stretched back to the 1930s. At that time, during a period of globaleconomic distress, Japan emerged as the largest exporter of cotton textiles, and the U.S. and Europe moved to limit importsfrom Japan to preserve their domestic markets for their own textile industries. These restraints never really went away. Bythe 1960s, they were extended to Hong Kong, Pakistan, and India. As the restraints on textile trade were globalized,multilateral negotiations ensued, leading to a series of agreements. Initially, the agreements covered only cotton, but theyeventually expanded into “multi fiber” arrangements covering textiles and clothing made from all fibers. The MFA washence introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from thedeveloping world.On January 1, 1995, the MFA was replaced by the WTO Agreement on Textiles and Clothing, which set out a transitionalprocess for the ultimate removal of the aforesaid quotas. The ATC was signed by the signatories to the General Agreementon Tariff and Trade (GATT) on the basis of securing the eventual integration of the textiles and clothing sector into theGATT on the basis of strengthened GATT rules and disciplines whereby quotas were phased out on the basis of an agreedtimetable i.e. 16% of imports were made quota-free by January 11, 1995, a further 17% by January 1, 1998, a further 18%by January 1, 2002 and the remaining 49% by January 1, 2005.The ATC was a transitional instrument, built to ensure the progressive integration of textile and clothing products into theGATT 1994 rules and thereby ensure a liberalization process to progressively enlarge existing quotas (until they areremoved) by increasing annual growth rates at each stage.The abolition on January 1, 2005 of the 42-year-old system of quotas for exports of textiles and clothing has led to thebiggest buyer’s market in history. From a situation where normal market rules of ‘caveat emptor’ (let the buyer beware)applied, we have moved to ‘caveat vendor’, where unwary or unprepared suppliers will find themselves without clients.The elimination of quotas has changed the global clothing industry forever, raising the bar for suppliers.National Textile Policy – 2000 (NTxP – 2000)The Government of India in November 2000 announced the National Textile Policy – 2000, thereby replacing the previousTextile Policy of 1985. The main objective of the NTxP – 2000 was to enable the industry to attain and sustain a preeminentglobal standing in the manufacture and export of clothing. It aimed at achieving textiles and apparel exports ofupto $ 50 billion by 2010 from the present $ 11 billion. It also dereserved the garments sector from the SSI reservation listand lifted the foreign direct investment cap of 24 per cent. The NTxP – 2000 took note of the new challenges andopportunities presented by the changing global environment, particularly the initiation of the process of gradual phasingout of quantitative restrictions on imports and the lowering of tariff levels for an integration of the world textile andclothing markets by the end of 2004.The objectives of the NTxP – 2000 were‣ Facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export ofclothing;‣ Equip the textile industry to withstand pressures of import penetration and maintain a dominant presence in thedomestic market;‣ Liberalise controls and regulations so that the different segments of the textile industry are enabled to perform in agreater competitive environment;‣ Enable the textile industry to build world class state-of-the-art manufacturing capabilities in conformity withenvironmental standards, and for this purpose to encourage both Foreign Direct Investment as well as research anddevelopment in the sector;‣ Develop a strong multi-fibre base with thrust on product upgradation and diversification;‣ Sustain and strengthen the traditional knowledge, skills and capabilities of our weavers and craftspeople;100
‣ Enrich human resource skills and capabilities, with special emphasis on those working in the decentralised sectors ofthe textile industry; and for this purpose to revitalise the institutional structure;‣ Expand productive employment by enabling the growth of the textile industry, with particular effort directed toenhancing the benefits to the north east region;‣ Make Information Technology (IT), an integral part of the entire value chain of textile production and therebyfacilitate the textile industry to achieve international standards in terms of quality, design and marketing and;‣ Involve and ensure the active co-operation and partnership of the State Governments, Financial Institutions,Entrepreneurs, Farmers and Non-Governmental Organisations in the fulfillment of these objectivesTMVide the NTxP – 2000 the Government has conveyed it’s commitment towards providing a conducive environment toenable the Indian textile industry to realise its full potential, achieve global excellence, and fulfill its obligation to differentsections of society.Technology Upgradation Fund Scheme (TUFS)Given the significance of the textile industry to the overall health of the Indian economy, its employment potential and thehuge historical backlog of technology upgradation, particularly in the context of the liberalization of the national industrialand trade policy and globalization of textile trade, it has been emphasized that in order to sustain and improve itscompetitiveness and overall long term viability, it is essential for the textile industry to have access to timely and adequatecapital at internationally comparable rates of interest in order to upgrade its technology level.In light of the foregoing, it has been felt necessary to make operational a focused and time-bound Technology UpgradationFund Scheme (TUFS) which would provide a focal point for modernization efforts through technology upgradation in thetextile industry. The main feature of the TUFS would be a five percent reimbursement on the interest actually charged bythe identified financial institutions on the sanctioned projects. The TUFS was launched from April 1, 1999 to March 31,2007 in order to provide an impetus for the modernization of the textile and jute industry and to further enhance itsviability and competitiveness in the domestic and the international markets. Technology upgradation under TUFS wouldordinarily mean induction of state-of-the-art or near-state-of-the-art technology. But in the widely varying mosaic oftechnology obtained in the Indian textile industry, at least a significant step up from the present technology level to asubstantially higher one for such trailing segments would be essential. Accordingly, technology levels are bench-marked interms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than thatspecified will not be permitted for funding under the TUFS Scheme.The Hon’ble Finance Minister, in his Budget Speech for the year 2007-08, has announced that the TUFS will be continuedduring the Eleventh Five Year Plan and has also made a provision of Rs. 911 crore for TUFS during 2007-08. It willfurther help domestic textile industry to upgrade the technology of existing units, and also to set up new units with state-ofthe-arttechnology for enhancing their viability and competitiveness in the domestic and international markets.Textiles Committee Act, 1963The Textiles Committee Act, 1963 came into force on August 22, 1964. The said Act calls for constitution of a TextilesCommittee by the Central Government. The said Textiles Committee shall ensure a standard quality of textiles both forinternal marketing and export purposes and the manufacture and use of standard types of textile machinery, assisting andencouraging scientific, technological and economic research in the textile industry and textile machinery. The TextilesCommittee shall also promote export of textiles and textile machinery and carry on propaganda for that purpose. The saidAct also imposes a duty of excise on textiles and textile machinery manufactured in India at such rate, not exceeding oneper cent ad valorem as the Central Government may, by notification in the Official Gazette, fix. Provided that, no such cessshall be levied on textiles manufactured out of the handloom or powerloom industry. However, the Central Governmentmay exempt any variety of textiles or textiles machinery if it is required to do so in the public interest.The Textiles Committee recognizes standard specifications for textiles and packing materials used in the packing of textilesor textile machinery, for the purposes of export and for internal consumption and affix suitable marks on such standardizedvarieties of textiles and packing materials.Vide notification dated January 17, 2007, the Central Government has exempted ready made garments, being a variety oftextiles from the levy of whole of the cess, so as to rationalize the tax and cess burden on the readymade garments in the101
changed scenario of global competitiveness and thus improve the competitiveness of the Indian readymade garment sectorin global markets.TMFurther, vide press release dated May 24, 2007, the Union Cabinet gave its approval for exemption of all textiles and alltextile machinery manufactured in India from Textiles Committee cess under the Textiles Committee Act, 1963.Textile (Development and Regulation) Order, 2001The Textile (Development and Regulation) Order, 2001 was brought into force by the Central Government under section 3of the Essential Commodities Act, 1955 and repealed the Textile (Development and Regulation) Order, 1993. Under thesaid Order every manufacturer of textiles, textile machinery and every person dealing with textiles shall keep books ofaccounts, data and other records relating to his business in the matter of production, processing, import, export, supply,distribution, sale, consumption, etc. and shall furnish such returns or information in respect of their business as and whendirected by the Textile Commissioner.The said Order further prescribes filing of an Information Memorandum as per the requisite form with the TextileCommissioner, Mumbai in the event of‣ installation of textile machinery for the manufacture of textiles within thirty days of the installation of such machinery;‣ relocation, selling, transferring or otherwise disposing of any textile machinery referred to above, within thirty daysfrom the date of such re-location, sale, transfer or disposal; and‣ modernization of a textile unit.The Order further provides that no person shall make any markings on any textiles resembling the brand name or tradename of any other person who has applied for or obtained a registration to that effect under the Trade and MerchandiseMarks Act, 1958 (43 of 1958), except under and limited to the extent of specific authorisation by the holder of or applicantfor such brand or trade name.Textile Workers’ Rehabilitation Fund Scheme (TWRFS)The incidence of sickness and closure in the organized textile industry has been a matter of concern. One main reason ofsickness is the structural transformation resulting in the composite units in the organized sector losing ground to powerlooms in the decentralized sector, on account of the latter’s greater cost effectiveness. The other causes of sickness/closureof the industry include low productivity due to lack of modernization, stagnation in demand and inability of some units toexpand in the export market, increase in the cost of inputs, difficulties in getting timely and adequate working capital, etc.In order to protect the interests of the workers of closed mills, the Textile Workers’ Rehabilitation Fund Scheme (TWRFS)came into force with the objective of providing interim relief to textile workers rendered unemployed as a consequence ofthe permanent closure of any particular portion of, or the entire textile unit. The assistance under TWRFS is available toeligible workers only for the purpose of enabling them to settle in other gainful employment and is available only for threeyears on a tapering basis, but would not extend beyond the date of super-annuation of any worker. The worker is entitled toget relief:‣ to the extent of 75% of the wage equivalent in the first year of the closure of the unit;‣ to the extent of 50% of the wage equivalent in the second year; and‣ to the extent of 25% of the wage equivalent in the third year.Eligibility criteria for mills‣ A closed textile mill should be licensed under the Industrial (Development and Regulation) Act, 1951 or registeredwith the Textile Commissioner as a medium scale unit on the date of the closure.‣ The mill should have obtained the requisite permission for closure from the appropriate State Government underSection 25(0) of the Industrial Disputes Act., 1947, or should be taken over by an Official Liquidator appointed by theHigh Court, and‣ The unit should have closed down on or after June 6, 1985.‣ This also includes partially closed units, wherein the State Government recommends that an entire uneconomicactivity (like weaving or processing) is scrapped as a part of rehabilitation package for a sick/weak mill (as per theRBI definition) approved by the Nodal Agency/BIFR, provided the scrapped capacity is surrendered for cancellationand endorsement is made on the License /Registration certificate to this effect.102
Eligibility criteria for workmen‣ Any worker is eligible for assistance under the scheme if, he/she has been engaged in a closed textile unit on the dateof its closure continuously for five years or more, and had been earning a wage equivalent of Rs. 2500 per month orless, for the mills closed between June 6, 1985 to April 1, 1993, and Rs.3500 or less thereafter.‣ They should have been contributing to the Provident Fund maintained by the Regional Provident Fund Commissionerof the State concerned.‣ The assistance is not heritable, transferable or capable of being attached on account of any other liability of the worker.‣ The worker’s eligibility shall cease if he takes up employment in another registered or licensed undertaking.‣ The rehabilitation assistance will not be curtailed if the worker engages himself in a self-employment venture.TMScheme for Integrated Textiles Parks (SITP)The Scheme for Integrated Textile Parks (SITP) was launched in August, 2005, by merging the Apparel Parks for ExportScheme (APE) and the Textile Centre Infrastructure Development Scheme (TCIDS). The primary objective of the SITP isto provide the industry with world-class infrastructure facilities for setting up of textile units in clusters.The SITP envisages creation of 25 new textile parks of international standards in potential growth centres before 2007-08.Under the SITP, an amount of Rs. 625.00 crores has been provided by the Government of India (GOI) for the developmentof these Parks. The Government of India’s (GOI) support under the SITP by way of Grant or Equity will be limited to 40%of the project cost, subject to a ceiling of Rs. 40.00 crores.The SITP is being implemented through Special Purpose Vehicles (SPVs). Industry Associations/Groups would be themain promoters of the Integrated Textile Parks (ITPs). The Infrastructure Leasing & Financial Services (ILF&S) has beenappointed as the Project Management Consultant for implementing the SITP. The Project Management Consultant will beresponsible for the speedy implementation of the Project in a transparent and professional manner, so as to achieve a highdegree of quality at a low cost acceptable to the members of the SPV for which a fee will be paid to the ProjectManagement Consultant.100% Foreign Direct Investment (FDI) in the Textile SectorExport Promotional Measures under the Foreign Trade Policy 2007 – 2008Our Company’s exports currently constitute approximately 25% of our total sales. The following export promotionalmeasures of the Government of India are applicable to our Company:1. Export HousesThe Government of India under the provisions of the Foreign Exchange Management Act, 1999 and the Foreign ExchangeManagement (Transfer or Issue of Security by Persons Resident Outside India) Regulations 2000 has allowed foreignequity participation upto 100%, through the automatic route, in the textile sector.Our Company being a Two Star Export House is eligible to avail of the following facilities:‣ Authorization and customs clearances for both imports and exports on self-declaration basis;‣ Fixation of Input-Output norms on priority within 60 days;‣ Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would bereceived through banking channels;‣ 100% retention of foreign exchange in Exchange Earner’s Foreign Currency account;‣ Enhancement in normal repatriation period from 180 days to 360 days;‣ Exemption from furnishing of bank guarantee in Schemes under Foreign Trade Policy; and‣ Star Export Houses shall be permitted to establish Export Warehouses, as per Department of Revenue Guidelines.Export Initiatives under the Foreign Trade Policy 2007 – 2008Our Company’s exports currently constitute approximately 25% of our total sales. The following export incentives ofthe Government of India are applicable to our Company:103
TM1. Export Promotion Capital Goods Scheme (EPCG Scheme)The EPCG Scheme allows import of capital goods for pre-production, production and post production at 5% customs dutysubject to an export obligation equivalent to 8 times of the duty saved on capital goods imported under the EPCG Schemeto be fulfilled over a period of 8 years reckoned from the date of issuance of the license. The EPCG Scheme coversmanufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supportingmanufacturer(s) and service providers.2. Advance Authorization SchemeAdvance Authorization Scheme is a duty exemption scheme issued to allow duty free import of inputs, which arephysically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalystswhich are consumed / utilized to obtain export product, may also be allowed. The DGFT, by means of Public Notice, mayexclude any product(s) from the purview of Advance Authorization. Advance Authorizations are exempted from paymentof basic customs duty, additional customs duty, education cess, antidumping duty and safeguard duty, if any. The facilityof Advance Authorization shall also be available where some or all inputs are supplied free of cost to exporter by foreignbuyer.3. Duty Entitlement Passbook Scheme (DEPB)DEPB is a duty remission scheme enabling post export replenishment / remission of duty on inputs used in export products.The Objective of DEPB is to neutralize the incidence of customs duty on import content of export product. Component ofSpecial Additional Duty and customs duty on fuel shall also be allowed under DEPB (as a brand rate) in case of nonavailmentof CENVAT credit. The neutralization shall be provided by way of grant of duty credit against the exportproduct. An exporter may apply for credit, at a specified percentage of FOB value of exports, made in freely convertiblecurrency or payment made from foreign currency account of SEZ unit / SEZ Developer in case of supply by DTA. Creditshall be available against such export products and at such rates as may be specified by DGFT by way of public notice.Credit may be utilized for payment of Customs Duty on freely importable items. The DEPB holder shall have the option topay additional customs duty in cash as well.4. Duty Free Import Authorization Scheme (DFIA)DFIA is a duty exemption scheme issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which arerequired for production of export product. DGFT, by means of Public Notice, may exclude any product(s) from purview ofDFIA. This scheme is in force from 1 st May, 2006.5. Duty Drawback Scheme (DBK)DBK is a duty remission scheme enabling post export replenishment / remission of duty on inputs used in export products,whereby exporters are allowed refund of the excise and import duty suffered on raw materials under DBK so as to makethe products more competitive in the international market.6. Target Plus Scheme and Duty Free Credit Entitlement Certificate (DFRC)DFRC and Target Plus Scheme is a duty remission scheme issued to allow duty free import of capital goods includingspares, office equipments, professional equipments and office furniture provided the same are freely importable under ITC(HC) and are non transferable. The objective of the scheme is to accelerate growth in exports by rewarding star exporthouses who have achieved a quantum growth in exports. The duty free entitlement certificate shall be valid for a period of12 months.The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 provides for the levy and collection of anadditional 15% of the total amount of excise duty chargeable on certain textiles and textile articles as specified in theschedule to the said Act.104
Union Budget 2007-2008TMThe Union budget 2007-2008 has specially mentioned that the textile industry is geared up to meet the global challenge.Under the Scheme for Integrated Textiles Parks (SITP) 26 parks have been approved so far out of 30 sanctioned. TheBudget provision for these parks has been increased from Rs.189 crore in 2006-07 to Rs.425 crore in 2007-08. Inconsonance with the industry, the Technology Upgradation Fund (TUF) scheme has been continued during the EleventhPlan. Allocation for TUF has been raised from Rs.535 crore in 2006-07, to Rs.911 crore in 2007-08.Human Resource DevelopmentThe Indian Government has promoted the training of fashion professionals for the Indian textile sector. On July 13, 2006the National Institute of Fashion Technology Act, 2006 came into force for establishing and incorporating the NationalInstitute of Fashion Technology for the promotion and development of education and research in fashion technology andfor all other matters connected therewith. The National Institute of Fashion Technology (NIFT) which provides training tofashion designers and fashion technologists has seven branches at Delhi, Mumbai, Calcutta, Hyderabad, Bangalore,Chennai and Gandhinagar. The Ministry of Textiles has established a Nodal Centre for Upgradation of Textile Education atthe Indian Institute of Technology, Delhi with funding from the Ministry of Textiles. The NIFT and the Apparel Training& Design Centres (ATDCs) are running various courses/ programmes to meet the skilled manpower requirements of thetextile industry, especially apparel, in the field of design, merchandising and marketing.105
HISTORY AND OTHER CORPORATE MATTERSTMOur Company was incorporated on July 25, 1984 at Mumbai in the State of Maharashtra as Mandhana Textile Mills PrivateLimited under the Companies Act, 1956, with registration number 11-33553 of 1984. Our Registered Office was situated atC-12, Sarvodaya Nagar, 1 st Panjrapole Road, Mumbai – 400002.With effect from July 1, 1993, our Company was converted into a deemed public limited company under Section 43A of theCompanies Act, 1956, whereby the word “Private” was deleted from the name of our Company.On April 18, 1995 the name of our Company was changed from “Mandhana Textile Mills Limited” to “Mandhana IndustriesLimited”.On March 27, 2002, pursuant to Section 43A (2A) of the Companies Act, 1956, our Company was converted from a deemedpublic limited company to a private limited company and our Company’s name was changed to “Mandhana IndustriesPrivate Limited”.On May 15, 2007, our Company was converted into a public limited company whereby the word “Private” was deleted fromthe name of our Company. Further, a Corporate Identification Number U17120MH1984PLC033553 was allotted to ourCompany.The evolution of our Company can be traced through the following phases:I: Expansion into major categories of textiles businessThough our Company’s operations started out in the year 1984 through textile trading, our processing activities commencedin the year 1994, with the setting up a plant at Tarapur for processing and printing of fabrics called as “Mandhana DyeingUnit”.In 1998, pursuant to our venture into fabrics processing, we decided to expand our horizons by penetrating the internationalgarments market and thereby began our export operations to the European market. At present, we export garments on a globalscale to all the known international garment markets.With effect from February 10, 1999 the Registered Office of our Company was changed from C-12, Sarvodaya Nagar, 1 stPanjrapole Road, Mumbai – 400002 to 137, Kewal Industrial Estate, Senapati Bapat Marg, Lower Parel, Mumbai – 400013.Further, in order to meet our internal requirements and thereby simultaneously reduce our costs, our Company set up aWeaving House at Tarapur for production of greige fabrics, called as “Mandhana Weaving House Unit”.With effect from May 3, 2003 the Registered Office of our Company was changed from 137, Kewal Industrial Estate,Senapati Bapat Marg, Lower Parel, Mumbai – 400 013 to 154/155, Kewal Industrial Estate, Senapati Bapat Marg, LowerParel, Mumbai – 400 013. Further, in 2003, we set up a sales office in Delhi so as to facilitate our market expansion into thenorthern region of India.II: Scaling up of operations to become internationally competitiveIn 2004, in order to meet our global garment demand, we established a modernised garment manufacturing unit at called as“Mandhana Industries Export Division (Bangalore Unit)” at Bangalore. The garments manufactured therein cater to ourinternational demand, thereby meeting the specified international criteria of our various international customers. Further, in2004, we set up a sales office in Chennai so as to facilitate our market expansion into the southern region of India.In 2005, we set up a new modernised unit called as “Mandhana Weaving House (Shirting Division)” at Tarapur which isengaged in manufacturing various fabrics including cotton, polyester etc. as well as engaging in the process of yarn dyeing.Further, with the intention of attaining a global image and strengthening our foothold therein, we set up a liaison office atParis called as “Mandhana Europe”.On May 11, 2005, the Registered Office of our Company was changed from 154/155, Kewal Industrial Estate, SenapatiBapat Marg, Lower Parel, Mumbai – 400 013 to 205/214, Peninsula Centre, Dr. S. S. Rao Road, Off Dr. Ambedkar Road,106
Parel (East), Mumbai – 400012. The contemporary design of this office helps us in showcasing the designs which we havedeveloped. This office also offers great ambience in terms ofTMIn 2006, our Company set up a garment manufacturing and sampling unit at Vikhroli, Mumbai, called as “Tirupati Apparel”,with a design studio, having a broad design archive of more than 75,000 designs.III: Becoming end to end player in textile and garment marketOur further expansion into processing, weaving and garmenting further enhanced our capacity thereby enabling us to cater toa greater number of customers both domestically and in the export markets. Our focus on quality, designing and samplinginputs and lower turnaround time has made us the vendor of choice for many customers.Our focus on mid to high-end segments has helped us in maintaining our margins. The current expansion of facilities wouldhelp us ensure quality products to our customers. Further it complements our presence in the textile and garment value chainstarting from yarn dyeing to selling our garments through our overseas offices.The current strength of our manpower is approximately 3248 people. Presently, we are operating with 184 weaving loomsproducing approximately 200 lac meters of fabric per annum and 750 sewing machines with an overall production capacity of30 lac garment pieces per annum. Further our processing capacity of finished fabric is 300 lac metres per annum and our yarndyeing capacity is 20 lac kgs per annum.Major Events:YearKey Events1984 Our Company was incorporated as a private limited company1993 Our Company was converted into a deemed public limited company under Section 43A of the CompaniesAct1994 Ventured into manufacturing activities by setting up of Mandhana Dyeing Unit at Tarapur.1995 Change of name of our Company to Mandhana Industries Limited1998 Exports to the European garments market2002Our Company was converted from a deemed public limited company to a private limited companySet up of Mandhana Weaving House Unit at Tarapur2003 Set up of sales office in Delhi2004Establishment of Mandhana Industries Export Division (Bangalore Unit) at BangaloreSet up of sales office in Chennai2005Establishment of Mandhana Weaving House (Shirting Division) at TarapurSet up of a liaison office at Paris called as Mandhana Europe2006 Set up of Tirupati Apparel, a garment manufacturing and sampling unit at Vikhroli, Mumbai2007 Our Company was converted into a public limited companyAwards, Achievements and Certifications:Year2004200520062007Particulars“NIRYAT SHREE” Gold Trophy awarded by the Federation of Indian Export Organisations for outstandingexport performance in the category of textiles and textile productsCertificate dated June 29, 2005 issued by Dewhirst Ladieswear approving our Bangalore Unit as a“Manufacturing Site” based on Marks & Spencer Global Sourcing Principals and the Ethical TradingInitiative Base Code“NIRYAT SHREE” certificate of excellence awarded by the Federation of Indian Export Organisations foroutstanding export performance in the category of textiles and textile productsSA 8000:2001 Certification for Social Accountability Management System for Manufacture and Export ofGarmentsISO 9001:2000 Certification for Quality Management System for Manufacture & Export of GarmentsExcellence award for excellence in productivity, quality, innovation and management awarded by theInstitute of Economic Studies, Delhi (IES) in the year 2007 at the time of the seminar on EconomicDevelopment107
Certificate of Recognition as Two Star Export HouseTMChanges in Registered Office of our CompanyDate Registered Address Changed From Changed toFebruary 10, 1999 C-12, Sarvodaya Nagar, 1 STPanjrapole Road, Mumbai – 400 002137, Kewal Industrial Estate, SenapatiBapat Marg, Lower Parel, Mumbai –400 013.May 3, 2003May 11, 2005137, Kewal Industrial Estate, SenapatiBapat Marg, Lower Parel, Mumbai –400 013.154/155, Kewal Industrial Estate,Senapati Bapat Marg, Lower Parel,Mumbai – 400 013.154/155, Kewal Industrial Estate,Senapati Bapat Marg, Lower Parel,Mumbai – 400 013.205/214, Peninsula Centre, Dr. S. S.Rao Road, Off Dr. Ambedkar Road,Parel (East), Mumbai – 400 012.Main Objects of our CompanyThe main objects of our Company, as contained in our Memorandum of Association, are as set forth below:To undertake and engage in or to carry on the activity of textile processes like calendaring, sizing, dyeing, bleaching,shrinking, finishing, mercerising, texturing, printing, stamping and other textile processes for yarns, threads, woven or nonwovenfabrics, hosiery, knitted garments and apparels, made of cotton, jute, hemp silk, art silk, nylon, wool, synthetic, manmadefibres and filaments like terence, terecot, polyester and others being produced and used at present and as may beproduced and used in future.The Main Objects clause and the Objects incidental or ancillary to the Main Objects of our MoA enable us to undertakeactivities for which funds are being raised through this Issue. The existing activities of our Company are in accordance withthe Objects clause of our Memorandum of Association.Changes in Memorandum of AssociationDate of Shareholders’ApprovalJuly 1, 1993October 29, 1993June 20, 1994January 28, 1995December 24, 2001Changes in the Memorandum of AssociationAlteration in Name ClauseChange in the name of our Company from Mandhana Textile Mills Private Limited toMandhana Textile Mills LimitedAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 5,000,000/- to Rs.10,000,000/- comprising of further 50,000 Equity SharesAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 10,000,000/- to Rs.30,000,000/- comprising of further 200,000 Equity SharesAlteration in Capital ClauseSub-division of each equity share of nominal value of Rs. 100/- into 10 equity shares ofnominal value of Rs. 10/- eachAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 30,000,000/- to Rs.50,000,000/- comprising of further 2,000,000 Equity SharesAlteration in Name ClauseChange in the name of our Company from Mandhana Textile Mills Limited to MandhanaIndustries LimitedAlteration in Name ClauseChange in the name of our Company from Mandhana Industries Limited to Mandhana108
Date of Shareholders’ApprovalMarch 6, 2003October 25, 2004February 18, 2005April 20, 2007July 2,2007Changes in the Memorandum of AssociationIndustries Private LimitedAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 50,000,000/- to Rs.57,500,000/- comprising of further 740,000 Equity Shares and 10,000 0%RedeemablePreference SharesAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 57,500,000/- to Rs.100,000,000/- comprising of further 4,250,000 Equity SharesAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 100,000,000/- to Rs.150,000,000/- comprising of further 5,000,000 Equity SharesAlteration in Name ClauseChange in the name of our Company from Mandhana Industries Private Limited toMandhana Industries LimitedAlteration in Capital ClauseIncrease in the authorized share capital of our Company from Rs. 150,000,000/- to Rs.200,000,000/- comprising of further 5,000,000 Equity SharesTMSubsidiariesOur Company has no subsidiaries as on date.Shareholders AgreementsThere are no subsisting shareholders agreements among our shareholders in relation to our Company.Other AgreementsWe are not a party, nor have we entered into, any other material contracts not being a contract:(1) entered into in the normal course of business carried on, or intended to be carried on, by us; or(2) entered into more than two years before the date of filing this Draft Red Herring Prospectus with SEBIRestrictive Covenants in Loan AgreementsLoan Agreements executed by our Company with various lenders contain certain restrictive covenants whereby we requireprior written consent from the aforesaid banks, for undertaking certain activities, including but not limited to:1. Effecting changes in our Company’s capital structure;2. Formulating any scheme of amalgamation/re-constitution;3. Entering into borrowing arrangements, either secured or unsecured, with any other bank, financial institution, companyor person;4. Undertaking guarantee obligations on behalf of any other company, firm or person;5. Creating any further charge, lien or encumbrance over the assets and properties of the Company, which are charged tothe aforesaid banks, in favour of any bank, financial institution, company, firm or person;6. Selling, assigning, mortgaging or otherwise disposing off any of the fixed assets charged to the banks;7. Effecting any material change in the composition of Board of Directors, management structure or equity pattern of theCompany.109
Approvals from bankers:TMPursuant to the aforesaid, we have received the following approvals from our bankers for the Issue:Sr.Name of bankLetter dateNo.1. Andhra Bank July 5, 20072. State Bank of Patiala July 7, 20073. Corporation Bank July 11, 20074. Bank of Maharashtra July 16, 20075. IndusInd Bank Limited November 21, 20076. Axis Bank Limited December 03, 20077. State Bank of Travencore June 23, 20078. Standard Chartered Bank June 27, 2007Strategic PartnersOur Company does not have any strategic partners.Financial PartnersOur Company does not have any financial partners.110
OUR MANAGEMENTTMBOARD OF DIRECTORSAs on date of filing this Draft Red Herring Prospectus with SEBI, we have seven Directors. Details of our Directors are givenbelow:Sr.No.Name, Designation,Father’s/ Husband’s Name,Address, Nationality,Occupation1. Mr. Purshottam MandhanaChairman-cum-ManagingDirectorS/o Mr. Chhaganlal Mandhana23, Mount Unique,62 – A Peddar Road,Mumbai – 400 026Maharashtra.Nationality: IndianOccupation: IndustrialistDIN: 00025633Age51yearsDate of Appointmentas Director & TermSince inception i.e. July25, 1984Re-appointed asChairman-cum-Managing Directorfor a period of 5 yearswith effect from April01, 2003 to April 01,2008.Details of other Directorships1. Mahan Synthetic Textiles PrivateLimited2. Golden Seam Textiles PrivateLimited3. Vicky Jhunjhunwala ResortsPrivate Limited4. Sundhya Chhaya Finvest PrivateLimited5. Dhumketu Finvest Private Limited6. Parag Kunj Finvest PrivateLimited7. Tarapur Enviornment ProtectionSociety8. CKM Investment Private Limited2. Mr. Biharilal MandhanaExecutive DirectorS/o Mr. Chhaganlal Mandhana31 – Mount Unique,62 Peddar Road,Gamdevi, Mumbai – 400 026,Maharashtra.61yearsSince inception i.e.July 25, 19841. Mahan Synthetic Textiles PrivateLimited2. Sundhya Chhaya Finvest PrivateLimited;3. Viky Jhunjhunwala Resort PrivateLimited.Nationality: IndianOccupation: IndustrialistDIN: 000256053. Mr. Manish MandhanaExecutive Joint ManagingDirectorS/o Mr. Biharilal Mandhana22/23, Mount Unique,62-A Peddar Road,Mumbai – 400 026,Maharashtra.Nationality: IndianOccupation: IndustrialistDIN: 0002544939yearsSeptember 30, 1995. 1. Golden Seam Textiles PrivateLimited2. Dhumketu Finvest Private Limited111
Sr.No.Name, Designation,Father’s/ Husband’s Name,Address, Nationality,Occupation4. Mr. Gyanendra Bajpai*Independent DirectorS/o. Bans Gopal BajpaiFlat No C-33,Mayfair Gardens,Little Gibbs Road,Malabar Hill,Mumbai – 400 006Nationality: IndianOccupation: ServiceDIN: 009461385. Mr. Sanjay Asher*Independent DirectorS/o Katau Asher32, Mody Street,Fort,Mumbai – 400 001Nationality: IndianOccupation: ProfessionalDIN: 00008221AgeDate of Appointmentas Director & TermDetails of other Directorships65 years May 16, 2007 1. Future Generali Life InsuranceCompany Limited;2. Future Generali InsuranceCompany Limited;3. Intuit Consulting Private Limited;4. Invent Assets Securitisation andReconstruction Company PrivateLimited;5. Epitome Global Private Limited;6. Infomerics Valuation and RatingPrivate Limited;7. Emaar MGF Land Limited8. Future Capital Holding Limited;9. The Dhanalakshmi Bank Limited;10. IDE India (section 25 company –non-profit-poverty allevation);11. Nitesh Estate Private Limited; and12. Aplaloan.com Services PrivateLimited.42 years May 16, 2007 1. A.L. Movers Private Limited;2. A.L. Records Management PrivateLimited;3. Allied Pickfords India PrivateLimited;4. Asian Electronics Limited;5. Bajaj Allianz General InsuranceCompany Limited;6. Bajaj Allianz Life InsuranceCompany Limited;7. Dewas Soya Limited;8. Diamant Boart Marketing PrivateLimited;9. Divinet Access TechnologiesLimited;10. Engineering & Designs TecnimontICB Private Limited;11. Finolib Chemicals PrivateLimited;12. Finolex Cables Limited;13. Huntleigh Healthcare India PrivateLimited;14. Infomedia India Limited;15. I2IT Private Limited;16. Kryfs Power Components Limited;17. Majesty Investments PrivateLimited;18. Migatronic India Private Limited;19. Morgan Stanley InvestmentManagement Private Limited;20. Mepha Pharma India PrivateLimited;21. NV Advisory Services PrivateTM112
Sr.No.Name, Designation,Father’s/ Husband’s Name,Address, Nationality,Occupation6. Mr. Khurshed Thanawalla*Independent DirectorS/o. Meherwanji ThanawallaKatau Bunglow,6 Manav Mandir Road,Mumbai – 400 006Nationality: IndianOccupation: ProfessionalDIN: 00201749Age65yearsDate of Appointmentas Director & TermDetails of other DirectorshipsLimited;22. Orbit Electricals Private Limited;23. Plastro Plasson Industries (India)Limited;24. Ratiopharm India Private Limited;25. Repro India Limited;26. Saurer Precicomp Private Limited;27. Schlafhorst Engineering (India)Limited;28. Sparsh BPO Services Limited;29. Shree Renuka Sugars Limited;30. Siporex India Limited;31. Zinser Textile Systems PrivateLimitedDecember 04, 2007 1. Schlafhorst Engineering (India)Limited2. Stovec Industries Limited3. Ahura Holdings Private Limited4. Bimag Machines Private Limited5. Giribala Properties Private Limited6. Oerlikon Textile India PrivateLimited7. Saurer Preceicomp Private Limited8. Oerlikon Textile ComponentsIndia Private Limited9. Zinser Textile System PrivateLimited10. Allma Machines Private Limited11. Volkmann Machines PrivateLimited12. Neumag Machines Private LimitedTM7. Mr. Robin Cornelius*Independent DirectorS/o. Sven-Erik Cornelius52 years July 25, 2007 1. Switcher SAChemin De La Flore,Lutry - 1095Nationality: CHDIN: 01668404*Appointed as Additional Directors and shall hold office until the date of the next AGM.BRIEF BIOGRAPHY OF OUR DIRECTORSMr. Purshottam Mandhana, Chairman-cum-Managing DirectorMr. Purshottam Mandhana holds a Bachelor’s degree in Commerce and has over 27 years of experience in the textileindustry. He is a great administrator and a visionary entrepreneur. He is well versed with different textile technologies likedyeing and processing. He has successfully set up the weaving unit and has also played a pivotal role in the modernisation ofprocess unit. Under his administrative supervision, our Company’s export division has performed consistently. He currentlyoversees the overall management of all the divisions of our Company.113
Mr. Biharilal Mandhana, Executive DirectorTMMr. Biharilal Mandhana has over 33 years of experience in the textile business. His experience in the industry serves ourCompany in a big way. He has successfully introduced various varieties of fabric for our Company and has thus, ensured agood market position for our Company. He currently, oversees the raw material requirements of our Company and is also incharge of the fabric division of our Company.Mr. Manish Mandhana, Executive Joint Managing DirectorMr. Manish Mandhana holds a Bachelor’s Degree in Commerce from Mumbai University and has over 13 years ofexperience in the textile industry. He is in overall charge of the export activities of our Company. His marketing andadministrative abilities have helped our Company’s export division grow outrageously. He is in sync with the latest trends inthe export market and understands the taste of the foreign fashion industry. He currently oversees export of garments.Mr. Gyanendra Bajpai, Independent DirectorMr. Gyanendra Bajpai holds a Master’s degree in Commerce from University of Agra and a Degree in L.L.B. from theUniversity of Indore. He has been the Chairman of Securities Exchange Board of India and also the Chairman of the LifeInsurance Corporation of India. He has also been the Chairman of Corporate Governance Task Force of InternationalOrganization of Security Commissions and the former Chairman of Insurance Institute India. He was the non- ExecituveChairman of the National Securities Exchange Board of India. Currently, he is on the Borad of Governance of Indian Instituteof Management (Lucknow) and a Member of the Standing Technical Committee on Financial Regulations and Board ofAdvisors.Mr. Sanjay Asher, Independent DirectorMr. Sanjay Asher completed his Bachelors in Commerce and Bachelors of Law from Mumbai University. He is also aqualified Chartered Accountant. He has been a practicing Advocate since 1989 with M/s. Crawford Bayley & Co. He wasadmitted as a Solicitor in the year 1993 and is a partner of M/s. Crawford Bayley & Co., since 2000.Mr. Khurshed ThanawallaMr. Khurshed Thanawalla holds a Bachelors degree of Commerce from University of Bombay. He also holds a fellowship ofthe the institute of Chartered Secretaries and administrators, London and is also an Associate of the Textile Institute, UK andAssociate of the British Institute of Management.He was the Managing Director of Barmag India Private Limited from 1985to 1996. From 2004 to July 2007 he was the Managing Director, Saurer India Private Limited. From September 2007 he wasappointed as Managing Director of Oerlikon Textile India Private Limited. He has also been a director of Lakshmi SyntheticMachinery Manufacturers Limited.Mr. Robin Cornelius, Independent DirectorMr. Robin Cornelius is a graduate from University of Lausanne, Switzerland. He is the founder promoter and CEO ofSwitcher SA. Mr. Cornelius has been awarded “International Corporate Conscience Award 2003 by SAI (SocialAccountability International) New York. He was also awarded with Swiss Entrepreneur of the Year ‘2005 Award organizedby Ernst & Young in services category. In 2006, he was nominated for the Swiss Award for “personality of the year”. In2004, he created Switcher Foundation running social projects all over the world including seven primary Educational Centersin Tamilnadu.Borrowing powers of Board of DirectorsPursuant to an ordinary resolution passed at the EGM of our shareholders held on July 2, 2007 our Directors were authorisedto borrow money(s) on behalf of our Company in excess of the paid up share capital and the free reserves of our Companyfrom time to time, pursuant to the provisions of Section 293(1)(d) of the Companies Act, subject to an amount not exceedingRs. 7,500 million.For further details of the provisions of our Articles of Association regarding borrowing powers, please refer to the sectiontitled ‘Main Provisions of the Articles of Association of our Company’ beginning on page no. [•] of this Draft Red HerringProspectus.114
Remuneration/Compensation of DirectorsTM(i) Executive DirectorsMr. Purshottam Mandhana, Chairman-cum-Managing Director was one of the subscribers to the Memorandum ofAssociation of our Company and has been appointed on the Board of Directors of our Company as per the Articles ofAssociation. He was designated as the Chairman-cum-Managing Director of our Company vide Board Resolution datedSeptember 9, 2003 for a period of 5 years, with effect from April 01, 2003 to April 01, 2008. The significant terms of hisemployment vide resolution passed at the EGM held on July 2, 2007 are as follows:Tenure of Appointment Period of 5 years with effect from April 01, 2003 to April 01, 2008.Basic Salary:CommissionRs. 1,200,000/- per month with such increments as may be decided by the Board ofDirectors (which includes any committee thereof) from time to time, but subject to themaximum salary of Rs. 1,600,000/- per month.Payment of commission of such amount for each corporate financial year as may ne decidedby the board of Directors (Which includes any committee thereof) in its absolute discretionprovided that aggregate commission paid to all the Managing Directors in any corporatefinaincial year shall not exeed 1% of the net profit of our Company as appearing in theaudioted annual accounts.Perquisites • Medical Benefits: Reimbursement of actual medical expenses incurred in Indiaand/or abroad including hospitalization, nursing home and surgical charges forhimself and family.• Leave Travel Concession: Reimbursement of Leave/Holiday Travel expenses (liketravel fare, lodging, boarding, conveyance and other expenses) incurred on one ormore occasions in a year whether in India or abroad in respect of himself and familysubject to the conditions that total reimbursement shall not exceed one month’s basicsalary per annum. The entitlement for any one year to the extent not availed shall beallowed to be accumulated upto next two year.• Club Fees: Reimbursement of membership fee upto three clubs in India includingadmission and life membership fees.• Personal Accident InsurancePersonal Accident Insurance Policy of such amount as may be decided by the ManagingDirector, the premium of which shall not exceed Rs. 15,000/- per annum.• Contribution to Provident Fund, Superannuation and Annuity FundCompany’s contribution to Provident Fund and Superannuation or Annuity Fund notexceeding 30% of salary in aggregate.• GratuityGratuity at the rage of half month’s salary for each completed year of service.• LeaveLeave with full pay or encashment thereof as per the Rules of the Company.• Electricity ExpensesExpenses pertaining to electricity at the residence of Mr. Purushottam C. Mandhanawill be borne / reimbursed by the Company.• Other perquisitesSubject to overall ceiling on remuneration mentioned hereinabove, Mr. PurushottamC. Mandhana may be given any other allowances, benefits and perquisites as theBoard of Directors (which includes any committee thereof) may from time to time115
decide and allowed under the provisions of the law.TMAmenities • Conveyance facilitiesCompany shall provide suitable conveyance facilities as may be required by Mr.Purushottam C. Mandhana and approved by the Board of Directors.• Communication facilitiesCompany shall provide telephone, telefax and other communication facilities at theresidence of Mr. Purushottam C. Mandhana.Explanation :Perquisites shall be evaluated as per Income Tax Rules, wherever applicable and inabsence of any such rule, perquisites shall be evaluated at actual cost.Mr. Biharilal Mandhana, Executive Director was one of the subscribers to the Memorandum of Association of ourCompany and has been appointed on the Board of Directors of our Company as per the Articles of Association. Thesignificant terms of his employment vide resolution passed at the EGM held on July 2, 2007 are as follows:Tenure of Appointment For a period of 3 (three) years with effect from 1 st April, 2007Basic Salary:CommissionRs. 300,000/- per month with such increments as may be decided by the Board of Directors(which includes any committee thereof) from time to time, but subject to the maximum salaryof Rs. 450,000/- per month.Payment of commission of such amount for each Corporate Financial Year, as may be decided bythe Board of Directors (which includes any committee thereof) in its absolute discretion providedthat aggregate commission paid to all the Whole Time Director in any Corporate Financial Yearshall not exceed 1% of the net profits of the Company as appearing in the Audited AnnualAccounts.Perquisites • Medical Benefits: Reimbursement of actual medical expenses incurred in India and/orabroad including hospitalization, nursing home and surgical charges for himself andfamily.• Leave Travel Concession: Reimbursement of Leave/Holiday Travel expenses (liketravel fare, lodging, boarding, conveyance and other expenses) incurred on one or moreoccasions in a year whether in India or abroad in respect of himself and family subject tothe conditions that total reimbursement shall not exceed one month’s basic salary perannum. The entitlement for any one year to the extent not availed shall be allowed to beaccumulated upto next two year.• Club Fees: Reimbursement of membership fee upto three clubs in India includingadmission and life membership fees.• Provident fund, superannuation benefits and gratuity: Company’s contribution toProvident Fund and Superannuation or Annuity Fund not exceeding 30% of salary inaggregate.• Personal Accident InsurancePersonal Accident Insurance Policy of such amount as may be decided by the WholeTime Director, the premium of which shall not exceed Rs. 15,000/- per annum.• GratuityGratuity at the rage of half month’s salary for each completed year of service.• Leave116
Leave with full pay or encashment thereof as per the Rules of the Company.TM• Electricity ExpensesExpenses pertaining to electricity at the residence of Mr. Biharilal C. Mandhana will be borne/ reimbursed by the Company.• Other perquisitesSubject to overall ceiling on remuneration mentioned here in below, Mr. Biharilal CMandhana may be given any other allowances, benefits and perquisites as the Board oDirectors (which includes any committee thereof) may from time to time decide and allowedunder the provisions of the law.Amenities • Conveyance facilitiesCompany shall provide suitable conveyance facilities as may be required by Mr. Biharilal C.Mandhana and approved by the Board of Directors.• Communication facilitiesCompany shall provide telephone, telefax and other communication facilities at theresidence of Mr. Biharilal C. Mandhana.Explanation :Perquisites shall be evaluated as per Income Tax Rules, wherever applicable and in absence ofany such rule, perquisites shall be evaluated at actual cost.Mr. Manish Mandhana, Executive Joint Managing Director, was appointed on the Board of Directors of our Companypursuant to a Board Resolution dated September 30, 1995. The significant terms of his employment vide resolution passed atthe EGM held on July 2, 2007 are as follows:Tenure of Appointment For a period of 3 (three) years with effect from 1 st April, 2007Basic Salary:Rs. 9, 00,000/- per month with such increments as may be decided by the Board of Directors(which includes any committee thereof) from time to time, but subject to the maximum salary ofRs. 11, 50,000/- per month.CommissionPayment of commission of such amount for each Corporate Financial Year, as may be decidedby the Board of Directors (which includes any committee thereof) in its absolute discretionprovided that aggregate commission paid to all the Whole Time Director in any CorporateFinancial Year shall not exceed 1% of the net profits of the Company as appearing in the AuditedAnnual Accounts.Perquisites • Medical Benefits: Reimbursement of actual medical expenses incurred in India and/orabroad including hospitalization, nursing home and surgical charges for himself andfamily.• Leave Travel Concession: Reimbursement of Leave/Holiday Travel expenses (liketravel fare, lodging, boarding, conveyance and other expenses) incurred on one or moreoccasions in a year whether in India or abroad in respect of himself and family subject tothe conditions that total reimbursement shall not exceed one month’s basic salary perannum. The entitlement for any one year to the extent not availed shall be allowed to beaccumulated upto next two year.• Club Fees: Reimbursement of membership fee upto three clubs in India includingadmission and life membership fees.• Provident fund, superannuation benefits and gratuity: Company’s contribution toProvident Fund and Superannuation or Annuity Fund not exceeding 30% of salary inaggregate.117
• Personal Accident InsurancePersonal Accident Insurance Policy of such amount as may be decided by the WholeTime Director, the premium of which shall not exceed Rs. 15,000/- per annum.TM• GratuityGratuity at the rage of half month’s salary for each completed year of service.• LeaveLeave with full pay or encashment thereof as per the Rules of the Company.• Electricity ExpensesExpenses pertaining to electricity at the residence of Mr. Biharilal C. Mandhana will be borne/ reimbursed by the Company.• Other perquisitesSubject to overall ceiling on remuneration mentioned here in below, Mr. Biharilal C.Mandhana may be given any other allowances, benefits and perquisites as the Board ofDirectors (which includes any committee thereof) may from time to time decide andallowed under the provisions of the law.Amenities • Conveyance facilitiesCompany shall provide suitable conveyance facilities as may be required by Mr. Biharilal C.Mandhana and approved by the Board of Directors.• Communication facilitiesCompany shall provide telephone, telefax and other communication facilities at theresidence of Mr. Biharilal C. Mandhana.Explanation :Perquisites shall be evaluated as per Income Tax Rules, wherever applicable and in absence ofany such rule, perquisites shall be evaluated at actual cost.(ii) Independent Directors: Our Independent Directors are entitled to sitting fees for attending meetings of the Board, or ofany committee of the Board. Currently, the sitting fees payable by our Company to our Directors is Rs. 2500/- for everymeeting of the Board attended by them, and for every meeting of the committee of the Board attended by them.SHAREHOLDING OF OUR DIRECTORSAs per our Articles, our Directors are not required to hold any Equity Shares in our Company. Save and except as below, ourDirectors do not hold any Equity Shares in our Company as on the date of filing of this Draft Red Herring Prospectus.Sr.No.Names of our DirectorsNo. of Equity Shares% of Pre-Issue ShareCapital1. Mr. Purshottam Mandhana 880500 7.952. Mr. Biharilal Mandhana 841000 7.593. Mr. Manish Mandhana 942000 8.514. Mr. Gyanendra Bajpai 10000 0.095. Mr. Sanjay Asher 20000 0.18118
None of our Directors or Key Managerial Personnel are “relatives” within the meaning of Section 6 of the Companies Actexcept as stated below:TMNames of our DirectorsMr. Purshottam MandhanaMr. Biharilal MandhanaMr. Manish MandhanaRelationBrother of Mr. Biharilal Mandhana; and uncle of Mr. ManishMandhanaBrother of Mr. Purshottam Mandhana; and father of Mr. ManishMandhanaSon of Mr. Biharilal Mandhana; and nephew of Mr. PurshottamMandhanaInterest of DirectorsAll of our Directors may be deemed to be interested to the extent of fees payable to them for attending meetings of the Boardor a committee thereof as well as to the extent of remuneration payable to them for their services as executive directors of ourCompany and reimbursement of expenses payable to them under our Articles of Association. All our Directors may also bedeemed to be interested to the extent of Equity Shares, if any, already held by them or their relatives in our Company, or thatmay be subscribed for and allotted to them, out of the present Issue in terms of this Draft Red Herring Prospectus and also tothe extent of any dividend payable to them and other distributions in respect of the said Equity Shares.Further, Mr. Sanjay Asher, one of the Independent Directors of our Company is deemed to be interested to the extent of thefees payable to M/s. Crawford Bayley & Co. as legal advisors to our Company and to this Issue.Further, save and except as stated otherwise on page no. [●] under the heading titled ‘Properties’ in the chapter titled‘Business Overview’ beginning on page no. [●] of this Draft Red Herring Prospectus, page no. [●] under the headings titled‘Shareholding of our Directors’ and ‘Interest of Directors’ in the chapter titled ‘Our Management’ beginning on page no. [●]of this Draft Red Herring Prospectus, in the chapter titled ‘Related Party Transactions’ beginning on page no. [●] of thisDraft Red Herring Prospectus and page no. [●] under the Annexure XVI titled ‘Related Party Disclosure’ in the chapter titled‘Financial Information’ beginning on page no. [●] of this Draft Red Herring Prospectus , our Directors do not have any otherinterests in our Company as on the date of filing of this Draft Red Herring Prospectus with SEBI.Our Directors are not interested in the appointment of or acting as Underwriters, Registrar and Bankers to the Issue or anysuch intermediaries registered with SEBI.Changes in our Board of Directors during the last three yearsThe following are the changes in our Board of Directors during the last three years:Name and Designation Date ofDate of ResignationReasonsof the Director AppointmentMr. Gyanendra Bajpai May 16, 2007 - AppointmentMr. Sanjay Asher May 16, 2007 - AppointmentMr. Ashok Kacker May 16, 2007 - AppointmentMr. Robin Cornelius July 25, 2007 - AppointmentMr. Ashok Kacker - December 04, 2007 ResignationMr. Thanawalla December 04, 2007 - AppointmentCorporate GovernanceThe provisions of the Listing Agreement / SEBI guidelines with respect to corporate governance will be applicable to ourCompany immediately upon the listing of our Company’s Equity Shares on the Stock Exchanges. We are in compliance withthese provisions relating to setting up necessary committees. We have constituted the following committees of our Board ofDirectors in pursuance hereof.119
Audit CommitteeTMThe Audit Committee was constituted vide Board Resolution dated December 04, 2007. The terms of reference of the AuditCommittee cover the matters specified under Section 292A of the Companies Act and clause 49 of the Listing Agreement.The Audit Committee consists of the following Directors:Name of the Director Designation in the Committee Nature of DirectorshipMr. Khurshed Thanawalla Chairman Independent DirectorMr. Gyanendra Bajpai Member Independent DirectorMr. Sanjay Asher Member Independent DirectorMr. Purshottam Mandhana Member Executive DirectorPowers of the Audit Committee1. To investigate any activity within its terms of reference;2. To seek information from any employee;3. To obtain outside legal or other professional advice; and4. To secure attendance of outsiders with reasonable expertise, if considered necessary.Role of the Audit Committee1) Overseeing our Company’s financial reporting process and the disclosure of its financial information to ensure that thefinancial statement is correct, sufficient and credible.2) Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of thestatutory auditor and the fixation of audit fees.3) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.4) Appointment, removal and terms of remuneration of internal auditors5) Reviewing, with the management, the annual financial statements before submission to the Board for approval, withparticular reference to:• Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in termsof clause (2AA) of Section 217 of the Companies Act 1956;• Changes, if any, in accounting policies and practices and reasons for the same;• Major accounting entries involving estimates based on the exercise of judgment by management;• Significant adjustments made in the financial statements arising out of audit findings;• Compliance with listing and other legal requirements relating to the financial statements;• Disclosure of any related party transactions;• Qualifications in the draft audit report.6) Reviewing, with the Management, the quarterly financial statements before submission to the Board for approval.7) Monitoring the use of the proceeds of the proposed initial public offering of our Company.8) Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal controlsystems.9) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department,staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internalaudit.10) Discussions with internal auditors on any significant findings and follow up thereon.11) Reviewing internal audit reports and adequacy of the internal control systems.12) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department,staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.13) Reviewing management letters / letters of internal control weaknesses issued by the statutory auditors14) Discussion with internal auditors any significant findings and follow up there on.15) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraudor irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.16) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-auditdiscussion to ascertain any area of concern.17) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in caseof nonpayment of declared dividends) and creditors.18) To review the functioning of the whistle blower mechanism, when the same is adopted by our Company and is existing.19) Carrying out any other function as may be statutorily required to be carried out by the Audit Committee.120
TMIPO CommitteeThe IPO Committee was constituted vide Board Resolution dated August 06, 2007 to oversee and inform the AuditCommittee when money is raised through prospectus or rights or preferential issues and shall inform of funds received,utilized, pending for project implementation etc. for the information of the Stock Exchanges and Investors and shall keep theinformation up dated through our Company’s website. The composition of the IPO Committee is as follows:Name of the Director Designation in the Committee Nature of DirectorshipMr. Biharilal C. Mandhana Chairman Executive DirectorMr. Purushottam C. Mandhana Member Executive DirectorMr . Manish B. Mandhana Member Executive DirectorThe terms of reference of the IPO Committee of our Company includes:1) to decide on the actual size of the Issue, including any reservation shareholders of promoting companies or shareholdersof group companies and/or any other reservations or firm allotments as may be permitted, timing, pricing and all theterms and conditions of the Issue of the shares, including the price, and to accept any amendments, modifications,variations or alterations thereto;2) to appoint and enter into arrangements with the Book Running Lead Manager, Co-Managers to the Issue, Underwritersto the Issue, Syndicate Members to the Issue, Advisors to the Issue, Stabilizing Agent, Brokers to the Issue, EscrowCollection Bankers to the Issue, Registrars, Legal Advisors to the Issue, Legal Advisors to our Company, Legal Advisorsas to Indian and overseas jurisdictions, advertising and/or promotion or public relations agencies and any other agenciesor persons;3) to finalize and settle and to execute and deliver or arrange the delivery of the offering documents (the Draft Red HerringProspectus, the Red Herring Prospectus, Final Prospectus (including the draft international wrap and final internationalwrap, if required, for marketing of the Issue in jurisdictions outside India), syndicate agreement, underwriting agreement,escrow agreement, stabilization agreement and all other documents, deeds, agreements and instruments as may berequired or desirable in connection with the Issue of shares or the Issue by our Company;4) to open one or more separate current account(s) in such name and style as may be decided, with a scheduled bank toreceive applications along with application monies in respect of the Issue of the shares of our Company;5) to open one or more bank account of our Company such name and style as may be decided for the handling of refundsfor the Issue;6) to make any applications to the RBI, FIPB and such other authorities, as may be required, for the purpose of Issue ofshares by our Company to non-resident investors including but not limited to NRIs, FIIs, FVCI’s and other nonresidents;7) to make applications for listing of the equity shares of our Company in one or more stock exchange(s) and to executeand to deliver or arrange the delivery of the listing agreement(s) or equivalent documentation to the concerned stockexchange(s);8) to settle all questions, difficulties or doubts that may arise in regard to the Issue or allotment of shares as it may, in itsabsolute discretion deem fit; and9) to do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary or desirable for suchpurpose, or otherwise in relation to the Issue or any matter incidental or ancillary in relation to the Issue, includingwithout limitation, allocation and allotment of the shares as permissible in law, issue of share certificates in accordancewith the relevant rules.Remuneration / Compensation CommitteeOur Company has constituted a Remuneration / Compensation Committee pursuant to the requirement of Schedule XIII ofthe Companies Act, 1956 for approving remuneration to our Directors. The Remuneration / Compensation Committee wasconstituted vide Board Resolution dated May 16, 2007. The composition of the Remuneration / Compensation Committee isas follows:Name of the Director Designation in the Committee Nature of DirectorshipMr. Sanjay Asher Chairman Independent DirectorMr. Gyanendranath Bajpai Member Independent DirectorMr. Purshottam Mandhana Member Executive Director121
TMThe terms of reference of the Remuneration / Compensation Committee of our Company include:1) To recommend to the Board, the remuneration packages of our Company’s Managing/Joint Managing/ DeputyManaging/Whole time / Executive Directors, including all elements of remuneration package (i.e. salary, benefits,bonuses, perquisites, commission, incentives, stock options, pension, retirement benefits, details of fixed component andperformance linked incentives along with the performance criteria, service contracts, notice period, severance fees etc.);2) To be authorised at its duly constituted meeting to determine on behalf of the Board of Directors and on behalf of theshareholders with agreed terms of reference, our Company’s policy on specific remuneration packages for Company’sManaging/Joint Managing/ Deputy Managing/ Wholetime/ Executive Directors, including pension rights and anycompensation payment;3) To implement, supervise and administer any share or stock option scheme of our CompanyShareholders’ / Investors’ Grievance, Share Allotment and Share Transfer CommitteeThe Shareholders’ / Investors’ Grievance, Share Allotment and Share Transfer Committee was constituted vide BoardResolution dated December 04, 2007. The composition of the Share Transfer Committee is as follows:Name of the DirectorDesignation in the Nature of DirectorshipCommitteeMr. Gyanendranath Bajpai Chairman Independent DirectorMr. Khurshed Thanawalla Member Independent DirectorMr. Manish Mandhana Member Executive DirectorThe Shareholders’ / Investors’ Grievance, Share Allotment and Share Transfer Committee was constituted specifically tolook into the redressal of shareholders and investors’ complaints like:1) Efficient transfer of shares; including review of cases for refusal of transfer / transmission of shares and debentures;2) Redressal of shareholder and investor complaints like transfer of shares, non-receipt of balance sheet, non-receipt ofdeclared dividends etc.;3) Issue of duplicate / split / consolidated share certificates;4) Allotment and listing of shares;5) Review of cases for refusal of transfer / transmission of shares and debentures;6) Reference to statutory and regulatory authorities regarding investor grievances; and7) Ensure proper and timely attendance and redressal of investor queries and grievances.Policy on Disclosures and Internal Procedure for Prevention of Insider TradingWe will comply with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 1992 after listing of ourCompany’s shares on the Stock Exchanges. NSE and BSE, Company Secretary and Compliance Officer, is responsible forsetting forth policies, procedures, monitoring and adhering to the rules for the prevention of dissemination of price sensitiveinformation and the implementation of the code of conduct under the overall supervision of the Board.122
MANAGEMENT ORGANISATION STRUCTURETMPurushottam Mandhana(Chairman & ManagingDirector)BiharilalMandhana,DirectorManish Mandhana,Director-Export and JointManaging DirectorVipulSaxena –PresidentHRA. P.Bhatnagar,President –Weaving &ShirtingUday Kulkarni,Vice President -ProcessPushpendra.Tyagi (GM –Marketing,Fabric Division)Ravi Karthikeya,President –Garment, BangaloreRitesh Kothari, GMTreasury & FinanceMitesh Shah,GM – Finance& AccountingGopal Shah, GMProduction –Garment, MumbaiJagdish Pamwani,GM – Marketing,(Garment -Domestic)Nayan Kambli,AGM – Finance& Accounts andComplianceOfficerAshok DhinojaAGM -SystemVarshaRaghuvaram, HeadMerchandiserRahul Anand,Head ProductDevelopment123
OUR KEY MANAGERIAL PERSONNELTMOur key managerial personnel other than our Executive Directors are as follows:In addition to our whole-time Directors, the following are our key managerial employees. All of our key managerialemployees are permanent employees of our Company. The details under this section are as on date of filing of the Draft RedHerring Prospectus.Key Managerial Personnel of our Company1. Mr. Nayan Kambli – Compliance Officer and Assistant General Manger (Finance & Accounts)Mr. Nayan Kambli, age 29, holds a Bachelors degree in Commerce from Mumbai University. Further, he has alsocompleted his Masters in Financial Management from Mumbai University. He began his career in May, 1999 atVishwanath R. Nayak, & Co. and audit firm. Thereafter, he joined our Company on July 1, 2001 as an Executive in theAccounts Department and has been with us ever since. He has of over 7 years experience in account and finance.Currently he holds the post of an Assistant General Manager, he is responsible for various Financial Report andInsurance related matter of the Company. He also oversees the functioning of Legal department, Administrative issueand Secretarial job of the Company. His remuneration is Rs. 0.78 million per annum.2. Mr. Ajay Bhatnagar – President (Weaving and Shirting Division)Mr. Ajay Bhatnagar, age 50, is a graduate in Business Management from Bhopal University. Before joining ourCompany, he was employed by Telco Bombay as a management trainee. Thereafter he joined Garware Paints as regionalhead and Shalimar Paints as a Branch Manager focusing mainly industrial and marine coatings besides DecorativePaints. Further he joined ACC Cements as Marketing Head for central region and later on joined Bharat Zinc Ltd. as aGeneral Manager – (Project Head). He was also a part of a project ‘Swill’ on nonferrous Metal Copper at Baruch nearAnkleshwar Gujarat handled by Khaitan Group. Then he joined Bhaskar Industries Textile division and was handlingtotal marketing and production planning and procurement of yarn for the company. He has of over experience of 29years in marketing and production. He joined our Company on May 1, 2002 as a General Manager (Weaving). Currentlyhe is handling the textile Mandhana Weaving House & yarn dyeing project at Tarapur. He also manages a team of highlyqualified and experienced professional under the leader ship of Board of Directors. His remuneration is Rs. 2.5 millionper annum.3. Mr. Rahul Anand – Manager (Designs)Mr. Rahul Anand, age 28, is a graduate in Fashion Design from the National Institute of Fashion Technology (NIFT),Mumbai. He has over 7 years of experience in the field of designing and is responsible for our Company’s conceptualdevelopment of major divisions or multiple product lines. He joined our Company on November 1, 2002 as Executive –Product Development. Today he holds the post of Manager – Designing. He oversees the work of the design team anddevelops products on a season-wise basis. His understanding of the commercial aspects of designs, trends, styling andgraphics enables him to design the whole range of menswear and ladies wear. Additionally, he identifies and developsnew products and maintains detailed files of individual styles, thereby fulfilling the business requirements of ourcustomers. His remuneration is Rs. 0.96 million per annum.4. Ms. Varsha Raghuram Singh – Head Merchandiser (Merchandising)Ms. Varsha Singh, age 35, is a Commerce graduate with a diploma in Fashion and Designing from J.D. Institute ofFashion Technology. She has over 13 years experience in the apparel industry. She joined our Company on July 1, 2003as Executive - Merchandiser in the Merchandising department. Currently she holds the post of Head Merchandiser in theMerchandising Department. Her profile at our Company involves driving the whole merchandising portfolio while beingspecifically responsible for liaising with the whole team of merchandisers and monitoring timely completion of bulkorders thereby ensuring timely delivery of shipments to customers. She also works closely with the design team, creativeteam, quality team and inventory team on matters including product content of each catalog, quality, fit of styles andcustomer fulfillment. Additionally, she is also responsible for the financial planning, bottom line profit and lossplanning, product development and style evaluation. His remuneration is Rs. 0.96 million per annum.124
5. Mr. Mitesh Shah –General Manager (Finance & Accounts)TMMr. Mitesh Shah, Age 27, is a qualified Chartered Accountant from the Institute of Chartered Accountants of India andalso holds a degree of Information System Audit. He has about 5 years experience in accounts and finance. He joined ourCompany on November 1, 2002 i.e. immediately after attaining his Chartered Accountancy degree as Manager –Accounts & Taxation in the Taxation Department. Today, he holds the position of General Manager (Finance andAccounts). He is responsible for ensuring timely and accurate reporting of financial and management reports, budgeting,reviewing, formulating and implementing accounting systems and providing an analytical review of our Company’sfinancial performance. He also oversees the functioning of direct & indirect taxation and is responsible for relatedinternal & statutory reporting. His remuneration is Rs. 1.2 million per annum.6. Mr. Ritesh Kothari –General Manager (Treasury & Finance)Mr. Ritesh Kothari, age 33, is a qualified Chartered Accountant from the Institute of Chartered Accountants of Indiahaving over 11 years of experience in the field of accounting. He joined our Company on August 1, 2002 i.e.immediately after attaining his Chartered Accountancy degree in August 2002 as Manager Financing in Treasury &Finance. Currently he holds the post of General Manager – Treasury and Finance. He is in-charge of the treasuryoperations of the company including strategic planning relating to the forex exposure of the company. He also handlesthe responsibility of project implementation and execution. His other responsibilities include sourcing continuousfinance for our Company, as well as looking after the shipment department and forex management. His remuneration isRs. 1.26 million per annum.7. Mr. Gopal Shah –General Manager (Production Department)Mr. Gopal Shah, Age 35, has been with our Company for over 15 (fifteen) years. He joined our Company on November1, 1997 as an Executive in the Production Department, Mumbai. Currently, he holds the post of General Manager –Production and is responsible for the complete production at our Vikhroli factory, wherein he leads a team of assistantsand quality controllers and manages the over all operations i.e. planning and controlling of the production unit forgarments. He plans the production process, reviews the output, performs on-line inspections, and also monitors thedifferent levels of production going on with various job workers thereby ensuring timely delivery from the job workersand timely execution and delivery of the shipment. His remuneration is Rs. 1.2 million per annum.8. Mr. Jagdish Pamwani – General Manager - Marketing (Garment – Domestic)Mr. Jagdish Pamwani, age 42, holds a Bachelors degree in Commerce from Mumbai University and ProfessionalDevelopment Program from Cornell University (New York). He has over 17 (seventeen) years of experience in the fieldof sales and marketing in the apparel and textiles industry. He was previously handling Director Operations for MahajanIndustries. He joined our Company on August 17, 2006 as an Assitant Manager in our Sales and Marketing (Domestic)Department. Currently, he is managing local retail operations, prepares & evaluates quarterly sales & profit projectionsand also manages the marketing and merchandising team. His remuneration is Rs. 1.14 million per annum.9. Mr. Ashok Dhinoja – Assistant General Manager (Information Technology System)Mr. Ashok Dhinoja, age 38, is a Commerce graduate from Mumbai University and has a Diploma in Software from ShriRatan Tata Computer Center; he has also received a SAP FICO certification from Grevel Softech Limited. He has over15 years of experience in the field of IT and was previously employed at Fixwell Bearing Corporation. He joined ourCompany on October 1, 1994 as an Executive- System Analyst in our Information Technology. Currently he holds thepost of Assistant General Manager and is responsible for handling the complete gamut of IT services. He is responsiblefor creating appropriate structures and best IT practices not only in the IT department but for the organization as a whole;keeping himself abreast of latest development in IT and implementing them appropriately to gain maximum businessbenefits. Currently, he has implemented the Enterprise Resource Planning technology for automating various workrelated aspects. His remuneration is Rs. 0.90 million per annum.10. Mr. Karthikeya Reddy – President (Garment – Bangalore Division)Mr. Karthikeya Reddy, age 36, is a Textile Engineer, from Bapuji Institute of Engineering and Technology, Bhavangiri.He has over 15 years of experience in the apparel industry, He was previously associated with Vetir France, a France125
ased company as their Sourcing Head. He joined our Company on January 17, 2005 as President, ProductionDepartment and is responsible for the operations of the garment section at the Bangalore division overlooking theplanning, organizing, and execution of various strategies as well as designing and implementation of various related HRPolicies. Under his leadership his team strives to maintain the highest standards and follow the guidelines of ISOcertification. His remuneration is Rs. 1.35 million per annum.TM11. Mr. Uday Kulkarni – Vice President (Processing)Mr. Uday Kulkarni, age 52, is a Science graduate majoring in Chemistry from Mumbai University. He joined ourCompany on April 1, 1997 as Manager (Process) in our Fabric Processing Department. He has been with our Companyfor over 27 years, before joining us he was associated with New Vinod Textile Processing, a Mumbai FinishingSupervisor. Currently he holds the post of General Manager – Fabric Process and is responsible for His role managingprocessing of yarn to fabric, both natural and man made fibers and working of the several imported and indigenousmachines to establish a state of the art processing and finishing unit. His remuneration is Rs. 1.44 million per annum.12. Mr. Pushpendra Tyagi – General Manager (Marketing Fabric Department)Mr. Pushpendra Tyagi, age 32, holds a Bachelors Degree in Science from C.C.S. University, Meerut and Masters inBusiness Administration – Marketing from University of Lucknow. He has over 10 years experience in the field ofMarketing. Prior to joining our Company, he has worked with Ginni International Limited, Delhi as Deputy ManagerMarketing from the year 2000 to 2003. He joined our Company on November 1, 2003 as a Senior Manager in ourMarketing department. Currently, he holds the post of General Manager Marketing department and is responsible formarketing and business development of processed, yarn dyed and greige woven fabric in India, managing agent exporternetwork comprising of garment exporters, buying houses, domestic traders as well as domestic brands across the India.His remuneration is Rs. 1.2 million per annum.13. Mr. Vipul Saxena -President HRMr. Vipul Saxsena, age 43, holds a masters degree in Human Resources and Development from Defence Institute ofPsychological Research (D.I.P.R.) New Delhi, a Aeronautical Engineer from A.M. Ae.S.I., and Bachalors Degree inCommerce and LLB from Rajasthan University. He also hold a diploma in Multi Modal Transport and LogisticsMangement from Institute of Rail Transport, New Delhi. From February 1986 to September 2001 he has worked as aSenior Mangerial Position in HRD/Recrutiment and Staffing in Army Nacy and Cost Guard, from September 2001 toMarch 2003 he worked as Head HRD with Parle’s for Bisleri and Fruit Based Drinks, from June 2003 to May 2004 heworked as Head HR and Marketing with Uniply Group of Industries, from May 2004 to January 2005 he worked withHead HR with CMS Securites Limited an from January 2005 till November 2007 he worked with Khatau Group. He hasabout 23 years experience in HR. He joined our Company in November 2006 and is currently working as President HR.His remuneration is Rs. 2.3 million per annum.All key managerial personnel are permanent employees of our Company. Further, the key managerial personnel asdisclosed above are not key managerial personnel as defined under Accounting Standard 18.Shareholding of our Key Managerial PersonnelOur key managerial personnel do not hold any Equity Shares in our Company.Bonus or Profit Sharing PlanThere is no bonus or profit sharing plan for our key managerial personnel save and except the bonus paid including under thePayment of Bonus Act to our key managerial personnel.Changes in our Key Managerial Personnel during the past three yearsName and Designation Date of Appointment Date of Resignation ReasonMr. Manoj Shrivastav June 2002 March 2006 ResignationAssistant GeneralManager126
Name and Designation Date of Appointment Date of Resignation Reason(Weaving Division)Ms. Hema Bhatia January 2003 December 2005 ResignationTMHead (Merchandiser)(Merchandising Division)Mr. Salvador FernandesAssistant GeneralManager(Production Department)Mr. Karthikeya ReddyPresident (Garment –Bangalore Division)Mr. Jagdish PamwaniManager(Marketing - Domestic)Mr. Vipul SaxenaPresident HRJanuary 2004 August 2006 ResignationJanuary 2005 - AppointmentAugust 2006 - AppointmentOctober,2007 - AppointmentInterest of Key Managerial PersonnelAll our key managerial personnel may be deemed to be interested to the extent of the remuneration and other benefits inaccordance with their terms of employment for services rendered as officers or employees to our Company. Further, if anyEquity Shares are allotted to our key managerial personnel in terms of this Issue, they will be deemed to be interested to theextent of their shareholding and / or dividends paid or payable on the same. Furthermore, no amount or benefit has been paidor given during the preceding year to any of our key managerial personnel.EmployeesWe believe that a motivated and empowered employee base is integral to our competitive advantage. Our Company has 3248employees as on the date of filing of this Draft Red Herring Prospectus. The details of which are enumerated below:DescriptionNumber of employeesRegistered Office 115Yarn Dyeing 41Weaving House Unit I 399Weaving House Unit II 190Fabric Process 176Garments 2317Sales Office 10Total 3248Employees Stock Option SchemeOur Company does not have any Employee Stock Option Scheme or other similar scheme giving options in our EquityShares to our employees.Payment of Benefits to Officers of our CompanyExcept for the payment of salaries and perquisites/sitting fees, lease rent and reimbursement of expenses incurred in theordinary course of business, and the transactions as enumerated in the section titled ‘Financial Statements’ and the chaptertitled ‘Business Overview’ beginning on page nos. [●] and [●] of this Draft Red Herring Prospectus, we have not paid /givenany benefit to the officers of our Company, within the two preceding years nor do we intend to make such payment/give suchbenefit to any officer as on the date of filing this Draft Red Herring Prospectus with SEBI.127
TMOUR PROMOTERS AND THEIR BACKGROUNDOur Company has been promoted by the following five individual Promoters:1. Mr. Purshottam Mandhana,2. Mr. Biharilal Mandhana,3. Mr. Manish Mandhana,4. Purshottam Mandhana (HUF),5. Mr. Priyavrat MandhanaDetails of our Promoters are given in the following table:Mr. Purshottam Mandhana, 51 years is the Promoter and Executive Chairman-cum-Managing Director of our Company.Mr. Purshottam Mandhana was one of the subscribers to the Memorandum ofAssociation of our Company. For details pertaining to his profile, please refer to thechapter titled ‘Our Management’” beginning on page no. [●] of this Draft Red HerringProspectus.Driving License No.: 5/2968.Voter ID No.: MT/04/024/258872.Mr. Biharilal Mandhana, 61 years, is the Promoter and Executive Director of ourCompany.Mr. Biharilal Mandhana was one of the subscribers to the Memorandum of Associationof our Company. For details pertaining to his profile, please refer to the chapter titled‘Our Management’” beginning on page no. [●] of this Draft Red Herring Prospectus.Driving License No.: 87-C-41378.Voter ID No.: MT/04/024/258732.Mr. Manish Mandhana, 39 years, is the Promoter and Executive Joint ManagingDirector of our Company.Mr. Manish Mandhana is one of the Promoters of our Company. For details pertainingto his profile, please refer to the chapter titled ‘Our Management’” beginning on pageno. [●] of this Draft Red Herring Prospectus.Driving License No.: 851C/31073.Voter ID No.: Not Available128
Mr. Priyavrat Mandhana, 18 years, is the Promoter of our Company.TMMr. Priyavrat Mandhana is one of the Promoters of our Company.Mr. Priyavrat Mandhana is a student of, H.R. College of Commerce and Economics,Mumbai University.Purshottam Mandhana [HUF]Our Promoter, Mr. Purshottam Mandhana is the Karta of Purshottam Mandhana(HUF), the other members of this HUF are Mrs. Prema Mandhana and Mr. PriyavratMandhana.We confirm that the Permanent Account Number, bank account number and passport number of our Promoters will besubmitted to BSE and NSE at the time of filing this Draft Red Herring Prospectus with the Stock Exchanges.Relationship of Promoters with each other and with our DirectorsSr. No. Name Status Relationship1. Mr. Purshottam Mandhana Promoter / Chairmancum-Managing• Brother of Mr. Biharilal Mandhana;• Uncle of Mr. Manish Mandhana; andDirector • Father of Mr. Priyavrat Mandhana.2. Mr. Biharilal Mandhana Promoter / ExecutiveDirector3. Mr. Manish Mandhana Promoter / ExecutiveDirector• Brother of Mr. Purshottam Mandhana;• Father of Mr. Manish Mandhana; and• Uncle of Mr. Priyavrat Mandhana• Son of Mr. Biharilal Mandhana;• Nephew of Mr. Purshottam Mandhana;and• Cousin of Mr. Priyavrat Mandhana4. Mr. Priyavrat Mandhana Promoter • Son of Mr. Purshottam Mandhana;• Nephew of Mr. Biharilal Mandhana;and• Cousin of Mr. Manish Mandhana.Common PursuitsMahan Synthetic Textiles Private Limited, one of our Promoter Group Entities, incorporated on February 28, 1991 isauthorised to carry on the business of processing, selling, importing, exporting, distributing and dealing in synthetic andsynthetic blends, both with natural and artificial fibres. As on date, Mahan Synthetic is currently engaged inter alia in thebusiness of trading and commission income arising from textiles.Golden Seam Textile Private Limited, one of our Promoter Group Entities, incorporated on March 26, 2004 is authorised tocarry on the business of textiles. As on date, Golden Seam is engaged inter alia in the business of manufacturing, export, saleand trading of textiles (bottom wear).M/s. Balaji Corporation, one of our Promoter Group entities, is a partnership firm formed under a partnership deed dated May05, 2003. M/s. Balaji Corporation is currently engaged inter alia in the business of trading and commission income arisingthere from in textiles.129
Interest of PromotersTMOur Promoters do not have any interest:(i) in the promotion of our Company, save and except the rent received from our Company for using the followingproperties:a. Unit No. 205, 211 and the passage between the units at Peninsula Centre, Off Ambedkar Road, Mumbai – 400 012leased by Mr. Manish Mandhana vide leave and licence agreement dated April 20, 2007;b. Unit No. 208 at Peninsula Centre, Off Ambedkar Road, Mumbai – 400 012 leased by Mr. Priyavrat Mandhana vide leaveand licence agreement dated April 20, 2007;c. Unit No. 209, 210 at Peninsula Centre, Off Ambedkar Road, Mumbai – 400 012 leased by Mr. Biharilal Mandhana videleave and licence agreement dated April 20, 2007;d. Unit No. 213, 214 at Peninsula Centre, Off Ambedkar Road, Mumbai – 400 012 leased by Mr. Purshottam Mandhanavide leave and licence agreement dated April 20, 2007; and(ii) in any property acquired by our Company for a period of two years before filing this Draft Red Herring Prospectus withSEBI or proposed to be acquired our Company as on the date of filing this Draft Red Herring Prospectus with SEBI.Further, save and except as stated otherwise in the chapters titled ‘Business Overview’ and ‘Our Management’ and thesection titled ‘Financial Statements’ beginning on page nos. [●], [●] and [●], respectively, of this Draft Red HerringProspectus, and to the extent of Equity Shares held by them, our Promoters do not have any other interests in our Company ason the date of filing of this Draft Red Herring Prospectus with SEBI.Payment or Benefit to our PromotersNo payment has been made or benefit given to our Promoters in the two years preceding the date of this Draft Red HerringProspectus except as mentioned/referred to in this chapter and in the chapter titled ‘Our Management’ and in the sectiontitled ‘Financial Statements’ beginning on pages [●] and [●] respectively, of this Draft Red Herring Prospectus.Related Party TransactionsFor details on our related party transactions please refer the table titled ‘Properties’ on page no [●] in chapter titled ‘BusinessOverview’ beginning on page no [●], paragraph under the heading ‘Interest of Directors’ on page no. [●] in the chapter titled‘Our Management’ beginning on page no [●] and in the Annexure XVI on page no. [●] under the section titled ‘FinancialStatements’ beginning on page no. [●], respectively, of this Draft Red Herring Prospectus.130
RELATED PARTY TRANSACTIONSTMFor details on our related party transactions please refer the table titled ‘Properties’ on page no [●] in chapter titled ‘BusinessOverview’ beginning on page no [●], paragraph under the heading ‘Interest of Directors’ on page no. [●] in the chapter titled‘Our Management’ beginning on page no [●] and in the Annexure XVI on page no. [●] under the section titled ‘FinancialStatements’ beginning on page no. [●], respectively, of this Draft Red Herring Prospectus, there have been no sales orpurchases between our Company, our Promoters and our Promoter Group Entities exceeding the aggregate value of 10% ofthe total sales or purchases of our Company.131
DIVIDEND POLICYTMThe declaration and payment of dividends will be recommended by our Board of Directors and approved by ourshareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits, capitalrequirements, and overall financial requirements. The amounts paid as dividends in the past are not necessarily indicative ofour dividend policy or dividend amounts, if any, in the future.Our Company has declared equity dividend in the last five years as detailed below:Equity Shares(Face Value ofRs.10/- each)Year endedMarch 31, 2007@20.00% on theequity sharecapitalYear endedMarch 31, 2006@ 17.50% on theequity sharecapitalYear ended March31, 2005@ 15.00% on theequity share capitalYear endedMarch 31, 2004@ 12.00% on theequity sharecapitalYear ended March31, 2003@ 10.00% on theequity share capital132
SECTION V – FINANCIAL STATEMENTSTMFINANCIAL INFORMATIONTo,The Board of Directors,Mandhana Industries Limited205-214, Peninsula Centre,Dr. S.S.Rao Road,Off. Dr. B S Ambedkar Road,Parel (West), Mumbai -12.Dear Sirs,Re: Public Issue of Equity Shares of Mandhana Industries LimitedWe have examined and found correct the annexed financial information of Mandhana Industries Limited for the five financial yearsended March 31, 2003,2004,2005,2006,2007 being the last date to which the accounts of the Company have been made up and auditedby us.At the date of signing this report, we are not aware of any material adjustment, which would affect the result shown by these accountsdrawn up in accordance with the requirements of Part II of Schedule II to the Companies Act, 1956.In accordance with the requirements of:• Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956;• Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (‘the SEBI Guidelines’) and• The terms of reference given vide the Company’s letter dated September 03, 2007 requesting us to carry out work in connectionwith the Issue as aforesaid, we report that:-1. The restated profits of the Company for the quarter ended on June 30,2007and for the financial years ended March 31, 2003,2004, 2005, 2006, 2007 are as set out in Annexure I to this report. These profits have been arrived at after charging allexpenses including depreciation and after making such adjustments / restatements and regrouping as in our opinion areappropriate and are subject to the Significant Accounting Policies and notes to accounts as appearing in Annexure IV to thisreport.2. The restated assets and liabilities of the Company as at June 30, 2007 and March 31, 2003, 2004, 2005, 2006 and 2007 are asset out in Annexure II to this report after making such adjustments/restatements and regrouping as in our opinion areappropriate and are subject to the Significant Accounting Policies and notes to account as appearing in Annexure IV to thisreport.3. We have examined the cash flow statement relating to the Company for the quarter ended June 30 ,2007 and years endedMarch 31, 2003, 2004, 2005, 2006, 2007 appearing in Annexure III to this report.We have examined the following financial information relating to the Company proposed to be included in the Draft Red HerringProspectus, as approved by you and annexed to this report:1. Statement of Sundry Debtors enclosed as Annexure V to this report;2. Details of loans and advances as appearing in Annexure VI to this report;3. Statement of Secured Loans as appearing in Annexure VII to this report.4. Statement of Unsecured Loans as appearing in Annexure VIII to this report;5. Statement of Income from Operations as appearing in Annexure IX to this report;6. Statement of Other Income as appearing in Annexure X to this report;7. Details of Contingent Liabilities as appearing in Annexure XI to this report;8. Accounting Ratios as appearing in Annexure XII to this Report;9. Capitalisation Statement as at June 30, 2007 and March 31 ,2007 as appearing in Annexure XIII to this report;10. Statement of Dividend paid as appearing in Annexure XIV to this report;133
11. Statement of Tax Shelters as appearing in Annexure XV to this report;12. Statement of related parties as appearing in Annexure XVI to this report;13. Statement of aggregate value and market value of quoted investments as appearing in Annexure XVII to this report;14. Statement of segment reporting as appearing in Annexure XVIII to this report.15. Statement of qualifications appearing in the audit Report as given in Annexure XIX to this report.TMIn our opinion, the above financial information of the Company read with Significant Accounting Policies and Notes to Accountsenclosed in Annexure IV to this report, after making adjustments / restatements and regroupings as considered appropriate has beenprepared in accordance with paragraph B(1) Part II of Schedule II of the Act and the SEBI Guidelines.This report is intended solely for your information and for inclusion in the Offer Document in connection with the specific PublicOffer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.For Vishal H. Shah & AssociatesChartered AccountantsVishal H. ShahProprietorMembership No. 101231Place: MumbaiDate: November 30, 2007134
TMAnnexure IStatement of Restated Profits & (Losses)(Rs. In Mn.)Quarter Year Year Year Year YearParticulars Ended ended ended ended ended ended30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03IncomeOperational Income 1054.28 2,412.17 1,820.05 1,272.51 870.73 676.96Other Income 2.48 4.38 11.45 5.48 1.95 2.48Increase/ (Decrease) in Inventories 72.71 202.63 33.45 0.07 (19.98) 32.27Total (A) 1129.47 2,619.18 1,864.95 1,278.06 852.70 711.71ExpenditureRaw Materials consumed 802.11 1,536.96 1,166.73 742.70 490.32 472.74Manufacturing Expenses 56.39 277.85 242.75 212.91 151.30 75.31Employees' Remuneration & Benefits 44.50 147.60 98.98 58.41 19.94 16.39Administrative and Other Expenses 53.76 166.63 133.61 103.30 74.03 61.09Selling & Distribution Expenses 1.84 35.01 21.87 17.10 16.31 8.52(Profit) / Loss on sale of Assets 0.17 2.89 (46.69) (0.04) 8.51 3.60Total (B) 958.77 2,166.94 1,617.25 1134.38 760.41 637.65EBIDTA 170.70 452.24 247.7 143.68 92.29 74.06Interest and Financial Charges 29.12 79.44 28.43 23.06 26.57 27.42Profit before depreciation, Tax &141.58 372.80 219.27 120.62 65.72 46.64Extraordinary Items (A-B)Depreciation 20.24 74.29 31.64 26.64 19.73 16.56Profit before Tax 121.34 298.51 187.63 93.98 45.99 30.08Provision for Taxation - - - - -Current Tax 36.68 31.72 16.09 11.08 2.09 2.28Deferred Tax 4.56 70.48 48.88 18.83 6.86 8.50Fringe Benefit Tax 0.64 2.00 1.40 - - -Profit after Tax 79.46 194.31 121.26 64.07 37.04 19.30Previous Years Adjustments - - - 0.04 (0.04) 0.04Profit available for Appropriations 79.46 194.31 121.26 64.11 37.00 19.34Annexure IIStatement of Restated Assets & LiabilitiesParticularsAs at30.06.07As at31.03.07As at31.03.06As at31.03.05As at31.03.04(Rs. In Mn.)As at31.03.03Fixed AssetsGross Block 1858.27 1,632.78 1,452.73 548.48 332.89 333.83Less: Depreciation 232.95 212.98 144.24 114.60 89.11 79.54Net Block 1625.32 1,419.80 1,308.49 433.88 243.78 254.29Capital Work in Progress 185.35 184.81 166.76 92.86 7.02 -Total (A) 1810.67 1,604.61 1,475.25 526.74 250.80 254.29Investment (B) 0.01 0.01 0.01 0.01 0.03 0.05Current Assets, Loans and Advances135
Inventories 610.15 494.87 252.35 144.77 121.91 155.80Sundry Debtors 275.41 293.61 196.97 189.73 197.85 141.98Cash and Bank Balances 50.00 23.40 17.39 12.99 14.80 9.83Loans and Advances 250.08 164.16 159.40 102.92 68.53 29.20Total (C ) 1185.64 976.04 626.11 450.41 403.09 336.81TMTotal Assets (A+B+C) = D 2996.32 2,580.66 2,101.37 977.16 653.92 591.15Liabilities and ProvisionsSecured Loans 1599.55 1,564.74 1,364.85 458.67 316.81 300.27Unsecured Loans 70.44 47.88 50.71 11.30 50.78 1.55Deferred Tax Liability 188.29 183.73 113.25 64.37 45.54 38.68Sundry Creditors 260.18 172.62 98.70 51.83 50.23 63.84Other Current Liabilities 135.86 59.68 101.16 115.20 12.17 41.43Provisions 38.02 9.69 0.75 4.15 7.79 4.00Total Liabilities (E) 2292.34 2,038.34 1,729.42 705.52 483.32 449.77Net Worth (D-E) 703.98 542.32 371.95 271.64 170.60 141.38Represented ByEquity Share Capital (I) 105.00 105.00 105.00 105.00 57.40 32.50Share Application Money (II) 5.75 - - - 0.01 24.90Reserves and Surplus 516.78 437.32 266.95 166.64 113.19 83.98Share Premium 76.45 - - - - -Net Reserves and Surplus (III) 593.23 437.32 266.95 166.64 113.19 83.98Misc. Expenditure (IV) - - - - - -Net worth (I+II+III-IV) 703.98 542.32 371.95 271.64 170.60 141.38Annexure –IIIStatement of Cash Flow(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Cash Flow from Operating Activities (A)Profit Before Tax (After adjusting prior period item) 121.34 298.51 187.63 94.02 45.99 30.12Adjustments for: - - - - -Depreciation & Amortisation 20.24 74.29 31.64 26.64 19.73 16.56Miscellaneous Expenditure w/off 0.53 0.40 0.33 0.13 0.12 0.16Loss/ (Profit) on Sale of Fixed Assets 0.17 2.89 (46.69) (0.04) 8.51 3.60Finance cost 29.12 79.44 28.43 23.06 26.57 27.42Operating Profit before Working Capital Changes 171.40 455.53 201.34 143.81 100.92 77.86Adjustments for:(Increase) / Decrease in Inventories (115.28) (242.52) (107.58) (22.86) 33.89 (46.57)(Increase)/ Decrease in Sundry Debtors 18.20 (96.66) (7.24) 8.13 (55.87) (20.92)(Increase)/ Decrease in Loans & Advances (85.92) (4.76) (56.48) (34.40) (39.33) (3.27)Increase/(Decrease) in Sundry Creditors 87.57 47.83 46.87 1.62 (13.62) 13.34136
TMIncrease/(Decrease) in Other Liabilities 118.37 (2.04) (46.81) 77.64 (0.18) (2.10)Cash Generated from Operations 194.34 157.38 30.10 173.94 25.81 18.34Tax Paid (8.98) (24.78) (20.89) (6.93) (2.46) (1.96)Net Cash Flow from Operating Activities 185.36 132.60 9.21 167.01 23.35 16.38Cash Flow from Investing Activities (B)Purchase of fixed Assets (229.56) (226.27) (1,011.16) (304.56) (42.54) (65.23)Investment / Withdrawal in / from Fixed Deposit 15.24 (19.61) - - 5.00 11.94Proceeds of disposal of Fixed Assets 2.57 19.35 77.37 1.89 17.68 2.84Proceeds from Investments - - 0.03 0.02 -Net Cash Flow from Investing Activities (211.75) (226.51) (933.79) (302.64) (19.84) (50.45)Cash Flow from Financing Activities (C) - - - - -Proceeds from Issue of Share Capital 82.20 - - 47.59 0.01 24.03Repayment of Long Term Borrowings - - - - (19.93) (32.36)Increase in Working Capital (53.33) 64.43 166.32 (31.51) 7.39 23.11Proceeds from Unsecured Loans 22.56 (2.83) 39.42 (39.47) 49.24 (3.37)Proceeds from Long Term Borrowings 45.92 122.12 772.62 198.73 - 57.30Dividend Paid (Inclusive of Dividend Tax) - (23.95) (20.95) (18.45) (3.67) (3.25)Interest Paid (29.12) (79.45) (28.43) (23.07) (26.58) (27.41)Net Cash Flow from Financing Activities ( C ) 68.23 80.32 928.98 133.82 6.46 38.05Net (Decrease) / Increase in cash and cashequivalents (A+B+C) 41.84 (13.59) 4.40 (1.81) 9.97 3.98Cash & Cash Equivalents at the beginning of theYear. (D) 3.80 17.39 12.99 14.80 4.83 0.85ash & Cash Equivalents at the End of the Year. (E) 45.64 3.80 17.39 12.99 14.80 4.83Net (Decrease) / Increase in cash and cash41.84 (13.59) 4.40 (1.81) 9.97 3.98equivalents (E-D)Note: Cash & Cash Equivalents do not include Fixed Deposits pledged with the Banks.Annexure -IVNOTES TO ACCOUNTS1. SIGNIFICANT ACCOUNTING POLICIES• BASIS OF ACCOUNTING:The financial statements are prepared as a going concern under historical cost convention on an accrual basis except, thosewith significant uncertainty and in accordance with the Companies Act, 1956. Accounting policies not stated explicitlyotherwise are consistent with generally accepted accounting principles and prudent commercial practices.• FIXED ASSETS:1. The Gross Block of Fixed asset is recorded at cost, which includes duties and other identifiable direct expenses upto the date of commissioning of the assets and is recorded net of Value Added Tax (VAT)) to the extentrefundable.137
2. For process division, the block is recorded net of CENVAT credit. For weaving, export, garment and shirtingdivisions, the block of fixed assets include excise duty also as for these divisions, the company has opted out ofexcise regime.3. For process and shirting division, the block is recorded net of 5 % capital subsidy granted by the centralgovernment on processing machinery.4. Incidental expenditure including interest on loans during construction period is included in capital work inprogress and the same is allocated to respective fixed assets on the completion of its construction.5. On the sale of fixed assets profit/loss if any, is credited/debited respectively to profit and loss account.TM• INTANGIBLE ASSETS:Intangible Assets include Software costs that will be amortised over a period of 5 years.• DEPRECIATION:Depreciation on fixed Assets is charged as follows :1. Premium on leasehold land is amortised in equal installments over the period of the lease.2. Capital expenditure on rented premises is amortised at the depreciation rate applicable to factory building underthe Companies Act, 1956.3. Dyeing, Weaving, Shirting, Garment & Export Divisions – on Straight Line Method.4. Fabric Division – on Written Down value Method.(At the rate specified in Schedule XIV of the Companies Act, 1956)5. On additions to the fixed assets made during the year, depreciation is provided on pro-rata basis, with reference tothe date of addition.6. On deletion or sale of assets, no depreciation is provided.• BORROWING COST:Interest and other cost in connection with the borrowing of funds to the extent related / attributed to the acquisition /construction of qualifying fixed assets are capitalised upto the date when such assets are ready for its intended use and allother borrowings cost are charged to revenue.• INVESTMENTS:Long term investments are valued at cost. Any decline other than temporary, in the value of long term investments isadjusted in the carrying value of such investments.• INVENTORIES:1. Finished goods are valued at cost or market value which ever is lower on FIFO basis.The cost of finished fabricsis arrived after deducting gross margin from the selling price of the goods2. Work in progress of manufacturing goods and contract job is valued at cost .Cost comprises all cost of purchase,cost of conversion and any cost incurred in bringing the inventories to its present location and condition.3. Raw materials for weaving, shirting and fabric division is valued at cost following specific identification method.4. The stock of auxiliary material for process division is valued at landed cost on FIFO basis.5. The stock of Raw materials and auxiliary material for export division is valued at cost on standard average pricemethod.6. The damaged, unserviceable and inert raw materials are valued at net realisable value.7. Stores and Spares and sample fabric purchases, are charged to profit and loss account in the year of purchase.8. Stock of unsold flats is valued at cost.• SALES AND PURCHASES:1. Sales include sale of raw materials, semi-finished goods and finished goods. Sales also include Processingcharges, Garment Stitching charges, Sample charges and Duty Drawback received and income earned fromforeign exchange fluctuation on export receivables.2. Value Added Tax (VAT) collected is shown as liability and netted off against VAT refund.3. Sales and purchases are accounted net of cash discount, returns, rebate, etc.4. VAT Set off being reimbursement of cost is reduced from Purchases to the extent available for set off.5. Purchases also include custom duty paid on raw material imports.6. Export sales are accounted on CIF value or FOB value basis depending on the terms of sale.7. Export sales of samples are accounted on realisation basis.138
8. Export Incentives like DEPB license or Duty Drawback available on exports are recognised on accrual basis inthe year of exports.TM• EXPENSES:All material known liabilities are provided for on the basis of available information/ estimates.• FOREIGN CURRENCY TRANSACTION:1. Foreign currency income on export sales is recorded at respective date of transaction at prevailing exchange rate.Resultant profit/ (loss) if any is credited / debited to profit and loss account.2. Purchases & expenditure in foreign currencies is accounted at the exchange rate prevailing at the time of payment/ forward contract.3. Monetary items denominated in foreign currency are restated at the exchange rate prevailing at the year-end or atthe actual rate for transactions effected after the balance sheet date up to the date of audit report except for Parisoffice accounts and the overall net gain / loss is adjusted to the profit & loss account.4. Premium receivable / payable on forward contracts is shown as Current Assets / Liabilities. Premium income /expense is amortised over the period of contract and the unamortised premium is shown under Current Liabilities/ Assets.5. Paris office transactions are accounted at the exchange rate prevailing at the time of payment.• ACCOUNTING FOR EXCISE DUTY:1. Excise duty on process job work is charged on advalorem basis.2. The CENVAT benefit attributable to acquisition of fixed assets is netted off against the cost of fixed Assets inaccordance with the guidance note issued by the Institute of Chartered Accountants of India.3. For process division, the CENVAT credit availed on dyes & chemicals is utilised to the extent of ratios ofexcisable clearances to total clearances.• EMPLOYEE BENEFITS:1. Contribution to provident fund is accounted on accrual basis with corresponding contribution to recognised fund.2. Leave encashment liability is defined benefit obligation and is provided for (charged to Profit and Loss Account)on the basis of actuarial valuation made at the end of each financial year.3. The liability for gratuity is ascertained and provided for by way of contribution to approved group gratuity schemeframed and managed by Life Insurance Corporation of India.• INCOME TAX :Current Tax : Provision is made for Income tax under the tax payable method based on the liability as computed after akincredit for allowances and exemptions. Current Tax provided for current year is also net of MAT Credit receivable underthe I.T Act.Deferred Tax : Consequent to the Accounting Standard 22- Accounting for Taxes on Income becoming mandatoryeffective from 1st April,2002, the differences that result between the profit offered for income tax and the profit as perfinancial statements are identified and thereafter a deferred tax asset or deferred tax liability is recorded for timingdifferences, namely the differences that originate in one accounting period and reverse in another, based on the tax effectof the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end ofan accounting period, based on prevailing enacted regulations.• GOVERNMENT GRANTS:Grants in the nature of interest subsidy under the Technology Up gradation Fund Scheme (TUFS) and capital subsidy onprocessing machinery are accounted for when it is reasonably certain that ultimate collection will be made.• IMPAIRMENT OF ASSETS:1. As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine,• The provision for impairment loss, if any required or,• The reversal, if any, required of impairment loss recognized in previous periods.2. Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.3. Recoverable amount is determined,In the case of an individual asset, at the higher of the net selling price and the value in use.139
In the case of a cash-generating unit, (a group of assets that generates identified independent cash flows), at thehigher of the cash generating unit’s selling price and the value in use.(Value in use is determined as the present value of estimated future cash flows from the continuing use of an assetand from its deposal at the end of its useful life)TM• PROVISION, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:1. Contingent Liability are not recognized, but disclosed in the case of,A present obligation arising from a past event, when it is not probable that an outflow of resources will berequired to settle the obligation. orA possible obligation, unless the probability of outflow of resources is remote.2. Contingent Assets are neither recognised, nor disclosed. Provisions, Contingent Liabilities and ContingentAssets are reviewed at each Balance sheet date.2. CHANGE IN ACCOUNTING POLICYThere is no change in the accounting policy in the reporting years / period.3. EARNINGS PER SHAREParticulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Face Value Per Share (Rs.) 10 10 10 10 10 10A. Weighted Average Number Of Equity SharesOutstanding (Mn)10.50 10.50 10.50 6.29 5.74 3.25B. Net Profit After Tax available for EquityShareholders (Mn)79.46 194.31 121.26 64.11 37.00 19.34C. Basic Earning Per Share (Rs) 7.57* 18.51 11.55 10.19 6.45 5.95D. Share Application Money – Weighted Avg. No.of Shares(Mn)0.25 - - - 0.01 2.49E. Diluted Earning Per Share 7.39* 18.51 11.55 10.19 6.43 3.37* Not Annualised4. DEFERRED TAX(Rs in Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03(a) Opening Deferred Tax Liability on accountof Depreciation183.73 113.25 64.37 45.54 36.92 29.15Add: Current Year Difference 4.56 70.48 48.88 18.83 8.62 7.77TOTAL – A 188.29 183.73 113.25 64.37 45.54 36.92- - - - -(b) Opening Deferred Tax Liability on accountof Interest- - - 1.76 1.03Add: Current Year Difference - - - (1.76) 0.73TOTAL – B - - - - 1.76- - - - -TOTAL - (A+B) 188.29 183.73 113.25 64.37 45.54 38.685. CHANGE IN STATUSThe Status of the company has changed from 'Private Limited' to 'Limited' w.e.f. 15th May 2007 by duly complying with theprovisions of The Companies Act, 1956.140
Annexure VStatement of Sundry Debtors(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03(Unsecured, Considered good)(a) Outstanding for more than six months- Considered Good8.50 8.77 6.53 13.28 21.50 28.12(b) Others- Considered Good266.91 284.84 190.44 176.45 176.35 113.86Total 275.41 293.61 196.97 189.73 197.85 141.98TMAssociated To Promoters & Relatives (O/s. > 6mths.)- - - - -Associated To Promoters & Relatives (Others) 4.09 - 2.42 21.12 16.87 44.05Annexure VIStatement of Loans & Advances(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03(Considered good)(a) Advances recoverable in cash or in kind orvalue to be received 159.29 143.20 138.27 89.10 60.63 25.96(b) Deposits 90.79 20.96 21.13 13.82 7.90 3.24Total 250.08 164.16 159.40 102.92 68.53 29.20Annexure VIIStatement of Secured Loans(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03WORKING CAPITALAndhra Bank 0.00 0.00 195.18 99.47 147.17 117.64Bank of Maharashtra 110.12 142.78 0.00 0.00 0.00 0.00State Bank of Patiala 152.36 146.70 0.00 0.00 0.00 0.00Corporation Bank 91.08 75.19 91.71 53.87 63.06 0.00United Western Bank 0.00 0.00 0.00 0.00 0.00 56.11TOTAL (A) 353.56 364.67 286.89 153.34 210.23 173.75TERM LOAN 0.00 0.00 0.00 0.00 0.00IDBI 2.63 2.86 3.76 4.62 1.40 10.20Vasantdada Shetkari Sahakari Bank Ltd. 0.00 0.00 0.00 0.00 0.00 13.06Andhra Bank 103.49 117.45 140.73 132.86 103.48 99.30Union Bank of India 0.00 0.00 0.00 78.24 0.00 0.00Corporation Bank 129.70 95.95 99.30 87.10 0.00 0.00State Bank of Patiala 758.98 758.98 694.93 0.00 0.00 0.00Oriental Bank of Commerce 137.50 137.50 135.80 0.00 0.00 0.00Bank of Maharashtra 111.81 84.28 0.00 0.00 0.00 0.00TOTAL (B) 1244.11 1197.02 1074.52 302.82 104.88 122.56VEHICLE LOAN FROM VARIOUS BANKS ( C ) 1.88 3.05 3.44 2.51 1.70 3.96TOTAL (A+B+C) 1599.55 1564.74 1364.85 458.67 316.81 300.27141
TMDETAILS OF PRINCIPAL TERMS & CONDITIONS OF LOANS OUTSTANDING AS AT JUNE 30 th 2007NatureOfLoanTermLoansName ofInstitutionAndhra Bank,Fort, Mumbai.– CorporateLoanState Bank ofPatiala,Nariman Point,Mumbai.SanctionedLimitRs. 20.00Mn.Vide letterdated25/3/2006Rs. 709.50Mn Videletter dated6/6/2005- Sub Limitof LC(withinTerm Loanof Rs.709.50 Mn)Rs. 300.00MnO/s. as on30 th June,2007Rate ofInterestP.A.Rs13.33 Mn BMPLR –1.50%i.e. 12.25%p.a.Rs 709.50Mn1.5% belowBPLRi.e. 11.50% p.aRepaymentTerms12 QuarterlyInstallmentswithout initialholiday.31 equalquarterlyinstallments ofRs. 22.20 Mncommencingfrom September2007 and lastinstalment of Rs.21.30 million.Securities OfferedExtension of charge onFixed assets of weaving &processing divisions.1 st charge on fixed assetsof shirting divisionincluding equitablemortgage of immovableproperties at Plot No. C-2,MIDC, Tarapur, Palghar.Rs. 66.00Mn VideLetter dated2/11/2006- Sub Limitof LC(withinTerm Loanof Rs. 66.00Mn) Rs.40.00 MnRs. 49.48Mn2% belowBPLRi.e. 11.% p.a..32 equalquarterlyinstallments ofRs. 2.10 Mnafter amoratorium of24 months fromthe 1 stdisbursement.1 st installmentshall fall due on30/9/2008.Rs. 412.50Mn Videletter dated30/3/2007- Sub Limitof LC(withinTerm Loanof Rs.412.50 Mn)Rs. 350.00MnNIL0.50% belowBPLRi.e. 12.50% p.a32 equalquarterlyinstallments ofRs. 12.90 Mnafter amoratorium of24 months fromthe 1 stdisbursement.1 st installmentshall fall due on31/12/2009142
State Bank ofTravancore, MG Road,Mumbai.- CorporateLoanRs. 50.00Mn Videletter dated7/8/2006Rs 19.10 Mn300 bps above3 monthsLIBOR to bereset afterevery 3months12 months –Repayment in 5monthlyinstallmentscommencingfrom the 8 thmonth of the firstdisbursement.TMOriental Bankof Commerce,Bandra (West),MumbaiRs. 676.50Mn Videletter dated31/3/2006.- Sub Limitof LC(withinTerm Loanof Rs.676.50 Mn)Rs. 460.00MnRs 137.50Mn2.50% belowPLRi.e. 10.75% p.a96 Equalmonthlyinstallment withmoratorium oftwo years,repayment tostart from30/6/2008.DP or DA with180 days usance1 st charge over the entirefixed assets of theproposed expansionincluding equitablemortgage over land andbuilding at Plot No. C-3,MIDC, Tarapur, Thane.Documents of title togoods in case of LC onDP basis.Hypothecation chargeover the goods in case ofLCon DA basisBank ofMaharashtra,Nariman Point,MumbaiRs. 148.50Mn Videletter dated1/9/2006- Sub Limitfor OneTime LC(withinTerm Loanof Rs.148.50 Mn)Rs. 148.50MnRs 111.81Mn10.75% p.a.with monthlyrests linked toBanks BPLRRepayable in 96installments ofRs. 1.55 Mn permonth withinitialmoratorium of 2years.1 st Charge on FixedAssets by way ofhypothecation of assets ofProcess Division at E-25,MIDC, Tarapur.CorporationBank, IFB,Mumbai.Rs. 123.70Mn Videletter dated19/1/2007- Sub Limitfor OneTime LC(withinTerm Loanof Rs.123.70 Mn)Rs. 115.00MnRs.36.87 Mn12.25% p.a.subject torevision fromtime to time.32 equalquarterlyinstallments ofRs. 3.87 Mnafter amoratorium of12 months fromthe 1 stdisbursement.Interest to bepaid separatelyas & when due.Exclusive 1 st charge onthe entire fixed assets(except vehicles) of thecompany situated atBangalore (Unit II)acquired or to be acquiredout of Bank Finance withestimated cost of Rs.137.30 Mn (excludingsecurity deposit of Rs.12.70 Mn)Exclusive 1 st charge onthe entire fixed assets(except vehicles) of the143
Rs. 62.50Mn Videletter dated27/9/2006Rs 50.03 Mn12.25% p.a.subject torevision fromtime to time.20 quarterlyinstallments ofRs. 3.13 Mnstarting from31/8/2006company situated atBangalore & VikhroliTMRs. 47.50Mn Videletter dated27/9/2006Rs.42.80 Mn12.25% p.asubject torevision fromtime to time.Interest to bepaid separatelyas & when due.20 quarterlyinstallments ofRs. 2.37 Mnstarting from1/5/2008Exclusive 1 st charge onthe entire fixed assets(except vehicles) of thecompany situated atBangalore & Vikrolixclusive 1 st charge onGala 154 & 155 at KewalIndl. Estate, Lower Parel(W)Interest to bepaid separatelyas & when due.Andhra Bank,Fort, Mumbai.Rs. 35.00Mn Videletter dated31/12/2001Rs 6.56 MnPLR + 2.5%12.25% p.asubject torevision16 equalquarterlyinstallments witha moratorium of12 months fromthe 1stdisbursement.1st Charge on all FixedAssets at processing Unitat Tarapur and alladditional assets to beacquired under the saidfacility on pari passu basiswith other Term Lenders.Rs. 24.30Mn Videletter dated31/12/2001Rs 4.56MnPLR + 2.5%12.25% p.asubject torevision fromtime to time.16 equalquarterlyinstallments witha moratorium of12 months fromthe 1stdisbursement.(In line withVSS bank TLrepayments)1st Charge on all FixedAssets at the proposedWeaving Division atTarapurRs. 40.00Mn Videletter datedRs 7.5 MnPLR + 2.5%12.25% p.asubject to16 equalquarterlyinstallments with1st Charge on the FixedAssets to be acquired144
4/3/2003revision fromtime to time.a moratorium of3 monthsunder the Facility granted.TMRs. 56.50Mn Videletter dated20/3/2004- Sub Limitfor LC(withinTerm Loanof Rs. 56.50Mn) Rs.50.00 MnRs. 11.00Mn Videletter dated20/3/2004Rs. 37.50Mn Videletter dated16/3/2005- Sub Limitfor LC(withinTerm Loanof Rs. 37.50Mn) Rs.30.00 MnRs 31.78 Mn4.13 MnRs 35.63MnBMPLR +0.25% (TLPremia)12.25% p.asubject torevision fromtime to time.BMPLR +0.25% (TLPremia)12.25% p.asubject torevision fromtime to time.Sub-BMPLRrate at BMPLR+ 0.25% (TLPremia) –1.75%12.25% p.asubject torevision fromtime to time.16 equalquarterlyinstallments witha moratorium of12 monthsInterest to berecovered as &when debited.16 equalquarterlyinstallments witha moratorium of12 monthsInterest to berecovered as &when debited.20 equalquarterlyinstallments witha moratorium of24 monthsInterest to berecovered as &when debited.1st Charge on the FixedAssets at Weaving Unitproposed to be acquiredunder the said facility.1st Charge on the FixedAssets at Process Unitproposed to be acquiredunder the said facility.1st Charge on the FixedAssets at ProcessingDivision at E-25, MIDC,Tarapur.IDBI Bank,MumbaiRs 2.63 Mn& Rs 2.37MnHousingLoanRs. 2.63 Mn7% per annum(Floating)Repayment:Interest on allamountsdisbursed tillHome Loan isnot fullydisbursed or 12months have notlapsed from thedate of firstdisbursement145
WorkingCapital(WC)State Bank ofPatiala,NarimanPoint,Mumbai- Rs. 150.00Mn FW WCRs 152.36Mn2% belowBPLRi.e. 10.75%p.a.Whichever isearlier.Equated Monthlyinstalmentthereafter for 60months.1 st charge onhypothecationof current assets of thecompany at Plot No C-2,MIDC, Tarapur, Palghar.TM- Rs. 60.00Mn LC’s forWCRs.25.38Usance period– 90 days.2 nd charge on fixed assetsof shirting divisionsituated at C-2, MIDC,Tarapur, Palgharincluding equitablemortgage of Land.DBS BankLtd, Fort5,Mumbai.Bank ofMaharashtra,NarimanPoint,Mumbai.Rs. 65.10MnFactoringFacility- Rs.35.10Mn forSalesInvoiceDiscounting- Rs.30.00Mn forPurchase BillsDiscountingRs. 150.00Mn WCDLin ForeignCurrencyRs. 50.00Mn WCDLin IndianRupeeNIL NIL Maximum 90days tenorRs 110.12MnLIBOR + 200bps (resting ofLIBOR on 1 stof everymonth)10.75% p.a.with monthlyrest linked toBank’s BPLRSix Months, tobe rolled overafter every sixmonthsHypothecation of Stock &Receivables.Rs. 60.00Mn Inland /Rs.4.25 Mn10% margin by way ofFixed Deposit146
StandardCharteredBank, M GRoad,Mumbai.CorporationBank, IFB,MumbaiImport LCRs. 125.00Mn PostShipmentFinance(FinanceagainstExport Sales& PostShipmentDocumentsunderLetters ofCredit)- SUBLIMITRs. 75.00Mn of PreShipmentFinance(PSFC /SBD / ID /PBD)Rs. 120.00Mn PCL /PCFCRs.26.34 MnRs 91.08MnAt ratenegotiatedbetween theBank &CompanyAt mutuallyagreeable12.25% p.asubject torevision fromtime7.50% p.a.subject torevision fromtime to timeRealisation ofBill Proceeds /Debit to Currentaccount on the30 th day fromDue Date.- Tenor of 90days- TenorPSFC – 180daysSBD / ID / PBD– 90 daysWithin 180 daysfrom the date ofavailment of.each PCLagainst theproceeds ofexport bills.PDC’s of the facilityamount.Hypothecation ofInventory for Export.TMRs. 100.00Mn FDBN /FDBP /PSCFC- SUBLIMITRs. 50.00Mn FDBD /PRs. 30.00Mn RupeeAdvanceRs. 29.33Mn7.50% p.a.upto 90 days& 9.50% p.a.above 90 daysupto 180 dayssubject torevision fromtime to time.Sight Bills to bepaid within thenormal transitperiod.Tenor not toexceed 180 daysfrom the date ofBill of Lading incase of usancebills.Post Shipment shall besecured by hypothecationcharge over exportreceivables of thecompany.Rs. 10.00Mn Inland /Import LC(DA / DP)NILCommission atprescribedratesDP / DA(Usance not toexceed 90 days)Extension ofhypothecation charge onstock / receivablesrelating to export activity.147
TMRs. 10.00Mn BankGuaranteeRs. 4.42MnCommission atprescribedratesValidity Period –One YearExtension ofhypothecation charge onstock / receivablesrelating to export activity.Rs. 50.00MnDerivativeLimitRs 119.52MnRs. 620.00Mn ForwardPurchaseContractRs. 125.00MnForwardSaleContractParticulars Name of Bank Amount O/s. as on 30/06/2007Vehicle Loan ICICI Bank Rs. 1.88TOTAL Rs. 1.88Note: All the facilities are secured by the Personal Guarantee of the Directors.Annexure VIIIStatement of Unsecured Loans(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03(a) Intercorporate Companies /Firms – Mahan Synthetics Pvt. Ltd.-- - 11.30 50.78 -(b) Others / Loans- Mahesh Nagari Sahakari Bank-- - - - 1.55-Bombay Rayon Fashions Limited 25.00(c ) State Bank of Travancore 19.10 47.88 50.71 - - -(d) Standard Chartered Bank 26.34Total 70.44 47.88 50.71 11.30 50.78 1.55Terms & ConditionsAvailedInterestAvailed atLibor+300Availed atLibor+350InterestFreeInterestFreeAvailed at16% p.a.148
Free ICDBps.Bps.TMRepayment– OnDemandRepayment– 12 monthsRepayable in5 BulletInstallmentsStartingfrom the 8 thmonth till12 th monthRepayment– 12 monthsRepayable in5 BulletInstallmentsStartingfrom the 8 thmonth till12 th monthRepayment– OnDemandRepayment– OnDemandRepayment– 12monthsAnnexure IXStatement of Income from Operations(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03(a) Domestic Sales 757.71 1,631.19 1,089.01 693.99 378.40 419.50(b) Export Sales (Inclusive of Duty Drawback &Foreign Exchange Fluctuation) 270.27 707.03 614.40 475.41 416.06 162.70( c ) Processing & Services Charges(Inclusive of Excise Duty)27.45 81.55 122.60 103.11 76.13 94.40(d) Sale of Garment Quota(Net of Returns, Rebate, Claim etc.) - - 0.00 0.14 0.36Total 1055.43 2,419.77 1,826.01 1,272.51 870.73 676.96Less: Discounts 1.15 7.60 5.96 - - -Total 1054.28 2,412.17 1,820.05 1,272.51 870.73 676.96Annexure XStatement of Other Income(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03 Remarks(a) Interest Income 0.45 0.461.64 0.61 1.24 Recurring1.86(b) Miscellaneous Income 2.03 3.923.84 1.34 1.07 Recurring9.59(c) Commission Income - - - - 0.17 Non-RecurringTotal 2.48 4.3811.455.48 1.95 2.48Annexure XIStatement of Contingent Liability(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Export Invoice backed by Letter of Credit 29.33 41.87 68.09 31.26 54.92 12.14Income Tax Demand 11.94 11.94 5.51 2.29 1.36 2.78Corporate Guarantee 0 162.80 39.00 0 0 31.50Custom Duty liability if Export obligation notfulfilled0- 0 0 0 1.14Excise Duty Demand 31.28 31.28 0 0 0 0149
Water Charges Demand 51.85 51.85 0 0 0 0Bank Guarantee 4.42 4.42 0 0 0 0Total 128.82 304.16 112.60 33.55 56.28 47.56TMAnnexure XIIAccounting RatiosParticulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Weighted Average Number of Shares Outstanding 10.50 10.50 10.50 6.29 5.74 3.25Total Number of Shares Outstanding at the end ofthe year 10.50 10.50 10.50 6.29 5.74 3.25Net Profit After Tax as Restated (Rs. In Mn.) 79.46 194.31 121.26 64.11 37.00 19.34Cash Profit – (Rs. In Mn.) 104.26 339.47 202.11 109.70 63.70 44.55Net Worth – (Rs. In Mn.) 703.98 542.32 371.95 271.64 170.60 141.38Net Assets- (Rs. In Mn.) 621.78 542.32 371.95 271.64 170.59 116.48Annualised Earnings Per Share (Rs.) 30.27 18.51 11.55 10.19 6.45 5.95Annualised Cash Earnings Per Share (Rs.) 39.72 32.33 19.25 17.44 11.10 13.71Annualised Return on Networth (%) 45.15% 35.83% 32.60% 23.60% 21.69% 13.68%Net Asset Per Share (Rs.) 59.22 51.65 35.42 43.19 29.72 35.84Note:The ratios have been computed as below:Earning Per Share (Rs)Cash Earning Per Share (Rs)Return on Net WorthNet Profit Attributable to Equity Shareholders as restatedWeighted Average Number of Shares outstanding duringthe yearNet Profit to Equity Shareholders as restated + DepreciationWeighted Average Number of Shares outstanding duringthe yearNet Profit after Tax as restatedNet Worth excluding revaluation reserve at the end of the yearNet Asset Value per equity shareNet Worth excluding revaluation reserve & Share applcation money at the end of the yearNumber of equity shares outstanding at the end of the year1. Net profit, as restated as appearing in the summary statement of profits and losses, of the Company has been considered forthe purpose of computing the above ratios2. Earnings per share is calculated in accordance with Accounting Standard 20 on 'Earnings per Share', issued by the Institute ofChartered Accountants of India3. Face value of the shares has been considered at Rs.10 for all the years for calculating the ratios on a uniform basisAnnexure XIIIStatement of CapitalisationParticulars Pre-Issue Pre-Issue Asas at as at Adjusted30/6/2007 31/3/2007 For IssueDebtShort Term Debt 424.00 412.55Long Term Debt (A) 1245.99 1200.07150
TOTAL 1669.99 1612.62Shareholders' FundShare Capital 105.00 105.00Share Application Money 82.20 --Reserves & Surplus after deducting Misc. Exp. Not written off. 516.78 437.31TOTAL Shareholders' Fund (B) 703.98 542.31Long Term Debt / Shareholders' Fund (A/B) 1.77 2.21TMNote:* Information pertaining to Share Capital & Reserves post Issue can be ascertained only after completion of the book-buildingprocess.Annexure XIVStatement of Dividend PaidParticulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03ON EQUITY SHARESPaid Up Share Capital 105.00 105.00 105.00 105.00 57.40 32.50Face Value (Rs.) 10 10 10 10 10 10Rate of Dividend (%) Nil 20.00 17.50 15.00 12.00 10.00Amount of Dividend Nil 21.00 18.38 9.43 6.89 3.25Corporate Dividend Tax Nil 2.95 2.58 1.23 0.90 0.42Annexure XVStatement of tax Shelter(Rs. In Mn.)Particulars 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03PROFIT BEFORE TAX AS PER BOOKS (A) 121.34 298.51 187.63 93.98 45.99 30.08Notional Rate of Tax (%) 33.99% 33.66 33.66 36.59 35.88 36.75Tax at actual rate on Book Profit 41.24 100.48 63.16 34.39 16.50 11.06Adjustments: - - - -Timing Differences - - - -Difference Between Tax - - - -Depreciation & Book Depreciation 13.61 207.04 145.94 65.77 29.22 23.66Other Adjustments (0.17) (3.00) (1.37) 0.01 14.01 4.08Net Adjustments (B) 13.44 204.04 144.57 65.78 43.23 27.74Tax Savings thereon 4.57 68.68 48.66 24.07 15.51 10.19Profit & Loss as per Income Tax returns (D) = (A - B) 107.90 94.47 43.06 28.20 2.76 2.37Brought Forward Losses Adjusted NIL NIL NIL NIL NIL NILTaxable Loss / Income 107.90 94.47 43.06 28.20 2.76 2.37Taxable Income as per MAT 121.34 298.51 187.63 93.98 23.44 24.41Tax as per Income Tax Returns 36.68 33.49 15.79 10.32 1.80 1.92Annexure XVIStatement of Related Party TransactionsRelated Party Transactions151
TMIn accordance with Accounting Standard 18 – “Related Party Disclosure” issued by the Institute of Chartered Accountants of India,the company has compiled the required information as detailed below(As identified and disclosed by the management):Name of Related Parties:Associates (Enterprises in key management personnel or their relatives exercise significant influence)1. Mahan Synthetics Textiles Private Limited2. Paxar India Pvt Ltd (formerly known as Mandhana Bornemann Industries Private Limited)3. Indus Fila Private Limited4. Golden Seam Textile Private Limited5. Balaji CorporationKey Managerial PersonnelBiharilal MandhanaPurushottam MandhanaManish MandhanaRelatives of Key Managerial Personnel:Govindlal MandhanaNarayandas MandhanaPrakash MandhanaShashikant MandhanaAshok MandhanaNitin MandhanaPrema MandhanaPriyavart MandhanaSudha B. MandhanaSangeeta M. MandhanaPreeti MandhanaTransactions with Associate Concern(Rs. In Mn.)Nature Of Transaction 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Sale of FabricsMahan Synthetics Textiles Pvt. Ltd. - - - - 29.36 105.74Indus Fila Limited 0.38 - 0.98 1.34 - -Golden Seam Textile Pvt. Ltd. 3.80 15.82 4.68 9.48 - -Total 4.18 15.82 5.66 10.82 29.36 105.74Purchase of Fabric / Auxillary MaterialMahan Synthetics Textiles Pvt. Ltd. - - 16.59 55.47 51.07Golden Seam Textile Pvt. Ltd. 0.02 0.26 0.61 7.67 - -Paxar India Pvt. Ltd. - 0.61 0.41 - 0.22(Formerly Mandhana Bornemann Industries Pvt. Ltd.)Total 0.02 0.26 1.22 24.67 55.47 51.29152
TMTransactions with Key Managerial Personnel & their Relatives(Rs. In Mn.)Nature Of Transaction 30.06.07 31.03.07 31.03.06 31.03.05 31.03.04 31.03.03Directors Remuneration & PerquisitesPurushottam Mandhana 1.80 7.20 3.63 0.90 0.90 0.83Biharilal Mandhana 0.45 1.80 1.80 0.45 0.45 0.41Manish Mandhana 1.35 5.40 1.82 0.45 0.45 -Govindlal Mandhana - - - - - 0.42Narayandas Mandhana - - - - - 0.41Prakash Mandhana - - - - - 0.42Shashikant Mandhana - - - - - 0.41Ashok Mandhana - - - - - 0.41Nitin Mandhana - - - - - 0.41Perquisites - 0.00 0.00 0.25 0.20 0.29Total 3.60 14.40 7.25 2.05 2.00 4.01Salary & AllowancesPreeti Mandhana - 0.20 0.24 - - -Total 0.00 0.20 0.24 0.00 0.00 0.00Rent to Directors & Relatives of DirectorsPurushottam Mandhana 0.30 8.01 7.44 6.09 1.20 -Biharilal Mandhana 0.10 3.00 2.79 2.56 1.09 -Manish Mandhana 0.18 5.36 4.97 4.56 0.92 -Prema Mandhana - 2.24 2.07 1.90 0.81 -Priyavrat Mandhana 0.12 2.45 1.11 2.87 - -Total 0.71 21.06 18.38 17.98 4.02 0.00Deposits against rented premisesPurushottam Mandhana 32.00 1.36 1.36 1.19 0.38 -Biharilal Mandhana 15.15 0.51 0.51 0.49 0.32 -Manish Mandhana 13.25 1.02 1.02 0.92 0.25 -Prema Mandhana 6.60 0.33 0.33 0.32 0.21 -Priyavrat Mandhana 4.00 0.20 1.00 0.00 0.00 -Total 71.00 3.42 4.22 2.92 1.16 0.00Annexure – XVIIStatement of Investments:Long-term investmentsFor the year endedAs at31.03.07As at31.03.06As at31.03.05As at31.03.04As at31.03.03-Trade (Quoted) - - - - --Trade (Unquoted) 0.01 0.01 0.01 0.03 0.05-In subsidiary company (unquoted) - - - - -Total 0.01 0.01 0.01 0.03 0.05153
Quoted investments – Not ApplicableTMAnnexure – XVIIISegment Reporting:ParticularsThreeMonthsendedJune30, 2007Textiles2007 2006 2005 2004 2003 ThreeMonthsendedJune30,2007Garments2007 2006 2005 2004 2003Income From ExternalCustomers 771.83 1679.46 1206.46 777.89 451.52 520.07 226.91 6,82.03 572.34 453.50 377.84 155.73Other Allocable Income 55.53 50.68 41.25 41.12 41.37 1.16Total Revenues 771.83 1679.46 1206.46 777.89 451.52 520.07 282.45 732.71 613.59 494.62 419.21 156.89Segment Result 101.90 293.01 132.22 66.75 37.51 51.75 68.80 159.23 115.48 76.93 54.78 22.31Other Non-AllocableIncome / (Expenditure)Non-Operating IncomeInterest CostDepreciationProvision For TaxesNet ProfitOther InformationSegment Assets 2,155.12 1914.74 1501.27573.04 509.54 477.70821.13 477.54 430.31282.34 134.90 111.02Unallocable CorporateAssetsTotal AssetsSegment Liabilities 1,586.31 1536.37 1200.16367.38 339.18 290.70373.55 1,32.88 279.76181.53 98.54 120.13Unallocable LiabilitiesTotal LiabilitiesCapital ExpenditureSegment CapitalExpenditureUnallocated CapitalExpenditureTotal CapitalExpenditureDepreciation &AmortisationSegment Depreciation& AmortisationUnallocated Dep. &AmortisationTotal Depreciation &227.51 182.57873.1195.26 26.81 110.701.51 25.6664.15 123.46 8.70 3.0017.71 63.7523.8722.97 18.9814.663.05 10.928.103.79 0.862.05- - - -154
AmortisationTMParticularsDomesticExportsSegment Revenues 784.01 1705.14 1205.65 797.09 454.67 480.27 270.27 707.03 614.40 475.42 416.06 196.68Carrying Cost OfSegment Assets2,184.78 1941.81 1501.27 573.04 509.54 477.70 791.47 450.47 430.31 282.34 134.90 111.02Addition To Fixed Assets 227.51 182.56 873.11 95.26 26.81 110.70 1.51 25.66 64.15 123.46 8.70 3.00ParticularsThreeMonthsendedJune30,2007Income From External Customers 998.75 2361.49Total2007 2006 2005 2004 20031778.801,231.39829.36 675.80Other Allocable Income 55.53 50.68 41.25 41.12 41.37 1.16Total Revenues 1,054.282412.171,820.051,272.51870.73 676.96Segment Result 170.70 452.24 247.70 143.68 92.29 74.06Other Non-Allocable Income / (Expenditure)Non-Operating IncomeInterest Cost 29.12 79.45 28.43 23.06 26.58 27.41Depreciation20.2374.29 31.64 26.64 19.73 16.56Provision For Taxes41.881,04.20 66.37 29.91 8.95 10.78Net Profit 79.46 1,94.31 121.26 64.07 37.04 19.30Other InformationSegment Assets 2,976.2523,92.281,931.58855.38 644.44 588.72Unallocable Corporate Assets 20.05 1,88.38 169.79 121.78 9.49 2.44Total Assets 2,996.312580.662,101.37977.16 653.93 591.15Segment Liabilities 1,959.8616,69.241,479.92548.90 437.72 410.84155
TMUnallocable Liabilities 144.16 1,85.35 136.24 92.23 0.06 0.25Total Liabilities 2,104.0218,54.601,616.16641.14 437.78 411.09Capital ExpenditureSegment Capital Expenditure 229.03 2,08.23 937.26 218.72 35.50 113.70Unallocated Capital Expenditure 0.53 18.04 73.90 85.83 7.03 0.00Total Capital Expenditure 229.56 2,26.27 1011.1 304.56 42.54 113.706Depreciation & AmortisationSegment Dep. & Amortisation 20.77 74.67 31.97 26.75 19.84 16.71Unallocated Dep. & Amortisation - -Total Depreciation & Amortisation 20.77 74.67 31.97 26.75 19.84 16.71ParticularsThreeMonthsendedJune30,2007Segment Revenues 1,054.28Carrying Cost Of Segment Assets 2,976.25Addition To Fixed AssetsAnnexture- XIXStatement of Qualification appearing in Audit reports.Qualification having financial impact:Total2007 2006 2005 2004 20032412.172392.28229.03 208.231,820.051,931.58937.261,272.51870.73 676.96855.38 644.44 588.72218.72 35.50 113.701. For Financial year from 2002-2003 to 2006-2007, Sales and Purchase figures are shown inclusive of inter-division transfers.The inter-division transfers do not affect the profitability of the company.The company has changed all the sales and related accounts in the restated financials to give the effect of qualification and tocomply with Para 6.10.2.7 (b) (i) of DIP guidelines, adjustment/rectification has to be made for all incorrect practices or failure tomake provisions or other adjustments which results in audit qualification.2. For the Financial Year 2003-04, export sales were accounted on FOB basis.Adjustment has been made in the Export sales to give the effect of qualifications.3. For the financial year 2002-2003 -Non provision of Gratuity AS 15156
As informed to us, in 2002-03, all the employees were retired due to partition of family business and the entire cost pertaining togratuity was accounted and paid in the 2002-2003. There after the company has followed the policy as prescribed in AccountingStandard 15 issued by ICAI.TMQualification having no financial impact:1. The company has no separate internal audit set-up.However, there are adequate internal control systems commensurate with the size of the company & nature of its business. Furtheras informed by the company, it is already in process of appointing an Internal Audit Firm2. The company has not maintained the prescribed accounts and records pursuant to the rules made by the Central Governmentfor the maintenance of cost records u/s 209 (1) (d) of the Companies Act,1956.As informed by the company, it is already in process of maintaining cost records as prescribed u/s 209(1)(d) of the Companies Act,1956.157
OUR PROMOTER GROUP ENTITIESTMOur Promoter Group includes following individuals:1. Ms. Prema Mandhana;2. Ms. Sudha Mandhana;3. Ms. Sangita Mandhana;4. Mr. Vinay Mandhana;5. Biharilal Mandhana (HUF);6. Manish Mandhana (HUF);7. Master Arnav Mandhana;8. Ms. Muskan Mandhana;9. Ms. Poorvi Jithalia;10. Ms. Preeti Daga;11. Ms. Kamlabai Rathi;12. Ms. Tulsibai Chandak;13. Ms. Bhagwati Chandak;14. Ms. Chanda Jaju;15. Ms. Mangala Somani;16. Ms. Shakuntala Dargad; and17. Ms. Archana SethMr. Narayandas Mandhana and Mr. Govindlal Mandhana, the brothers of Mr. Purushottam Mandhana and Mr. BiharilalMandhana have their own ventures, which they have promoted or in which they hold substantial equity interest. However,they do not hold any interest, equity or otherwise, in the business, properties, companies or firms of Mr. PurushottamMandhana or Mandhana Industries Limited. In addition the Promoters of Mandhana Industries Limited and the venturespromoted by them do not have any ownership interest in such ventures of Mr. Narayandas Mandhana and Mr. GovindlalMandhana. Accordingly, information regarding the ventures of Mr. Narayandas Mandhana and Mr. Govinddas Mandhanahave not been disclosed in this DRHP.We have eight Promoter Group Entities, namely:1. Sundhya Chhaya Finvest Private Limited;2. Ashlesha Finvest Private Limited;3. Dhumketu Finvest Private Limited;4. Parag Kunj Finvest Private Limited;5. Mahan Synthetic Textiles Private Limited;6. Golden Seam Textiles Private Limited;7. Vicky Jhunjhunwala Resort Private Limited; and8. M/s Balaji Corporation1. Sundhya Chhaya Finvest Private Limited (“Sundhya Chhaya”)Sundhya Chhaya was incorporated on July 27, 1995 having Registration No. 11-91094 of 1995. The registered office ofSundhya Chhaya is 138, Kewal Industrial Estate, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013. Sundhya Chhayais authorised to carry on the business of money lending, investment in securities as well as land and buildings. However, ason date, Sundhya Chhaya is not carrying on any business.Board of Directors:As on November 30, 2007 Sundhya Chhaya has two directors, as detailed herein below:NameMr. Purshottam MandhanaMr. Biharilal MandhanaDesignationDirectorDirector158
Shareholding Pattern:TMThe equity shares of Sundhya Chhaya are not listed on any stock exchange. The shareholding pattern of Sundhya Chhaya ason November 30, 2007 is as followsName of Shareholders Number of shares Percentage of sharecapital [%]Mr. Purshottam Mandhana 5000 50Mr. Biharilal Mandhana 5000 50Total 10,000 100Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income - - -Profit / Loss after tax (2,600) (2,110) (6,321)Equity Capital 100,000 100,000 100,000Reserves and Surplus (25,385) (22,785) (20,675)Earnings per share (of Rs.10(0.26) (0.21) (0.63)each)Book value per share (of Rs.10each)7.46 7.72 7.932. Ashlesha Finvest Private Limited (“Ashlesha Finvest”)Ashlesha Finvest Private Limited was incorporated on July 21, 1995 having Registration No. 11-90876 of 1995. AshleshaFinvest has its registered office at 155 Kewal Industrial Estate Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013.Ashlesha Finvest is authorised to carry on the business of money lending, investment in securities as well as land andbuildings. However, as on date, Ashlesha Finvest is not carrying on any business.Board of Directors:As on November 30, 2007, Ashlesha Finvest has six directors as detailed herein below.NameMr. Nayan KambliMr. Ashwin ShethMr. Girish ShahMr. Firdosh MahuvawallaPositionDirectorDirectorDirectorDirectorShareholding Pattern:The equity shares of Ashlesha Finvest are not listed on any stock exchange. The shareholding pattern of Ashlesha Finvest ason November 30, 2007 is as follows:Name of ShareholdersNumber of sharesPercentage of sharecapitalMr. Purshottam Mandhana 5000 50Mr. Manish Mandhana 5000 50Total 10,000 100159
Financial Performance:TMParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income - - -Profit / loss after tax (6,210) (1,510) (6,320)Equity Capital 100,000 100,000 100,000Reserves and Surplus (29,563) (23,353) (21,843)Earnings per share (of Rs.10/-(0.62) (0.15) (0.63)each)Book value per share (of Rs.10/-each)7.04 7.66 7.823. Dhumketu Finvest Private Limited (“Dhumketu Finvest”)Dhumketu Finvest Private Limited was incorporated on August 7, 1995 having Registration No. 11-91455 of 1995.Dhumketu Finvest has its registered office at 154, Kewal Industrial Estate, Senapati Bapat Marg, Lower Parel (W), Mumbai400 013. Dhumketu Finvest is authorised to carry on the business of money lending, investment in securities as well as landand buildings. However, as on date, Dhumketu Finvest is not carrying on any business.Board of Directors:As on November 30, 2007, Dhumketu Finvest has three directors as detailed herein below:NameMr. Purshottam MandhanaMr. Manish MandhanaPositionDirectorDirectorShareholding Pattern:The equity shares of Dhumketu Finvest are not listed on any stock exchange. The shareholding pattern of Dhumketu Finvestas on November 30, 2007 is as followsName of Shareholders Number of shares Percentage of sharecapital (%)Mr. Purshottam Mandhana 5000 50Mr. Manish Mandhana 5000 50Total 10,000 100Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income - - -Profit / loss after tax (6,210) (1,510) (6,328)Equity Capital 100,000 100,000 100,000Reserves and Surplus (28,114) (21,904) (20,394)Earnings per share (of Rs.10/- (0.62) (0.15) (0.63)each)Book value per share (ofRs.10/- each)7.19 7.81 7.96160
TM4. Parag Kunj Finvest Private Limited (“Parag Kunj”)Parag Kunj Finvest Private Limited was incorporated on July 21, 1995 having Registration No. 11-90877 of 1995. ParagKunj has its registered office at 154/155, Kewal Industrial Estate, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013.Parag Kunj is authorised to carry on the business of money lending, investment in securities as well as land and buildings. Ason date, Parag Kunj is engaged inter alia in the business of real estate.Board of Directors:As on November 30, 2007, Parag Kunj has two directors, as detailed herein below:NameMr. Purshottam MandhanaMr. Girish ShahPositionDirectorDirectorShareholding Pattern:The equity shares of Parag Kunj are not listed on any stock exchange. The shareholding pattern of Parag Kunj as onNovember 30, 2007 is as followsName of Shareholders Number of shares Percentage of sharecapital (%)Mr. Purshottam Mandhana 5000 50Mr. Girish Shah 5000 50Total 10,000 100Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income - - -Profit / Loss after tax (39,469) 9,260 9,522Equity Capital 100,000 100,000 100,000Reserves and Surplus (65,677) (26,208) (16,948)Earnings per share (of Rs.10/- (3.95) (0.93) (0.95)each)Book value per share (of Rs.10/-each)3.43 7.38 8.315. Mahan Synthetic Textiles Private Limited (“Mahan Synthetic”)Mahan Synthetic Textile Private Limited was incorporated on February 28, 1991 having Registration No. 11-19556 of 1991.Mahan Synthetic has its registered office at 205/214, Peninsula Centre, Dr. S.S. Rao Road, Off Ambedkar Road, Parel (E),Mumbai 400 012. Mahan Synthetic is authorised to carry on the business of processing, selling, importing, exporting,distributing and dealing in synthetic and synthetic blends, both with natural and artificial fibres. As on date, Mahan Syntheticis currently engaged inter alia in the business of trading and commission income arising from textiles.Board of Directors:As on November 30, 2007, Mahan Synthetic has two directors as detailed herein below:NameMr. Purshottam MandhanaMr. Biharilal MandhanaPositionDirectorDirector161
Shareholding Pattern:TMThe equity shares of Mahan Synthetic are not listed on any stock exchange. The shareholding pattern of Mahan Synthetic ason November 30, 2007 is as follows:Name of Shareholders Number of shares Percentage of sharecapitalMr. Biharilal Mandhana 1550 15.32%Mr. Sudha Mandhana 970 9.58 %Mr. Manish Mandhana 1250 12.35 %Mr. Sangita Mandhana 1290 12.75 %Mr. Purshottam Mandhana 2050 20.26 %Mr. Prema Mandhana 1450 14.33 %Mr. Preeti Mandhana 250 2.47 %Mr. Priyavrat Mandhana 1310 12.94 %Total 10,120 100%Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income 1,137902 9,343,183 24,876,187Profit / loss after tax 90072 7,569,923 6,020,917Equity Capital 1,012,000 1,012,000 1,012,000Reserves and Surplus 2,751,752 2,661,680 (4,908,243)Earnings per share (of8.90 748.02 594.95Rs.100/- each)Book value per share (ofRs.100/- each)371.91 363.01 (385.00)6. Vicky Jhunjhunwala Resort Private Limited (“Jhunjhunwala Resort”)Vicky Jhunjhunwala Resort Private Limited was incorporated on March 28, 1996 having Registration No. 11 - 64076.Jhunjhunwala Resort has its registered office at 205/214 Peninsula Centre, Dr. S.S. Rao Road, Off Ambedkar Road, Parel(E), Mumbai 400 012. Jhunjhunwala Resort is authorised to carry on the business of hotels, restaurants and catering.However, as on date, Jhunjhunwala Resort is not carrying on any business.Board of Directors:As on November 30, 2007, Jhunjhunwala Resort has two directors as detailed herein below:NameMr. Purshottam MandhanaMr. Biharilal MandhanaPositionDirectorDirectorShareholding Pattern:The equity shares of Jhunjhunwala Resort are not listed on any stock exchange. The shareholding pattern of JhunjhunwalaResort as on November 30, 2007 is as follows:Name of Shareholders Number of shares Percentage of sharecapitalPurshottam C. Mandhana 26,500 18.6%Prema P. Mandhana 20,000 13.3%Priyavrat P. Mandhana 25,310 17.8%Biharilal C. Mandhana 22,500 15.8%162
Sudha B. Mandhana 15,500 10.8%Manish B. Mandhana 22,500 15.8%Sangita M. Mandhana 11,100 7.9%Total 143,410 100%TMFinancial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income - - -Profit / loss after tax (14,360) (10,972) (9,526)Equity Capital 1,434,100 1,434,100 1,434,100Reserves and Surplus 205,566 219,926 230,898Earnings per share (of Rs.10/- (0.10) (0.08) (0.07)each)Book value per share (ofRs.10/- each)11.43 11.53 11.617. Golden Seam Textiles Private Limited (“Golden Seam”)Golden Seam Textile Private Limited was incorporated on March 26, 2004 having CIN is U17120MH2004PTC145341.Golden Seam has its registered office at 154/155 Kewal Industrial Estate Senapati Bapat Marg, Lower Parel (W), Mumbai400 013. Golden Seam is authorised to carry on the business of textiles. As on date Golden Seam is engaged inter alia in thebusiness of manufacturing, export, sale and trading of textile (bottom wear).Board of Directors:As on November 30, 2007, Golden Seam has four directors as detailed herein below:NameMr. Purshottam MandhanMr. Manish MandhanaMr. Sanjiv MukhijaMrs. Minal MukhijaPositionDirectorDirectorDirectorDirectorShareholding Pattern:The equity shares of Golden Seam are not listed on any stock exchange. The shareholding pattern of Golden Seam as onNovember 30, 2007 is as follows:Name of ShareholdersNumber of sharesPercentage ofshare capital (%)Mr. Purshottam Mandhana 3,62,500 25Mr. Manish Mandhana 3,62,500 25Mr. Sanjeev Mukhija 3,62,500 25Mr. Minal Mukhija 3,62,500 25Total 14,50,000 100Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Sales and other Income 94,199,203 54,593,195 40,461,582Profit / loss after tax 5,368,076 1,775,340 1,229,162Equity Capital 14,500,000 4,500,000 2,500,000163
Reserves and Surplus 8,345,906 3,004,502 1,229,162Earnings per share (of Rs.10/-21.03 7.10 4.91each)Book value per share (of Rs.10/-each)15.76 16.68 14.92TM8. M/s Balaji Corporation (“Balaji Corporation”)M/s Balaji Corporation is a partnership firm formed under a partnership deed dated May 05, 2003 and situated at 167 VakharBhag, Sangli, 416 416. Balaji Corporation is currently engaged inter alia in the business of trading and commission incomearising there from in textile.Partners of Balaji Corporation:As on November 30, 2007, Balaji Corporation has nine partners and their profit sharing ratio as on date is as follows:Particulars% StakeMr. Biharilal Mandhana 8.34Mr. Purshottam Mandhana 16.67Mr. Manish Mandhana 8.34Mr. Biharilal Mandhana (HUF) 8.33Mr. Purshottam Mandhana (HUF) 16.67Mr. Manish Mandhana (HUF) 8.33Mr. Sudha Mandhana 8.33Mr. Prema Mandhana 16.67Mr. Sangeeta Mandhana 8.33Total 100%Financial Performance:ParticularsFor the Financial Year ended March 31 (Rs.)2007 2006 2005Operating Income 377964 960250 50,522,670Other Income 1,635,658 264,000 55,000Stock Adjustments - - -Total Income 2,013,622 1,224250 50,577,670Profit/ loss After Tax 159,473 22,242 572,239Partners Capital 5,542,919 725,258 2,186,181Details of Companies / Firms from which Promoters have DisassociatedDuring the last three years, our Promoters have not disassociated themselves from any companies/partnership firms.Details of Group Companies whose names have been struck off from RoCsNone of our Promoter Group Entities have been struck off the record of Registrar of Companies as “defunct companies”.Promoter Group Entities referred to BIFR/ Under Winding Up/having Negative Net WorthNIL.Common Pursuits/Conflict of InterestMahan Synthetic Textiles Private Limited, one of our Promoter Group Entities, incorporated on February 28, 1991 isauthorised to carry on the business of processing, selling, importing, exporting, distributing and dealing in synthetic and164
synthetic blends, both with natural and artificial fibres. As on date, Mahan Synthetic is currently engaged inter alia in thebusiness of trading and commission income arising from textiles.TMGolden Seam Textile Private Limited, one of our Promoter Group Entities, incorporated on March 26, 2004 is authorised tocarry on the business of textiles. As on date, Golden Seam is engaged inter alia in the business of manufacturing, export, saleand trading of textiles (bottom wear).M/s. Balaji Corporation, one of our Promoter Group entities, is a partnership firm formed under a partnership deed dated May05, 2003. M/s. Balaji Corporation is currently engaged inter alia in the business of trading and commission income arisingthere from in textiles.Related Party TransactionsFor details on our related party transactions please refer to the chapter titled ‘Related Party Transactions’ beginning on pageno. [●] of this Draft Red Herring Prospectus.Details of Public Issue / Rights Issue of Capital in the last three yearsOur aforesaid Promoter Group Entities have not come out with any public issues / rights issues in the last three years.Further, none of our aforesaid Promoter Group Entities are listed on any stock exchanges.Changes in Accounting Policies in the last three yearsThere have been no changes in the accounting policies of our Company in the last three years.165
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSTMThe following discussion of our financial condition and results of operations should be read together with the audited financialstatements, for each of the fiscal years ended March 31, 2004, 2005, 2006, 2007 and quarter ended June 30, 2007 including theSchedules, Annexures and Notes thereto and the Reports thereon, which appear in the section titled “Financial Statements” beginningon page [●]. These financial statements are prepared in accordance with Indian GAAP, the Companies Act, and the SEBI Guidelinesas described in the Auditor’s Report of Vishal H. Shah and Associates, Chartered Accountants dated November 30, 2007 in thesection titled ‘Financial Information – as restated’ beginning on page [●].Our Financial Year (FY) ends on March 31 of each year, so all references to a particular FY are to the twelve-month period endedMarch 31 of that year.Business OverviewWe are a vertically integrated textile and garment manufacturing company in India. Our operations and facilities enable us tomanufacture a wide variety of value-added fabrics and garments through our integrated operations comprising of dyeing of yarns andfabrics, weaving operations for fabrics, processing solutions for both fabrics and garments, garment manufacturing, domain expertisein providing sampling and designing for both fabrics and garments. Our operations and facilities enable us to provide a number oftextile products / processes for our customers.We are focused towards capitalizing on the vertical integration of our operations which gives us the advantage of higher profit marginsfrom our garment business. We have achieved a high level of self-sufficiency in producing new designs and samples for our clientswhich has helped us in enhancing our product offering portfolio and improved our adaptability to the latest trends in fashion. We havepositioned ourselves as a multi-product, multi-fibre and multi-market player ensuring that our target market is a diverse mix ofdomestic fabrics and garments as well as the international garment markets.In the FY ended March 31, 2007, 2006, 2005 and 2004 our total sales were Rs.2412.17 million, Rs.1820.05 million, and Rs.1272.51million respectively. Further for quarter ended June 30, 2007 were able to achieve sales of Rs.1054.28 million.Factors that may affect Results of OperationsOur business is subject to various determining factors and risks/ uncertainties which have been elaborated in the sections titled “RiskFactors” and “Our Business” on pages [●] and [●] respectively. However, we have also enumerated such factors affecting our resultsof operations, below –1. General economic and business conditions2. Government policies and regulations governing the textile industry including subsidies3. Economic and market conditions in our export markets4. Availability of external sources of funding at favorable terms5. Exchange rate fluctuations6. Competition7. Optimum utilization of installed capacities8. Ability to effectively maintain our market positioning9. Success in implement our growth plansDiscussion on Results of OperationsAnalysis of revenuesSegment –wise break-up of revenuesOur revenues originate from two broad business segments – textiles and garments. Our textile division comprises of the followingactivities - yarn dyeing, production of greige fabrics, fabric processing and finishing. The garmenting division consists of the sale ofreadymade garments apart from charges on sample pieces sent to customers for approval, duty drawback, DEPB License sale andexchange fluctuation income on account of exports of garments.166
Analysis of RevenuesParticulars FY 04 FY 05 FY 06 FY 07 Quarterended June30, 2007Textiles Sales 451.52 777.89 1206.46 1679.46 771.83 54.94as a %of Sales 51.85% 61.13% 66.29% 69.62% 73.21%% growth 72.28% 55.09% 39.21%Garments Sales 419.21 494.62 613.59 732.71 282.45 20.46as a % of Sales 48.14% 38.87% 33.71% 30.38% 26.79%% growth 17.99% 24.05% 19.41%Rs. in millionCAGR(%)*TM* CAGR has been calculated between FY04 and FY07Income from sale of textiles grew at a CAGR of 54.94% from Rs 451.52 mn in FY 2004 to Rs 1679.46 mn in FY 2007 and further forquarter ended June 30, 2007 the sale of textile stood at 771.83 mn. This has been on account of several factors such as -a. Backward integration of the weaving division in FY2005 and the yarn dyeing activity in FY2006 with our overall operations.b. Capacity expansion in the weaving division for production of greige fabrics from 0.7 million metres per month in FY2004 to1.5 million per month at the end of FY2006.c. Opening of sales offices at new locations in the country. Previously the sales function was handled from our corporate officelocated in Mumbai whereas in the year 2007, we have added 3 new sales offices at New Delhi, Chennai and Bangalore. Wepresently have a network of around 60 dealers and agents across the country.d. Launch of new products using the in-house processing technology during the period from FY2005 to FY2007. Some of theinnovative fabrics introduced by us were mosquito repellant fabric, oil repellant fabric, stain-free fabrics, UV protectorfabrics, anti-bacterial fabrics etc.Income from sale of Ready made Garments grew at a CAGR of 20.46% from Rs 419.22 mn in FY 2004 to Rs 732.71 mn in FY 2007and further for quarter ended June 30, 2007 the sale of Readymade Garment stood at 282.45 mn. A majority of our revenues fromgarments sales in the year 2007 constituting 95.86% of the garment sales accrue from exports including charges on sample pieces sentto customers for approval, duty drawback, DEPB License sale and exchange fluctuation income on account of exports of garments andfurther in June’ 07, exports constitute 96.13 % of total garment sales.We commenced in-house commercial manufacturing of garments in September 2004. The expansion in garment manufacturing to thecurrent capacity of 0.25 million pieces per month has helped in the growth in the revenues from the garmenting division. Wecommenced domestic sale of garments in FY2007.The expansion in capacities in the textile division has been faster than in the garmenting division and thus the former has accountedfor a larger share of the revenues. We believe we have an established presence in the division owing to the long-standing experienceof our promoters which enables us to benefit from a robust marketing network and understanding of the industry.We have identified the garment division as one of the highest growth potential areas of our Company. We have embarked on astrategy of catering to a clientele offering better margins on the products sold to them. We propose to increase our capacities in thegarmenting division as has been elaborated in the section titled “Business Overview” on page [●] of the Draft Red Herring Prospectus.Our other income consists of interest income from bank deposits and customers, rent received on company property and discountreceived on raw material purchasesBusiness-wise Profitability analysisOur business divisions have shown a growth in the EBITDA margins over the years – from 8.57% in FY2005 to 17.52% in FY2007 inthe textile division and from 15.55% in FY2005 to 21.58% in FY2007 in the garments division.167
Rs. In millionTMParticulars FY 2004 FY 2005 FY 2006 FY 2007 Three months endedJune 30, 2007Textile Garment Textile Garment Textile Garment Textile Garment Textile GarmentSales 451.52 419.21 777.89 494.62 1206.46 613.59 1679.46 732.71 771.83 282.45EBITDA 37.51 54.78 66.75 76.93 132.22 115.48 293.01 159.23 101.90 68.80EBITDA % 8.31% 13.07% 8.58% 15.55% 10.96% 18.82% 17.45% 21.73% 13.20% 24.36%Several factors contributed to the growth in revenues which has been described under the heading ‘Segment-wise break-up ofRevenues’ on page [●] of this section. We believe our quality standards have ensured that a large proportion of our customer basecomprises of repeat customers; 80% of our top ten customers currently have been repeat customers. The increase in revenues has beendue to the addition of the shirting division which enlarged the scope of our offerings with the introduction of yarn-dyed greige fabricand finished fabric. These are value-added textile products that offer potential for higher realizations such as innovative varieties offinished fabric. The average realization per piece has consistently increased and our vertical integration efforts have yielded costbenefits.Geographical SpreadThe geographical distribution of the export sales can be summarized in the following table:(Rs. in million)FY04 FY05 FY06 FY07 Three months endedJune 30, 2007Sales% ofsalesSales% ofsalesDomestic 454.67 52.22 797.09 62.64 1205.65 66.24 1705.14 70.69 784.01 74.36SalesExports** 416.06 47.78 475.42 37.36 614.4 33.76 707.03 29.31 270.27 25.64Europe 304.16 348.24 498.16 601.55 209.58America 11.83 41.59 18.52 16.4 0.78Far & Middle 57.87 40.71 51.81 36.36 2.82EastOthers 0.7 2.03 7.73 2.00 1.38Total 870.73 100 1272.51 100 1820.05 100 2412.17 100 1054.28 100Sales% ofsales*Domestic sales also include income from processing charges and sale of garment quota.**The total export includes duty drawback and foreign exchange fluctuationOur domestic sales arise primarily from the sale of textiles which accounted for 98.49 % of the domestic revenue in FY2007 and 98.45% of the domestic revenue for the quarter ended June 30, 2007. The balance 1.51 % and 1.55% respectively being the contribution ofthe recently commenced domestic sale of garments. Our domestic sales have grown at a CAGR of 55.37% while the total sales havegrown at a CAGR 40.45%. We believe that there is an opportunity presented by the domestic markets with regard to the growth inorganized retailing and consumption patterns. We believe our vertically integrated manufacturing capabilities, expertise in designingfor several overseas customers and established presence in the export markets provides us with an inherent advantage in our foray intodomestic sale of garments.There has been a steady increase in the domestic contribution to revenues from 52.22% in FY2004 to 70.69% in FY2007 on accountof the growth in the capacity of the textile fabric division. The expansion in capacities in the fabric division has been faster than in thegarmenting division and thus the domestic sales accounted for a larger share of the revenues.Sales% ofsalesSales% ofsales168
While we commenced garment manufacturing at Bangalore in FY2005, we subsequently added another manufacturing base atVikhroli, Mumbai in FY2006. Further in FY 2008 we added two another units at Bangalore. Owing to our design capabilities, focuson value-driven sales rather than volume-driven sales and our increasing overseas presence, we have enjoyed a sustained increase inthe average realization per piece of garment from Rs.282.16 in FY2004 to Rs.388.64 in FY2007 and further in June 30, 2007 averagerealization per piece was Rs.330.82TMWe draw a majority of our revenues from Europe which has been on an increasing trend, comprising 91.65% of export revenues inFY2007 and further in June Europe constituted 97.60% of total exports. This is the part of a strategy which yields multiple benefitsincluding presence in the fashion hub of the world. Further, as our products are positioned in the premium fashion segment in a valuedriven,fashion-conscious market, we enjoy better margins. We have been insulated from the fluctuations in the foreign exchange ratessince the majority of our exports are invoiced in EURO.Average realization per piece (ARP)Our average realization on export sales has historically been higher than domestic sale. Our export sales are made to leading fashionhouses and retailers and the major countries our exports are directed at are Italy, United Kingdom, France and Turkey.The following table presents the continent-wise average realisation price earned by us in our export business.(In Rs.million)FY04 FY05 FY06 FY07 Quarter endedJune 30, 2007Europe 297.55 308.04 336.28 409.41 337.41America 298.43 385.78 364.94 450.16 463.25Far & Middle East 213.48 281.24 289.69 307.93 463.13Others 415.39 380.38 269.30 416.45 418.86Total 282.16 311.56 331.22 402.98 339.46There has been a steady increase in the average realization per unit from Rs 282.16 in FY 2004 to Rs 402.98 in FY 2007 at a CAGRgrowth of 12.61%. Our overseas customers include clientele which comprises of fashion brands and retailers in the premium segment.We started a sales office at Paris in FY2006 which gives us a closer proximity to the fashion trends and fashion houses based inEurope as well as address customer requirements effectively.Analysis of CostsParticulars FY 04 FY 05 %GrowthRaw MaterialConsumedFY 06 %GrowthFY 07 %GrowthRs. In millionThree monthsended June30, 2007490.32 742.7 51.47 1166.73 57.09% 1536.96 31.73 802.11% to Operating Cost 74.12 73.24 77.35 78.32 88.83Manufacturing 151.3 212.91 40.72 242.75 14.02 277.85 14.46 56.39Expense% to Operating Cost 22.87 21.00 16.09 14.16 6.24Manpower Costs 19.94 58.41 192.93 98.98 69.46 147.6 49.12 44.51% to Operating Cost 3.01 5.76 6.56 7.52 4.93Total OperatingCost661.56 1014.02 53.28 1508.46 48.76 1962.41 30.09 903.00Selling, Distribution 90.34 120.4 33.29 155.48 29.14 201.64 29.69 55.60& AdministrationCostDepreciation 19.73 26.64 35.02 31.64 18.77 74.29 134.80 20.24Finance Expenses 26.58 23.07 (13.21) 28.43 23.29 79.44 179.42 29.12TOTAL COST 798.20 1184.12 1724.01 2317.78 1007.96169
TMThe share of manufacturing expenses in the operating costs has reduced from 22.87% in FY2004 to 14.16% in FY2007 due to thecontinuous increase in the in-house manufacturing capacity. For quarter ended June 30, 2007 manufacturing expense as a percentageof operating cost was 6.24% .While we used to depend on job-work execution of contracts for our garment and fabric sales, we havebecome increasingly reliant on our in-house capabilities. This also explains the increase in the consumption of raw materials over thesaid period.Our employee costs increased as a proportion of total operating cost from 3.01% in FY2004 to 7.52% in FY2007. This has been onaccount of increase in the number of employees from 823 in FY2004 to 3169 in FY2007. For quarter ended June 30, 2007 employeeexpense as a percentage of operating cost was 4.93%.Over the period, we have increased the manufacturing bases and capacities, salesoffices, marketing staff and also opened a sales office at Paris.The growth in the finance expenses to the tune of 179.42% in FY2007 has been the result of the term loan of Rs.758.98 million takenby our Company in July 2005 for the shirting division at Tarapur. As the commercial operation of the shirting division started inMarch 2006, the interest charges due on the loan were capitalized for most part of FY2006. The effect of the interest charges onaccount of the said loan on our profitability are reflected in FY2007. For quarter ended June 30, 2007 financial expense was 29.12million. The increase in the depreciation charges in FY2007 is also on account of the commencement of commercial operation of theshirting division in March 2006, whose effect on the profitability is reflected in FY2007. For quarter ended June 30, 2007 depreciationcost was 20.24 million.Analysis of Raw material costOur raw material primarily includes yarn, fabrics, dyes and chemicals. Over the years we have been able to control our raw materialcost in relation to our sales and this has resulted in lowering the cost of raw materials over sales.Particulars FY2004 % ofRawmatrialFY2005% ofRawmatrialFY2006% ofRawmatrialFY2007% ofRawmatrialRs. In millionQuarter % ofended RawJune 30, matrial2007Domestic 485.50 99.02% 710.12 95.61% 1153.03 98.83% 1415.33 92.09% 800.08 99.75%RawmaterialImported 4.82 0.98% 32.58 4.39% 13.70 1.17% 121.63 7.91% 2.03 0.25RawmaterialTotal 490.32 100.00% 742.70 100.00% 1166.73 100.00% 1536.96 100.00% 802.11 100.00%Total costas % ofsales56.31% 58.36% 64.10% 63.72% 76.08%Analysis of Business Productivity ParametersRs. in millionParticulars FY2004 FY2005 FY2006 FY2007 Three monthsended June 30,2007Capital Employed 327.97 588.27 1500.61 1790.28 2020.41EBIT 72.56 117.04 216.06 377.95 150.46ROCE % (On average capitalemployed)24.29% 25.55% 20.69% 22.97% 7.90%*Stock Turnover (in days) 51 42 51 75 53EBITDA 92.29 143.68 247.7 452.24 170.7EBITDA Margin 10.60% 11.29% 13.61% 18.75% 16.19%*170
% increase 55.68% 72.40% 82.58%Net Profit 37.04 64.07 121.26 194.31 79.46Net Profit Margin 4.25% 5.03% 6.66% 8.06% 7.54%*% increase 72.98% 89.26% 60.24% (59.11)%** Not annualizedTMOur EBIDTA margin has increased from 10.60% in FY 2004 to 18.75% in FY 2007. This is mainly on account of increase inrealisations for fabrics and garments, higher emphasis on value added products and improving operational efficiency and economies ofscale. For quarter ended June 30, 2007 our EBITDA margin stood at 16.19%. Our Net Profit margins has increased from 4.25% in FY2004 to 8.06% in FY 2007. For quarter ended June 30, 2007 our Net profit margin stood at 7.54%.Our Return on Capital Employed reduced in FY 2006 on account of additional Debt financing of Rs.724.93 millions for setting of newmanufacturing units at Vikhroli (in Mumbai) and Tarapur (in Thane District - Maharashtra). Both the units started commercialproduction in the month of Oct’ 05 and March’ 06 respectively.Capacity UtilizationYear ended March 31,Installed capacity ('000 units)Quarter endedJune 30,20072007 2006 2005Yarn Dyeing (in Kgs.) 0.45 1.80 0.15 -Weaving (In mtrs.) 4.50 18.00 9.20 7.20Fabric Processing (In mtrs.) 5.10 20.40 20.40 20.40Garment Stitching (In pcs.) 0.53 2.10 1.80 0.88Production ('000 units)Griege Fabric 3.75 14.78 7.94 6.01Finished Cloth 1.32 3.31 2.55 2.66Yarn Processing 0.40 1.45 0.11In-house 0.34 1.23 0.11Jobwork 0.07 0.22 -% of in-house to total 83.73% 84.93% 100%Fabric processing 3.40 12.87 19.21 21.01In-house 2.11 5.11 3.64 2.46Jobwork 1.29 7.75 15.57 18.55% of in-house to total 61.93% 39.74% 18.93% 11.71%Garment 0.85 1.96 1.71 1.44Capacity utilisation (%)Yarn Dyeing 89.65 80.29% 75.19% -Weaving 83.36% 82.09% 86.32% 83.44%Fabric Processing 66.66% 63.07% 94.17% 103.00%171
Garment Stitching 162.71% 93.24% 94.98% 164.43%Note: The figures for each year indicate the capacity available from the date of capacity installationTMThe table above presents the capacity utilization of our manufacturing capabilities and is symptomatic of the demand for our productsand nature of our capacity expansion.A majority of our yarn dyeing capacity aggregating to 83.73% is utilized for our in-house requirements and the remaining capacity isutilized for job-work purposes. In FY2006, we introduced a yarn-dyeing unit in Tarapur with an installed capacity of 150,000 kgs permonth.Our weaving capacity is utilized solely for our requirements and is consumed for either further processing or for sale in the openmarket. We have an established presence in the greige fabrics segment.The output of the weaving activity is greige fabric and we produce broadly two main categories of griege fabric – simple greige with aproduction capacity of 0.7 million meters per month and yarn-dyed greige with a production capacity of 0.8 lac meters per month. Weintroduced the production of yarn-dyed greige in March, 2006 which is a superior product to the simple greige, utilized for exportqualitygarments and fetches better realization and margins. For instance, in 2006-2007, a meter of plain greige fabric realized anaverage price of Rs. 50.55 while a meter of yarn-dyed greige fabric realized a price of Rs. 58.22.The output of the fabric processing activity is finished cloth and our processing capacities are utilized for own requirements as well asjob-work. The production of finished cloth is used mainly for in-house consumption for garmenting and external demand for finishedfabric.However the capacity utilization shows a decreasing trend as the fabric processing capacity is defined by the capacity available fortop-dyeing (stenter-finish) which is a required treatment irrespective of the nature of the fabric outputOver the period of the last three years, the proportion of in-house fabric processing to job-work has increased. As in-house fabricprocessing is done on the piece-dyeing basis wherein all dyeing processes are used as against job-work that utilizes only the topdyeingprocess, the dependence on the stenter-machines has relatively reduced.We try to ensure that our garmenting capacities are utilized in an optimum manner. The garment business displays seasonality and inthe peak production season, our manufacturing capacities are optimally utilized and production is also outsourced partially on a jobworkbasis. We offer garments in the premium segments primarily in the overseas market which involve intricate styles. With thegrowing demand for our garment products , we have undertaken plans to enhance the garment manufacturing capacity.Operating ResultsRestated profit and Loss SummaryFY 2004 FY 2005 FY 2006 FY 2007 QuarterEndedJune 30,2006*(Rs In Million)QuarterEndedJune 30,2007*Sales 870.73 1,272.51 1,820.05 2,412.17 588.41 1054.28% increase 46.14% 43.03% 32.53% 79.17%Other Income 1.95 5.48 11.45 4.38 2.14 2.48% increase 181.03% 108.94% (61.75)% 15.89%Raw MaterialConsumed490.32 742.70 1,166.73 1,536.96 417.01 802.11% to Sales 56.31% 58.36% 64.10% 63.72% 70.87% 76.08%% increase 51.47% 57.09% 31.73% 86.69%Manpower 19.94 58.41 98.98 147.6 25.05 44.50Costs% to Sales 2.29% 4.59% 5.44% 6.12% 4.26% 4.22%% increase 192.93% 69.46% 49.12% 77.64%172
OtherManufacturingoverheads151.3 212.91 242.75 277.85 41.64 56.39% to Sales 17.38% 16.73% 13.34% 11.52% 7.08% 5.35%% increase 40.72% 14.02% 14.46% 35.42%TMTotalOperating costs661.56 1014.02 1508.46 1962.41 483.70 903.00% to sales 75.98% 79.69% 82.88% 81.35% 82.20% 85.65%% increase 53.28% 48.76% 30.09%Administrative,selling anddistributionexpenses90.34 120.40 155.48 201.64 35.70 55.60% to Sales 10.38% 9.46% 8.54% 8.36% 6.07% 5.27%% increase 33.27% 29.14% 29.69% 55.74%EBITDA 92.29 143.68 247.70 452.24 87.76 170.70% to Sales 10.60% 11.29% 13.61% 18.75% 14.91% 16.19%% increase 55.68% 72.40% 82.58% 94.51%FinancialExpenses26.57 23.06 28.43 79.44 13.72 29.12Short Term 17.77 11.20 17.17 29.88 4.51 10.12% to Sales 2.04% 0.88% 0.94% 1.24% 0.77% 0.96%% increase -36.95% 53.17% 74.08% 124.39Long Term 8.8 11.86 11.26 49.56 9.21 19.00% to Sales 1.01% 0.93% 0.62% 2.05% 1.57% 1.80%% increase 34.77% -5.06% 340.14% 106.30%Depreciation 19.73 26.64 31.64 74.29 9.46 20.24% to Sales 2.27% 2.09% 1.74% 3.08% 1.61% 1.92%% increase 35.02% 18.77% 134.80% 113.95%Profit Before 45.99 93.98 187.63 298.51 64.58 121.34Tax% to Sales 5.28% 7.39% 10.31% 12.38% 10.98% 11.51%% increase 104.35% 99.65% 59.10% 4.86%Current Tax 2.09 11.08 16.09 31.72 7.25 36.68Deferred Tax 6.86 18.83 48.88 70.48 14.39 4.56Fringe BenefitTax- - 1.40 2.00 0.30 0.64Net ProfitbeforeAdjustmentsExtra ordinaryitems /Adjustments37.04 64.07 121.26 194.31 42.65 79.46(0.04) 0.05 - - - -173
Net Profit afterExtra ordinaryitems /Adjustments37.00 64.11 121.26 194.31 42.65 79.46% to Sales 4.25% 5.04% 6.66% 8.06% 7.25% 7.54%% increase 73.27% 89.14% 60.24% 86.31%TMBalance Sheet Anlaysis(Rs In Million)FY 2004 FY 2005 FY 2006 FY 2007 QuarterEnded June30, 2007*Inventory(Includes RM,WIP,FG &stores)121.91 144.77 252.35 494.87 610.15% to Sales 14.00% 11.38% 13.87% 20.52% 57.87%% increase 18.75% 74.31% 96.10%Sundry Debtors 197.85 189.73 196.97 293.61 275.41% to Sales 22.72% 14.91% 10.82% 12.17% 26.12%% increase -4.10% 3.82% 49.07%Outstandingmore than 6months21.5 13.27 6.53 8.78 8.51Others 176.35 176.46 190.44 284.83 266.90Other CurrentAssets (cash &bank balances)14.80 12.99 17.39 23.4 50.00Loans andAdvances68.53 102.92 159.4 164.16 250.08Total CurrentAssetsCurrentLiabilities &ProvisionsWorkingCapital LoanLong TermLoans* Not annualized403.09 450.41 626.11 976.04 1185.6470.19 171.18 200.61 241.99 434.06210.23 153.34 286.89 364.67 353.56106.59 305.33 1077.95 1200.07 1245.99a. Comparison of Performance and Analysis of Developments for the quarter ended June 30, 2007 vis-à-vis quarter ended June 30,2006SalesOur sales increased from Rs.588.41 million in quarter ended June 30, 2006 to 1054.28 in quarter ended June 30, 2007 registering agrowth rate 79.17%. This is on account of 100.38 % increase in export sales of garments inclusive of drawback, exchange fluctuationand sample sales and also on account of 75.74 % increase in the domestic sales of greige and finished fabrics in the quarter ended June30, 2007 compared to the quarter ended June 30, 2006. . The growth in sales is mainly attributable to sustained marketing effortscoupled with better capacity utilisations in garmenting.174
TMOther IncomeOther income has marginally increased from Rs.2.14 million in quarter ended June 30, 2006 to Rs.2.48 million in quarter ended June30, 2007 which is on account of increase in interest income from customers on delayed payments.Raw material cost and manufacturing expensesTotal Raw Material cost including manufacturing expenses has increased to Rs. 802.11 millions in quarter ended June 30, 2007 fromRs. 417.01 millions in quarter ended June 30, 2006. It has increased as a proportion of sales from 70.87%in quarter ended June 30,2006 to 76.08% % in quarter ended June 30, 2007. This is as a result of increase in the closing inventory of finished stock on accountof large order book for the beginning of second quarter.Manpower costStaff cost has increased from Rs. 25.05 millions in quarter ended June 30, 2006 to Rs. 44.50 millions in quarter ended June 30, 2007.As a proportion of sales, it has marginally decreased from 4.26% in quarter ended June 30, 2006 to 4.22% in quarter ended June 30,2007 on account of increased revenue base.Administrative, selling and distribution expensesSelling, General and Administrative expenses have increased from Rs. 35.70 millions in quarter ended June 30, 2006 to Rs. 55.60millions in quarter ended June 30, 2007. As a proportion of sales, it has marginally decreased from 6.07 % in quarter ended June 30,2006 to 5.27 % in quarter ended June 30, 2007. This is on account of administrative cost control measures and wider revenue base.Finance chargesFinance charges have increased from Rs. 13.72 million in quarter ended June 30, 2006 to Rs. 29.12 million in quarter ended June 30,2007. This is on account of additional term loans taken for the new garment manufacturing facilities at Bangalore and for modificationof process and shirting house at MIDC, Tarapur, Thane. The increase is also on account of increase in interest on working capitalloans on account of higher utilisation of working capital limits to facilitate growth in sales.DepreciationDepreciation has increased from Rs.9.46 million in quarter ended June 30, 2006 to Rs 20.24 million in quarter ended June 30, 2007.This is on account of increase in fixed asset base for the manufacturing facilities at Tarapur and Bangalore.Profit after taxProfit after tax has increased from Rs.42.65 million in quarter ended June 30, 2006 to Rs 79.46million in the quarter ended June 30,2007, registering a growth of 86.31% which is primarily due to increase in turnover and subsequent increase in operational margins.InventoryInventory comprises of raw material, work in progress & finished goods and auxiliary materials. It has increased from Rs. 291.14million in quarter ended June 30, 2006 to Rs.610.15 million in quarter ended June 30, 2007. This is primarily due to increase in thenumber of in-house machined components and higher stocking requirements of raw materials and finished goods on account of growthin business operations and sales and also increase in buffer stock.b. Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2007 vis-à-vis Financialyear ended March 31, 2006Major Events during the yearWe started the domestic garmenting business in January 2007. The Company’s garment factory at Bangalore has ISO: 9001 and SA:8000 quality certifications.SalesOur sales increased from Rs.1820.05 million in FY2006 to 2412.17 in FY 2007 registering a growth rate 32.53%. This is on accountof full year of operation of shirting unit and the start of the operations in our garment manufacturing units at Vikhroli. This is also onaccount of higher sales realization on garments and fabrics.175
Other IncomeOther income has reduced from Rs.11.45 million in FY2006 to Rs.4.38 million in FY2007 which is on account of increase in theinsurance claims received in FY2006. Balance of other income consists of interest income, rent received, sundry balances written offand discount received from suppliers of raw materials.TMRaw material cost and manufacturing expensesTotal Raw Material cost including manufacturing expenses has increased to Rs. 1,814.81 millions in FY 2007 from Rs. 1,409.48millions in FY 2006. It has reduced as a proportion of sales from 77.44 % in FY2006 to 75.24 % in FY2007. This is as a result ofimprovement in sales realizations and cost reduction benefits due to the increase in vertical integration of our operations.Staff costStaff cost has increased from Rs. 98.98 millions in FY 2006 to Rs. 147.60 millions in FY 2007. As a proportion of sales, it hasmarginally increased from 5.44% in FY2006 to 6.12% in FY2007 on account of fresh recruitment and pay revision for existingemployees.Administrative, selling and distribution expensesAdministrative, selling and distribution expenses have increased from Rs.155.48 millions in FY 2006 to Rs. 201.64 millions in FY2007. As a proportion of sales, it has marginally decreased from 8.54 % in FY2006 to 8.36 % in FY2007. This is on account ofadministrative cost control measures and increased revenue base.Finance chargesFinance charges have increased from Rs. 28.43 million in FY2006 to Rs.79.44 million in FY2007. This is on account of additionalterm loans taken for the new manufacturing facilities at Vikhroli and Tarapur, in Mumbai and Thane and modification/enhancement ofprocess house at Tarapur, Thane.DepreciationDepreciation has increased from Rs.31.64 million in FY2006 to Rs 74.29 million in FY2007. This is on account of increase in fixedasset base for the manufacturing facilities at Vikhroli and Tarapur, in Mumbai and Thane respectively.Profit after taxProfit after tax has increased from Rs.121.26 million in FY2006 to Rs 194.31 million in FY2007, registering a growth of 60.24%which is primarily due to increase in turnover ,increased per unit realization and subsequent increase in operating margins.InventoryInventory comprises of raw material, work in progress & finished goods and auxiliary materials. It has increased from Rs. 252.35million in FY2006 to Rs.494.87 million in FY2007. This is primarily due to increase in the number of in-house machined components,increased capacity with the beginning of commercial operation of new shirting unit leading to higher stocking requirements of rawmaterials and finished goods and also increase in buffer stock .c. Comparison of Performance and Analysis of Developments for Financial year ended March 31, 2006 vis-à-vis March 31, 2005Major Events during the yearWe started commercial production for two manufacturing units, one at Vikhroli and other at TarapurSalesOur sales increased from Rs.1272.51 million in FY2005 to 1820.05 in FY 2006 registering a growth rate of 43.03 %. This increase ison account of growth in 29.24% growth in export sales of garments and 51.26% increase in domestic sale of fabrics over the previousyear.Other IncomeOther income has increased from Rs.5.48 million in FY2005 to Rs.11.45 million in FY2006 which reflects a growth of 108.94% . Thisincrease in on account of several insurance claims received in FY2006.176
Raw material cost and manufacturing expensesTMTotal Raw Material cost including manufacturing expenses has increased to Rs. 1,409.48 millions in FY 2006 from Rs. 955.61millions in FY 2005. It has increased as a proportion of sales from 75.10 % in FY 2005 to 77.44 % in FY 2006. This is as a result ofmarginal increase in yarn prices, which is one of the major raw materials.Staff costStaff cost has increased to Rs. 98.98 millions in FY 2006 from Rs. 58.41 millions in FY 2005. As a proportion of sales, it hasmarginally increased to 5.44% in FY2006 from 4.59% in FY2005 on account of fresh recruitment and pay revision for existingemployees.Administrative, selling and distribution expensesAdministrative, selling and distribution expenses have increased to Rs.155.48 millions in FY 2006 from Rs. 120.40 millions in FY2005. As a proportion of sales, it has decreased to 8.54 % in FY2006 from 9.46 % in FY2005 on account of administrative cost controlmeasures and wider revenue base.Finance chargesFinance charges have increased from Rs.23.06 million in FY2005 to Rs.28.43 million in FY2006. This is on account of additionalterm loans taken for the new manufacturing facilities at Vikhroli and Tarapur, in Mumbai and Thane.DepreciationDepreciation has increased from Rs.26.64 million in FY2005 to Rs.31.64 million in FY2006. This is on account of increase in fixedasset base for the manufacturing facilities at Vikhroli and Tarapur, in Mumbai and Thane respectively.Profit after taxProfit after tax has increased from Rs.64.11 million in FY2005 to Rs.121.26 million in FY2006, registering a growth of 89.14% whichis primarily due to increase in turnover especially export turnover and higher per piece sales realization.InventoryInventory comprises of raw material, work in progress & finished goods and has increased from Rs 144.77million in FY2005 toRs.252.35 million in FY2006. This is primarily due to increase in the number of higher stocking requirements of raw materials andfinished goods at various locations across the country.d. Comparison of Performance and Analysis of Developments for Financial year ended March 31, 2005 vis-à-vis March 31, 2004Major Events during the yearWe started a new garment manufacturing unit at Bangalore and expansion of existing weaving division. The company’s weavingdivision got ISO – 9001 certification.SalesOur sales increased from Rs.870.73 million in FY2004 to 1272.51 in FY 2005 registering a growth rate 46.14%. This increase is onaccount of growth in fabric sales due to expansion of weaving facility at TarapurOther IncomeOther income has increased from Rs.1.95 million in FY2004 to Rs.5.48 million in FY2005 which reflects a growth of 181.03%. Thisincrease is on account of Increase in interest income and insurance claims received.Raw material cost and manufacturing expensesTotal Raw Material cost including manufacturing expenses has increased from Rs. 641.62 millions in FY 2004 to Rs. 955.61 millionsin FY 2005. It has increased as a proportion of sales from 73.69 % in FY 2004 to 75.10 % in FY 2005. This is as a result of greaterreliance on outside suppliers for greige and finished fabrics in the absence of sufficient in house weaving capacity.177
Manpower costTMStaff cost has increased from Rs. 19.94 millions in FY 2004 to Rs. 58.41 millions in FY 2005. As a proportion of sales, it hasincreased from 2.29 % in FY2004 to 4.59% in FY2005 on account of beginning of commercial operation of garment unit atBangalore, which is a labour intensive operation.Administrative, selling and distribution expensesAdministrative, selling and distribution expenses have increased from Rs. 90.34 millions in FY 2004 to Rs. 120.40 millions in FY2005. As a proportion of sales, it has decreased from 10.37 % in FY2004 to 9.46 % in FY2005 on account of administrative costcontrol measures and wider revenue base.Finance chargesFinance charges have reduced from Rs.26.57 million in FY2004 to Rs.23.06 million in FY2005. This is as a result of reduction ofinterest charges and deployment of dollar denominated loan in substitution of high interest bearing rupee loans.DepreciationDepreciation has increased from Rs.19.73 million in FY2004 to Rs.26.64 million in FY2005. This is on account of increase in fixedasset base for the garment manufacturing facility at Bangalore in Karnataka and expansion of the weaving facility at Tarapur nearThane.Profit after taxProfit after tax has increased from Rs.37.00 million in FY2004 to Rs.64.11 million in FY2005, registering a growth of 73.27% whichis primarily due to increase in turnover and higher realizations.InventoryInventory comprises of raw material, work in progress & finished goods and has increased from Rs.121.91 million in FY2004 toRs.144.77 million in FY2005. This is primarily due to higher stocking requirements of raw materials and finished goods at variouslocations across the country.Liquidity and Capital ResourcesCash and Working CapitalSummary of Cash flows & Working Capital Requirements(Rs. In Million)Particulars FY2004 FY2005 FY2006 FY2007 Quarter endedJune 30, 2007endedCash flows from:Operating activities 23.35 167.01 9.21 132.60 185.36Investing activities (19.84) (302.64) (933.79) (226.51) (211.75)Financing activities 6.46 133.82 928.98 80.32 68.23Net increase (decrease) in cash 9.97 (1.81) 4.40 (13.59) 41.84Cash at beginning of year 4.83 14.80 12.99 17.39 3.80Cash at end of period 14.80 12.99 17.39 3.80 45.64Operating ActivitiesNet cash released from operating activities for the quarter ended June 30, 2007 was Rs 185.36 millions as compared to the EBITDA of170.70 million for the same period. This difference is primarily on account of favorable terms of trade with reduction in collectionperiod and increase in payment period.178
Net cash released from operating activities for the Financial Year ended 2007 was Rs 132.60 million as compared to the EBITDA ofRs. 452.24 million for the same period. This difference is primarily on account of increase in inventory holding and receivable levelsafter the commencement of commercial operation of shirting unit.TMNet cash released from operating activities for the Financial Year ended 2006 was Rs 9.21 as compared to the EBITDA of Rs 247.70millions for the same period. This difference is primarily on account of increase in inventory holding and receivable levels owing to43.03 % increase in revenues for F.Y – 2005-2006. Inventories were maintained in excess of the normal holding levels to ensuretimely execution of heavy order book position for 1 st quarter of F.Y – 2006-2007.Net cash released from operating activities for the Financial Year ended 2005 was Rs 167.01 million as compared to the EBITDA ofRs 143.68 million for the same period. This difference is primarily on account of increase in other liabilities.Net cash released from operating activities for the Financial Year ended 2004 was Rs 23.35 million as compared to the EBITDA of Rs92.29 million for the same period. This difference is primarily on account of increase in receivable and advances level and decrease inpayable level.Investing ActivitiesOur expenditure on investing activities primarily relates to investment in fixed assets for manufacturing facilities. For the quarterended June 30, 2007, the net cash invested in Investing Activities was Rs. 211.75 This expenditure was on account of purchase of landat Tarapur and investment in machinery at Tarapur and Bangalore units.For the FY ended March 31, 2007, the net cash invested in Investing Activities was Rs. 226.51 million. This expenditure was onaccount of increase in net block owing to expansion plans undertaken at shirting and process units.For the FY ended March 31, 2006, the net cash invested in Investing Activities was Rs.933.79 million. This expenditure was onaccount of increase in fixed assets block pursuant to setting up of shirting unit and Vikhroli garment unit.For the FY ended March 31, 2005, the net cash invested in Investing Activities was Rs.302.64 million. This expenditure was onaccount of increase in net block due to setting up of Bangalore garment factory and expansion of weaving house at Tarapur.For the FY ended March 31, 2004, the net cash invested in Investing Activities was Rs.19.84 million. This expenditure was on accountof increase in net block of assets at Tarapur.Financing ActivitiesNet cash released for the Quarter ended June 30, 2007 is Rs.68.23, comprising of inflow of funds by way of share application moneyfor additional equity shares.Net cash released for the financial year ended March 31, 2007 is Rs. 80.32 million comprising of increase in term loans and workingcapital borrowings.Net cash released for the financial year ended March 31, 2006 is Rs. 928.98 millions, comprising of increase in term loans, unsecuredloans and working capital borrowingsNet cash released for the financial year ended March 31, 2005 is Rs. 133.82 millions, comprising of increase in share capital and termloans.Net cash used/ released for the financial year ended March 31, 2004 is Rs. 6.46 millions, comprising of increase in unsecured loansand working capital finance.Working CapitalRs. In millionParticulars FY2004 FY2005 FY2006 FY2007 Quarter endedJune 30, 2007Current Ratio 1.44 1.39 1.28 1.61 1.51Net Working Capital 1,22.67 1,25.89 1,38.61 3,69.38 398.02179
Particulars FY2004 FY2005 FY2006 FY2007 Quarter endedJune 30, 2007Collection period (in Days) 82.94 54.42 39.50 44.43 23.77Payment Period (in Days) 37.39 25.47 30.88 40.99 29.52Collection period / Payment period 2.22 2.14 1.28 1.08 0.81TMOver the period of time our collection period in number of days has reduced from 82.94 days in FY 2004 to 44.43 days in FY 2007,this reduction is on account of reduction in credit period offered to the customers and extensive use of factoring and post shipmentfinance facilities. This reduction in collection period has reduced our working capital cost.Long Term Debt(Rs. in Million)Particulars FY2004 FY2005 FY2006 FY2007 QuarterendedJune 30,2007Secured Debt 106.59 305.33 1077.95 1200.07 1245.99Unsecured Debt 50.78 11.3 50.71 47.88 70.44Total 157.37 316.63 1128.66 1247.95 1316.43% increase 101.20% 256.46% 10.57% 5.49%The increase in secured debt is primarily on account of additional borrowing of approx. Rs.878.5 million for setting up of newgarment manufacturing facility at Vikhroli, Mumbai and Bangalore, new yarn dyeing & weaving factory at Tarapur and modification /expansion of existing process house .Significant Accounting PoliciesI. Basis of AccountingThe financial statements are prepared as a going concern under historical cost convention on an accrual basis except, those withsignificant uncertainty and in accordance with the Companies Act, 1956. Accounting policies not stated explicitly otherwise areconsistent with generally accepted accounting principles and prudent commercial practices.II. Fixed Assetsa. The Gross Block of Fixed asset is recorded at cost, which includes duties and other identifiable direct expenses up to the date ofcommissioning of the assets and is recorded net of Value Added Tax (VAT)) to the extent refundable.b. For process division, the block is recorded net of CENVAT credit. For weaving, export, garment and shirting divisions, the blockof fixed assets include excise duty also as for these divisions, the company has opted out of excise regime.c. For process and shirting division, the block is recorded net of 5 % capital subsidy granted by the central government onprocessing machinery.d. Incidental expenditure including interest on loans during construction period is included in capital work in progress and the sameis allocated to respective fixed assets on the completion of its construction.e. On the sale of fixed assets profit/loss if any, is credited/debited respectively to profit and loss account.III. Intangible Assetsa. Intangible Assets include Software costs that will be amortised over a period of 5 years180
IV. DepreciationTMa. Depreciation on fixed Assets is charged as follows :i) Premium on leasehold land is amortised in equal installments over the period of the lease.ii) Capital expenditure on rented premises is amortised at the depreciation rate applicable to factory building under theCompanies Act, 1956.iii) Dyeing, Weaving, Shirting, Garment & Export Divisions – on Straight Line Method.iv)Fabric Division – on Written Down value Method.(At the rate specified in Schedule XIV of the Companies Act, 1956)b. On additions to the fixed assets made during the year, depreciation is provided on pro-rata basis, with reference to the date ofaddition.c. On deletion or sale of assets, no depreciation is provided.V. Borrowing CostInterest and other cost in connection with the borrowing of funds to the extent related / attributed to the acquisition / construction ofqualifying fixed assets are capitalised upto the date when such assets are ready for its intended use and all other borrowings cost arecharged to revenue.VI. InvestmentsLong term investments are valued at cost. Any decline other than temporary, in the value of long term investments is adjusted in thecarrying value of such investments.VII. Inventoriesa. Finished goods are valued at cost or market value which ever is lower on FIFO basis. The cost of finished fabrics is arrived afterdeducting gross margin from the selling price of the goods.b. Work in progress of manufacturing goods and contract job is valued at cost .Cost comprises all cost of purchase, cost ofconversion and any cost incurred in bringing the inventories to its present location and condition.c. Raw materials for weaving, shirting and fabric division is valued at cost following specific identification method. The stock ofauxiliary material for process division is valued at landed cost on FIFO basis. The stock of Raw materials and auxiliary materialfor export division is valued at cost on standard average price method. The damaged, unserviceable and inert raw materials arevalued at net realisable value.d. Stores and Spares and sample fabric purchases, are charged to profit and loss account in the year of purchase.e. Stock of unsold flats is valued at cost.VIII. Sales and Purchasesa. Sales include sale of raw materials, semi-finished goods and finished goods. Sales also include Processing charges, GarmentStitching charges, Sample charges and Duty Drawback received and income earned from foreign exchange fluctuation on exportreceivables.b. Value Added Tax (VAT) collected is shown as liability and netted off against VAT refund.c. Sales and purchases are accounted net of cash discount, returns, rebate, etc.181
TMd. VAT Set off being reimbursement of cost is reduced from Purchases to the extent available for set off.e. Purchases also include custom duty paid on raw material imports.f. Export sales are accounted on CIF value or FOB value basis depending on the terms of sale.g. Export sales of samples are accounted on realisation basis.h. Export Incentives like DEPB license or Duty Drawback available on exports are recognised on accrual basis in the year ofexports.IX. ExpensesAll material known liabilities are provided for on the basis of available information/ estimates.X. Foreign Currency Transactiona. Foreign currency income on export sales is recorded at respective date of transaction at prevailing exchange rate. Resultant profit/(loss) if any is credited / debited to profit and loss account.b. Purchases & expenditure in foreign currencies is accounted at the exchange rate prevailing at the time of payment / forwardcontract.c. Monetary items denominated in foreign currency are restated at the exchange rate prevailing at the year-end or at the actual ratefor transactions effected after the balance sheet date up to the date of audit report except for Paris office accounts and the overallnet gain / loss is adjusted to the profit & loss account.d. Premium receivable /payable on forward contracts is shown as Current Assets/ Liabilities. Premium income/expense is amortisedover the period of contract and the unamortized premium is shown under Current Liabilities/ Assets.e. Paris office transactions are accounted at the exchange rate prevailing at the time of payment.XI. Accounting for Excise Dutya. Excise duty on process job work is charged on advalorem basis.b. The CENVAT benefit attributable to acquisition of fixed assets is netted off against the cost of fixed Assets in accordance withthe guidance note issued by the Institute of Chartered Accountants of India.c. For process division, the CENVAT credit availed on dyes & chemicals is utilised to the extent of ratios of excisable clearances tototal clearances.XII. Employee Benefits:a. Contribution to provident fund is accounted on accrual basis with corresponding contribution to recognised fund.b. The liabilities for Bonus and leave salary has been provided for the quarter as per the management’s estimate based on previousyear’s bonus payment and salary for the month of June respectively.c. The liability for gratuity is ascertained and provided for by way of contribution to approved group gratuity scheme framed andmanaged by Life Insurance Corporation of India.182
XIII Income TaxTMa. Current Tax : Provision is made for Income tax under the tax payable method based on the liability as computed after akin creditfor allowances and exemptions. Current Tax provided for current year is also net of MAT Credit receivable under the I.T Act.b. Deferred Tax : Consequent to the Accounting Standard 22- Accounting for Taxes on Income becoming mandatory effective from1 st April,2002, the differences that result between the profit offered for income tax and the profit as per financial statements areidentified and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences thatoriginate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. Thetax effect is calculated on the accumulated timing differences at the end of an accounting period, based on prevailing enactedregulations.XIV. Government GrantsGrants in the nature of interest subsidy under the Technology Up gradation Fund Scheme (TUFS) and capital subsidy onprocessing machinery are accounted for when it is reasonably certain that ultimate collection will be made.XV. Impairment of Assets As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine,a) The provision for impairment loss, if any required or,b) The reversal, if any, required of impairment loss recognized in previous periods.Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.Recoverable amount is determined,a) In the case of an individual asset, at the higher of the net selling price and the value in use.b) In the case of a cash-generating unit, (a group of assets that generates identified independent cash flows), at the higher ofthe cash generating unit’s selling price and the value in use.(Value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and from itsdeposal at the end of its useful life)XVI Provision, Contingent Liabilities and Contingent AssetsContingent Liability are not recognized, but disclosed in the case of,a) A present obligation arising from a past event, when it is not probable that an outflow of resources will be required tosettle the obligation.b) A possible obligation, unless the probability of outflow of resources is remote.Contingent Assets are neither recognised, nor disclosed. Provisions, Contingentreviewed at each Balance sheet date.Liabilities and Contingent Assets areSignificant developments after June 30,2007 that may affect our future results of operations:1. In July 2007, our company has alloted of 5.75 lakh equity shares to various entities.2. In September 2007, our company started commercial operations for two new factories at Peenya in Bangalore with a totalmanufacturing capacity of 75,000 pieces per month.Adverse EventsThere has been no adverse event affecting the operations of our Company occurring within one year prior to the date of filing of theDraft Red Herring Prospectus with SEBI.183
Except as described in this Draft Red Herring Prospectus, to our knowledge no circumstances have arisen since the date of the lastfinancial statements as disclosed in this Draft Red Herring Prospectus which materially and adversely affect, or are likely to so affect,our operations or profitability, the value of our assets or our ability to pay our material liabilities within the next twelve months.TMExcept as otherwise described in this Draft Red Herring Prospectus, there are no subsequent developments after the date of theAuditor’s Report which we believe are expected to have a material adverse impact on our reserves, profits, earnings per share andbook value.DefaultsWe have not defaulted in meeting any undisputed statutory dues, institutional dues or bank dues. We have never accepted fixeddeposits from the public and we have not issued debentures since inception.Details of any encumbrances over the property of our company and guarantees given by our company to any other party:There are no encumbrances over the property of our Company except as disclosed in the Auditors report included in this Draft RedHerring Prospectus.Information required as per clause 6.10.5.5(a) of the SEBI Guidelines:Unusual or infrequent events or transactions:There have been no unusual or infrequent transactions that have taken place during the last three years.Significant Economic changes that materially affected or are likely to affect income from continuing operations:Except as detailed in the section titled “Risk Factors” beginning on page [●] and “Management Discussion and Analysis of FinancialConditions and Results of Operations” beginning on page [●] and elsewhere in this Draft Red Herring Prospectus, there are no knownfactors that will have a material adverse impact on our operations, our income from continuing operations and our finances.Known trends or uncertaintiesApart from the risks as disclosed in the section titled “Risk factors” beginning on page [•], there are no other known trends oruncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operation-s.Future relationship between costs and revenuesCertain factors shall be mainly responsible for determining the future relationship between costs and revenues such as our continuingfocus on products and geographies offering higher realizations and margins, benefits of vertical integration, optimum utilization ofcapacities, increasing the domestic sale of garments, increasing share of the garmenting segment that renders the highest margins inthe textile value chain etc.Total turnover of the Industry in which we operateWe are operating in two business segment namely the Textiles and Apparels industry. Relevant published data, as available, for theindustry turnover has been included in the section entitled “Industry” beginning on page [•].Seasonality of businessWe do not experience seasonality in the textile segment of our business. There are primarily two fashion seasons in the garmentingbusiness being the summer and winter seasons. We experience seasonality in the garmenting segment wherein the first and thirdquarters of the financial year are subdued in terms of sale of garments.Over dependence on Single supplier/CustomerWe source our raw materials from a number of suppliers, details of which have been provided in the section titled “Our Business” onpage [•] of this Draft Red Herring Prospectus.Competitive conditionsWe face competition both from larger and well-established players.184
SECTION VI – LEGAL AND OTHER INFORMATIONTMOUTSTANDING LITIGATIONS, MATERIAL DEVELOPMENTS AND OTHER DISCLOSURESExcept as described below, there are no outstanding litigations, suits, civil or criminal prosecutions, proceedings before anyjudicial, quasi-judicial, arbitral or administrative tribunals, including pending proceedings for violation of statutoryregulations or, alleging criminal or economic offences or tax liabilities or any other offences (including past cases wherepenalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part 1 ofSchedule XIII of the Companies Act) against our Company, our Directors, our Promoters and our Promoter Group Entitiesthat would have a material adverse effect on our business. Further there are no defaults, non-payments or overdue of statutorydues, institutional/bank dues and dues payable to holders of debentures or fixed deposits and arrears of cumulative preferenceshares that would have a material adverse effect on our business.This section has been divided into seven parts:Part 1 Contingent Liabilities of our CompanyPart 2 Litigation relating to our CompanyPart 3 Litigation against out DirectorsPart 4 Litigation relating to our Promoter and Promoter Group CompaniesPart 5 Penalties imposed in past casesPart 6 Amounts owed to Small Scale Undertakings and other CreditorsPart 7 Material DevelopmentsPART 1 – CONTINGENT LIABILITIES OF OUR COMPANYContingent liabilities as on March 31, 2007 and June 30, 2007Rs. In millionParticulars 30.06.07 31.03.07Export Invoice backed by Letter of Credit 29.33 41.87Income Tax Demand 11.94 11.94Corporate Guarantee 0 162.80Custom Duty liability if Export obligation not fulfilled 0 -Excise Duty Demand 31.28 31.28Water Charges Demand 51.85 51.85Bank Guarantee 4.42 4.42Total 128.82 304.16PART 2 – LITIGATION RELATING TO OUR COMPANYCASES FILED AGAINST OUR COMPANYA. EXCISE CASES1. Notice no. C. Ex./Bond/Sec-II/M/2006/884 dated November 29, 2006 from Superintendent (Bond) Central Excise,Mumbai - I.A notice bearing no. C. Ex./Bond/Sec-II/M/2006/884 dated November 29, 2006 was issued by the Superintendent(Bond) Central Excise, Mumbai – I, alleging failure on behalf of our Company to file Proof of Export (POE)/UnutilizedCertificate with respect to the BT/CTI No. 01 dated February 28, 1996 for the amount of Rs. 85,000/- availed by ourCompany under the terms and conditions of the General Bond no. 1271/1996 for Rs. 5,00,000/- executed by ourCompany under Rule 13 of the Central Excise Rules, 1944 vide above notice our Company was called upon to file POEfailing which action under the Central Excise Act and Rules would be initiated against our Company. There has been nocorrespondence thereafter from the Superintendent (Bond) Central Excise, Mumbai.185
2. Notice no. C. Ex./Bond/Sec-II/M/2006/1750 dated December 22, 2006 from Superintendent (Bond) Central Excise,Mumbai - I.A notice bearing no. C. Ex./Bond/Sec-II/M/2006/1750 dated December 22, 2006 was issued by the Superintendent(Bond) Central Excise, Mumbai – I, alleging failure on behalf of our Company to file Proof of Export (POE)/UnutilizedCertificate with respect to the BT/CTI No. 01 availed by our Company under the terms and conditions of the GeneralBond nos. 624/1997 and 1981/2001for Rs. 10,00,000/- each executed by our Company under Rule 13 of the CentralExcise Rules, 1944 vide above notice our Company was called upon to file POE failing which action under the CentralExcise Act and Rules would be initiated against our Company. There has been no correspondence thereafter from theSuperintendent (Bond) Central Excise, Mumbai.TM3. Show Cause Notice no. F. No. V. Adj (SCN) 30-39/Th-II/05/2712 dated June 21, 2005 issued by AdditionalCommissioner, Central Excise, Thane – II.A Show Cause Notice no. F. No. V. Adj(SCN) 30-39/Th-II/05/2712 dated May 21, 2005 was issued by the AdditionalCommissioner, Central Excise, Thane – II in the name of the Dyeing unit of our Company situated at Thane, callingupon our Company to show cause as to why:a. the deemed credit amounting to Rs. 516,687/- utilized wrongly by our Company should not be deemed andrecovered from them under the provision of section 11A of Central Excise Act, 1944 read with Rule 14 of CenvetCredit Rules, 2004;b. interest at appropriate rate should not be demanded and recovered from them under the provision of section 11ABof Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rule 2002;c. penalty should not be imposed upon them under the provisions of Rule 15 of Cenvat Credit Rules, 2002.Our Company vide its letter dated August 04, 2005 replied that our Company has availed legitimate CenvateCredit and said amount need not be required to be reversed. The matter is pending before the AdditionalCommissioner, Central Excise.B. INCOME TAX CASES1. Appeal No. 7112/M/06 filed before the Income Tax Appellate Tribunal for the Assessment year 2001-2002.The Assistant Commissioner of Income Tax Circle, 6(3), Mumbai filed the above appeal no. 7112/M/06 for setting asidethe order dated October 19, 2006 of Commissioner of Income Tax (Appeals) XXVI, Mumbai, in appeal no. CIT(A)XXVI/DC 6(3)/119/2006-2007 allowing the appeal filed by the Company on the following grounds:a. Our Company was not entitled for deduction under section 80HHC for the Income Tax Act for an amount Rs.2,210,451/- ;b. Our Company had furnished inaccurate particulars of income of the extent of disallowance made in assessmentorder.Our Company filed a cross objection against the above appeal on the following grounds:a. ACIT erred in objecting to the relief given y CIT(A) by deleting the penalty under section 271(1)(c) of Rs.13,58,717/-;b. ACIT failed to appreciate that the CIT(A) was justifying in deletion of penalty as there was neither furnishing ofinaccurate particulars nor was it a case of concealment of income.The appeal and the cross objection are pending before the Income Tax Appellate Tribunal.2. Appeal no. 6424/M/60 filed before the Income Tax Appellate Tribunal for the Assessment Year 2003-2004.The Assistant Commissioner of Income Tax, Circle 6(3) filed the above appeal no. 6424/M/06 against for setting asidethe order dated September 22, 2006 of Commissioner of Income Tax (Appeals) XXVI, Mumbai, in appeal no.CIT(A)XXVI/DCIT-6(3)/677/2005-2006 partly allowing the appeal field by our Company, on the following grounds:a. the CIT(A) has erred in directing the assessing officer to allow the deduction of interest of Rs. 20,68,515/- in spite ofthe fact that our Company had deducted this amount as interest capitalised in the computation of income;b. the CIT(A) has erred in directing the assessing officer to allow deduction of interest;c. the CIT(A) erred in directing to allow a sum of Rs. 3,24,576/- being 90% of garment quota, without appreciating thefact that only specific export incentives listed in section 28(iii)(a) to 28(iii)(e) are entitled for deduction undersection 80HHC. The CIT(A) further failed to appreciate that garment quota does not form part of deductionallowable for the purpose of computation of deduction under section 80HHC;186
d. the CIT(A) has erred in directing the assessing officer to consider net receipt received on account of processingcharges which needs to be excluded from the profit of the business while determining deduction under section80HHC.TMThe appeal is currently pending before the Income Tax Appellate Tribunal.3. Appeal no. 6425/M/60 filed before the Income Tax Appellate Tribunal for the Assessment Year 2004-2005.The Assistant Commissioner of Income Tax, Circle 6(3) filed the above appeal no. 6425/M/06 against our Company forsetting aside the order dated September 28, 2006 passes by the Commissioner of Income Tax (Appeals) XXVI, Mumbai,in appeal no. CIT(A)XXVI/DCIT-6(3)/758/2005-2006 partly allowing the appeal field by our Company, on thefollowing grounds:a. the CIT(A) erred in directing to allow a sum of Rs. 123,037/- being 90% of garment quota, without appreciating thefact that only specific export incentives listed in section 28(iii)(a) to 28(iii)(e) are entitled for deduction undersection 80HHC. The CIT(A) further failed to appreciate that garment quota does not form part of deduction allowedfor the purpose of computation of deduction under section 80HHC;b. the CIT(A) erred in directing the assessing officer to consider net receipt received on account of processing chargeswhich need to be excluded from the profit of the business while determining deduction under section 80HHC.The appeal is currently pending before the Income Tax Appellate Tribunal.C. LABOUR CASES1. Show Cause Notice no./RMJ98/2590-91 dated August 1, 1998 issued by Deputy Director Industrial Safety & health,VasaiThis show cause notice was issued to Mr. Biharilal Mandhana, in his capacity of being promoter director of ourCompany, for violation of sections 21(1)(10)(c), 62(1.A) to Factory Act 1948 at our Dyeing unit at Tarapur. Mr.Biharilal Mandhana was called to show cause within seven days from the date of receipt of this show cause notice, as towhy no legal action should be initiated against our Company in respect of the violation of Section 21(1) (10) (c), 62(1.A) of Factory Act, 1948. Our Company replied to the above show cause notice giving the details of rectificationscarried out in the dyeing unit vide letter dated August 13, 1998. There have been several personnel hearing in the abovematter. The Matter is pending before Labour Court, Thane. .2. Show Cause Notice No./SMK/dtd/97/608 dated May 6, 1997 issued by Deputy Director Industrial Safety & health,Vasai.This show cause notice was issued to Mr. Biharilal Mandhana, in his capacity of being promoter director of our Company forviolation of sections 62 (1.A) and 63 of the Factory Act 1948 at Dyeing unit at Tarapur. Mr. Mandhana was called to showcause within seven days from the date of receipt of this letter, as to why no legal action should be initiated against ourCompany in respect of the violation of Section 62 (1.A), 63 of Factory Act 1948. Our Company replied to the above showcause notice giving the details of rectifications carried out in the dyeing unit vide letter dated May 26, 1997. There have beenseveral personnel hearing in the above matter. The Matter is pending before Labour Court, Thane.3. Show Cause Notice No. IS&H/SCH/VVK/2003/2659 dated August 29, 2003 issued by Deputy Director IndustrialSafety & Health, Vasai.A show cause notice no. IS&H/SCH/VVK/2003/2659 dated August 29, 2003 was issue by the Deputy Director IndustrialSafety & Health, Vasai, in the name of our Company, inquiring about the accident that took place on Lab Beaker DyeingMachine due to non-fencing of coupling of the Dyeing Machine and also informing our Company that no written informationabout the accident was sent to them. Vide this show cause notice, Deputy Director called our Company to show cause as towhy legal action should not be initiated against our Company for the said accident. Vide letter dated September 03, 2003 ourCompany informed the Joint Director that form 24-A reporting the accident was already sent to them by post, and alsoinformed that the fencing was not required as per the manufacturer of the machine and that the Company had paid all themedical expenses of the employee. There have been several personnel hearing in the above matter. The Matter is pendingbefore Labour Court, Thane.187
TMD. CIVIL CASES1. Caveat Petition No. [●] 2007 in O. S. No. [●] 2007 filed by Mr. R. Suraksha (Caveator) against our Company beforethe City Civil Judge, Bangalore.Mr. Suraksha (“Caveator”) had entered into a Lease Deed with our Company on July 10, 2006 for industrial land andbuilding bearing no. 10(A), 2 nd Stage, Peenys, Yeshwantpur Hobli, Bangalore North, land measuring 40,245.24 sq. ft.and built up area measuring 144,000 sq. ft.. With permission of the Caveator, our Company commenced the work ofelectrification and partitions. Our Company had paid Rs. 1,500,000/- and Rs. 35,000/- to the contractors towardselectrification and wire mesh partition, respectively, as advance. The Caveator along with his farther Mr. Ravikumar,stopped the work and forcibly did not allow the Contractors to continue with the work in the said premises. The Caveatorvide lease deed dated January 24, 2007 leased the said premised in favour of M/s Shashi Exports Private Limited. TheCaveator has filed the above petition praying for an opportunity of being heard before passing any impugned order in theevent our Company files any suit or seeks interim order against him in respect of the said property. The matter ispending.2. Show Cause Notice no. SGB/ RKM/20007-1880 dated April 7, 2007, issued by the Inspector of Security Guards Boardfor Brihans Mumbai and Thane District under the Private Security guards (Regulation of Employment & Welfare)Scheme(Amended) 2005.A show cause notice no. SGB/ RKM/20007-1880 dated April 7, 2007 was issued by the Inspector of Security GuardsBoard for Brihan Mumbai and Thane District under the Private Security Guards (Regulation of Employment & Welfare)Scheme(Amended) 2005 against our Company, Our Company was called to show cause within 7 days from the day ofthe receipt of the letter i.e. from April 7, 2007 as to why penal proceedings should not be considered against ourCompany for contravention of clause 13/27/28 of the Private Security guards (Regulation of Employment & Welfare)Scheme (Amended) 2005, read with clause 42 of the Scheme and Section 3(3) of the Maharashtra Private Securityguards (Regulation of Employment & Welfare) act, 1981. Our Company vide letter dated April 16, 2007 replied to theabove show cause notice stating that the provisions of Maharashtra Private Security guards (Regulation of Employment& Welfare) act, 1981 ceased to operate as the Maharashtra Government adopted and implemented Private SecurityAgencies (Regulation) Act, 2005 (Central Act) and hence no proceedings can be taken against the Company. OurCompany has not received any further correspondence thereafter.3. Arbitration between Toyota Constructions Private Limited and our Company.Toyota Construction Private Limited (“Toyota”) had offered a tender, in response to our Company’s notice InvitingTender, for construction of weaving house of our Company, situated at Tarapore for which Toyota was granted acontract on September 15, 2004. The tender contract was governed by terms and conditions as set out therein. There wasdelay in performance of the contract and defective work performed by your company. Toyota claims that some amount isoutstanding and due from our company. Toyota by their letter invoked Arbitration clause 62 of the contract. Mandhanareplied to their letter dated May 8, 2007 and claimed an amount of Rs. 39,208,264/- alongwith interest @ 18% perannum. Both the parties have two appointed arbitrators. The matter is currently pending before the arbitrators.CASES FILED BY OUR COMPANYF. EXCISE CASES1. Settlement Application filed against the Show Cause Notice no. F. No. V. Adj(SCN) 30-43/Thane-II/06 dated June 09,2006 issued by Additional Commissioner, Central Excise, Thane – II.The above show cause notice was issued by the Commissioner, Central Excise, Thane-II, in the name of our DyeingDivision at Tarapur, our Company, our Export Division and Mr. Purushottam Mandhana (Noticees),i. calling upon our Dyeing unit to show cause as to why:a. the deemed credit availed by our Company at the time of clearance of the aforesaid gods as well as deemed creditarising out of the differential duty leviable on the same goofs, should not be denied in terms of para 6 of NotificationNo. 6/2002 CE dated March 01, 2002 while demanding the duty short paid;b. the duty demanded after denying the benefit of notification no. 6/2002 CE dated March 01, 2002 works out to Rs.41,525,760/- for the period May 01, 2001 to May 24, 2003 should not be demanded and recovered from them underthe provisions of section 11A(1) of Central Excise Act, 1944;188
c. interest at the appropriate rate should not be recovered from them under section 11AB of the Central Excise Act,1944;d. penalty should not be imposed on them under the provisions of section 11AC of the Central Excise Act, 1944;e. penalty should not be imposed on them under the provisions of Rule 173Q(1) of the Rules and later on Rule 25 ofthe new Rules; andf. the Central Excise Duty of Rs. 1,520,259/- and interest of Rs. 53,859/- paid by our Company should not beappropriate towards the Central Excise Duty and interest as may be determined as payable / leviable in respect ofduty and interest demanded above at sr. no. (b) and (c).TMii. calling upon our Company and our Export Division to show cause as to why penalty should not be imposed on eachof them under Rule 209A of the Rules and later Rule 26 and / or Rule 27 of the new Rules.iii. Calling upon Mr. Purushottam Mandhana to show cause as to why penalty should not be imposed on him underRule 209A of the Rules and later Rule 26 and / or Rule 27 of the new Rules for the aforesaid acts of omission andcommission on his port.All the Noticees filed a settlement application before the Settlement Commissioner on the following grounds:a. the effective rate of duty not allowed show cause notice issued taking maximum duty as per tariff rate;b. deemed credit of Cenvate Credit not allowed;c. department has gone against its own letter F. No. V/PI/TH-II/12-17/2003/2680 dated June 21, 2005;d. duty was being paid on coat construction basis equal to the duty which was being paid in respect of fabrics receivedfrom the independent job workers as well as on their own fabrics received form the principal and another division atthe same ratio. Therefore the present show cause notice is in discrimination;e. show cause notice is time barred as the same is issued after the stipulated period;f. there is no suppression, fraud collusion, misstatement in this case as all the facts are known to the department;The Settlement Commission passed an interim order dated November 15, 2006 directing the company to pay Rs.31,275,928/- as a condition of admitting the application and also adjusted Rs. 2,075,100/- already paid by theCompany before issuance of show cause notice. The Settlement Application is pending before the SettlementCommissioner.2. Writ Petition no. 622 of 2007 filed by Dyeing Division of our Company against the Union of India, SettlementCommission and Commissioner of Central Excise, Thane, in the High Court of Bombay.A show cause notice no. Show Cause Notice no. F. No. V. Adj(SCN) 30-43/Thane-II/06 dated June 09, 2006 issued byAdditional Commissioner, Central Excise, Thane – II was issued by the department in the name of our Company, ourdyeing division, our export division and Mr. Purshottam Mandhana in the capacity of being the Managing Director ofour Company, demanding duty of Rs. 41,525,760/- for the period form May 2001 to May 2003 in respect of processedfabrics cleared by the dyeing division of our Company to our Company. The show cause notice was issued invoking theproviso to section 11A (1) on the ground that the dyeing division of our Company has suppressed the fact that they are adivision of our Company and also proposed to deny the deemed credit availed by our dyeing division. Against the aboveshow cause notice the noticees filed applications before the Settlement Commission. The Settlement Commission videthe impugned order dated November 15, 2006 directed all the parties to pay Ra. 3,12,75,928/- as a condition of admittingthe application and adjusted Rs. 20,75,100/- already paid by the parties before the issuance on the show cause notice.The dyeing division of our Company filed the above writ petition no. 622of 2007 against the Union of India, SettlementCommission and Commissioner of Central Excise, for setting aside the settlement order dated November 15, 2006passed by the Settlement Commission being contrary to the provisions of section 32F(3) of the Central Excise Act, 1944.The writ petition is pending before the High Court of BombayG. INCOME TAX CASES1. Miscellaneous Application arising form ITS no. 341/M/04 of the Revenue and Cross Objection No. 39/M/05 for theAssessment Year 1998-1999 filed before the Income Tax Appellate Tribunal, “E” bench, Mumbai.Our Company file the above Miscellaneous Application against the order dated July 31, 2006, passed by the “E” benchallowing the appeal no ITA No. 3410/M/2004 filed by the department and the Cross objections filed by our Company.Vide order dated July 31, 2006 the Income Tax Appellate Tribunal:189
a. Set aside the orders of the departmental authorities and restored the issue to the file of the assessing officer for freshdetermination of claim under section 80HHC in the light of the amended provisions and allowed the appeal of thedepartment for the statistical purpose;b. The nature of income from processing should be determined afresh in the light of the decision of the high court ofBombay, in the case of Bangalore clothing, 260 ITR 372c. Allowed the cross objection for the statistical purpose.TMThe Miscellaneous Application is pending before the Income Tax Appellate Tribunal.2. Appeal no. 17A/6425/M/06 filed by our Company before the Income Tax Appellate Tribunal for the Assessment Year2004-2005.Our Company file the above appeal before the Appellate Tribunal for setting aside the order dated September 28, 2006passes by the Commissioner of Income Tax (Appeals) XXVI, Mumbai, in appeal no. CIT (A) XXVI/DCIT-6(3)/758/2005-2006 partly allowing the appeal field by our Company, on the following grounds:a. Disallowance of Employees Contribution to PF amounting to Rs. 73,742/- and Employer’s contribution to PFamounting to Rs. 62,795/-;b. Disallowance of Rs. 53,000/-, expenses incurred on increasing authorised share capital;c. Erred in confirming the action of the assessing officer considering the profits of the whole business for the purposeof working of deduction under section 80HHC even when separate books have been maintained in respect of ExportDivision;d. Failed to appreciate that the Export Division of our Company was functioning independent of the other division andhence, deduction under section 80HHC had to be worked out on the basis of the profits derived from the activitiesand ignoring the profit of the other divisions not connected to exports;e. Erred in confirming the action of the assessing officer in holding that the commissioner income is falling underclause (baa) and thereby, reducing 90% of the commission from profits of business for computation of deductionunder section 80HHC;f. Erred in confirming the action of the assessing officer in reducing 100% of the miscellaneous income from profits ofthe business while computing the deduction under section 80HHC on the ground that the same is not related toexport business;g. Erred in not appreciating that only 90% of the net income and not the gross income could be deducted;h. Erred in confirming the levy of interest under sections 234B, 234C and 234D.The appeal is pending before the Income Tax Appellate Tribunal.H. DEPB CASESI. CRIMINAL CASES1. Complaint No. 89/S/2006 in the 29 th Court of Metropolitan Magistrate at Dadar, Mumbai filed by our Companyagainst Patloon Apparels Private LimitedOur Company supplied the directors of the defendant with goods worth Rs. 15, 58,758/-. The defendant, however, failedto make the aforesaid payment. Further, the defendant sold the consignment of goods delivered and misappropriated theproceeds therefrom. Our Company has thus filed this case under sections 420/418/120B of the Indian Penal Code, 1860claiming a loss of Rs. 25,42,236/- and praying that the police take action under section 156(3) of the Criminal ProcedureCode to recover the said goods or proceeds from the defendant. The above complaint is pending before the MetropolitanMagistrate.2. Case No. 317/M/05 in the 7 th Court of Metropolitan Magistrate at Dadar, Mumbai filed by our Company againstPatloon Apparels Private LimitedOur Company supplied the directors of the defendant with goods worth Rs. 15, 58,758/-. Further, our Company issued abill to the defendant dated March 27, 2002 bearing number 03586 for the payment of Rs. 2,93,800/-. The defendant,however, issued two cheques for Rs. 1, 00,000/- each, which, on depositing were dishonoured by the bank. Inspire offurther correspondence in this regard the defendant failed to make the payment, as a result of which, our Company filedthis case under section 138 read with section 141 of the Negotiable Instruments Act. The above matter is pending beforethe Metropolitan Megistrate.J. CIVIL CASES190
1. Writ Petition No.1552 of 2004 filed before The High Court of Bombay filed by our Company against RegionalProvident Fund Commissioner & another.Our Company filed a Writ Petition No.1552 of 2004 before the high court of Bombay against Regional Provident FundCommissioner & another challenging the order dated March 30, 2004 passed by the Regional Provident FundCommissioner Sub Accounts Office, Kandivali, directing the Dyeing division of our Company at Tarapur to pay:a) the Provident Fund Contribution under section 6 of the Act read with paragraph 38 of the Employees, ProvidentFund Scheme, 1952;b) the employees pension scheme 1995 contributions under section 6A of the Act read with paragraph 4(1) of theEmployees Pension Scheme, 1995;c) administrative charges under paragraph 38 of the Employees, Provident Fund scheme, 1952;d) contributions under section 6(c) read with paragraph 8 (1) of the Employees’ deposit Linked Insurance Scheme,1976;e) the administrative charges on EDLI contributions under section 6C of the Act; and penal damage under section 14-Bamounting to Rs. 179,542/-.Our Company prayed for issuance of a Writ of Certiorari or any other appropriate writ, order or direction, calling forthe records and quashing of the said order.TMThe court vide its order dated July 07, 2004 rejected the petition, enabling our Company to move to the appellateauthority challenging the above order of the court and directed that no coercive steps shall be taken against our Companyfor a period of 6 weeks from the date of this order i.e. July 07, 2004. Our Company on August 13, 2004 filed a notice ofmotion for review and recall of the order dated July 07, 2004 and restoration of the above writ petition and also prayedfor extension of 6 weeks period granted vide the said order till the final disposal of this notice of motion. The abovenotice of motion is pending before the Hight Court of Bombay.PART 3 – LITIGATION AGAINST OUR DIRECTORSOutstanding Litigations against our DirectorsExcept for the case mentioned in Serial No. F1 and F2 filed by our Director Mr. Purshottam Mandhana and Serial No. C1 andC2 above, and K1 below filed against our Director Mr, Biharilal Mandhan, there are no outstanding litigations against ourDirectors.Outstanding Litigations by our DirectorsThere are no outstanding litigations against our Directors.PART 4 – LITIGATION RELATING TO OUR PROMOTERS AND PROMOTER GROUP ENTITIESOutstanding Litigations against our PromotersExcept for the case mentioned in Serial No. F1 and F2 filed by our Promoter Mr. Purshottam Mandhana and Serial No. C1and C2 above, and K1 below filed against our Promoter Mr, Biharilal Mandhan, there are no outstanding litigations againstour Promoters.Outstanding Litigations by our PromotersThere are no outstanding litigations by our Promoters.Outstanding litigations against our Promoter Group EntitiesMahan Synthetic Textiles Private Limited (“MSTPL”)K. Labour Cases1. Complaint (ULP) No.140 OF 2003191
The above complaint was filed by R. D. Padave, S. P. Mandavkar, C. S. Chavan, R. H. Pandey, P. R. Pandharkar; B. S. Kanwarbefore the Labour Court of Mumbai. The complainants filed the complaint to direct M/s.Mahan Synthetics Textiles Ltd,Purshottam Mandhana in his capacity of being the director of Mahan Synthetics (Currently Promoter Director of our Company)and others to reinstate the complainants on their original posts with full back wages with respective dates of their termination i.e.from January 31, 2003 and February 8, 2003 to the date of reinstatement and with continuity in service. The Complainants filedan application for interim relief for Unfair Labour Practice under Item 1(a) (b) and (f) of Schedule IV of Maharashtra Recognitionof Trade Union (MRTU) & Prevention of Unfair Labour Practices (PULP) Act, 1999 as their services were illegally terminatedby paying some amount which is not the legal dues as per Section 25-F of the Industrial Dispute act. The Complainants prayedthat M/s. Mahan Synthetics Textiles Limited be directed to deposit the monthly wages of the complainants in the Court everymonth and the complainant be allowed to at least withdraw 50% of the same. The Complainants have prayed for a grant of adinterimrelief’s for the same and till the time the complaint is pending for final hearing and disposal of the complaint. Saidcomplaint is pending before the Labour Court of Mumbai.TMOutstanding litigations by our Promoter Group EntitiesThere are no outstanding litigations by our Promoter Group Entities.PART 5 – PENALTIES IMPOSED IN PAST CASESPaid By Our Company in the last five yearsThe amount of penalties paid by our Company in last five years towards alleged non-compliance / violation of applicable law / rules /regulations / orders are as follows:( Rs. In million)Year Amount Brief description2002-2003 Nil Nil2003-2004 Nil Nil2004-2005 434,472 Central Excise2005- 2006 100,000 Central Excise2006-2007 Nil NilPenalties paid by our Promoters/Directors in last five years.NilPenalties paid by Promoter Group Entities in last five years.NilPART 6 – AMOUNTS OWED TO SMALL SCALE UNDERTAKINGS AND OTHER CREDITORSAmount owed to small scale undertakings and other creditors is not determined.PART 7 – MATERIAL DEVELOPMENTSIn the opinion of the Board of Directors of our Company, there have not arisen since the date of the last financial statements disclosedin this Draft Red Herring Prospectus, any circumstances that materially or adversely affect or are likely to affect the profitability ofour Company to pay their material liabilities within the next twelve months.192
TMGOVERNMENT/ STATUTORY APPROVALSExcept for pending approvals mentioned under this heading, our Company has received the necessary consents, licenses, permissionsand approvals from the Government/RBI and various Government agencies required for our present business. Further, except asmentioned hereinbelow, our Company has not yet applied for any licenses for the proposed activities as contained in the chapter titled‘Objects of this Issue’ beginning on page no. [●] of this Draft Red Herring Prospectus to the extent that such licences/approvals maybe required for the same. It must be distinctly understood that, in granting these approvals, the Government of India does not take anyresponsibility for our financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf.I. General1. Certificate of incorporation issued in the name of our Company dated May 15, 2007 bearing Corporate Identity NumberU17120MH1984PLC033553 and registration no. 11-33553 issued by Registrar of Companies, at Mumbai, Maharashtra.2. Registration Certificate of Establishment under Bombay Shops and Establishments Act, 1948 dated July 27, 2006 bearingregistration no. FS-II/006582 issued by the Inspector under the Bombay Shops and Establishment Act, 1948 valid tillDecember 31, 2007.3. Our Company’s PAN (Permanent Account Number) under the Income Tax Act is AABCM6615M.4. Our Company’s TAN (Tax Deduction Account Number) under the Income Tax Act is MUMM20579G.5. Our Company’s TIN (Tax payers Identification Number) under the Central Value Added Tax Act, 2002 is 27930346454 C.6. Our Company’s TIN (Tax payers Identification Number) under the Maharashtra Value Added Tax Act, 2002 is27930346454 V.7. Registration of Employees under the Employees State Insurance Act, 1948 bearing registration no. NS-42599(31-42460-19)dated October 28, 1996 issued by the Regional Director, Regional Office Maharashtra, Employees State InsuranceCorporation in the name of our Company.8. Registration of Employees under the Employees’ Provident Fund and Miscellaneous Provision Act, 1952 and scheme framedthereunder bearing code no. MH/29516 vide approval no. MH/PE/APP/RCL/29516/205 dated February 17, 1994 issued bythe Regional Provident Fund Commissioner, Maharashtra and Goa.9. Certificate of Importer – Exporter Code (IEC) dated December 14, 1995 bearing IEC no. 0391156390 issued by Ministry ofCommerce in the name of our Company. .10. Registration–Cum-Membership Certificate dated June 8, 2005 bearing registration no. SR/MFG/9987/2005-06 issued by theDirector and Secretary of the Synthetic and Rayon Textile Export Promotion Council in the name of our Company, validupto March 31, 2010.11. Registration-Cum-Membership Certificate bearing registration no. MP/19369(96)-M issued by the Assistant Director, theCotton Textile Export Promotion Council, in the name of our Company on November 03, 2004 , valid upto March 31, 2009.12. Registration-Cum-Membership Certificate dated April 01, 2004 bearing registration no. FIEO/WR/2637/2004-2005/2637issued by Joint Director, Federation of Indian Export Organisation, New Delhi, in the name of our Company, valid uptoMarch 31, 2009.13. Registration-Cum-Membership Certificate dated July 7, 2007 bearing registration no. 101073 issued by Assistant Director,Apparel Export Promotion Council, New Delhi, in the name of our Company, valid upto December 30, 2007.14. Certificate of Recognition as Two Star Export House dated April 16, 2007 bearing no. 03/2/001109/20070416 issued byAdditional Export Commissioner/Joint Director General of Foreign Trade, Ministry of Commerce & Industry in the name ofour Company, valid upto March 31, 2009.193
II. Export Division (Bangalore)TM1. Factory Licence no. 35858 dated September 22, 2004 issued by the Chief Superintendent, Department of Factories andBoiler, Bangalore in the name of our Company valid upto December 31, 2007.2. Central Excise Registration Certificate bearing no. AABCM6615MXM007 dated December 13, 2006 issued by the DeputyCommissioner of Central Excise in the name of our Company.3. Value Added Tax Registration Certificate dated April 01, 2005 bearing TIN (Tax Payers Identification Number)29290141715 issued by the Assistant Commissioner of Commercial Tax, Bangalore.4. Certificate of Registration under the Central Sales Tax (Registration and Turnover) Rules, 1957 dated November 03, 1999bearing no. 29290141715 (Central) issued by Assistant Commissioner of Commercial Taxes, Bangalore in the name of ourCompany.5. Registration of Employees under the Employees State Insurance Act, 1948 bearing registration no. 53-21121-19 datedJanuary 28, 2005 issued by the Deputy Director, Regional Office Karnataka, Employees State Insurance Corporation in thename of our Company.6. Employees Provident Fund no. KN/29849 issued by the Assistant Provisional Fund Commissioner, Employees ProvidentFund Organisation, Bangalore vide letter no. KN/ PNY/29489/PF/CIR-III/893/2004-2005 in the name of Export Division ofour Company on January 13, 2005.7. Industrial Entrepreneur Memorandum bearing no. 1856/SIA/IMO/2004 dated May 27, 2004, issued by the Secretariat forIndustrial Assistance, New Delhi in the name of our Company for carrying out the activities of manufacture of readymadegarments except knitted garments reserved for SSI sector.8. ISO 9001:2000 Certificate registration no. 12 100 29861 TMS dated November 25, 2006 issued by the Certification Body ofTUV SUD Management Service GmbH Trading as TUV South Asia Private Limited in the name of our Company for QualityManagement System for manufacture and export of garments, valid upto November 22, 2009.9. ISO 8000:2001 Certificate registration no. 99 810 00014 dated November 25, 2006 issued by the Certification Body of TUVSUD Group in the name of our Company for Social Accountability Management System for manufacture and export ofgarments, valid upto November 24, 2009.10. Electricity Supply agreement bearing no. HT/470 dated March 26, 2006 between Electricity Supply Company Limited andMr. H. C. Byregowda (Landlord of the property).11. Consent bearing no. 355/KSPCB/RO/PEENYA/DEO/AEO-1/WPC/IND/PIA/LG/2006-2007/2001 dated December 27, 2006under section 25/26 of the Water (Prevention and Control of Pollution) Act, 1974 issued by the Regional Officer, Peenya,authorising it to continue to discharge sewage effluents on land for gardening after treating in the sewage treatment plant andrestraining it from generating any trade effluents from the process, valid for a period till December 31, 2007.12. Consent bearing no. 286/KSPCB/RO/PEENYA/DEO/AEO-1/IND/APC/PIA/LG/2006-2007/2002 dated December 27, 2006under section 21 of the Air (Prevention and Control of Pollution) Act, 1981 issued by the Regional Officer, Peenya,authorising it to operate their industrial plant in the air pollution control areas as notified and to continue to make existingdischarge of emission from the chimney attached to 250 KVA DG Set and two Chimneys attached to 50 Kg/hr Boilers, validfor a period till December 31, 2007.III. Mandhana Weaving House (Shirting Division, Tarapur, Thane)2. Industrial Entrepreneur Memorandum bearing no. 4221/SIA/IMO/2004 dated November 04, 2004 issued by the Secretariatfor Industrial Assistance, New Delhi in the name of our Company for carrying out the activities of• weaving and finishing of cotton textiles on powerloom; and• weaving and finishing of artificial synthetics textile fabrics on powerloom194
3. Consent no. BO/WPAE/EIC No. TN.01154-C6/R/CCHWA-78 dated February 02, 2007 granted by the MaharashtraPollution Control Board under the section 26 of the Water (Prevention & Control of Pollution) Act, 1974 and under Section21 of the Air (Prevention & Control of Pollution) act, 1981 and authorisation / Renewal of Authorisation under Rule 5 of theHazardous Wastes (Management & Handling) Rules, 1989 and Amendment Rules, 2003 in the name of our Company for aperiod upto December 31, 2011TM4. Agreement dated November 16, 2005 entered between the Maharashtra State Electricity Board and Mandhana WeavingHouse (Shirting Division) for consumption of electrical energy for the purpose of weaving.IV. Mandhana Dyeing (Tarapur, Thane)1. Factory Licence no. 087520 dated December 20, 2005 issued by the Joint Director Industrial Safety and Health, Vasai,valid upto December 31, 2007.2. Central Excise Registration Certificate bearing no. AABCM6615MXM001 dated July 29, 2003 issued by AssistantCommissioner of Central Excise, Boisar.3. Industrial Entrepreneur Memorandum bearing no. 232/SIA/IMO/2000 dated January 27, 2000 issued by the Secretariatfor Industrial Assistance, New Delhi in the name of our Company for carrying out the activities of• Bleaching, dyeing and printing of cotton textiles;• Bleaching, dyeing and printing of cloth other than by hand; and• Bleaching, dyeing and printing of artificial synthetic textiles other than by hand.4. Consent no. BO/WPAE/EIC No. TN. 0861-06/R/CCHWA-611 dated August 10, 2006 issued by the MaharashtraPollution Control Board granting consent to operate under section 26 of the Water (Prevention and Control of Pollution)Act, 1947 and under section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and Authorisation / Renewalof Authorisation under Rule 5 of the Hazardous Wastes (Management & Handling) Rules 1989 and Amendment Rules,2003, for a period upto June 30, 2011.5. Licence No. P/HQ/MH/15/5226(P7051) dated May 22, 2005 for Existing Petroleum Class B&C Installation at plot no.E-25, M.I.D.C., Tarapur District, Thane, issued by Joint Chief Controller of Explosives, Ministry of Commerce andIndustry, Mumbai, renewed upto December 31, 2007.6. Service Tax Certificate of Registration bearing registration no. ST/MUM/DIV-VI/GTA/489/TH II/04-05 dated March22, 2005 issued by the Superintendent (Service Tax) Division VI, Mumbai.7. Boiler Certificate bearing no. MR/13200 dated September 11, 2007 issued by the Deputy Director of Steam, Boilers,Maharashtra, permitting the unit to use smoke tubes upto September 08, 2006.8. Contract labour License bearing license no. DC/THN/LLA/012/23 dated December 31, 1999 issued by the Licensingofficer permitting the unit to employ not more than 50 workmen valid upto December 31, 2007.V. Mandhana Weaving House (Tarapur, Thane)1. Factory Licence no. 079806 dated June 6, 2003 issued by the Joint Director Industrial Safety and Health, Vasai, validupto December 31, 2007.2. Industrial Entrepreneur Memorandum bearing no. 493/SIA/IMO/2002 dated February 21, 2002 issued by the Secretariatfor Industrial Assistance, New Delhi in the name of our Company for carrying out the activities of• weaving and finishing of cotton textiles on powerlooms; and• weaving and finishing of artificial synthetic textile fabrics on powerlooms.3. Certificate of Registration bearing registration no. ST/MUM/DIV-VI/GTA/490/TH II/04-05 dated March 22, 2005issued by the Superintendent (Service Tax) Division VI, Mumbai.195
4. Electricity Sanction Letter no. 06301 dated November 02, 2002 issued by Maharashtra State Electricity Board, O & MCircle, and Vasai.TMV. Mandhana Industries, Vikhroli.1. Industrial Entrepreneur Memorandum bearing no. 4907/SIA/IMO/2005 dated October 19, 2005 issued by Secretariat forIndustrial Assistance in the name of our Company for carrying out the manufacture of readymade garments and fabrics.Applications filed for Renewal1. Application dated May 28, 2007 for renewal of Registration-Cum-Membership Certificate bearing registration no. 101073issued by Deputy Director (Acting), Apparel Export Promotion Council.2. Application dated September 03, 2007 Renewal of Contract Labour Licence nos. DC/THN/CLA/002/19 dated March 03,1997 and DC/THN/CLA/012/23 dated March 16, 2000.3. Application dated October 22, 2007 for renewal of IS/ISO 9001:2000 bearing license no. QMS/WR/L – 7002712 datedOctober 29, 2004 issued by the Bureau of Indian Standards.4. Application dated April 07, 2007 for renewal of Boiler Certificate bearing no. MR/11608 dated June 22, 2006 issued by theDeputy Director of Steam, Boilers, Maharashtra, permitting the unit to use HORZ smoke tubes5. Mandhana Logo6. Canvas by Mandhana7. Back 2 RootsEPCG LicencesSr.No.LICENCENODATECIFVALUE/DUTYSAVE (RS./INR)EXPORTOBLIGATION(US$)EXPORT OBLIGATIONITEMS1 0330007006 March 11, 2004 68,310/- 11420.68 Readymade Garment2 0330007200 November 25, 2004 1,94,770/- 32,563.42 Readymade Garment3 0330007360 December 13, 2004 63,925/- 10,687.56 Readymade Garment4 0330007898 February 15, 2005 1,95,522/- 32,689.15 Readymade Garment / Fabrics5 0330007911 February 16, 2005 141,614.70 23,676.43 Readymade Garment / Fabrics6 0330008088 March 9, 2005 .35,46,350/- 5,92,911.18 Readymade Garment / Fabrics7 0330008163 March 17, 2005 71,508/- 11,955.36 Readymade Garment / Fabrics8 0330008282 March 29, 2005 6,01,184.32 100,511.48 Readymade Garment / Fabrics9 0330008283 March 29, 2005 1,77,105.00 29,610.03 Readymade Garment / Fabrics10 0330008294 March 30, 2005 85,71,187.00 14,33,009.32 Readymade Garment / Fabrics11 0330008808 June 3, 2005 2,43,095.00 40,642.84 Readymade Garment / Fabrics12 0330008809 June 3, 2005 64,238.00 10,739.89 Readymade Garment / Fabrics13 0330009022 June 28, 2005 12,37,755.00 2,06,939.18 Readymade Garment / Fabrics14 0330009140 July 8, 2005 1,11,118.00 18,577.72 Readymade Garment / Fabrics15 0330009357 August 9, 2005 35,872.41 5,997.47 Readymade Garment / Fabrics16 0330009552 August 26, 2005 3,25,329.00 54,391.47 Readymade Garment / Fabrics17 0330009615 September 2, 2005 2,78,154/- 46,504.32 Readymade Garment / Fabrics18 0330009770 September 20, 2005 18,29,817/- 3,05,925.51 Readymade Garment / Fabrics19 0330009972 October 7, 2005 .20,13,888.89 3,36,700/- Readymade Garment / Fabrics20 0330010121 October 26, 2005 .9,84,750/- 164,639.49 Readymade Garment / Fabrics21 0330010124 October 26, 2005 27,92,003.62 466,792.66 Readymade Garment / Fabrics196
22 0330010192 November 9, 2005 .13,53,963.00 2,26,367.89 Readymade Garment / Fabrics23 0330010327 November 25, 2005 459,257.00 76,782.77 Readymade Garment / Fabrics24 0330010448 December 8, 2005 18,72,494.55 3,13,060.73 Readymade Garment / Fabrics25 0330010675 December 29, 2005 .1,71,354.53 28,648.61 Readymade Garment / Fabrics26 0330011155 February 27, 2006 5,59,689.48 100,731.51 Fabrics27 0330011269 March 8, 2006 4,27,593.60 76,612.51 Readymade Garment / Fabrics28 0330011278 March 9, 2006 5,87,510.67 105,265.06 Readymade Garment / Fabrics29 0330011544 March 29, 2006 9,84,628.80 1,76,417.25 Readymade Garment / Fabrics30 0330011775 April 24, 2006 50,73,432.00 9,04,960/- Readymade Garment / Fabrics31 0330011826 April 27, 2006 16,54,250.85 2,95,072.61 Readymade Garment / Fabrics32 0330011902 May 5, 2006 18,21,430.85 3,21,310.84 Readymade Garment / Fabrics33 0330011942 May 9, 2006 2,26,240.00 39,910.03 Readymade Garment / Fabrics34 0330013099 August 31, 2006 2,31,838.92 39,294.73 Readymade Garment / Fabrics35 0330013296 September 19, 2006 6,84,463.04 117,002.22 Readymade Garment36 0330014221 December 5, 2006 11,07,845.96 1,94,572.88 Readymade Garment37 0330014953 February 2, 2007 9,95,332.86 1,79,137.52 Fabric38 0330015126 February 19, 2007 1,32,313.07 23,813.37 Readymade Garment39 0330015512 March 22, 2007 1,66,074.30 29,889.63 Readymade Garment40 0330015513 March 22, 2007 2,64,928.05 47,681.08 Readymade Garment41 0330015750 April 14, 2007 5,35,128.30 97,517.68 Readymade Garment42 0330015751 April 10, 2007 8,53,657.05 1,55,563.92 Readymade GarmentTM43 0330015789 April 13, 2007 2,574,208.00 4,69,103.96 Fabrics44 0330015981 May 4, 2007 4,292,168.72 8,18,530.38 Fabrics45 0330015820 April 18, 2007 975,513.00 1,77,770.02 Fabrics46 0330015902 April 27, 2007 138,563.60 25,250.76 Fabrics47 0330016023 May 10, 2007 552,460.26 1,05,355.94 Fabrics48 0330016045 May 14, 2007 2,161,245.69 412,156.50 Fabrics49 0330016198 May 25, 2007 15,34,734.68 2,92,678.84 Fabrics50 0330016653 July 5, 2007 2,008,346.00 3,91,395.20 Fabrics51 0330016920 July 27, 2007 1,141,253.33 2,22,412.34 Readymade Garment52 0330017014 July 8, 2007 8,592,878.00 16,95,265.69 Fabrics53 0330017015 July 8, 2007 6,225,893.04 12,28,289.70 Fabrics54 0330017214 August 23, 2007 2,703,960.19 5,33,457.00 Fabrics55 0330017287 August 30, 2007 5,240,665.78 10,33,916.80 Fabrics56 0330017350 September 6, 2007 345,246.72 66,875.87 Readymade Garment / Fabrics57 0330017351 September 6, 2007 345,246.72 66,875.87 Fabrics / Readymade Garment58 0330017393 September 7, 2007 820,019.18 1,58,841.48 Fabrics / Readymade Garment59 0330017628 October 3, 2007 14,19,037.17 2,83,453.11 Fabrics / Readymade Garment197
60 0330017786 October 15, 2007 24,68,284.97 4,93,040.69 FabricsTM61 0330017792 October 16, 2007 195,258.25 39,002.89 Fabrics62 0330017749 October 12, 2007 1,80,796.05 36,114.06 Fabrics63 0330018035 November 6, 2007 1,121,233.05 2,25,090.70 Fabrics64 0330018162 November 21, 2007 492,511.35 98,873.04 Fabrics65 0330018229 November 28, 2007 628,376.55 1,26,148.36 Fabrics / Readymade Garment66 0330018241 November 29, 2007 628,376.55 1,26,148.36 Readymade GarmentLicences required but not applied for the Objects of the Issue:Garment Manufacturing Unit: (Bangalore) 3 Unit7. Factory Licence application for 3 unites at Bangalore before the Chief Superintendent, Department of Factories and Boiler,Bangalore.8. Industrial Entrepreneur Memorandum for 3 Unites at Bangalore before Secretariat for Industrial Assistance, New Delhi9. Electricity Supply / Power Sanction from Bangalore Electricity Supply Company Limited, Bangalore10. Consent for Water (Prevention and Control of Pollution) Act, 1974 issued before the Regional Officer, Peenya11. Consent for Air (Prevention and Control of Pollution) Act, 1981 issued by the Regional Officer, Peenya12. Water Supply sanction letter from Concern AuthoritySampling Unit at Mumbai (Garment)7. Factory License application before the Joint Director Industrial Safety and Health, Mumbai8. Industrial Entrepreneur Memorandum before Secretariat for Industrial Assistance, New Delhi9. Power Sanction (Electric) from concern authority10. NOC from BMC for running the manufacturing activity11. Service Tax Certificate issued by the Superintendent (Service Tax) Division VI, Mumbai.12. Contract labour License issued by the Licensing officer permitting the unit to employ contract labourFabric Processing Plant (Tarapur)10. Factory Licence application before the Joint Director Industrial Safety and Health, Vasai,11. Industrial Entrepreneur Memorandum issued by the Secretariat for Industrial Assistance, New Delhi in the name of our Companyfor carrying out the activities of• Bleaching, dyeing and printing of cotton textiles;• Bleaching, dyeing and printing of cloth other than by hand; and• Bleaching, dyeing and printing of artificial synthetic textiles other than by hand.12. Consent issued by the Maharashtra Pollution Control Board granting consent to operate under section 26 of the Water (Preventionand Control of Pollution) Act, 1947 and under section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and198
Authorisation / Renewal of Authorisation under Rule 5 of the Hazardous Wastes (Management & Handling) Rules 1989 andAmendment Rules, 2003,TM13. Licence for Existing Petroleum Class B&C Installation at plot no. C-3 , M.I.D.C., Tarapur District, Thane, issued by Joint ChiefController of Explosives, Ministry of Commerce and Industry, Mumbai14. Service Tax Certificate issued by the Superintendent (Service Tax) Division VI, Mumbai.15. Boiler Certificate issued by the Deputy Director of Steam, Boilers, Maharashtra, permitting the unit to use smoke tubes.16. Power Sanction (Electricity) from Maharashtra State Electricity Board17. Water Supply sanction letter from Maharashtra Industrial development Corporation18. Sanctioning Factory Plan from Maharashtra Industrial development CorporationApplication received for the Objects of the IssueMandhana Weaving House (Shirting Division, Tarapur, Thane)1. Industrial Entrepreneur Memorandum bearing no. 4221/SIA/IMO/2004 dated November 04, 2004 issued by the Secretariat forIndustrial Assistance, New Delhi in the name of our Company for carrying out the activities of• weaving and finishing of cotton textiles on powerloom; and• weaving and finishing of artificial synthetics textile fabrics on powerloom2. Consent no. BO/WPAE/EIC No. TN.01154-C6/R/CCHWA-78 dated February 02, 2007 granted by the Maharashtra PollutionControl Board under the section 26 of the Water (Prevention & Control of Pollution) Act, 1974 and under Section 21 of the Air(Prevention & Control of Pollution) act, 1981 and authorisation / Renewal of Authorisation under Rule 5 of the Hazardous Wastes(Management & Handling) Rules, 1989 and Amendment Rules, 2003 in the name of our Company for a period upto December31, 20113. Agreement dated November 16, 2005 entered between the Maharashtra State Electricity Board and Mandhana Weaving House(Shirting Division) for consumption of electrical energy for the purpose of weaving.199
SECTION VII – OTHER REGULATORY AND STATUTORY DISCLOSURESTMAuthority for this IssueOur Board has, pursuant to a resolution passed at its meeting held on August 06, 2007, authorised this Issue, subject to the approval ofour shareholders under Section 81 (1A) of the Companies Act.Our shareholders have authorised this Issue by a special resolution adopted pursuant to Section 81 (1A) of the Companies Act, passedat the Extraordinary General Meeting held on August 28, 2007.Our Company has also obtained all the necessary contractual approvals required for this Issue. For further details, please refer to thechapter titled ‘Government / Statutory Approvals’ beginning on page no. [●] of this Draft Red Herring Prospectus.Prohibition by SEBIOur Company, our Directors, our Promoters, our Promoter Group Entities and the companies in which our Directors are associated asdirectors or promoters, have not been prohibited from accessing capital markets under any order or direction passed by SEBI.Further, our Promoters, their relatives (as per Companies Act, 1956), our Company and our Promoter Group Entities have confirmedthat they have not been declared as willful defaulters by RBI or any other governmental authority and there are no violations ofsecurities laws committed by them in the past or are pending against them.ELIGIBILITY FOR THIS ISSUEOur Company is an “Unlisted Company” in terms of the SEBI Guidelines; and this Issue is an “Initial Public Offer” in terms of theSEBI Guidelines.As per clause 2.2.1 of the SEBI Guidelines, an unlisted company may make an initial public offering (IPO) of equity shares or anyother security, which may be converted into or exchanged with equity shares at a later date, only if it meets all the followingconditions:1. The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (of 12 months each), of which notmore than 50% is held in monetary assets: Provided that if more than 50% of the net tangible assets are held in monetary assets,the company has made firm commitments to deploy such excess monetary assets in its business/project;2. The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three (3)out of immediately preceding five (5) years; Provided further that extraordinary items shall not be considered for calculatingdistributable profits in terms of Section 205 of Companies Act, 1956;3. The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years (of 12 months each);4. In case the company has changed its name within the last one year, at east 50% of the revenue for the preceding 1 full year isearned by the company from the activity suggested by the new name; and5. The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through theoffer document + firm allotment + promoters' contribution through the offer document), does not exceed five (5) times of its preissuenetworth as per the audited balance sheet of the last financial year.In terms of a certificate issued by our Auditors, M/s. Vishal Shah & Associates, Chartered Accountants, dated December 02, 2007 theCompany satisfies the above financial eligibility criteria as detailed below:(Rs. In million.)Particulars June 30, 2007 March 31, 2007 March 31, 2006 March 31, 2005 March 31, 2004 March 31, 2003Net Tangible2,562.28 2,338.68 1,900.77 805.99 583.74 481.89Assets (1)Monetary50.00 23.40 17.39 12.99 14.80 9.83Assets (2)MonetaryAssets as aPercentage ofNet Tangible1.95% 1.00% 0.92% 1.61% 2.54% 2.04%200
Particulars June 30, 2007 March 31, 2007 March 31, 2006 March 31, 2005 March 31, 2004 March 31, 2003AssetsNet Profits as79.46 194.31 121.26 64.07 37.04 19.30restatedNet worth as703.98 542.32 371.95 271.64 170.60 141.38restatedDistributableprofits (3)79.46 194.31 121.26 64.11 37.00 19.341. Net tangible assets is defined as the sum assets of fixed assets (including capital work in progress and excluding revaluationreserves,) trade investments, current assets (excluding deferred tax assets) less current liabilities (excluding deferred taxliabilities and long term liabilities),2. Monetary assets include cash on hand and bank and quoted investments.3. The Distributable profits of our company as per Section 205 of the Act, and has been calculated from the audited financialsstatements of the respective year/period before making adjustments for restatement of financial statements.Hence, our Company is eligible for this Issue under Clause 2.2.1 of the SEBI Guidelines.Further, in addition to the conditions enumerated in Clause 2.2.1 of the SEBI Guidelines; our Company, in accordance with Clause2.2.2A, undertakes that the number of allottees in this Issue shall be at least one thousand (1,000) in number; otherwise the entireapplication money shall be refunded forthwith. In case of delay, if any, in refund of application money, our Company shall payinterest on the application money at the rate of 15% per annum for the period of delay.For a complete explanation of the above figures, please refer to Section V titled ‘Financial Statements’ beginning on page no. [●] ofthis Draft Red Herring Prospectus.DISCLAIMER CLAUSEAS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BEDISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING PROSPECTUS TO SEBI SHOULDNOT, IN ANY WAY, BE DEEMED OR CONSTRUED TO MEAN THAT THE SAME HAS BEEN CLEARED OR APPROVEDBY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANYSCHEME OR THE PROJECT FOR WHICH THIS ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OFTHE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOKRUNNING LEAD MANAGER, EDELWEISS CAPITAL <strong>LIMITED</strong>, HAS CERTIFIED THAT THE DISCLOSURES MADE INTHE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH THESEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000, AS FOR THE TIME BEING IN FORCE. THISREQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING ANINVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE OURCOMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALLRELEVANT INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGER ISEXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITYADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGER,EDELWEISS CAPITAL <strong>LIMITED</strong> HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED DECEMBER12, 2007 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS ASFOLLOWS:“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKECOMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALSIN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THESAID ISSUE.ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, IT’S DIRECTORS ANDOTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THEOBJECTS OF THIS ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THEDOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY,TM201
WE CONFIRM THAT:TM1. THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH THEDOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THIS ISSUE;2. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES,INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITYIN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND3. THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR ANDADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO THEINVESTMENT IN THE PROPOSED ISSUE.4. BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRINGPROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID.5. WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH OF THEUNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.6. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSIONOF THEIR SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THESECURITIES PROPOSED TO FORM PART OF THE PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-INWILL NOT BE DISPOSED/SOLD/TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTINGFROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH SEBI TILL THE DATE OFCOMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS.THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROMANY LIABILITIES UNDER SECTION 63 AND SECTION 68 OF THE COMPANIES ACT OR FROM THE REQUIREMENTOF OBTAINING SUCH STATUTORY AND OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THEPROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOKRUNNING LEAD MANAGER, ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED HERRING PROSPECTUS.”All legal requirements pertaining to this Issue will be complied with at the time of filing of the Prospectus with the Registrar ofCompanies, Mumbai at Maharashtra, in terms of Section 56, Section 60 and Section 60(B) of the Companies Act.The filing of this Draft Red Herring Prospectus does not, however, absolve our Company from any liabilities under Section 63 andSection 68 of the Companies Act or from the requirement of obtaining such statutory and other clearances as may be required forthe purpose of the proposed offer. SEBI further reserves the right to take up at any point of time, with the BRLM any irregularitiesor lapses in this Draft Red Herring Prospectus.Disclaimer Statement from our Company and the BRLMOur Company, our Directors and the BRLM accept no responsibility for statements made otherwise than in this Draft Red HerringProspectus or in the advertisements or any other material issued by or at instance of the above mentioned entities and anyone placingreliance on any other source of information, including our website, www.mandhana.com, would be doing so at his or her own risk.The BRLM accepts no responsibility, save to the limited extent as provided in the Underwriting Agreement to be entered into betweenthe Underwriters and our Company and the Memorandum of Understanding between the BRLM and our Company.Our Company and the BRLM shall make all information available to the public and investors at large and no selective or additionalinformation would be available for a section of the investors in any manner whatsoever including at road show presentations, inresearch or sales reports or at bidding centers, etc.Neither our Company nor the BRLM is liable to the Bidders for any failure in downloading the Bids due to faults in anysoftware/hardware system or otherwise.Caution202
TMInvestors that bid in this Issue will be required to confirm and will be deemed to have represented to our Company and theUnderwriters and their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicablelaws, rules, regulations, guidelines and approvals to acquire Equity Shares and will not offer, sell, pledge or transfer the EquityShares to any person who is not eligible under applicable laws, rules, regulations, guidelines and approvals to acquire EquityShares. Our Company and the BRLM and their respective directors, officers, agents, affiliates and representatives accept noresponsibility or liability for advising any investor on whether such investor is eligible to acquire Equity Shares.Disclaimer in Respect of JurisdictionThis Issue is being made in India to persons resident in India (including Indian nationals resident in India who are majors, HUFs,companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in Equity Shares andWarrants,Indian Mutual Funds registered with SEBI, Indian Financial Institutions, commercial banks, regional rural banks, cooperativebanks (subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as amended from time totime, or any other Trust law (who are authorised under their constitution to hold and invest in Equity Shares and Warrants). This DraftRed Herring Prospectus does not, however, constitute an invitation to subscribe to Equity Shares and Warrants issued hereby in anyother jurisdiction to any person to whom it is unlawful to make an issue or invitation in such jurisdiction. Any person into whosepossession this Draft Red Herring Prospectus comes is required to inform himself or herself about, and to observe any suchrestrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Mumbai only.No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose,except that this Draft Red Herring Prospectus has been filed with SEBI for observations and SEBI has given its observations and theRed Herring Prospectus has been filed with RoC as per the provisions of the Companies Act. Accordingly, the Equity Shares andWarrants, represented thereby may not be issued or sold, directly or indirectly, and this Draft Red Herring Prospectus may not bedistributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery ofthis Draft Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been nochange in the affairs of our Company from the date hereof or that the information contained herein is correct as of any timesubsequent to this date.The Equity Shares and Warrants have not been and will not be registered under the Securities Act or any state securities laws inthe United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (asdefined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, theregistration requirements of the Securities Act. Accordingly, the Equity Shares and Warrants are only being offered and soldoutside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act andthe applicable laws of the jurisdiction where those offers and sales occur.The Equity Shares and Warrants have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outsideIndia and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with theapplicable laws of such jurisdiction.Disclaimer Clause of the Bombay Stock Exchange LimitedBSE has vide its letter bearing reference number [●] dated [●], given permission to this Company to use BSE’s name in this Draft RedHerring Prospectus as one of the stock exchanges on which this Company’s securities are proposed to be listed. BSE has scrutinizedthis Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to thisCompany. BSE does not in any manner:-• warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring Prospectus; or• warrant that this Company’s securities will be listed or will continue to be listed on BSE; or• take any responsibility for the financial or other soundness of this Company, its Promoters, its management or any scheme orproject of this Company;and it should not for any reason be deemed or construed that this Draft Red Herring Prospectus has been cleared or approved by BSE.Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to an independentinquiry, investigation and analysis and shall not have any claim against BSE whatsoever by reason of any loss which may be sufferedby such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted tobe stated herein or for any other reason whatsoever.203
TMDisclaimer Clause of the National Stock Exchange of India LimitedAs required, a copy of this Draft Red Herring Prospectus has been submitted to NSE. NSE has vide its letter bearing reference number[●] dated [●], given permission to our Company to use NSE’s name in this Draft Red Herring Prospectus as one of the stockexchanges on which this Company’s securities are proposed to be listed. NSE has scrutinized this Draft Red Herring Prospectus for itslimited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. It is to be distinctlyunderstood that the aforesaid permission given by NSE should not in any way be deemed or construed that this Draft Red HerringProspectus has been cleared or approved by NSE nor does it in any manner warrant, certify or endorse the correctness or completenessof any of the contents of this Draft Red Herring Prospectus; nor does it warrant that this Company’s securities will be listed or willcontinue to be listed on NSE; nor does it take any responsibility for the financial or other soundness of this Company, its Promoters,its management or any scheme or project of this Company.Every person who desires to apply for or otherwise acquire any securities of this Company may do so pursuant to an independentinquiry, investigation and analysis and shall not have any claim against NSE whatsoever by reason of any loss which may be sufferedby such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted tobe stated herein or any other reason whatsoever.FilingA copy of this Draft Red Herring Prospectus has been filed with the Corporation Finance Department of SEBI at SEBI Bhavan, PlotNo.C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. A copy of the Red Herring Prospectus, along with thedocuments required to be filed under Section 60B of the Companies Act, will be delivered to the RoC at least 3 (three) days before theBid / Issue Opening Date. The final Prospectus would be filed with the Corporate Finance Department of SEBI and the RoC at theirrespective addresses upon closure of this Issue and on finalization of the Issue Price.ListingThe Equity Shares issued through this Draft Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited(BSE) and the National Stock Exchange of India Limited (NSE). In-principle approval for listing of the Equity Shares and Warrant ofour Company from BSE and NSE have been received vide their letters dated [•] and [•] respectively.NSE will be the Designated Stock Exchange.If the permission to deal in and for an official quotation of our Equity Shares and Warrant is not granted by any of the StockExchanges mentioned above, our Company will forthwith repay, without interest, all money received from the Bidders in pursuance ofthe Red Herring Prospectus. If such money is not repaid within eight days after our Company becomes liable to repay it. (i.e. from thedate of refusal or within 15 days from the Bid/Issue Closing date, whichever is earlier), then our Company, and every Director of ourCompany who is an officer in default shall, on and from such expiry of eight days, be jointly and severally liable to repay the moneywith interest at the rate of 15% per annum on the Bid Amount, as prescribed under Section 73 of Companies Act.We shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at the StockExchanges mentioned above are taken within seven working days of finalisation and adoption of the Basis of Allotment for this Issue.ImpersonationAttention of the Bidders is specifically drawn to the provisions of sub-section (1) of Section 68 A of the Companies Act, which isreproduced below:(a)“Any person who:(a) makes in a fictitious name, a Bid to a company for acquiring or subscribing for, any shares therein, or(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitiousname,shall be punishable with imprisonment for a term which may extend to five years.”204
TMConsentsConsents in writing from:(a) our Directors(b) Promoters(c) our Company Secretary and Compliance Officer(d) our Auditors(e) Bankers to our Company,(f) Escrow Collection Banks*(g) Underwriters(h) Book Running Lead Manager to this Issue and Syndicate Members*(i) Registrar to this Issue and(j) Legal advisors to this Issueto act in their respective capacities, have been obtained and filed along with a copy of the Red Herring Prospectus with the RoC,Mumbai, at Maharashtra, as required under Sections 60 and 60B of the Companies Act and such consents have not been withdrawn upto the time of filing of this Draft Red Herring Prospectus with SEBI.* - Consents from the Escrow Collection Banks and Syndicate Member(s) shall be obtained prior to filing of the Red HerringProspectus with the RoC. Other consents mentioned hereinabove have been obtained prior to filing of this Draft Red HerringProspectus with SEBI.Vishal H. Shah & Associates, our statutory auditors, have given their written consent to the inclusion of their report in the form andcontext in which it appears in this Draft Red Herring Prospectus and such consent and report has not been withdrawn up to the time offiling of this Draft Red Herring Prospectus with SEBI.Vishal H. Shah & Associates, our statutory auditors, have given their written consent to the tax benefits accruing to our Company andits members in the form and context in which it appears in this Draft Red Herring Prospectus and has not withdrawn such consent upto the time of filing of this Draft Red Herring Prospectus with SEBI.Expert OpinionWe have not obtained any expert opinions.Expenses of the IssueThe expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distributionexpenses, legal fees, statutory advertisement expenses and listing fees. The total expenses of the Issue are estimated to beapproximately Rs. 1000 million. The estimated Issue Expenses are as follows:(Rs. in million)Activity Expenses % of Issue % of Issue SizeExpensesLead management, underwriting and selling commission * [•] [•] [•]Advertisement and marketing expenses** [•] [•] [•]Printing, stationery including transportation of the same [•] [•] [•]Other (Registrar’s fees, legal fees, fees for auditors and bankers to the [•] [•] [•]issue, stamp duty, initial listing fees and annual listing fees, SEBI filingfees, other statutory fees, depository fees, charges for using the bookbuilding software of the exchanges and other related expenses)**Total Estimated Issue Expenses [•] 100% [•]* Will be incorporated after finalization of Issue Price** Will be incorporated prior to filing Red Herring Prospectus with the RoCAll expenses with respect to this Issue will be borne by our Company.205
TMDetails of Fees PayableFees Payable to the Book Running Lead ManagerThe total fees payable to the Book Running Lead Manager will be as per the Engagement Letter dated June 7, 2007 and as stated inthe Memorandum of Understanding executed between our Company and BRLM dated August 30, 2007, a copy of which is availablefor inspection at our Registered Office.Fees Payable to the Registrar to this IssueThe fees payable to the Registrar to this Issue will be as per the Memorandum of Understanding dated April 4, 2007, a copy of whichis available for inspection at our Registered Office.Adequate funds will be provided to the Registrar to the Issue to enable them to send refund orders or allotment advice by registeredpost/speed post/under certificate of posting.Underwriting Commission, Brokerage and Selling CommissionThe Underwriting Commission and Selling Commission for this Issue is as set out in the Syndicate Agreement amongst our Company,the BRLM and Syndicate Members. The Underwriting Commission shall be paid as set out in the Underwriting Agreement based onthe Issue Price and amount underwritten in the manner mentioned in this Draft Red Herring Prospectus.The Brokerage for the Issue will be not more than 3.25% of the Issue Price of the Equity Shares and Warrants by our Company on thebasis of the allotments made against the Bids bearing the stamp of a member of any recognized Stock Exchange in India in the‘Broker’ column. Brokerage at the same rate will also be payable to the Escrow Collection Banks in respect of the allotments madeagainst Bids procured by them provided the respective forms of Bid bear their respective stamp in the Broker column. In case oftampering or over-stamping of Brokers’/Agents’ codes on the Bid-cum-Application Form, our Company’s decision to pay brokeragein this respect will be final and no further correspondence will be entertained in this matter. We, at our sole discretion, may considerpayment of additional incentive in the form of kitty or otherwise to the performing brokers on such terms and mode as may be decidedby us.Previous Rights and Public IssuesWe have not made any previous rights and/or public issues during the last five years, and are an “Unlisted Company” in terms of theSEBI Guidelines and this Issue is an “Initial Public Offering” in terms of the SEBI Guidelines.Previous issue of shares otherwise than for cashExcept as stated in the chapter titled ‘Capital Structure’ beginning on page no. [●] of this Draft Red Herring Prospectus, we have notissued any Equity Shares for consideration other than for cash.Commission and Brokerage on Previous IssuesSince this is the initial public offer of the Equity Shares and Warrants by our Company, no sum has been paid or has been payable ascommission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of our Equity Shares since ourinception.Listed companies under the same ManagementThere are no listed companies under the same management as our Company within the meaning of Section 370(1B) of the CompaniesAct, 1956 which have made any capital issues in the last three years.Promise versus performance for our CompanyOur Company is an “Unlisted Company” in terms of the SEBI Guidelines, and this Issue is an “Initial Public Offering” in terms of theSEBI Guidelines. Therefore, data regarding promise versus performance is not applicable to us.206
TMPromise versus Performance – Previous Issues of Promoter Group Entities.None of our Promoter Group Entities have made any public issues in the past. Therefore, data regarding promise versus performanceis not applicable.Outstanding debentures, bonds, redeemable preference shares and other instruments issued by our CompanyAs on the date of filing this Draft Red Herring Prospectus with SEBI, our Company has no outstanding debentures, bonds orredeemable preference shares.Option to SubscribeEquity Shares being offered through this Draft Red Herring Prospectus can be applied for in dematerialized form only.Stock Market Data for our Equity SharesOur Company is an “Unlisted Company” in terms of the SEBI Guidelines, and this Issue is an “Initial Public Offering” in terms of theSEBI Guidelines. Thus there is no stock market data available for the Equity Shares of our Company.Mechanism for Redressal of Investor GrievancesThe Memorandum of Understanding between the Registrar and us will provide for retention of records with the Registrar for a periodof at least one year from the last date of dispatch of the letters of allotment, demat credit and refund orders to enable the investors toapproach the Registrar to this Issue for redressal of their grievances.All grievances relating to this Issue may be addressed to the Registrar with a copy to the Company Secretary and Compliance Officer,giving full details such as the name, address of the applicant, number of Equity Shares applied for, amount paid on application and thebank branch or collection center where the application was submitted.Disposal of Investor Grievances by our CompanyWe estimate that the average time required by us or the Registrar to this Issue for the redressal of routine investor grievances will be 15 daysfrom the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are involved, we will seek toredress these complaints as expeditiously as possible.We have constituted a Shareholders’ / Investors’ Grievance, Share Allotment and Share Transfer Committee of the Board videresolution passed at the Board Meeting held on July 25, 2007. The composition of the Shareholders’ / Investors’ Grievance, ShareAllotment and Share Transfer Committee is as follows:Name of the Director Designation in the Committee Nature of DirectorshipMr. Gyanedra Bajpai Chairman Independent DirectorMr. Khurshed Thanawalla Member Independent DirectorMr. Manish Mandhana Member Executive DirectorFor further details, please refer to the chapter titled ‘Our Management’ beginning on page no. [●] of this Draft Red HerringProspectus.Our Company has appointed Mr. Benzamin Menezes as the Company Secretary and Mr. Nayan Kambli as the Compliance Officerand they may be contacted the following addresses. :Mr. Benzamin Menezes205/214, Peninsula Centre, Dr. S.S. Rao Road,Off Dr. Ambedkar Road, Parel (East), Mumbai – 400 012, Maharashtra, India.Tel No.: + 91 22 3040 9191Fax No.: + 91 22 3040 9218Email: cs@mandhana.com207
TMNayan Kambli205/214, Peninsula Centre,Dr. S.S. Rao Road, Off Dr. Ambedkar Road,Parel (East),Mumbai – 400 012,Maharashtra,India.Tel No.: + 91 22 3040 9191Fax No.: + 91 22 3040 9218Email: ipo@mandhana.comInvestors can contact the Compliance Officer or the Registrar in case of any pre-Issue or post-Issue related problems such as nonreceiptof letters of allocation, credit of allotted Equity Shares in the respective beneficiary account or refund orders, etc.Changes in Auditors during the last three financial years and reasons thereforeThere have been no changes in the statutory Auditors of our Company during the last three financial yearsCapitalisation of Reserves or ProfitsExcept as stated in the chapter titled ‘Capital Structure’ beginning on page no. [●] of this Draft Red Herring Prospectus, our Companyhas not capitalized its reserves or profits at any time since inception. For details on capitalization of reserves or profits please refer tothe chapter titled ‘Capital Structure’ beginning on page no. [●] of this Draft Red Herring Prospectus.Revaluation of assetsOur Company has not revalued its assets since incorporation.208
TMSECTION VIII – ISSUE RELATED INFORMATIONISSUE STRUCTUREThe present Issue of Vishal H. Shah & Associates Equity Shares and Warrants aggregating Rs. [•] million (hereinafter referred to asthe “Issue”), being made through the 100% Book Building Process. The Issue would constitute 26.66 % of the post Issue paid-upcapital of the Company prior to exercise of Warrants and the Issue shall constitute [●] % of the Equity Share capital of our Companyafter exercise of Warrants, assuming full convertibility of the Warrants.Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon thecompletion of the Pre-IPO placement the number of equity shares in the Issue will be reduced by the number of shares in thePre-IPO Placement. The Issue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Sharecapital.QIBsNon-Institutional Retail Individual BiddersNumber of EquityShares*Percentage of IssueSize available forAllotment/allocationIssue to the Public lessallocation to Non-Institutional Bidders andRetail Individual Bidders ofupto Equity Shares [●] and[●] Warrants, aggregating toRs. [•] millionUpto 50% of the Issue (ofwhich 5% shall be reservedfor Mutual Funds) or Issueless allocation to Non-Institutional Bidders andRetail Individual Bidders. *Mutual Funds participatingin the 5% reservation in theQIB Portion (i.e. [●] EquityShares and [●] Warrants)will also be eligible forallocation in the remainingQIB Portion. Theunsubscribed portion, if any,in the Mutual Fundreservation will be availableto QIBs.BiddersAtleast [●] EquityShares or Issue size lessallocation to QIBBidders and IndividualBidders and [●]Warrants aggregating toRs. [•] millionAt least 15% of theIssue or Issue lessallocation to QIBs andRetail Portion*Atleast [●] Equity Shares orIssue size less allocation toQIB Bidders and NonInstitutional Bidders and [●]Warrants, aggregating to Rs.[•] million.At least 35% of the Issue orIssue less allocation to QIBsand Non-InstitutionalPortion*Basis of Allotment/allocation ifrespective categoryis oversubscribedProportionate(a) [•] Equity Sharesaggregating Rs. [•] millionshall be available forallocation on a proportionatebasis to Mutual Funds; andProportionateProportionate(b) [•] Equity Sharesaggregating to Rs. [•]million shall be allotted on aproportionate basis to allQIBs, including MutualFunds receiving allocation209
QIBsas per (a) above.Minimum Bid Such number of EquityShares that the Bid Amountexceeds Rs. [•] and inmultiples of [●] EquityShares thereafter.Maximum Bid Such number of EquityShares not exceeding theIssue, subject to regulationsas applicable to the BidderMode of Allotment Compulsorily indematerialized form.Non-InstitutionalBiddersSuch number of EquityShares that the BidAmount exceeds Rs. [•]and in multiples of [●]Equity Sharesthereafter.Such number of EquityShares not exceedingthe Issue, subject toregulations asapplicable to the BidderCompulsorily indematerialized form.Retail Individual Bidders[•] Equity Shares and inmultiples of [●] EquityShare thereafterSuch number of EquityShares per Retail IndividualBidder whereby the Bidamount does not exceed Rs.[•]Compulsorilydematerialized form.inTMBid lotAllotment lotTrading LotWho can Apply **[●] Equity Shares and inmultiples of [●] EquityShares thereafter[●] Equity Shares and inmultiple of 1 Equity Sharethereafter. [●] Warrants andin multiple of 1 Warrantthereafter.One Equity Share and OneWarrantPublic financial institutionsas specified in Section 4A ofthe Companies Act, FIIsregistered with SEBI,scheduled commercialbanks, mutual fundsregistered with SEBI,multilateral and bilateraldevelopment financialinstitutions, venture capitalfunds registered with SEBI,foreign venture capitalinvestors registered withSEBI, state industrialdevelopment corporations,insurance companiesregistered with InsuranceRegulatoryandDevelopment Authority,provident funds withminimum corpus of Rs. [•]million (subject toapplicable law) and pensionfunds with minimum corpusof Rs. [•] million (subject toapplicable law).[●] Equity Shares andin multiples of [●]Equity Shares thereafter[●] Equity Shares andin multiple of 1 EquityShare thereafter. [●]Warrants and inmultiple of 1 Warrantthereafter.One Equity Share andOne WarrantNRIs, Resident Indianindividuals, HUFs (inthe name of karta),companies,bodies,institutions,and trusts.corporatescientificsocieties[●] Equity Shares and inmultiples of [●] EquityShares thereafter[●] Equity Shares and inmultiple of 1 Equity Sharethereafter. [●] Warrants andin multiple of 1 Warrantthereafter.One Equity Share and OneWarrantIndividuals (including HUFsin the name of karta, NRI’s),applying for Equity Sharessuch that the Bid Amountper Retail Individual Bidderdoes not exceed Rs. [•] invalue.Terms of PaymentMargin Amount applicableto QIB Bidders at the timeMargin Amountapplicable to Non-Margin Amount applicableto Retail Individual Bidder210
Margin AmountQIBsof submission of Bid-cum-Application Form to theMember of Syndicate.10% of the Bid Amount inrespect of bids placed byQIB Bidder on bidding.Non-InstitutionalBiddersinstitutional Bidder atthe time of submissionof Bid-cum-ApplicationForm to the Member ofSyndicate.Full Bid Amount onbidding.Retail Individual Biddersat the time of submission ofBid-cum-Application Formto the Member of Syndicate.Full Bid Amount onbidding.TM* Subject to valid Bids being received at or above the Issue Price, Under-subscription, if any, in any of the above categories would beallowed to be met with spillover inter-se from any other categories, at the sole discretion of the Company, the BRLM and subject toapplicable provisions of the SEBI Guidelines.** In case the Bid-cum-Application Form is submitted in joint names, the investors should ensure that the demat account is also heldin the same joint names and in the same sequence in which they appear in the Bid-cum-Application Form.# If the aggregate demand by Mutual Funds is less than [•] Equity Shares aggregating to Rs. [•] million, the balance Equity Sharesavailable for allocation in the Mutual Fund reservation will first be added to the QIB Portion and be allocated proportionately to theQIB Bidders in proportion to their Bids.211
TERMS OF THE ISSUETMThe Equity Shares and Warrants being offered are subject to the provisions of the Companies Act, the Memorandum and Articles ofAssociation of our Company, conditions of RBI approval, the terms of the Red Herring Prospectus, Bid-cum-Application Form, theRevision Form, the Confirmation of Allocation Note (“CAN”) and other terms and conditions as may be incorporated in the Allotmentadvice and other documents/certificates that may be executed in respect of this Issue. The Equity Shares shall also be subject to lawsas applicable, guidelines, notifications and regulations relating to this Issue of capital and listing and trading of securities issued fromtime to time by SEBI, Government of India, Stock Exchanges, Reserve Bank of India, Registrar of Companies and/or otherauthorities, as in force on the date of this Issue and to the extent applicable.Ranking of Equity SharesThe Equity Shares being issued through this Issue and the Equity Shares being allotted pursuant to the exercise of Warrants, shall besubject to the provisions of the Companies Act, our Memorandum and Articles and shall rank pari passu in all respects with the otherexisting Equity Shares of our Company including rights in respect of dividends. The Allottees, in receipt of Allotment of EquityShares under this Issue, will be entitled to dividend or any other corporate benefits, if any, declared by our Company after the date ofallotment. For a description of our Articles of Association, please refer to the section titled ‘Main Provisions of the Articles ofAssociation of our Company’ beginning on page no. [●] of this Draft Red Herring Prospectus.The Warrant -holders shall not be entitled to any dividend or any other corporate benefits, which may bedeclared or announced by ourCompany from time to time, till such time that the Warrants are convertedinto the underlying Equity Shares of our Company inaccordance with the terms contained herein and fullpayment of the conversion price.The Warrants shall not confer upon the holders thereof any right to receive any notice of the meeting of theShareholders of ourCompany or Annual Report of our Company and or to attend /vote at any of the General Meetings of the Shareholders of ourCompany.Our Company is considering a Pre-IPO placement of upto 250,000 Equity Shares ("Pre-IPO Placement"). Upon the completion of thePre-IPO placement the number of equity shares in the Issue will be reduced by the number of shares in the Pre-IPO Placement. TheIssue size offered to the public will remain atleast 25% of the post-Issue paid up Equity Share capital.Mode of Payment of DividendWe shall pay dividend to the shareholders as per the provisions of the Companies Act, 1956.Face Value and Issue PriceThe Equity Shares with a face value of Rs. 10 each along with the Warrant wioll be issued in terms of the Red Herring Prospectus tobe filed with the RoC, Maharashtra at a price of Rs. [•] per share. At any given point of time, there shall be only one denomination forthe Equity Shares of the Company, subject to applicable laws.Rights of the Equity ShareholderSubject to applicable laws, the equity shareholders shall have the following rights:i. Right to receive dividend, if declared;ii. Right to attend general meetings and exercise voting powers, unless prohibited by law;iii. Right to vote on a poll either in person or by proxy;iv. Right to receive offers for rights shares and be allotted bonus shares, if announced;v. Right to receive surplus on liquidation;vi. Right of free transferability; andvii. Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and Articles ofAssociation of the Company.For further details on the main provisions of our Company’s Articles of Association dealing with voting rights, dividend, forfeitureand lien, transfer and transmission and/or consolidation/splitting, please refer to the section titled ‘Main Provisions of the Articles ofAssociation of our Company’ beginning on page no. [●] of this Draft Red Herring Prospectus.212
Compliance with SEBI GuidelinesTMWe shall comply with all disclosures and accounting norms as specified by SEBI from time to time.Market Lot and Trading LotIn terms of Section 68B of the Companies Act, 1956, the Equity Shares and Warrant of the Company shall be allotted only indematerialized form. In terms of existing SEBI Guidelines, the trading in the Equity Shares of the Company shall only be indematerialized form for all investors. Since trading of our Equity Shares will be in dematerialized form, the tradable lot would be oneEquity Share and one Warrant. Interms of Section 68B of the Companies Act, the Equity Shares and Warrants shall be allotted onlyindematerialised form. Allocation and Allotment in this issue will be only in electronic form in multiples of one Equity Share and oneWarrant subject to a minimum Allotment of Equity Shares. For details of allocation and allotment, please refer to the chapter titled‘Issue Procedure’ beginning on page no. [●] of the Draft Red Herring Prospectus.Exercise of WarrantsEvery Allottee of Equity Shares under the Issue shall receive a Warrant in the ratio of one Warrant for two Equity Shares alloted. EachWarrant shall be convertible into one equity share of a face value of Rupees Ten (10) each, of our Company during the WarrantExercise Period.In the event that there is any share split of the Equity Shares of our Company, prior to the exercise of Warrants, then, the Warrantholder, who exercises his right to exercise the Warrant, shall be entitled to such number of Equity Shares in order for the aggregateface value of the number of Equity Shares issued to the Warrant holder be equal to Rupees Ten (10).One Warrant shall entitle the holder to receive one Equity Share upon exercise. The Warrants can be freely and separately traded tillthe same are tendered for exercise. The market lot for Warrants is one. Exercise of Warrants during the Warrant Exercise Period willbe carried out without the need for our Company to take any further approvals, however the Warrant-holders should independentlycheck if they require any approvals.The Board subject to the terms of this DRHP, our Memorandum and Articles of Association, the approvals from the Government ofIndia and RBI and provisions of the Companies Act, any other legislative enactments and rules as may be applicable will proceedwithin the process of exercise of the Warrants in accordance with the applicable laws.Warrant Exercise PriceWarrant Exercise Price shall be the price which is at a fixed premium of [●] over the Issue Price.Warrant Exercise PeriodWarrant Exercise Period shall be the period commencing from the completion of the 16th month and be open up to the completion ofthe 18th month from the date of Allotment of the Equity Shares and Warrants.Warrant holders can exercise their right to apply for the Exercise of Warrants into Equity Shares at the Warrant Exercise Price at anytime during the Warrant Exercise Period. The Warrants not tendered for exercise during the Warrant Exercise Period at the WarrantExercise Price shall lapse.The Warrant Exercise Price valid during the Warrant Exercise Period would be advertised by us in an English national daily, Hindinational daily with wide circulation and a Regional Language Daily circulated at the place where our Registered Office is situated.Such an advertisement would appear on the day of the commencement of the Warrant Exercise Period.Our Company shall fix a record date 15 days prior to the commencement of the Warrant Exercise Period to determine the Warrantholderseligible for exercising the Warrants held by them.Allotment of shares arising from Warrant ExerciseThe application for the exercise of Warrants can be made at any time immediately after the announcement of Warrant Exercise Price.213
TMActivity Time Period as defined herein Indicative Relevant DateAllotment of Equity Shares and [●][●]Warrants in the IssueCommencement Of Warrant From the completion of the 16 th Month [●]Exercise PeriodAdvertisement for Warrant Exercise On the day of the commencement of the [●]PriceWarrant Exercise PeriodWarrant Exercise Period - Warrant Two Months[●]Exercise Price would be applicableuptoAllotment DateTen (10) working days from the date ofexpiry of the Warrant[●]Procedure for ExerciseThe Registrar to our Company, Intime Spectrum Registry Limited, will before the Warrant Exercise Period open a special depositoryaccount with NSDL called, ["[●]"] with a Depository Participant (the "Special Depository Account"). Beneficial owners (holders ofWarrants) having their beneficiary account with the CDSL must use the inter-depository delivery instruction slip for the purpose ofcrediting their Warrants in favour of the Special Depository Account with the NSDL.Beneficial owners (holders of Warrants) who wish to tender their Warrants for exercise will be required to send their application forexercise on the prescribed application form accompanied by a cheque / demand draft favoring [“[●]”] payable at Mumbai for therequisite amount along with a photocopy of the delivery instruction in "Off-market" mode, or counterfoil of the delivery instructionsin "Off-market" mode, duly acknowledged by the Depository Participant ("DP"), in favour of the Special Depository Account to theRegistrar to our Company.Shares allotted on Exercise of WarrantsShares allotted on exercise of valid Warrants will be dispatched/credited to the applicant’s electronic account within 10 working daysfrom the day of expiry of the Warrant Exercise Period.The Application Form will be sent by our Company to all the Warrant holders along with the letter of Allotment.The Application Form would also be available to all Warrant holders on request with the Registrar during the Warrant Exercise Periodand can be downloaded from our Company’s website www.renjewellery.com. During the Warrant Exercise Period, the Warrant holdershould send his application to Intime Spectrum Registry Limited, C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup (West),Mumbai 400 078, India, the Registrar to the Issue by filling up the said application form. It should be accompanied by a cheque /demand draft favoring [“[●]”] payable at Mumbai for the requisite amount.In case the Warrants along with the cheque/demand draft towards full payment of the Exercise Price do not reach the Registrar by theend of Warrant Exercise Period i.e. by the end of the 18 th month from the date of Allotment in this Issue, the same shall lapse.Rights of Warrant holdersa. The Warrants shall be transferable and transmittable in the same manner and to the same extent and be subject to the samerestrictions and limitations and other related matters as in the case of Equity Shares of our Company.b. Save and except the right of subscription to our Company's Equity Shares as per the terms of the Issue, the holders of theWarrants in their capacity as Warrant holders shall have no other rights or privileges.c. The Warrant holder’s inter-se shall rank pari-passu without any preference or priority of one over the other or others.All the above rights of the Warrant holders shall lapse automatically if it is not exercised within the Warrant Exercise Period and theunexercised Warrant shall be automatically treated as cancelled. On exercise and subsequent allotment of Equity Shares, the Warrantholders shall enjoy the rights and privileges of shareholders of our Company and not of Warrant holders.214
The Warrants shall not confer upon the holders thereof any right to receive any notice of the meeting of the Shareholders of ourCompany or Annual Report of our Company and or to attend/vote at any of the general meetings of the shareholders of our Company.The Warrant-holders shall not be entitled to any dividend or any other corporate benefits, which may be declared or announced by ourCompany from time to time, till such time that the Warrants are exercised into the underlying Equity Shares of our Company inaccordance with the terms contained herein and full payment of the Exercise Price.TMVariance in the terms of the WarrantsThe rights, privileges and conditions attached to the Warrants may be modified or varied or abrogated with the consent of the holdersof the Warrants by a Special Resolution passed at a meeting of the Warrant holders, provided that nothing in such resolution shall beoperative against our Company when such resolution modifies or varies the terms and conditions governing the Warrants if the sameis not acceptable to our Company. At a meeting of the Warrant holders, every Warrant holder, and in the case of joint holders, firstholder of the Warrant shall be entitled to vote, either in person or by proxy, in respect of such Warrants. The Warrant holder will beentitled to one vote on a show of hands and his / her voting rights on a poll shall be in proportion to the outstanding number of theWarrants held by him / her. The quorum for such meetings shall be at least five Warrant holders present in person. The proceedings ofthe meeting of the Warrant holders shall be governed by the provisions contained in our Articles regarding meetings of shareholdersand such other rules in force for the time being to the extent applicable and in relation to matters not otherwise provided for in termsof the Issue.Register of Warrant holdersThe Register of Warrant holders shall be maintained by the Registrar in the same manner as the Register and Index of beneficialowners is maintained under Section 11 of the Depositories Act.JurisdictionThe jurisdiction for the purpose of this issue is with competent courts/authorities in Mumbai, India.Nomination Facility to the InvestorIn accordance with Section 109A of the Companies Act, the sole or first bidder, along with other joint bidders, may nominate any oneperson in whom, in the event of the death of sole bidder or in case of joint bidders, death of all the bidders, as the case may be, theEquity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the originalshareholder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or shewould be entitled if he or she were the registered holder of the equity share(s). Where the nominee is a minor, the holder(s) may makea nomination to appoint, in the prescribed manner, any person to become entitled to equity share(s) in the event of his or her deathduring the minority. A nomination shall stand rescinded upon a sale/ transfer/ alienation of equity share(s) by the person nominating.A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribedform available on request at the Registered Office of our Company or to the Registrar and Transfer Agents of our Company.In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either:i. to register himself or herself as the holder of the Equity Shares; orii. to make such transfer of the Equity Shares, as the deceased holder could have made.Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transferthe Equity Shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter withhold payment ofall dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice have beencomplied with.Since the allotment of Equity Shares and Warrants in the Issue will be made only in dematerialized mode, there is no need to makea separate nomination with us. Nominations registered with respective depository participant of the applicant would prevail. If theinvestors require to change the nomination, they are requested to inform their respective depository participant.215
Minimum SubscriptionTM“If the Company does not receive the minimum subscription of 90% of the issue amount, including devolvement of the Underwriter/Members of the Syndicate, if any, within 60 days from the date of Bid/Issue Closing Date, our Company shall forthwith refund theentire subscription amount received. If there is a delay beyond eight days after the Company becomes liable to pay the amount, theCompany shall pay interest prescribed under Section 73 of the Companies Act, 1956.”Further, in terms of clause 2.2.2A of the SEBI Guidelines, we shall ensure that the number of prospective allottees to whom EquityShares will be allotted will not be less than 1000.As per the policy of RBI, Overseas Corporate Bodies cannot participate in this Issue.The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended (the “Securities Act”) orany state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefitof, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transaction notsubject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares may be offered and sold only outside theUnited States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur.The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India andmay not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicablelaws of such jurisdiction.Arrangements for disposal of odd lotsTrading lot for our shares is one share, therefore, there are no odd lots.Restrictions on transfer of shares etc. and alteration of capital structureThere are no restrictions on transfers and transmission of shares/debentures and on their consolidation/splitting except as provided inour Articles. For further details, please refer to the section titled ‘Main Provisions of the Articles of Association of our Company’beginning on page no. [●] of this Draft Red Herring Prospectus.The Equity Shares and Warrants have not been and will not be registered under the U.S. Securities Act of 1933 (the SecuritiesAct”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for theaccount or benefit of, “U.S. persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption from,or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares and Warrantsare only being offered and sold outside the United States to certain persons in offshore transactions in compliance with RegulationS under the Securities Act.216
ISSUE PROCEDURETMBook Building ProcedureThe Issue is being made through the 100% Book Building Process under clause 2.2.1 of SEBI (DIP) Guidelines, 2000, wherein upto50% of the Issue shall be available for allocation on a proportionate basis to QIBs, including up to 5% of the QIB portion which shallbe available for allocation to Mutual Funds only. Further, at least 35% of the Issue shall be available for allocation on a proportionatebasis to the Retail Individual Bidders and at least 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders, subject to valid Bids being received at or above the Issue Price.Bidders are required to submit their Bids through the members of the Syndicate. Further, QIB bids can be submitted through theSyndicate members only. In case of QIB Bidders, our Company, in consultation with the BRLM, may reject any Bid procured fromQIBs, for reasons to be recorded in writing provided that such rejection shall be made at the time of acceptance of the Bid and thereasons therefor shall be disclosed to the Bidders. In case of Non-Institutional Bidders and Retail Individual Bidders our Companywould have a right to reject the Bids only on technical grounds as listed in the Red Herring Prospectus.Investors should note that allotment of Equity Shares and Warrants to all successful Bidders will only be in the dematerializedform. Bidders will not have the option of getting allotment of the Equity Shares or Warrants in physical form. The Equity Sharesand Warrants on allotment shall be traded only in the dematerialized segment of the Stock Exchanges.Bid cum Application FormBidders shall only use the specified Bid cum Application Form bearing the stamp of a Member of the Syndicate for the purpose ofmaking a Bid in terms of the Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in the Bidcum Application Form and such options shall not be considered as multiple bids. Upon the allocation of Equity Shares and Warrants,dispatch of the Confirmation of Allocation Note (“CAN”), and filing of the Prospectus with the RoC, the Bid cum Application Formshall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to a member of theSyndicate, the Bidder is deemed to have authorized the Company to make the necessary changes in the Red Herring Prospectus andthe Bid cum Application Form as would be required for filing the Prospectus with the RoC and as would be required by RoC aftersuch filing, without prior or subsequent notice of such changes to the Bidder.The prescribed colour of the Bid cum Application Form for various categories is as follows:CategoryIndian public, NRIs applying on a non-repatriation basisNon-residents including Eligible NRIs, FIIs, Foreign VentureCapital Funds registered with SEBI, Multilateral and BilateralDevelopment Financial Institutions applying on a repatriation basisColour of Bid cum Application FormWhiteBlueWho Can Bidi. Indian nationals resident in India who are majors, or in the names of their minor children as natural/legal guardians, in singleor joint names (not more than three);ii.iii.iv.Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is beingmade in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: XYZ HinduUndivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at parwith those from individuals;Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in the EquityShares and Warrants;Indian Mutual Funds registered with SEBI;217
v. Indian Financial Institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI regulations andSEBI Guidelines and regulations, as applicable);TMvi.vii.viii.ix.Venture Capital Funds registered with SEBI;Foreign Venture Capital investors registered with SEBI;State Industrial Development Corporations;Trusts/ societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to Trustsand who are authorized under their constitution to hold and invest in Equity Shares and Warrants;x. Eligible NRIs and FIIs on a repatriation basis or non-repatriation basis subject to applicable laws;xi.xii.xiii.xiv.xv.xvi.xvii.xviii.xix.FIIs registered with SEBI on repatriation or non-repatriation basisScientific and/ or Industrial Research Organizations authorized to invest in Equity Shares;Insurance companies registered with the Insurance Regulatory and Development Authority of India;As permitted by the applicable laws, provident funds with minimum corpus of Rs. 250 million and who are authorized undertheir constitution to invest in equity shares;As permitted by applicable laws, pension funds with minimum corpus of Rs. 250 million and who are authorized undertheir constitution to invest in equity shares;;Multilateral and bilateral development financial institutions;Eligible NRIs on a repatriation/non- repatriation basis subject to applicable laws. NRIs other than Eligible NRIs are notpermitted to participate in this Issue;Scientific and/or industrial research organizations authorized under their constitution to invest in equity shares.andPursuant to the existing regulations, OCBs are not eligible to participate in the Issue.Note: The BRLM shall not be entitled to subscribe to this Issue in any manner except towards fulfilling their underwriting obligation.However, associates and affiliates of the BRLM, may subscribe for Equity Shares in the Issue, including in the QIB Portion and Non-Institutional Portion, where the allocation is on a proportionate basis.In terms of the regulation 15A (1) of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations,1995,the FIIs may issue, deal in or hold, off-shore derivative instruments such as Participatory Notes, Equity Linked Notes or any othersimilar instruments against underlying securities being allocated to such FIIs. Bidders are advised to ensure that any single Bid fromthem does not exceed the investment limits or maximum number of Equity Shares that can be held by them under the relevantregulations or statutory guidelines.The information below is given for the benefit of the Bidders. The Company, the BRLM are not liable for any amendment ormodification or changes in applicable laws or regulations, which may occur after the date of the Red Herring Prospectus. Bidders areadvised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that canbe held by them under applicable law.Participation by Associates of BRLM and Syndicate Members:Associates of the BRLM and the Syndicate Member(s) may Bid and subscribe to Equity Shares and Warrants in the Issue either inthe QIB Portion or in Non-Institutional Portion as may be applicable to such investors. Such bidding and subscription may be ontheir own account or on behalf of their clients. Allotments to all investors including associates of BRLM and Syndicate Membersshall be on a proportionate basis.218
Further the BRLM and Syndicate Member shall not be entitled to subscribe to this Issue in any manner except towards fulfillingtheir underwriting obligation.TMApplication in the IssueEquity Shares and Warrants being issued through the Draft Red Herring Prospectus can be applied for in the dematerialized form only.Application By Mutual FundsAs per the current regulations, the following restrictions are applicable for investments by mutual funds:An eligible Bid by Mutual Fund shall be first considered for allocation proportionately in the Mutual Fund portion. In the event thatthe demand is greater than [●] Equity Shares and [●] Warrants, aggregating to Rs. [●] million, allocation shall be made to MutualFunds proportionately, to the extent of the Mutual Fund Portion. The remaining demand by the Mutual Funds shall as part of theaggregate demand by QIBs, be available for allocation proportionately out of the remainder of the QIB Portion, after excluding theallocation in the Mutual Fund Portion.No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related instruments of anycompany provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. Nomutual fund under all its schemes should own more than 10% of any company’s paid-up capital carrying voting rights. These limitswould have to be adhered to by the mutual funds for investment in the Equity Shares.In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such Bidsin respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that the Bids clearly indicate thescheme concerned for which the Bid has been made.Application By NRIsNRI applicants may please note that only such applications as are accompanied by payment in free foreign exchange shall beconsidered for allotment under the NRI category. The NRIs who intend to make payment through Non-Resident Ordinary (NRO)accounts shall use the form meant for Resident Indians (white in colour) and shall not use the forms meant for reserved category. Allinstruments accompanying Bids shall be payable in Mumbai only.Application By FIIsAs per current regulations, the following restrictions are applicable for investment by FIIs:The issue of Equity Shares and Warrants to a single FII should not exceed 10% of our post-Issue paid capital of our Company (i.e. [•]Equity Shares of Rs. 10 each prior to exercise of Warrants and [•] Equity Shares after the Issue, post exercise of Warrants, assumingfull exercise). In respect of an FII investing in Equity Shares and Warrants of the Company on behalf of its sub-accounts, theinvestment on behalf of each sub-account shall not exceed 10% of our total issued capital or 5% of our total issued capital in case suchsub-account is a foreign corporate or an individual.As of now, the aggregate FII holding in our Company cannot exceed 40% of the total issued capital of our Company. With approval ofour Board and that of the shareholders by way of a special resolution, the aggregate FII holding limit can be enhanced up to 100%;however till date no such resolution has been recommended to our shareholders for approval.Subject to compliance with all applicable Indian laws, rules, regulations,guidelines and approvals, in terms of Regulation 15A(1) ofthe SEBI(Foreign Institutional Investors) Regulations, 1995, as amended, an FII or its sub account may issue, deal or hold, off-shorederivative instruments, such as Participatory Notes, Equity-Linked notes or any other similar instruments against underlying securitieslisted or proposed to be listed in any Stock Exchange in India only in favour of those entities which are regulated by any relevantregulatory authorities, in the countries of their incorporation or establishment, subject to compliance of “know your client”requirements. An FII or sub account shall also ensure that no further downstream issue or transfer of any instrument referred to hereinabove is made to any other person other than a regulated entity.219
Bids By NRIs Or FIIs On A Repatriation BasisTMBids and revision to Bids must be made:i. On the Bid cum Application Form or Revision Form, as applicable, (Blue in colour), and completed in full in BLOCKLETTERS in ENGLISH in accordance with the instructions contained therein.ii.iii.iv.In a single or joint names (not more than three).Bids by NRIs for a Bid Amount of up to Rs. 100000 would be considered under the Retail Individual Bidders Portion for thepurposes of allocation and Bids for a Bid Amount of more than Rs. 100000 would be considered under Non InstitutionalBidder Portion for the purposes of allocation by FIIs or Foreign Venture Capital Fund, Multilateral and BilateralDevelopment Financial Institutions for a minimum of such number of Equity Shares and in multiples of [•] Equity Sharesthereafter so that the Bid Amount exceeds Rs. 1.00 Lac; for further details, please refer to the paragraph titled ‘Maximum andMinimum Bid Size’ in the chapter titled ‘Issue Procedure’ beginning on page no. [●] of this Draft Red Herring Prospectus.In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital Fund, Multilateral andBilateral Development Financial Institutions but not in the names of minors, firms or partnerships, foreign nationals or theirnominees or OCBs.Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or commission.In case of Bidders who remit money payable upon submission of the Bid cum Application Form or Revision Form through IndianRupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertiblecurrency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched byregistered post/speed post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished inthe space provided for this purpose in the Bid cum Application Form. Our Company will not be responsible for loss, if any, incurredby the Bidder on account of conversion of foreign currency.It is to be distinctly understood that there is no reservation for Non Residents, NRIs, FIIs and foreign venture capital funds and all NonResidents, NRI, FII and foreign venture capital funds applicants will be treated on the same basis with other categories for the purposeof allocation.Application By SEBI Registered Venture Capital Funds And Foreign Venture Capital InvestorsAs per the current regulations, the following restrictions are applicable for SEBI registered Venture Capital Funds and ForeignVenture Capital Investors:The SEBI (Venture Capital Funds) Regulations, 1996 and SEBI (Foreign Venture Capital Investor) Regulations, 2000 prescribeinvestment restrictions on venture capital funds and foreign venture capital investors registered with SEBI. Accordingly, the holdingby any individual venture capital fund registered with SEBI, in one company should not exceed 25% of the corpus of the venturecapital fund, a Foreign Venture Capital Investor can invest its entire funds committed for investments into India in one company.Further, Venture Capital Funds and Foreign Venture Capital Investors can invest only upto 33.33% of the investable funds by way ofsubscription to an initial public offer.The above information is given for the benefit of the Bidders. Our Company and the BRLM are not liable for any amendments ormodification or changes in applicable laws or regulations, which may happen after the date of the Red Herring Prospectus. Bidders areadvised to make their independent investigations and ensure that the number of Equity Shares bid for do not exceed the applicablelimits under laws or regulations.Maximum And Minimum Bid Size:(a)For Retail Individual Bidders: The Bid must be for a minimum of [•] Equity Shares and in multiples of [•] Equity Sharesthereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed Rs. 1.00 Lac. In case of Revision ofBids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed Rs.1 Lac. In case the Bid amount isover Rs.100000 due to revision of the Bid or revision of the Price Band or on exercise of the Cut-off option, the Bid would beconsidered for allocation under the Non-Institutional Bidders portion. The Cut-off option is an option given only to the Retail220
Individual Bidders indicating their agreement to bid and purchase at the final Issue Price as determined at the end of the BookBuilding Process.TM(b)For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such number of Equity Sharesin multiples of [•] Equity Shares such that the Bid Amount exceeds Rs. 1.00 Lac and in multiples of [•] Equity Sharesthereafter. A Bid cannot be submitted for more than the size of the Issue. However, the maximum Bid by a QIB investorshould not exceed the investment limits prescribed for them by applicable laws/regulations.Under the existing SEBI (DIP) guidelines, a QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date and isrequired to pay QIB Margin upon submission of Bid.In case of revisions of Bids, the Non-Institutional Bidders, who are Individuals, have to ensure that the Bid Amount is greaterthan Rs. 1.00 Lac for being considered for allocation in the Non-Institutional Portion. In case the Bid amount reduces to Rs.1.00 Lac or less due to a revision in Bids, or revision of the Price Band, Bids by Non-Institutional Bidders who are eligiblefor allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non-Institutional Biddersand QIBs are not allowed to Bid at “Cut-off”.Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number ofEquity Shares that can be held by them under applicable law, or regulation or as specified in this Draft Red HerringProspectus.Information for the Biddersi. Our Company will file the Red Herring Prospectus with the RoC at least 3 (three) days before the Bid/Issue Opening Date.ii.iii.iv.The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum Application Formto potential investors.An investor (who is eligible to invest in our Equity Shares according to the terms of the Red Herring Prospectus andapplicable law) who would like to obtain the Red Herring Prospectus and/ or the Bid cum Application Form can obtain thesame from our Registered Office or from any of the members of the Syndicate.The Bids should be submitted on the prescribed Bid cum Application Form only. The Bid cum Application Form should bearthe stamp of the members of the Syndicate. Bid cum Application Forms, which do not bear the stamp of the members of theSyndicate, will be rejected.Method and Process of Biddingi. Our Company, the BRLM shall declare the Bid/Issue Opening Date, Bid/Issue Closing Date and Price Band at the time offiling the Red Herring Prospectus with RoC and also publish the same in two widely circulated newspapers (one each inEnglish and Hindi) and a regional language newspaper circulated at the place where the registered office of our Company issituated. This advertisement, subject to the provisions of Section 66 of the Companies Act shall be in the format and containthe disclosures specified in Schedule XX-A of the SEBI (DIP) Guidelines. The Members of the Syndicate shall accept Bidsfrom the Bidders during the Issue Period in accordance with the terms of the Syndicate Agreement.ii.iii.iv.Investors who are interested in subscribing to our Equity Shares should approach any of the members of the Syndicate ortheir authorised agent(s) to register their Bid.The Bidding Period shall be for a minimum of three working days and not exceeding seven working days. In case the PriceBand is revised, the revised Price Band and the Bidding Period will be published in two national newspapers (one each inEnglish and Hindi) and one regional language newspaper circulated at the place where the registered office of our Companyis situated and the Bidding Period may be extended, if required, by an additional three working days, subject to the totalBidding Period not exceeding ten working days.Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (For further detailsplease refer to the paragraph titled ‘Bids at Different Price Levels’ on page no. [●] of this Draft Red Herring Prospectus)within the Price Band and specify the demand (i.e., the number of equity shares Bid for) in each option. The price and221
demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from theBidder and will not be cumulated. After determination of the Issue Price, the maximum number of equity shares Bid for by aBidder at or above the Issue Price will be considered for allocation and the rest of the Bid(s), irrespective of the Bid price,will become automatically invalid.TMv. The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application Form have beensubmitted to any member of the Syndicate. Submission of a second Bid cum Application Form to either the same or toanother member of the Syndicate will be treated as multiple Bids and is liable to be rejected either before entering the Bidinto the electronic bidding system, or at any point of time prior to the allocation/allotment of Equity Shares in this Issue.However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed in the paragraph titled‘Build up of the Book and Revision of Bids’ on page no. [●] of this Draft Red Herring Prospectus.vi.vii.viii.The members of the Syndicate will enter each Bid option into the electronic bidding system as a separate Bid and generate aTransaction Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder. Therefore, aBidder can receive up to three TRSs for each Bid cum Application Form.During the Bidding period, Bidders may approach the members of the Syndicate to submit their bid. Every member of theSyndicate shall accept Bids from all clients/investors who place orders through them and shall have the right to vet the bids,subject to the terms of the Syndicate Agreement and the Red Herring Prospectus.Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the paragraph‘Terms of Payment and Payment into the Escrow Collection Accounts’ on page no. [●] of this Draft Red Herring Prospectus.Bids at Different Price Levelsi. The Price Band has been fixed at Rs. [•] to [•] per Equity Share of Rs. 10 each, Rs. [•] being the Floor Price and Rs. [•]being the Cap Price. The Bidders can bid at any price within the Price Band, in multiples of Re. 1(One).ii.iii.iv.Our Company, in consultation with the BRLM, reserves the right to revise the Price Band, during the Bidding Period, inwhich case the Bidding Period shall be extended further for a period of three working days, subject to the total BiddingPeriod not exceeding ten working days. The higher end of the Price Band should not be more than 20% of the lower end ofthe Price Band. Subject to compliance with the immediately preceding sentence, the floor of Price Band can move up ordown to the extent of 20% of the floor of the Price Band disclosed in the Red Herring Prospectus.In case of revision in the Price Band, the Issue Period will be extended for three additional working days subject to amaximum of ten working days. Any revision in the Price Band and the revised Bidding/Issue period will be widelydisseminated by notification to BSE and NSE, by issuing a public notice in two national newspapers (one each in English andHindi), and one regional newspaper, and also by indicating the change on the websites of the BRLM, and the terminals of themembers of the Syndicate.Our Company, in consultation with the BRLM, can finalise the Issue Price within the Price Band in accordance with thisclause, without the prior approval of, or intimation, to the Bidders.v. The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number of Equity shares at aspecific price. Retail Individual Bidders applying for a maximum Bid in any of the Bidding options not exceeding Rs. 1 Lacmay bid at Cut-off price. However, bidding at Cut-off price is prohibited for QIB or Non Institutional Bidders and such Bidsfrom QIBs and Non Institutional Bidders shall be rejected.vi.vii.Retail Individual Bidders who bid at the Cut-Off Price agree that they shall purchase the Equity Shares and Warrants at theIssue Price, as finally determined, which will be a price within the Price Band. Retail Individual Bidders bidding at Cut-OffPrice shall deposit the Bid Amount based on the higher end of the Price Band in the Escrow Account. In the event the BidAmount is higher than the allocation amount payable by the Retail Individual Bidders, who Bid at Cut off Price (i.e., the totalnumber of Equity Shares and Warrants allocated in the Issue multiplied by the Issue Price), the Retail Individual Bidders,who Bid at Cut off Price, shall receive the refund of the excess amounts from the Escrow Account.In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had bid at Cutoff Pricecould either (i) revise their Bid or (ii) make additional payment based on the higher end of the Revised Price Band (such that222
the total amount i.e., original Bid Price plus additional payment does not exceed Rs. 1 Lac for Retail Individual Bidders , ifthe Bidder wants to continue to bid at Cut-off Price), with the Syndicate Member to whom the original Bid was submitted. Incase the total amount (i.e., original Bid Price plus additional payment) exceeds Rs. 100000 for Retail Institutional Bidders,the Bid will be considered for allocation under the Non-Institutional portion in terms of the Red Herring Prospectus. If,however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the higherend of the Price Band prior to revision, the number of Equity Shares bid for shall be adjusted downwards for the purpose ofallotment, such that the no additional payment would be required from the Bidder and the Bidder is deemed to have approvedsuch revised Bid at Cut-off Price.TMviii.ix.In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders who have bid at Cut-offPrice could either revise their Bid or the excess amount paid at the time of bidding would be refunded from the EscrowAccount.In the event of any revision in the Price Band, whether upwards or downwards, the minimum application size shall remain [•]Equity Shares irrespective of whether the Bid Price payable on such minimum application is not in the range of Rs. 5000 toRs. 7000.Escrow MechanismOur Company shall open Escrow Accounts with one or more Escrow Collection Banks in whose favour the Bidders shall make out thecheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bidamount from Bidders in a certain category would be deposited in the Escrow Account for the Issue.The Escrow Collection Banks will act in terms of the Red Herring Prospectus and an Escrow Agreement. The Escrow CollectionBank(s) for and on behalf of the Bidders shall maintain the monies in the Escrow Account. The Escrow Collection Bank(s) shall notexercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On theDesignated Date, the Escrow Collection Banks shall transfer the monies from the Escrow Account to the Public Issue Account as perthe terms of the Escrow Agreement. Payment of refunds to the Bidders shall also be made from the Escrow Collection Banks as perthe terms of the Escrow Agreement and the Red Herring Prospectus.The Bidders shall note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between theEscrow Collection Bank(s), the Registrar to the Issue and the Syndicate Members to facilitate collections from the Bidders and theCompany.Terms of Payment and Payment into the Escrow Collection AccountsIn case of Retail Individual Bidders and Non-Institutional Bidders, each Bidder, shall pay the applicable Margin Amount, with thesubmission of the Bid cum Application Form and draw a cheque or demand draft for the maximum amount of his/ her Bid in favour ofthe Escrow Account of the Escrow Collection Bank(s) (For further details please refer to the paragraph titled ‘Payment Instructions’beginning on page no. [●] of this Draft Red Herring Prospectus) and submit the same to the member of the Syndicate to whom the Bidis being submitted. Bid cum Application Forms accompanied by cash shall not be accepted. The maximum Bid price has to be paid atthe time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder.The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Bank(s), which will hold suchmonies for the benefit of the Bidders till the Designated Date. On the Designated Date, the Escrow Collection Bank(s) shall transferthe funds equivalent to the size of the Issue from the Escrow Account, as per the terms of the Escrow Agreement, into the Public IssueAccount with the Banker(s) to the Issue. The balance amount after transfer to the Public Issue Account shall be held in the RefundAccount for the benefit of the Bidders who are entitled to refunds. Not later than 15 days from the Bid/Issue Closing Date, the EscrowCollection Bank(s) shall refund all amounts payable to unsuccessful Bidders and also the excess amount paid on bidding, if any, afteradjustment for allotment to the Bidders.Each category of Bidders i.e. Non Institutional Bidders and Retail Individual Bidders, would be required to pay their applicableMargin Amount at the time of the submission of the Bid cum Application Form. The Margin Amount payable by each category ofBidders is mentioned in the chapter titled ‘Issue Structure’ beginning on page no. [●] of this Draft Red Herring Prospectus.In case of QIBs, each QIB shall along with submission of the Bid Cum Application form, draw a cheque or demand draft for 10% ofthe maximum amount of his Bid in favour of the Escrow account of the Escrow Collection Bank. The balance amount shall be payable223
y the Bidder for Equity Shares allocated at the Issue Price, no later than the Pay-in-Date, which shall be a minimum period of twodays from the date of communication of the allocation list to the members of the Syndicate If the payment is not made favouring theEscrow Account within the time stipulated above, the Bid of the Bidder is liable to be rejected and the margin money will be refunded.TMWhere the Bidder has been allocated lesser number of Equity Shares and Warrants than he or she had bid for, the excess amount paidon bidding, if any, after adjustment for allocation, will be refunded to such Bidder within 15 days from the Bid/Issue Closing Date,failing which the Company shall pay interest at 15% per annum for any delay beyond the periods as mentioned above.Electronic Registration Of Bids1) The Members of the Syndicate will register the Bids using the on-line facilities of BSE and NSE. There will be at least one onlineconnectivity in each city, where a stock exchange is located in India and where Bids are being accepted.2) BSE and NSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the terminals ofthe Members of the Syndicate and their authorised agents during the Bidding Period. Syndicate Members can also set up facilitiesfor off-line electronic registration of Bids subject to the condition that they will subsequently upload the off-line data file into theon-line facilities for book building on a half hourly basis. On the Bid Closing Date, the Members of the Syndicate shall upload theBids till such time as may be permitted by the Stock Exchanges. This information shall be available with the BRLM on a regularbasis.3) The aggregate demand and price for Bids registered on the electronic facilities of BSE and NSE will be uploaded on a half hourlybasis, consolidated and displayed on-line at all bidding centers and the websites of BSE and NSE. A graphical representation ofconsolidated demand and price would be made available at the Bidding centres during the Bidding Period.4) At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the on-linesystem:i) Name of the investor (Investors should ensure that the name given in the Bid cum Application form is exactly the sameas the name in which the Depositary Account is held. In case the Bid cum Application Form is submitted in joint names,investors should ensure that the Depository Account is also held in the same joint names and are in the same sequence inwhich they appear in the Bid cum Application Form.)ii) Investor Category –Individual, Corporate, NRI, FII, or Mutual Fund etc.iii) Numbers of Equity Shares bid for.iv) Bid Price.v) Bid cum Application Form number.vi) Whether payment is made upon submission of Bid cum Application Form.vii) Margin Amount; andviii) Depository Participant Identification Number and Client Identification Number of the Beneficiary Account of theBidder.5) A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding options. It is the Bidder’sresponsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of the Syndicatedoes not guarantee that the Equity Shares and Warrants shall be allocated either by the members of the Syndicate or ourCompany.6) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.7) Any of the members of the Syndicate may reject QIB Bids provided the rejection is at the time of receipt of such Bids and thereason for rejection of the Bid is communicated to the Bidder at the time of such rejection. In case of Non-Institutional Bidders224
and Retail Individual Bidders, Bids would not be rejected except on the technical grounds listed on page no. [●] of this Draft RedHerring Prospectus.TM8) The permission given by BSE and NSE to use their network and software of the Online IPO system should not in any way bedeemed or construed to mean that the compliance with various statutory and other requirements by our Company and/or theBRLM are cleared or approved by BSE and NSE; nor does it in any manner warrant, certify or endorse the correctness orcompleteness of any of the compliance with the statutory and other requirements nor does it take any responsibility for thefinancial or other soundness of our Company, our Promoters, our management or any scheme or project of our Company.9) It is also to be distinctly understood that the approval given by BSE and NSE should not in any way be deemed or construed thatthe Red Herring Prospectus has been cleared or approved by the BSE and NSE; nor does it in any manner warrant, certify orendorse the correctness or completeness of any of the contents of the Red Herring Prospectus; nor does it warrant that the EquityShares will be listed or will continue to be listed on the BSE and NSE.10) Bids not uploaded to the online IPO system of NSE / BSE shall not be considered for allocations / allotment. In case ofdiscrepancy of data between the BSE and NSE the decision of the BRLM based on the physical records of the Bid CumApplication forms shall be final and binding on all concerned.Build Up Of The Book And Revision Of Bidsi. Bids registered by various Bidders through the Members of the Syndicate shall be electronically transmitted to the BSE orNSE mainframe on a regular basis.ii.iii.iv.The book gets built up at various price levels. This information will be available with the BRLM on a regular basis.During the Bidding Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level isfree to revise his or her Bid within the Price and using the printed Revision Form, which is a part of the Bid cum ApplicationForm.Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision Form. Apartfrom mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in hisor her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has bid for three options in the Bid cumApplication Form and he is changing only one of the options in the Revision Form, he must still fill the details of the othertwo options that are not being revised, in the Revision Form. The members of the Syndicate will not accept incomplete orinaccurate Revision Forms.v. The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid,the Bidders will have to use the services of the same member of the Syndicate through whom he or she had placed theoriginal Bid.vi.vii.viii.Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such RevisionForm.Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount,if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revisionof the Bid would be returned to the Bidder at the time of refund in accordance with the terms of the Red Herring Prospectus.In case of QIB Bidders, the members of the Syndicate may at their sole discretion waive the payment requirement at the timeof one or more revisions by the QIB Bidders.When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members ofthe Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of hisor her having revised the previous Bid.Price Discovery And Allocation/ Allotmenti. After the Bid Closing Date /Issue Closing Date, the BRLM will analyse the demand generated at various price levels anddiscuss pricing strategy with us.225
TMii.iii.iv.Our Company, in consultation with the BRLM, shall finalise the “Issue Price” and the number of Equity Shares and Warrantsto be allotted in each category to the Bidders.The allocation to QIBs upto 50%, Non-Institutional Bidders and Retail Individual Bidders of at least 15% and 35% of the NetIssue respectively, would be on proportionate basis, in the manner specified in the SEBI Guidelines and the Red HerringProspectus, in consultation with Designated Stock Exchange, subject to valid Bids being received at or above the Issue PriceUndersubscription, if any, in any category would be allowed to be met with spill over from any of the other categories at thediscretion of our Company in consultation with the BRLM .However, if the aggregate demand by Mutual Funds is less than[•] Equity Shares and [●] Warrants aggregating to Rs.[●] Lacs, the balance Equity Shares and Warrants available forallocation in the Mutual Fund Portion will first be added to the QIB Portion and be allocated proportionately to the QIBBidders. In the event that the aggregate demand in the QIB Portion has been met, under-subscription, if any, would beallowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, inconsultation with the BRLM and the Designated Stock Exchange.v. Allocation to QIBs, NRIs, FIIs, Foreign Venture Capital Funds, Multilateral and Bilateral Development Financial Institutionsregistered with SEBI applying on repatriation basis will be subject to the terms and conditions stipulated by the FIPB andRBI while granting permission for allotment of Equity Shares to them.vi.vii.viii.Our Company reserves the right to cancel the Issue any time after the Bid/Issue Opening Date without assigning any reasonswhatsoever.In terms of the SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date.The allotment details shall be put on the website of the Registrar of the Issue.Signing Of Underwriting Agreement And ROC Filingi. Our Company, the BRLM have entered into an Underwriting Agreement on finalisation of the Issue Price andallocation(s)/Allotment to the Bidders.ii.After signing the Underwriting Agreement, the Company would update and file the updated Red Herring Prospectus withRoC, which then would be termed ‘Prospectus’. The Prospectus would have details of the Issue Price, Issue size,underwriting arrangements and would be complete in all material respects.Filing of the Prospectus with the ROCWe will file a copy of the Prospectus with the Registrar of Companies, Maharashtra, and Mumbai in terms of Section 56, Section 60and Section 60B of the Companies Act.Announcement of Pre-Issue AdvertisementSubject to Section 66 of the Companies Act, the Company shall after receiving final observations, if any, on the Draft Red HerringProspectus from SEBI, publish an advertisement, in the form prescribed by the SEBI (DIP) Guidelines in an English national dailywith wide circulation, one Hindi National newspaper and a regional language newspaper with wide circulation at Mumbai.Advertisement Regarding Issue Price and ProspectusWe will issue a statutory advertisement after the filing of the Red Herring Prospectus with the RoC. This advertisement, in addition tothe information that has to be set out in the statutory advertisement, shall indicate the Issue Price. Any material updates between thedate of filing of the Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.226
Issuance of Confirmation of Allocation Note (CAN)TMAfter the determination of the Issue Price, the following steps would be taken:i. Upon approval of the basis of allotment by the Designated Stock Exchange, the BRLM or Registrar to the Issue shall send tothe members of the Syndicate a list of their Bidders who have been allocated/Alloted Equity Shares and Warrants in theIssue. The approval of the basis of allocation by the Designated Stock Exchange for QIB Bidders may be donesimultaneously with or prior to the approval of the basis of allocation for the Retail Individual and Non-Institutional Bidders.However, Bidders should note that our Company shall ensure that the date of Allotment of the Equity Shares to all Bidders,in all categories, shall be done on the same date.ii.iii.iv.The BRLM would dispatch a CAN to their Bidders who have been allocated Equity Shares and Warrants in the Issue. Thedispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price forall the Equity Shares and Warrants allocated to such Bidder. Those Bidders who have not paid the entire Bid Amount into theEscrow Account at the time of bidding shall pay in full the Allocation Amount payable into the Escrow Account by the PayinDate specified in the CAN.Bidders who have been allocated Equity Shares and Warrants and who have already paid the Bid Amount into the EscrowAccount at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, to realisationof his or her cheque or demand draft paid into the Escrow Account. The dispatch of a CAN shall be deemed a valid, bindingand irrevocable contract for the Bidder to pay the entire Issue Price for the allotment to such Bidder.The issuance of CAN is Subject to “Allotment Reconciliation and revised CANs” as set forth herein.INVESTORS ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE EQUITY SHARESTHAT MAY BE ALLOTTED TO THEM PURSUANT TO THIS ISSUE.Notice To QIBs: Allotment, Reconciliation And Revised CansAfter the Bid/Issue Closing Date, an Electronic Book will be prepared by the Registrar on the basis of Bids upload on the BSE/NSEsystem. This shall be followed by physical book prepared by the Registrar prepared on the basis of the Bid cum Application formreceived. Based on the physical book or electronic book, QIBs may be sent a CAN, indicating the number of Equity Shares andWarrants that may be allotted to them. This CAN is subject to the Basis of final allotment, which will be approved by the DesignatedStock Exchange and reflected in the physical book prepared by the Registrar. Subject to SEBI Guidelines, certain Bid Applicationsmay be rejected due to technical reasons, non-receipt of fund, cancellation of cheques, cheque bouncing, incorrect details, etc., andthese rejected applications will be reflected in the reconciliation and basis of allotment as approved by the Designated Stock Exchangeand specified in the physical book. As a result, a revised CAN may be sent to QIBs and the allocation of Equity Shares and Warrantsin such revised CAN may be different from that specified in the earlier CAN. It is not necessary that a revised CAN will be sent. QIBsshould note that they may be required to pay additional amounts, if any, by the Pay-in Date specified in the revised CAN, for anyincreased Allotment of Equity Shares and Warrants. The CAN will constitute the valid, binding and irrevocable contract (subject onlyto the issue of a revised CAN) for the QIB to pay the entire Issue Price for all the Equity Shares and Warrants allocated to such QIB.The revised CAN, if issued, will supersede in entirety, the earlier CAN.Designated Date and Allotment of Equity Shares and Warrantsi. Our Company will ensure that the allotment of Equity Shares and Warrants is done within 15 days of the Bid/Issue ClosingDate. After the funds are transferred from the Escrow Account to the Public Issue Account on the Designated Date, we wouldallot the Equity Shares to the allottees. Our Company would ensure the credit to the successful Bidders depository account.Allotment of the Equity Shares and Warrants to the allottees shall be within two working days of the date of allotment. Incase, our Company fails to make allotment or transfer within 15 days of the Bid/Issue Closing Date, interest would be paid tothe investors at the rate of 15% per annum.ii.In accordance with the SEBI Guidelines, Equity Shares and Warrants will be issued, transferred and allotment shall be madeonly in the dematerialised form to the allottees. Allottees will have the option to re-materialise the Equity Shares andWarrants, if they so desire, as per the provisions of the Companies Act and the Depositories Act.227
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated to them pursuant tothis Issue.TMGeneral InstructionsDo’s:i. Check if you are eligible to apply;Read all the instructions carefully and complete the Resident Bid cum Application Form (white in colour) or Non-Resident Bid cumApplication Form (blue in colour) as the case may be;ii.iii.iv.Ensure that the details about Depository Participant and Beneficiary Account are correct as allotment of Equity Shares andWarrants will be in the dematerialized form only;Investor must ensure that the name given in the Bid cum Application Form is exactly the same as the name in which theDepository Account is held. In case the Bid cum Application Form is submitted in joint names, it should be ensured that theDepository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cumApplication Form;Ensure that the Bids are submitted at the Bidding centres only on forms bearing the stamp of a members of the Syndicate;v. Ensure that you have been given a TRS for all your Bid options;vi.vii.viii.ix.Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revisedTRS;Ensure that the Bid is within the Price Band;Ensure that you mention your Permanent Account Number (PAN) allotted under the I.T. Act The copy of the PAN card orthe PAN allotment letter should be submitted with the application form;If you have mentioned “Applied For” or “Not Applicable” in the Bid cum Application Form in the section dealing with PANnumber, ensure that you submit Form 60 or 61, as the case may be, together with permissible documents as address proof;andx. Ensure that the demographic details (as defined herein below) are updated true and correct in all respectsDon’ts:i. Do not Bid for lower than the minimum Bid size;ii. Do not Bid/ revise Bid Amount to less than the lower end of the Price Band or higher than the higher end of the Price Band;iii. Do not Bid on another Bid cum Application Form after you have submitted a Bid to the members of the Syndicate;iv. Do not pay the Bid Amount in cash;v. Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate only;vi. Do not Bid at Cut Off Price (for QIB Bidders, Non-Institutional Bidders) ;vii. Do not Bid at Bid Amount exceeding Rs 1 Lac (for Retail Individual Bidders);viii. Do not fill up the Bid cum Application Form such that the Equity Shares and Warrants bid for exceeds the Issue Size and/ orinvestment limit or maximum number of Equity Shares and Warrants that can be held under the applicable laws orregulations or maximum amount permissible under the applicable regulations;ix. Do not submit Bid accompanied with Stock invest;x. Do not submit GIR number instead of PAN as Bid is liable to be rejected on this ground; andxi. Do not submit the Bid without the QIB Margin Amount, in case of a Bid by a QIB.Instructions for Completing the Bid cum Application FormBidders can obtain Bid cum Application Forms and / or Revision Forms from the BRLM.228
Bids and Revisions of BidsTMBids and revisions of Bids must be:i. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white colour for Resident Indians,blue colour for NRI, FII or foreign venture capital fund registered with SEBI applying on repatriation basis.ii.iii.iv.Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, in the Bidcum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to berejected.For Retail Individual Bidders, the Bid must be for a minimum of [•] Equity Shares and in multiples of [•] thereafter subjectto a maximum Bid amount of Rs. 1 Lac.For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the BidPrice exceeds Rs. 1 Lac and in multiples of [•] Equity Shares thereafter. Bids cannot be made for more than the Net Offer tothe Public. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximumnumber of shares that can be held by them under the applicable laws or regulations.v. In single name or in joint names (not more than three, and in the same order as their Depository Participant details).vi.Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of Indiamust be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.Bidder’s Bank DetailsBidders should note that on the basis of names of the Bidders, Depository Participant’s name, Depository Participant IdentificationNumber and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue willobtain from the Depository the Bidder bank account details. These bank account details would be printed on the refund order, ifany, to be sent to Bidders or used for sending the refund through ECS, hence, Bidders are advised to immediately update theirbank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result indelays in credit of refund to Bidders at the Bidders sole risk and neither the BRLM nor the Registrar nor the Escrow CollectionBanks nor the Company shall have any responsibility and undertake any liability for the same.Bidder’s Depository Account DetailsIT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES AND WARRANTS IN DEMATERIALISEDFORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANTIDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM.INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THESAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATIONFORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSOHELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUMAPPLICATION FORM.Bidders should note that on the basis of name of the Bidders, Depository Participant’s name and identification number and beneficiaryaccount number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depositorydemographic details of the Bidders such as address, bank account details for printing on refund orders or give credit through ECS andoccupation (hereinafter referred to as “Demographic Details”). Hence, Bidders should carefully fill in their Depository Account detailsin the Bid cum Application Form.These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/ECS creditfor refunds/CANs/Allocation advice and printing of bank particulars on the refund order and the Demographic Details given byBidders in the Bid cum Application Form would not be used for these purposes by the Registrar. Hence, Bidders are advised to updatetheir Demographic Details as provided to their Depository Participants.229
By signing the Bid cum Application Form, the Bidder would be deemed to have authorised the depositories to provide, upon request,to the Registrar to the Issue, the required Demographic Details as available on its records.TMRefund Orders/ECS refunds for credits/Allocation Advice/CANs would be mailed at the address of the Bidder as per the DemographicDetails received from the Depositories. Bidders may note that delivery of refund orders/ECS refunds for credits /allocationadvice/CANs may get delayed if the same once sent to the address obtained from the depositories are returned undelivered. In such anevent, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure dispatch ofrefund orders. Please note that any such delay shall be at the Bidders sole risk and neither the Company nor the Registrar nor theEscrow Collection Bank(s) nor the BRLM shall be liable to compensate the Bidder for any losses caused to the Bidder due to any suchdelay or liable to pay any such interest for such delay.The company in its absolute discretion, reserves the right to permit the holder of Power of Attorney to request the Registrar that for thepurpose of printing particulars on the refund order and mailing of the Refund Orders/ECS refunds for credits/AllocationAdvice/CANs, the demographic details given on the Bid cum Application Form should be used (and not those obtained from theDepository of the Bidder) In such cases, the Registrar shall use Demographic details as given in the Bid cum Application Form insteadof those obtained from the Depositories.In case no corresponding record is available with the Depositories, which matches three parameters, namely, names of the Bidders(including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s identity, then suchBids are liable to be rejected.Bids by Non Residents, NRIs, FIIs and Foreign Venture Capital Funds Registered With SEBI on a Repatriation BasisBids and revision to Bids must be made:i. On the Bid cum Application Form or the Revision Form, as applicable (blue in colour), and completed in full in BLOCKLETTERS in ENGLISH in accordance with the instructions contained therein.ii.iii.iv.In a single name or joint names (not more than three).By NRIs for a Bid Amount of up to Rs. 1 Lac would be considered under the Retail Portion for the purposes of allocation andBids for a Bid Amount of more than Rs. 1 Lac would be considered under Non-Institutional Bid Portion for thepurposes of allocation, by FIIs or Foreign Venture Capital Investors registered with SEBI, Multilateral and BilateralDevelopment Financial Institutions for a minimum of such number of Equity Shares and in multiples of [•] Equity Sharesthereafter so that the Bid Price exceeds Rs. 1 Lac. For further details, please refer to the paragraph titled ‘Maximum andMinimum Bid Size’ on page no. [●] of this Draft Red Herring Prospectus.In the names of individuals, or in the names of FIIs but not in the names of minors, OCBs, firms or partnerships, foreignnationals (excluding NRIs) or their nominees.v. Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / orcommissionvi.vii.viii.In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will beconverted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchangeprevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited totheir NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum ApplicationForm. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreigncurrency.Our Company does not require approvals from FIPB or RBI for the transfer of Equity Shares in this Issue to eligible NRIs,FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral development financial institutions.As per the RBI regulations, OCBs are not permitted to participate in the Issue.There is no reservation for Non Residents, NRIs, FIIs and foreign venture capital funds and all Non Residents, NRI, FII andforeign venture capital funds applicants will be treated on the same basis with other categories for the purpose of allocation.230
The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended (the “Securities Act”) orany state securities laws in the United States and may not be offered or sold within the United States or to, or for the account orbenefit of, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transactionnot subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares may be offered and sold only outsidethe United States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occurTMBids under Power Of AttorneyIn case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, a certified copyof the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the Memorandum ofAssociation and Articles of Association and/or bye laws must be lodged along with the Bid cum Application Form. Failing this, ourCompany reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefor.In case of Bids made pursuant to a power of attorney by FIIs, a certified copy of the power of attorney or the relevant resolution orauthority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the Bid cumApplication Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, withoutassigning any reason therefor.In case of Bids made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified copyof certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the Bid cumApplication Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, withoutassigning any reason therefor.In case of Bids made by provident funds with minimum corpus of Rs. [●] Lacs (subject to applicable law) and pension funds withminimum corpus of Rs. [●] Lacs, a certified copy of certificate from a chartered accountant certifying the corpus of the providentfund/ pension fund must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to accept orreject any Bid in whole or in part, in either case, without assigning any reason therefor.In case of Bids made by Mutual Fund registered with SEBI, venture capital fund registered with SEBI and foreign venture capitalinvestor registered with SEBI, a certified copy of their SEBI registration certificate must be submitted with the Bid cum ApplicationForm. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning anyreason therefor.Our Company in its absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the power ofattorney along with the Bid cum Application form, subject to such terms and conditions that our Company, the BRLM may deem fit.Payment InstructionsOur Company shall open Escrow Accounts with the Escrow Collection Bank(s) for the collection of the Bid Amounts payable uponsubmission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Issue. Each Bidder shall draw acheque or demand draft for the amount payable on the Bid and/or on allocation as per the following terms:Payment into Escrow Account1) The applicable Margin Amount for Non Institutional and Retail Individual Bidders is equal to 100% and while submitting the Bidcum Application Form, draw a payment instrument for the Bid Amount in favour of the Escrow Account of the Company andsubmit the same to the members of the Syndicate.2) In case the above Margin Amount paid by the Bidders during the Bidding Period is less than the Issue Price multiplied by theEquity Shares allocated to the Bidder, the balance amount shall be paid by the Bidders into the Escrow Account within the periodspecified in the CAN which shall be subject to a minimum period of two days from the date of communication of the allocationlist to the members of the Syndicate3) The payment instruments for payment into the Escrow Account should be drawn in favour of:i) In case of Resident QIB Bidders: “Escrow Account-[●]ii) In case of Non Resident QIB Bidders: “Escrow Account-[●]iii) In case of Resident Bidders: “Escrow Account-[●]iv) In case of Non-resident Bidders: [●]231
4) In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased abroador cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds heldin Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banksauthorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will notbe accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident Bidder bidding on a repatriation basis. Payment bydrafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE Account or FCNRAccount.5) In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee Account along with documentaryevidence in support of the remittance. Payment by drafts should be accompanied by bank certificate confirming that the draft hasbeen issued by debiting to Special Rupee Account.6) Where a Bidder has been allocated a lesser number of Equity Shares and Warrants than the Bidder has Bid for, the excess amount,if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated, will be refunded tothe Bidder from the Escrow Account of our Company.7) The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated Date.8) On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account as per the terms of theEscrow Agreement into the Public Issue Account with the Bankers to the Issue.9) On the Designated Date and no later than 15 days from the Bid/Issue Closing Date, the Escrow Collection Bank shall also refundall amounts payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for allocation tothe Bidders.10) Payments should be made by cheque, or demand draft drawn on any Bank (including a Co-operative Bank), which is situated at,and is a member of or sub-member of the bankers’ clearing house located at the centre where the Bid cum Application Form issubmitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted andapplications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ Stock invest/Money Orders/ Postalorders will not be accepted.TMPayment by Stock investIn terms of the Reserve Bank of India Circular No. DBOD No. FSC BC 42/24.47.00/2003-04 dated November 5, 2003, the option touse the stockinvest instrument in lieu of cheques or bank drafts for payment of Bid money has been withdrawn. Hence, paymentthrough stockinvest would not be accepted in this Issue.Submission of Bid cum Application FormAll Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts shall besubmitted to the members of the Syndicate at the time of submission of the Bid. Each member of the Syndicate may, at its solediscretion, waive the requirement of payment at the time of submission of the Bid cum Application Form and Revision Form.However, for QIB Bidders, the members of the Syndicate shall collect the Margin Amount.No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form.However, the collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms orRevision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as theduplicate of the Bid cum Application Form for the records of the Bidder.Other InstructionsJoint Bids in the case of IndividualsBids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour ofthe Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communications will be addressed to theFirst Bidder and will be dispatched to his or her address as per the Demographic details received from the Depository.Multiple BidsA Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares and Warrants required. Two ormore Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same.232
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such Bidsin respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that the Bids clearly indicate thescheme concerned for which the Bid has been made.TMOur Company reserves the right to reject, in our absolute discretion, all or any multiple Bids in any or all categories.Permanent Account Number or PANBidder or in the case of a Bid in joint names, each of the Bidders, should mention his/her Permanent Account Number (PAN) allottedunder the I.T. Act. The copy of the PAN card or PAN allotment letter is required to be submitted with the Bid-cum-ApplicationForm. Applications without this information and documents will be considered incomplete and are liable to be rejected. It is to bespecifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground.In case the Sole/First Bidder and Joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention “NotApplicable” and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet been allotted eachof the Bidder(s) should Mention “Applied for” in the Bid cum Application Form. Further, where the Bidder(s) has mentioned“Applied for” or “Not Applicable”, the Sole/First Bidder and each of the Joint Bidder(s), as the case may be, would be required tosubmit Form 60 (Form of declaration to be filed by a person who does not have a permanent account number and who enters into anytransaction specified in rule 114B), or, Form 61 (form of declaration to be filed by a person who has agricultural income and is not inreceipt of any other income chargeable to income tax in respect of transactions specified in rule 114B), as may be applicable, dulyfilled along with a copy of any one of the following documents in support of the address: (a) Ration Card (b) Passport (c) DrivingLicense (d) Identity Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address (f) Anydocument or communication issued by any authority of the Central Government, State Government or local bodies showing residentialaddress (g) Any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and Form61 have been amended vide a notification issued on December 1, 2004 by the Ministry of Finance, Department of Revenue, CentralBoard of Direct Taxes. All Bidders are requested to furnish, where applicable, the revised Form 60 or 61, as the case may be.Unique Identification Number-MAPINSEBI has, with effect from July 2, 2007 declared that the PAN would be the sole identification number for participants transacting in thesecurities market, irrespective of the amount of transaction. Thus the use of UIN has been discontinued.Our Right to Reject BidsIn case of QIB Bidders, our Company, in consultation with the BRLM may reject a bid placed by a qualified QIB for reasons to berecorded in writing, provided that such rejection shall be made at the time of submission of the Bid and the reasons therefore shall bedisclosed to the QIB Bidders. In case of QIB Bidders, Non-Institutional Bidders, Retail Individual Bidders, we have a right to rejectBids based on technical grounds. Consequent refunds shall be made as set out under the heading titled ‘Modes of Making Refunds’ onpage no. [●] of this Draft Red Herring Prospectus.Grounds for Technical RejectionsBidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:i. Amount paid does not tally with the amount payable for the highest value of Equity Shares and Warrants bid for;ii. Age of First Bidder not given;iii. In case of partnership firms, Equity Shares and Warrants may be registered in the names of the individual partners and nofirm as such shall be entitled to apply;iv. Bid by persons not competent to contract under the Indian Contract Act, 1872, including minors, insane persons;v. PAN photocopy/PAN communication/ Form 60 or Form 61 declaration along with documentary evidence in support ofaddress given in the declaration, not given;vi. Bank account details for refund are not given;vii. Bids for lower number of Equity Shares and Warrants than specified for that category of investors;viii. Bids at a price less than lower end of the Price Band;ix. Bids at a price more than the higher end of the Price Band;x. Bids by QIBs not submitted through members of the Syndicate;xi. Bids by any persons outside India if not in compliance with applicable foreign and Indian laws;xii. Bids for number of Equity Shares and Warrants which are not in multiples of [•];233
xiii.xiv.xv.xvi.xvii.xviii.xix.xx.xxi.xxii.xxiii.xxiv.xxv.xxvi.Category not ticked;Multiple Bids as defined in the Red Herring Prospectus;In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;Bids accompanied by Stockinvest/money order/postal order/cash;Signature of sole and / or joint Bidders missing;Bid cum Application Forms does not have the stamp of the Syndicate Members;Bid cum Application Forms does not have Bidder’s depository account details;Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid cum ApplicationForms, Bid/Issue Opening Date advertisement and the Red Herring Prospectus and as per the instructions in the Red HerringProspectus and the Bid cum Application Forms;In case no corresponding record is available with the Depositories that matches three parameters namely, names of theBidders (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’sidentity;Bids for amounts greater than the maximum permissible amounts prescribed by the regulations;Bids for amounts greater than the maximum permissible amounts prescribed by the regulations, please refer to the details inparagraph regarding the same on page no. [●] of this Draft Red Herring Prospectus;Bids not duly signed by the sole/joint Bidders;Bids by OCBs; orIf GIR number is mentioned instead of PAN NumberTMEquity Shares In Dematerialised Form with NSDL or CDSLAs per the provisions of Section 68B of the Companies Act, the allotment of Equity Shares and Warrants in this Issue shall be only ina de-materialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued throughthe electronic mode).In this context, two agreements have been signed among our Company, the respective Depositories and the Registrar to the Issue:a) A tripartite Agreement dated October 9, 2006 with NSDL, our Company and the Registrar to the Issue;b) A tripartite Agreement dated September 12, 2006, with CDSL, our Company and the Registrar to the Issue.All Bidders can seek allotment only in dematerialised mode. Bids from any Bidder without relevant details of his or her depositoryaccount are liable to be rejected.i. A Bidder applying for Equity Shares and Warrants must have at least one beneficiary account with either of the DepositoryParticipants of either NSDL or CDSL prior to making the Bid.ii. The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository Participant’sidentification number) appearing in the Bid cum Application Form or Revision Form.iii. Equity Shares and Warrants allotted to a Bidder will be credited in electronic form directly to the beneficiary account (withthe Depository Participant) of the Bidderiv. Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details in theDepository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the accountdetails in the Depository.v. If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the Bid cumApplication Form or Revision Form, it is liable to be rejected.vi. Non-transferable allotment advice or refund orders will be directly sent to the Bidder by the Registrars to the Issue.vii. The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum Application Form vis-àvisthose with his or her Depository Participant.viii. Equity Shares and Warrants in electronic form can be traded only on the stock exchanges having electronic connectivity withNSDL and CDSL. All the Stock Exchanges where our Equity Shares are proposed to be listed have electronic connectivitywith CDSL and NSDL.ix. The trading of the Equity Shares and Warrants of our Company would be in dematerialised form only for all investors in thedemat segment of the respective Stock Exchanges.As this Issue comprises of a fresh Issue, investors are advised to instruct their Depository Participants to accept their Equity Sharesthat may be allocated to them pursuant to this Issue.234
TMCommunicationsAll future communications in connection with Bids made in this Issue should be addressed to the Registrar to the Issue quoting the fullname of the sole or First Bidder, Bid cum Application Form number, Bidders Depository account details, number of Equity Sharesand Warrants applied for, date of Bid form, name and address of the member of the Syndicate where the Bid was submitted andcheque or draft number and issuing bank thereof.Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or post-Issue related problems suchas non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary accounts, refund orders etc.Disposal of Applications and Applications MoneyOur Company shall give credit of Equity Shares and Warrants allotted to the beneficiary account with Depository Participants within15 working days of the Bid/Issue Closing Date. Applicants residing at 15 centers where clearing houses are managed by the ReserveBank of India (RBI) will get refunds through ECS only (subject to availability of all information for crediting the refund throughECS).In case of other applicants, the Company shall ensure dispatch of refund orders, if any, of value up to Rs. 1,500 by “Under Certificateof Posting”, and shall dispatch refund orders above Rs. 1,500, if any, by registered post or speed post, except for Bidders who haveopted to receive refunds through the ECS facility.Applicants to whom refunds are made through Electronic transfer of funds will be send a letter through ordinary post intimating themabout the mode of credit of refund within 15 working days of closure of Issue.We shall ensure dispatch of refund orders, if any, by “Under Certificate of Posting” or registered post or speed post or ECS, asapplicable, only at the sole or First Bidder’s sole risk within 15 days of the Bid Closing Date/Issue Closing Date, and adequate fundsfor making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available to the Registrar to the Issue by theIssuer.We shall ensure dispatch of allotment advice, refund orders and give benefit to the beneficiary account with Depository Participantsand submit the documents pertaining to the allotment to the Stock Exchanges within 2 (two) working days of date of Allotment.We shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at the StockExchanges as mentioned under the heading ‘Listing’ in the section titled ‘Other Regulatory and Statutory Disclosures’ beginning onpage no. [●] of this Draft Red Herring Prospectus are taken within seven working days of finalisation and adoption of the Basis ofAllotment for this Issue.In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI DIP Guidelines, our Company furtherundertakes that:i. Allotment of Equity Shares and Warrants shall be made only in dematerialised form within 15 (fifteen) days of the Bid/IssueClosing Date;ii. despatch refund orders within 15 (fifteen) days of the Bid/Issue Closing Date would be ensured;iii. and our Company shall pay interest at 15% (fifteen) per annum (for any delay beyond the 15 (fifteen)-day time period asmentioned above), if allotment is not made and refund orders are not despatched and/or demat credits are not made toinvestors within the 15 (fifteen)-day time prescribed above as per the Guidelines issued by the Government of India, Ministryof Finance pursuant to their letter No. F/8/S/79 dated July 31, 1983, as amended by their letter No. F/14/SE/85 datedSeptember 27, 1985, addressed to the Stock Exchanges, and as further modified by SEBI’s Clarification XXI dated October27, 1997, with respect to the SEBI DIP Guidelines.Consequent refunds shall be made as set out under the heading titled ‘Modes of Making Refunds’ on page no. [●] of this Draft RedHerring Prospectus.235
Interest on Refund of excess Bid AmountTMThe Company shall pay interest at the rate of 15% per annum on the excess Bid Amount received if refund orders are not dispatchedwithin 15 days from the Bid/Issue Closing Date as per the Guidelines issued by the GoI, Ministry of Finance pursuant to their letterNo.F/8/S/79 dated July 31, 1983, as amended by their letter No. F/14/SE/85 dated September 27, 1985, addressed to the stockexchanges, and as further modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.Basis Of AllotmentA. For Retail Individual Bidders• Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the totaldemand under this portion. The Allotment to all the successful Retail Individual Bidders will be made at the Issue Price.• The Issue size less Allotment to Non-Institutional Bidders and QIB Bidders shall be available for Allotment to RetailIndividual Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.• If the valid Bids in this category is for less than or equal to [●] Equity Shares and [●] Warrants at or above the Issue Price,full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.If the valid Bids in this category are for more than [●] Equity Shares and [●] Warrants at or above the Issue Price, the allocationshall be made on a proportionate basis up to a minimum of [●] Equity Shares and [●] Warrants and in multiples of [●] EquityShares and [●] Warrants thereafter. For the method of proportionate basis of allocation, refer below.B. For Non-Institutional Bidders• Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to determine the totaldemand under this portion. The Allotment to all successful Non-Institutional Bidders will be made at the Issue Price.• The Issue size less allocation to QIB Bidders and Retail Individual Bidders shall be available for allocation to Non-Institutional Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.• If the valid Bids in this category is for less than or equal to [●] Equity Shares and [●] Warrants at or above the Issue Price,full Allotment shall be made to Non-Institutional Bidders to the extent of their valid Bids.• In case the valid Bids in this category are for more than 798,636 Equity Shares and 399,318 Warrants at or above the IssuePrice, allocation shall be made on a proportionate basis up to a minimum of [●] Equity Shares and [●] Warrants and inmultiples of [●] Equity Shares and [●] Warrants thereafter. For the method of proportionate basis of allocation, refer below.C. For QIB Bidders• Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the total demand underthis portion. The allocation to all the QIB Bidders will be made at the Issue Price.• The QIB Portion shall be available for allocation to QIB Bidders who have Bid in the Issue at a price that is equal to orgreater than the Issue Price.• However, eligible Bids by Mutual Funds only shall first be considered for allocation proportionately in the Mutual FundsPortion. After completing proportionate allocation to Mutual Funds for an amount of up to [●] Equity Shares and [●]Warrants (the Mutual Funds Portion), the remaining demand by Mutual Funds, if any, shall then be considered for allocationproportionately, together with Bids by other QIBs, in the remainder of the QIB Portion (i.e. after excluding the Mutual FundsPortion). For the method of allocation in the QIB Portion, see the paragraph titled “Illustration of Allotment to QIBs”appearing below. If the valid Bids by Mutual Funds are for less than [●] Equity Shares, the balance Equity Shares andWarrants available for allocation in the Mutual Funds Portion will first be added to the QIB Portion and allocatedproportionately to the QIB Bidders. For the purposes of this paragraph it has been assumed that the QIB Portion for thepurposes of the Issue amounts to 50% of the Issue size, i.e. 1,887,500 Equity Shares.• Allotment shall be undertaken in the following manner:(a)In the first instance allocation to Mutual Funds for 5% of the QIB Portion shall be determined as follows;236
i. In the event that Mutual Fund Bids exceeds 5% of the QIB Portion, allocation to Mutual Funds shall be done ona proportionate basis for 5% of the QIB Portion.TMii.iii.In the event that the aggregate demand for Mutual Funds is less than 5% of the QIB Portion then all MutualFunds shall get full allotment to the extent of valid Bids received above the Issue Price.Equity Shares and Warrants remaining unsubscribed, if any, not allocated to Mutual Funds shall be available toall QIB Bidders as set out in (b) below;(b)In the second instance allocation to all QIBs shall be determined as follows:i. In the event that the oversubscription in the QIB Portion, all QIB Bidders who have submitted Bids above theIssue Price shall be allotted Equity Shares on a proportionate basis for up to 95% of the QIB Portion.ii.iii.Mutual Funds, who have received allocation as per (a) above, for less than the number of Equity Shares Bid forby them, are eligible to receive Equity Shares and Warrants on a proportionate basis along with other QIBBidders.Under-subscription below 5% of the QIB Portion, if any, from Mutual Funds, would be included for allocationto the remaining QIB Bidders on a proportionate basis.Except for any Equity Shares and Warrants allocated to QIB Bidders due to Under-subscription in the Retail Portion and/or NonInstitutional Portion, the aggregate allocation to QIB Bidders shall be made on a proportionate basis of at least [●] Equity Sharesand Warrants. For the method of proportionate basis of allocation refer below.Procedure and Time of Schedule for Allotment of Equity Shares and Demat Credit of EquityThe Issue will be conducted through a “100% book building process” pursuant to which the Underwriters will accept bids for theEquity Shares during the Bidding Period. The Bidding Period will commence on [•] and expire on [•]. Following the expiration of theBidding Period, our Company, in consultation with the BRLM, will determine the Issue Price, and, in consultation with the BRLM,the basis of allocation and entitlement to allotment based on the Bids received and subject to the confirmation by the BSE/NSE.Successful Bidders will be provided with a confirmation of their allocation and will be required to pay any unpaid amount for theEquity Shares within a prescribed time. SEBI Guidelines require our Company to complete the allotment to successful bidders within15 days of the expiration of the Bidding Period. The Equity Shares will then be credited and allotted to the investors’ demat accountsmaintained with the relevant depository participant. Upon approval by the Stock Exchanges, the Equity Shares will be listed andtrading will commence. This typically takes three trading days from the date of crediting the investor’s demat account, subject to finalapproval by the Stock Exchanges.Method of Proportionate Basis of AllotmentIn the event of the Issue being over-subscribed, we shall finalize the basis of allotment to Retail Individual Bidders and Non-Institutional Bidders and QIBs in consultation with the Designated Stock Exchange. The Executive Director or Managing Director (orany other senior official nominated by them) of the Designated Stock Exchange along with the BRLM and the Registrar to the Issueshall be responsible for ensuring that the basis of allotment is finalized in a fair and proper manner.Allotment to Bidders shall be as per the basis of allocation as set out in the chapter titled ‘Issue Structure’ beginning on page no. [●]of this Draft Red Herring Prospectus(a)(b)(c)Bidders will be categorized according to the number of Equity Shares and Warrants applied for by them.The total number of Equity Shares and Warrants to be allotted to each category as a whole shall be arrived at on aproportionate basis, being the total number of Equity Shares and Warrants applied for in that portion (number of Bidders inthe portion multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.Number of Equity Shares and Warrants to be allotted to the successful Bidders will be arrived at on a proportionate basis,being the total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the oversubscriptionratio.237
(d)In all Bids where the proportionate Allotment is less than [•] Equity Shares per Bidder, the Allotment shall be made asfollows:TM(e)(f)• Each successful Bidder shall be allotted a minimum of [•] Equity Shares and Warrants; and• The successful Bidders out of the total Bidders for a portion shall be determined by draw of lots in a manner such thatthe total number of Equity Shares and Warrants allotted in that portion is equal to the number of Equity Shares andWarrants calculated in accordance with (b) above; andIf the Equity Shares and Warrants allocated on a proportionate basis to any category are more than the Equity Shares andWarrants allotted to the Bidders in that portion, the remaining Equity Shares and Warrants available for Allotment shall befirst adjusted against any other portion, where the Equity Shares and Warrants are not sufficient for proportionate Allotmentto the successful Bidders in that portion. The balance Equity Shares, if any, remaining after such adjustment will be added tothe portion comprising Bidders applying for minimum number of Equity Shares and Warrants.If the proportionate allotment to a Bidder is a number that is more than [•] but is not a multiple of 1 (which is the marketablelot), the number in excess of the multiple of 1 would be rounded off to the higher multiple of 1 if that number is 0.5 or higher.If that number is lower than 0.5, it would be rounded off to the lower multiple of 1. All Bidders in such categories would beallotted Equity Shares and Warrant arrived at after such rounding off.Letters of Allotment or Refund OrdersWe shall give credit of Equity Shares and Warrants to the beneficiary account with Depository Participants within two working daysfrom the date of the Allotment. Applicants residing at 15 centers where clearing houses are managed by the Reserve Bank of India(RBI) will get refunds through ECS only (subject to availability of all information for crediting the refund through ECS).We shall ensure dispatch of refund orders, if any, of value up to Rs. 1500 by “Under Certificate of Posting”, and shall dispatch refundorders above Rs. 1500, if any, by registered post or speed post at the sole or First Bidder's sole risk within 15 days of the Bid /IssueClosing Date.In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, we undertake that:i. Allotment shall be made only in dematerialised form within 15 days from the Bid/Issue Closing Date;ii. Dispatch of refund orders shall be done within 15 days from the Bid/Issue Closing Date; andiii. We shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if Allotment isnot made, refund orders are not dispatched and/or demat credits are not made to investors within the 15 day time periodprescribed above.Payment of RefundBidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant-Identificationnumber and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtainfrom the Depository the Bidders bank account details including nine digit MICR code as appearing on a cheque leaf. Hence, Biddersare advised to immediately update their bank account details as appearing on the records of the depository participant. Please note thatfailure to do so could result in delays in credit of refunds to Bidders at the Bidders sole risk and neither the BRLM nor the RefundBank nor our Company nor the Registrar shall have any responsibility and undertake any liability for the same.Modes of Making RefundsThe payment of refund, if any, would be done through various modes in the following order of preference:(a)ECS: Payment of refund would be done through ECS for applicants having an account at one of the 15 centres, whereclearing houses for ECS are managed by Reserve Bank of India namely 1) Ahmedabad 2) Bangalore 3) Bhubaneshwar 4)Kolkata 5) Chandigarh 6) Chennai 7) Guwahati 8) Hyderabad 9) Jaipur 10) Kanpur 11) Mumbai 12) Nagpur 13) New Delhi14) Patna and 15) Thiruvanthapuram. This would be subject to availability of complete Bank Account Details includingMICR code from the depository. The payment of refund through ECS is mandatory for applicants having bank account at anyof the 15 centres named herein above, except where applicant is otherwise disclosed as eligible to get refunds through directcredit or RTGS or NEFT.238
(b) Direct Credit: Investors having their bank account with the Refund Bank, i.e. [●] shall be eligible to receive funds, if any,through Direct Credit. The refund amount, if any, would be credited directly to their bank account with the Refund Banker.(c) RTGS: Applicants having a bank account at any of the 15 centres detailed above, and whose Bid amount exceeds Rs. 10Lacs, shall be eligible to exercise the option to receive refunds, if any, through RTGS. All applicants eligible to exercise thisoption shall mandatorily provide the IFSC code in the Bid-cum-Application Form. In the event of failure to provide IFSCcode in the Bid-cum-Application Form, the refund shall be made through ECS or Direct Credit, if eligibility is disclosed;(d) NEFT (National Electronic Fund Transfer): Payment of refund shall be undertaken through NEFT wherever the applicants’bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a Magnetic Ink CharacterRecognition (MICR), if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI ason a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the applicantshave registered their nine digit MICR number and their bank account number while opening and operating the demataccount, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will bemade to the applicants through this method. The process flow in respect of refunds by way of NEFT is at an evolving stageand hence use of NEFT is subject to operational feasibility, cost, and process efficiency.(e) For all the other applicants, including applicants who have not updated their bank particulars alongwith the nine digit MICRCode, the refund orders would be dispatched “Under Certificate of Posting” for refund orders of value up to Rs. 1500 and throughSpeed Post / Registered Post for refund orders of Rs. 1500 and above.Please note that only applicants having a bank account at any of the 15 centres where clearing houses for ECS are managed by RBI areeligible to receive refunds through the modes detailed in (a), (b) and (c) hereinabove.Interest in Case of Delay in Dispatch of Allotment Letters/Refund OrdersOur Company agrees that as far as possible allotment of securities offered to the public shall be made within 15 days of the closure ofthe public issue. Our Company further agrees that we shall pay interest at rate of 15% per annum if the allotment letters/refund ordershave not been dispatched to the applicants or if, in a case where the refund or portion thereof is made in electronic manner, the refundinstructions have not been given to the clearing system in the disclosed manner within 15 days from the date of closure of the Issue.However, applications received after the closure of issue in fulfillment of underwriting obligations to meet the minimum subscriptionrequirement shall not be entitled for the said interest.Issue ProgramBID/ISSUE OPENS ON: [•], 2007BID/ISSUE CLOSES ON: [•], 2007Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the Bidding Period asmentioned above at the bidding centers mentioned on the Bid cum Application Form except that on the Bid/Issue Closing Date, theBids shall be accepted only between 10 a.m. and 1 p.m. (Indian Standard Time) or uploaded till such time as may be permitted by theBSE and NSE on the Bid/Issue Closing Date.Bids will only be acepted on working days i.e., Monday to Friday (excluding any publicholidays).In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional working days after revision ofPrice Band. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated bynotification to the BSE and NSE, by issuing a press release, and also by indicating the change on the web site of the BRLM and attheir terminals.Undertakings by Our CompanyOur Company undertakes as follows:a) that the complaints received in respect of this Issue shall be attended to by us expeditiously and satisfactorily;b) that all steps will be taken for the completion of the necessary formalities for listing and commencement of trading at all theStock Exchanges where the Equity Shares and Warrants are proposed to be listed within seven working days of finalisationof the basis of allotment;c) that the funds required for despatch of refund orders or allotment advice by registered post or speed post shall be madeavailable to the Registrar to the Issue by us;TM239
d) that funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed under the heading ‘Modes ofMaking Refunds’ on page no. [●] of this Draft Red Herring Prospectus shall be made available to the Registrar to the issue bythe Issuer.e) that the refund orders or allotment advice to the successful Bidders shall be despatched within specified time; andf) no further issue of Equity Shares shall be made till the Equity Shares offered through the Red Herring Prospectus are listed oruntil the Bid monies are refunded on account of non-listing, under-subscription etc.g) that the certificate of securities/refund order to the NRIs/FIIs shall be dispatched within the specified time.h) that promoters’ contribution in full, wherever required, shall be brought in advance before the issue opens for publicsubscription.i) that all steps for the completion of the necessary formalities for listing and commencement of trading at the Stock Exchangesas mentioned under the heading ‘Listing’ in the section titled ‘Other Regulatory and Statutory Disclosures’ beginning onpage no. [●] of this Draft Red Herring Prospectus are taken within seven working days of the finalisation and adoption of theBasis of Allotment for this Issue.j) that where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicantwithin 15 days of the Bid/Issue closing date as the case may be giving details of the bank where refunds shall be creditedalong with amount and expected date of electronic credit of refund;k) that except the Pre-IPO Placement as disclosed in the section titled “Capital Structure” beginning on page [●] of the DraftRed Herring Prospectus, no further issue of Equity Shares and Warrants shall be made till the Equity Shares and Warrantsissued through this Draft Red Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing,under subscription, etc.TMWe will provide adequate funds required for dispatch of refund orders / electronic transfer of funds for refunds or allotment advice tothe Registrar to the Issue.Utilisation of Issue ProceedsOur Board of Directors certify that:a) all monies received out of the Issue, including on exercise of Warrants, shall be credited/transferred to a separate bankaccount other than the bank account referred to in sub-section (3) of Section 73 of the Companies Act;b) details of all monies utilised out of Issue shall be disclosed under an appropriate head in our balance sheet indicating thepurpose for which such monies have been utilised;c) details of all unutilised monies out of the Issue, including on exercise of Warrants, if any shall be disclosed under the anappropriate separate head in the balance sheet indicating the form in which such unutilised monies have been invested;d) our Company shall not have recourse to the Issue proceeds until the approval for trading of the Equity Shares and Warrantsfrom all the Stock Exchanges where listing is sought has been received.Pending any use as described above, our Company intends to invest the proceeds of this Issue in high quality, interest / dividendbearing short term / long term liquid instruments including deposits with banks for the necessary duration. These investments wouldbe authorised by Board of Directors of the Company or a duly authorised committee thereof.Rectification of Register of MembersThe Company, under Section 111A of the Companies Act will have the right to rectify the register of members to comply with theCompanies Act.Restrictions on Foreign Ownership of Indian SecuritiesForeign investment in Indian securities is regulated through the industrial policy of Government of India, or the Industrial Policy andFEMA. While the Industrial Policy prescribes the limits and the conditions subject to which foreign investment can be made indifferent sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under theIndustrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy to any extentand without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making suchinvestment. The government bodies responsible for granting foreign investment approvals are the Foreign Investment PromotionBoard of the Government of India (“FIPB”) and the RBI.240
The maximum permissible FII investment in our Company as approved at our Annual General Meeting held on August 22, 2006 is40% of our total paid up capital. This can be raised to 100% by adoption of a Board resolution and special resolution by ourshareholders; however, as of the date hereof, no such resolution has been recommended to Board or our shareholders for adoption.TMBy way of Circular No. 53 dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian company in apublic Issue without prior RBI approval, so long as the price of Equity Shares to be issued is not less than the price at which EquityShares are issued to residents.The transfer of Equity Shares of NRIs, FIIs, and Foreign Venture Capital Investors registered with SEBI and Multilateral and BilateralDevelopment Financial institutions shall be subject to the conditions as may be prescribed by the Government of India or RBI whilegranting such approvals.Subscription by NRIs/ FIIsIt is to be distinctly understood that there is no reservation for Non-Residents, NRIs and FIIs and all Non-Residents, NRI and FIIsapplicants will be treated on the same basis as other categories for the purpose of allocation.As per the RBI regulations, OCBs cannot participate in this Issue.The Equity Shares have not been and will not be registered under the Securities Act, 1933 or any state securities laws in the UnitedStates and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined inRegulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registrationrequirements of the Securities Act. Accordingly, the Equity Shares may be offered and sold outside the United States to certainpersons in offshore transactions in compliance with Regulation S under the Securities Act and the applicable laws of the jurisdictionwhere those offers and sales occur.As per the current regulations, the following restrictions are applicable for investments by FIIs:No single FII can hold more than 10% of the post-issue paid-up capital of our Company. In respect of an FII investing in our EquityShares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our total issued capital or5% of total issued capital of our Company in case such sub account is a foreign corporate or an individual.The above information is given for the benefit of the Bidders. Our Company and the BRLM are not liable for any amendments ormodification or changes in applicable laws or regulations, which may happen after the date of the Draft Red Herring Prospectus.Bidders are advised to make their independent investigations and ensure that the number of Equity Shares bid for do not exceed theapplicable limits under laws or regulations.241
SECTION IX – MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF OUR COMPANYTMMAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF OUR COMPANYCAPITAL AND INCREASE AND REDUCTION OF CAPITALTitle of ArticleArticle Number and contentsShare Capital 3. The Authorised Share Capital of the Company is Rs. 20,00,00,000/- (Rupees TwentyCrores Only) divided into 1,99,90,000 (One Crore Ninety Nine Lacs NinetyThousand) Equity Shares of Rs. 10/- (Rupees Ten Only) each and 10,000/- (TenThousand) 0% Redeemable Preference Shares of Rs. 10/- each with the rights,privileges and conditions attaching thereto as are provided by the Articles ofAssociation of the Company for the time being, with power to increase, consolidatedor decreased the capital of the Company and to divide the shares in the capital for thetime being into several classes and to attach thereto respectively such preferential,deferred, qualified or special rights, privileges or conditions as may be determined byor in accordance with the articles of Association of the Company and to vary, modifyor abrogate any such rights, privileges or conditions in such manner as may for thetime being be provided by the Articles of Association of the Company.Increase of capitalby the Companyhow carried intoeffect4. The Company may in General Meeting from time to time by Ordinary Resolutionincrease its capital by creation of new Shares which may be unclassified and may beclassified at the time of issue in one or more classes and of such amount or amounts asmay be deemed expedient. The new Shares shall be issued upon such terms andconditions and with such rights and privileges annexed thereto as the resolution shallprescribe and in particular, such Shares may be issued with a preferential or qualifiedright to dividends and in the distribution of assets of the Company and with a right ofvoting at General Meeting of the Company in conformity with Section 87 and 88 of theAct. Whenever the capital of the Company has been increased under the provisions of thisNew Capital sameas existing capitalNonSharesVotingRedeemablePreference SharesVoting rights ofpreference sharesArticle the Directors shall comply with the provisions of Section 97of the Act5. Except so far as otherwise provided by the conditions of issue or by These Presents, anycapital raised by the creation of new Shares shall be considered as part of the existingcapital, and shall be subject to the provisions herein contained, with reference to thepayment of calls and instalments, forfeiture, lien, surrender, transfer and transmission,voting and otherwise.6. The Board shall have the power to issue a part of authorised capital by way of non-votingShares at price(s) premia, dividends, eligibility, volume, quantum, proportion and otherterms and conditions as they deem fit, subject however to provisions of law, rules,regulations, notifications and enforceable guidelines for the time being in force.7. Subject to the provisions of Section 80 of the Act, the Company shall have thepower to issue preference shares which are or at the option of the Company, liableto be redeemed and the resolution authorising such issue shall prescribe themanner, terms and conditions of redemption.8. The holder of Preference Shares shall have a right to vote only on Resolutions,which directly affect the rights attached to his Preference Shares.]Provisions toapply on issue ofRedeemablePreference Shares9. On the issue of redeemable preference shares under the provisions of Article7 hereof, the following provisions-shall take effect:(a)(b)No such Shares shall be redeemed except out of profits of which wouldotherwise be available for dividend or out of proceeds of a fresh i ssu e ofshares made for the purpose of the redemption.No such Shares shall be redeemed unless they are fully paid.242
TM(c)(d)The premium, if any payable on redemption shall have been provided for out ofthe profits of the Company or out of the Company's share premium account,before the Shares are redeemed.Where any such Shares are redeemed otherwise then out of the proceeds of afresh issue, there shall out of profits which would otherwise have beenavailable for dividend, be transferred to a reserve fund, to be called "theCapital Redemption Reserve Account", a sum equal to the nominal amountof the Shares redeemed, and the provisions of the Act relating to the reduction ofthe share capital of the Company shall, except as provided in Section 80 ofthe Act apply as if the Capital Redemption Reserve Account were paid-upshare capital of the Company.ReductioncapitalofSubject to the provisions of Section 80 of the Act. The redemption of(e) preference shares hereunder may be effected in accordance with the termsand conditions of their issue and in the absence of any specific terms andconditions in that behalf, in such manner as the Directors may think fit.10. The Company may (subject to the provisions of section 78, 80 and 100 to105, both inclusive, and other applicable provisions, if any, of the Act) from timeto time by Special Resolution reduce(a) the share capital(b)any capital redemption reserve account; orPurchase of ownSharesSub-divisionconsolidation andcancellation ofShares(c) any share premium accountin any manner for the time being, authorised by law and in particular capitalmay be paid off on the footing that it may be called up again or otherwise. ThisArticle is not to derogate from any power the Company would have, if it wereomitted.11. The Company shall have power, subject to and in accordance with all applicableprovisions of the Act, to purchase any of its own fully paid Shares whether or notthey are redeemable and may make a payment out of capital in respect of suchpurchase.12. Subject to the provisions of Section 94 and other applicable provisions of theAct, the Company in General Meeting may, from time to time, sub-divide orconsolidate its Shares, or any of them and the resolution whereby any Share issub-divided may determine that, as between the holders of the Shares resultingfrom such sub-divisions, one or more of such Shares shall have some preferenceor special advantage as regards dividend, capital or otherwise over or ascompared with the other(s). Subject as aforesaid, the Company in General Meetingmay also cancel shares which have not been taken or agreed to be taken by anyperson and diminish the amount of its share capital by the amount of the Sharesso cancelled.MODIFICATION OF RIGHTSTitle of ArticleModificationrightsofArticle Number and contents13. Whenever the capital, by reason of the issue of preference shares or otherwise, isdivided into different classes of Shares, all or any of the rights and privilegesattached to each class may, subject to the provisions of Sections 106 and 107 ofthe Act, be modified, commuted, affected, abrogated, dealt with or varied with theconsent in writing of the holders of not less than three-fourth of the issued capitalof that class or with the sanction of a Special Resolution passed at a separateGeneral Meeting of the holders of Shares of that class, and all the provisionshereafter contained as to General Meeting shall mutatis mutandis apply to everysuch Meeting. This Article is not to derogate from any power the Company would243
have if this Article was omitted.The rights conferred upon the holders of the Shares (including preference shares, ifany) of any class issued with preferred or other rights or privileges shall, unlessotherwise expressly provided by the terms of the issue of Shares of that class, bedeemed not to be modified, commuted, affected, dealt with or varied by the creation orissue of further Shares ranking pari passu therewith.TMSHARES, CERTIFICATES AND DEMATERIALISATIONTitle of ArticleRestriction onallotment andreturn of allotmentFurther issue ofsharesArticle Number and contents14. The Board of Directors shall observe the restrictions on allotment of Shares to the publiccontained in Sections 69 and 70 of the Act, and shall cause to be made the returns as toallotment provided for in Section 75 of the Act.15. (1) Where at any time after the expiry of two years from the formation of theCompany or at any time after the expiry of one year from the allotment of Shares inthe Company made for the first time after its formation, whichever is earlier ,it isproposed to increase the subscribed capital of the Company by allotment of furtherShares whether out of unissued share capital or out of increased share capital then:a)b)c)d)(2)Such further Shares shall be offered to the persons who at the date of the offerare holders of the equity shares of the Company, in proportion, as nearly ascircumstances admit, to the capital paid up on those Shares at that dateSuch offer shall be made by a notice specifying the number of Shares offered andlimiting a time not being less than fifteen days from the date of the offer and theoffer, if not accepted, will be deemed to have been declined.The offer aforesaid shall be deemed to include a right exercisable by the personconcerned to renounce the Shares offered to them in favour of any other person,and the notice referred to in sub-clause (b) shall contain a statement of thisright, PROVIDED THAT the Directors may decline, without assigning any reason, toallot any Shares to any person in whose favour any Member may renounce theShares offered to him.After the expiry of the time specified in the aforesaid notice or on receipt ofearlier intimation from the person to whom such notice is given declines toaccept the Shares offered, the Board of Directors may dispose them off insuch manner and to such person(s) as they may think in their sole discretion fit.Notwithstanding anything contained in sub-clause (1) hereof, the furtherShares aforesaid may be offered to any person(s) (whether or not those personsinclude the persons referred to in clause (a) sub-clause (1) hereof) in any mannerwhatsoever.If a Special Resolution to that effect is passed by the Company in theGeneral Meeting; ora)b)Where no such Special Resolution is passed, if the votes cast (whether ona show of hands, or on a poll, as the case may be) in favour of theproposal contained in the resolution moved in that General Meeting,(including the casting vote, if :any, of the Chairman) by Members who, being entitledto do so, vote in person, or where proxies are allowed by proxy, exceed the votes, ifany, cast against the proposal by Members, so entitled and voting and the CentralGovernment is satisfied, on an application made by the Board of Directors in thisbehalf, that the proposal is most beneficial to the Company.244
Title of ArticleArticle Number and contentsNothing in sub-clause (c) of clause(l) hereof shall be deemed;TMTo extend the time within which the offer should be accepted; or(3)a)b)(4)i)ii)To authorise any person to exercise the right of renunciation for a second time, on theground that the persons in whose favour the renunciation was first made has declinedto take the Shares comprised in the renunciation.Nothing in this Article shall apply to the increase of the subscribed capital of theCompany caused by the exercise of an option attached to the debenture issued orloans raised by the Company:To convert such debentures or loans into Shares in the Company; orto subscribe for Shares in the Company (whether such option is conferred in theseArticles or otherwise)PROVIDED THAT the terms of issue of such debentures or the terms of such loansinclude a term providing for such option and such term:either has been approved by the Central Government before the issue of thedebentures or the raising of the loans, or is in conformity with the rules, if any, madeby that government in this behalf, anda)in the case of debentures or loans other than debentures issued to, or loans obtainedfrom government or any institution specified by the Central Government in thisbehalf, has also been approved by a Special Resolution passed by the Company inthe General Meeting before the issue of the debentures or the raising of the loans.SharescontrolDirectorsunderofPower to offerShares/options toacquire Shares16. Subject to the provisions of the Act and these Articles, the Shares in the capital ofthe Company for the time being shall be under the control of the Directors who mayissue, allot or otherwise dispose of the same or any of them to such persons, in suchproportion and on such terms and conditions and either at a premium or at par or(subject to the compliance with the provision of Section 79 of the Act) at a discountand at such time as they may from time to time think fit and with the sanction of theCompany in the General Meeting to give to any person or persons the option or rightto call for any Shares either at par or premium during such time and for suchconsideration as the Directors think fit, and may issue and allot Shares in the capitalof the Company on payment in full or part of any property sold and transferred orfor any services rendered to the Company in the conduct of its business and anyShares which may so be allotted may be issued as fully paid up Shares and if soissued, shall be deemed to be fully paid Shares. Provided that option or right to callfor Shares shall not be given to any person or persons without the sanction of theCompany in the General Meeting.16A i) Without prejudice to the generality of the powers of the Board under Article16 or in any other Article of these Articles of Association, the Board or anyCommittee thereof duly constituted may, subject to the applicable provisionsof the Act, rules notified thereunder and any other applicable laws, rules andregulations, at any point of time, offer existing or further Shares (consequentto increase of share capital) of the Company, or options to acquire suchShares at any point of time, whether such options are granted by way ofwarrants or in any other manner (subject to such consents and permissions asmay be required) to its employees, including Directors (whether whole-time245
Title of ArticleArticle Number and contentsor not), whether at par, at discount or at a premium, for cash or forconsideration other than cash, or any combination thereof as may bepermitted by law for the time being in force.TMApplication ofpremium receivedon Sharesii)iii)17. (1)(2)a)b)c)In addition to the powers of the Board under Article 16A (i), the Board mayalso allot the Shares referred to in Article 16A (i) to any trust, whose principalobjects would inter alia include further transferring such Shares to theCompany’s employees [including by way of options, as referred to in Article16A (i)] in accordance with the directions of the Board or any Committeethereof duly constituted for this purpose. The Board may make such provisionof moneys for the purposes of such trust, as it deems fit.The Board, or any Committee thereof duly authorised for this purpose, maydo all such acts, deeds, things, etc. as may be necessary or expedient for thepurposes of achieving the objectives set out in Articles 16A(i) and (ii) above.where the Company issues Shares at a premium whether for cash orotherwise, a sum equal to the aggregate amount or value of the premiumon these Shares shall be transferred to an account, to be called "the sharepremium account" and the provisions of the Act relating to the reduction ofthe share capital of the Company shall except as provided in this Article,apply as if the share premium account were paid up share capital of theCompany.The share premium account may, notwithstanding anything in clause(I) thereof be applied by the Company:In paying up unissued Shares of the Company, to be issued to theMembers of the Company as fully paid bonus;In writing off the preliminary expenses of the Company;In writing off the expenses of or the commission paid or discount allowed orany issue of Shares or debentures of the Company ; orPower also toCompany inGeneral Meetingto issue SharesPower of GeneralMeeting toauthorize Board toofferShares/Options toemployeesd) In providing for the premium payable on the redemption of anyredeemable preference shares or of any debentures of the Company.18. In addition to and without derogating from the powers for that purpose conferred onthe Board under these Articles, the Company in General Meeting may, subject to theprovisions of Section 81 of the Act, determine that any Shares (whether forming partof the original capital or of any increased capital of the Company) shall be offered tosuch persons (whether Members or not) in such proportion and on such terms andconditions and either (subject to compliance with the provisions of Sections 78 and79 of the Act) at a premium or at par or at a discount as such General Meeting shalldetermine and with full power to give any person (whether a Member or not) theoption or right to call for or buy allotted Shares of any class of the Company either(subject to compliance with the provisions of Sections 78 and 79 of the Act) at apremium or at par or at a discount, such option being exercisable at such times andfor such consideration as may be directed by such General Meeting or the Companyin General Meeting may make any other provision whatsoever for the issue,allotment, or disposal of any Shares.18A Without prejudice to the generality of the powers of the General Meeting underArticle 18 or in any other Article of these Articles of Association, the GeneralMeeting may, subject to the applicable provisions of the Act, rules notifiedthereunder and any other applicable laws, rules and regulations, determine, or givethe right to the Board or any Committee thereof to determine, that any existing orfurther Shares (consequent to increase of share capital) of the Company, or options246
Title of ArticleShares at adiscount19.Article Number and contentsto acquire such Shares at any point of time, whether such options are granted by wayof warrants or in any other manner (subject to such consents and permissions as maybe required) be allotted/granted to its employees, including Directors (whetherwhole-time or not), whether at par, at discount or a premium, for cash or forconsideration other than cash, or any combination thereof as may be permitted bylaw for the time being in force. The General Meeting may also approve anyScheme/Plan/ other writing, as may be set out before it, for the aforesaid purposeIn addition to the powers contained in Article 18A(i), the General Meeting mayauthorise the Board or any Committee thereof to exercise all such powers and do allsuch things as may be necessary or expedient to achieve the objectives of anyScheme/Plan/other writing approved under the aforesaid Article.The Company may issue at a discount Shares in the Company of a classalready issued, if the following conditions are fulfilled, namely:TM(a)(b)(c)The issue of the Shares at discount is authorised by resolution passed by theCompany in the General Meeting and sanctioned by the Company Law Board;The resolution specifies the maximum rate of discount (not exceeding tenpercent or such higher percentage as the Company Law Board may permit inany special case) at which the Shares are to be issued; andThe Shares to be issued at a discount are issued within twomonths after the date in which the issue is sanctioned by the Company LawBoard or within such extended time as the Company Law Board may allow.Installments ofShares to be dulypaidThe Board mayissue Shares asfully paid-upAcceptanceSharesofDeposit and calletc., to be debtpayableLiabilityMembersof20. If by the conditions of any allotment of any Shares the whole or any part of theamount or issued price thereof shall, be payable by installments, everysuch installment shall when due, be paid to the Company by the person who forthe time being and from time to time shall be the registered holder of the Sharesor his legal representatives, and shall for the purposes of these Articles bedeemed to be payable on the date fixed for payment and in case of nonpaymentthe provisions of these Articles as to payment of interest and expensesforfeiture and like and all the other relevant provisions of the Articles shallapply as if such installments were a call duly made notified as hereby provided.21. Subject to the provisions of the Act and these Articles, the Board may allot andissue Shares in the Capital of the Company as payment for any propertypurchased or acquired or for services rendered to the Company in the conduct ofits business or in satisfaction of any other lawful consideration. Shares whichmay be so issued may be issued as fully paid-up or partly paid up Shares.22. Any application signed by or on behalf of an applicant for Share(s) in theCompany, followed by an allotment of any Share therein, shall be an acceptanceof Share(s) within the meaning of these Articles, and every person who thus orotherwise accepts any Shares and whose name is therefore placed on the Registerof Members shall for the purpose of this Article, be a Member.23. The money, if any which the Board of Directors shall on the allotment of anyShares being made by them, require or direct to be paid by way of deposit, call orotherwise, in respect of any Shares allotted by themshall immediately on the inscription of the name of the allottee in the Register ofMembers as the holder of such Shares, become a debt due to and recoverableby the Company from the allottee thereof, and shall be paid by him accordingly.24. Every Member, or his heirs, executors or administrators to the extent of hisassets which come to their hands, shall be liable to pay to the Company the portionof the capital represented by his Share which may, for the time being, remain unpaidthereon in such amounts at such time or times and in such manner as the Board ofDirectors shall, from time to time, in accordance with the Company'srequirements require or fix for the payment thereof.247
Title of ArticleDematerialisationof securitiesArticle Number and contents25 A DefinitionsBeneficial Owner “Beneficial Owner” means a person whose name isrecorded as such with a Depository.TMSEBI “SEBI” means the Securities and Exchange Board of India.Bye-Laws “Bye-Laws” mean bye-laws made by a depository under Section26 of the Depositories Act, 1996;Depositories Act “Depositories Act” means the Depositories Act, 1996including any statutory modifications or re-enactment thereof for the timebeing in force;Depository “Depository” means a company formed and registered under theCompanies Act, 1956 and which has been granted a certificate of registrationunder sub-section (1A) of Section 12 of the Securities and Exchange Board ofIndia Act, 1992;Record “Record” includes the records maintained in the form of books orstored in a computer or in such other form as may be determined by theregulations made by SEBI;Regulations “Regulations” mean the regulations made by SEBI;Dematerialisationof securitiesOptions to receivesecuritycertificates or holdsecurities withdepositorySecurities indepositories tobe in fungibleformRights ofdepositories andbeneficial ownersDepository ToFurnishInformationBCDE(1)(2)(3)FSecurity “Security” means such security as may be specified by SEBI.Either on the Company or on the investor exercising an option to hold hissecurities with a depository in a dematerialised form, the Company shall enterinto an agreement with the depository to enable the investor to dematerialisethe Securities, in which event the rights and obligations of the partiesconcerned shall be governed by the Depositories Act.Every person subscribing to securities offered by the Company shall have theoption to receive the Security certificates or hold securities with a depository.Where a person opts to hold a Security with a depository, the Company shallintimate such depository the details of allotment of the Security, and onreceipt of such information the depository shall enter in its record the name ofthe allotted as the Beneficial Owner of that Security.All Securities held by a Depository shall be dematerialised and shall be in afungible form; nothing contained in Sections 153, 153A, 153B, 187B, 187Cand 372 of the Act shall apply to a Depository in respect of the Securities heldby it on behalf of the Beneficial Owners.Notwithstanding anything to the contrary contained in the Articles, aDepository shall be deemed to be a registered owner for the purposes ofeffecting transfer of ownership of Security on behalf of the Beneficial Owner;Save as otherwise provided in (1) above, the Depository as a registered ownershall not have any voting rights or any other rights in respect of Securitiesheld by it;Every person holding equity share capital of the Company and whose name isentered as Beneficial Owner in the Records of the Depository shall bedeemed to be a Member of the Company. The Beneficial Owner shall beentitled to all the rights and benefits and be subjected to all the liabilities inrespect of the Securities held by a Depository.Every Depository shall furnish to the Company information about the transferof Securities in the name of the Beneficial Owner at such intervals and insuch manner as may be specified by the bye-laws and the Company in that248
Title of ArticleServicedocumentsOption to optout in respect ofany securitySections 83 and108 of the Actnot to applyofGHI(1)Article Number and contentsbehalf.Notwithstanding anything in the Act or these Articles to the contrary, wheresecurities are held in a depository, the records of the beneficial ownershipmay be served by such depository on the Company by means of electronicsmode or by delivery of floppies or discs.If a Beneficial Owner seeks to opt out of a Depository in respect of anySecurity, the Beneficial Owner shall inform the Depository accordingly. TheDepository shall on receipt of information as above make appropriate entriesin its Records and shall inform the Company. The Company shall, withinthirty (30) days of the receipt of intimation from the depository and onfulfillment of such conditions and on payment of such fees as may bespecified by the regulations, issue the certificate of securities to the BeneficialOwner or the transferee as the case may be.Notwithstanding anything to the contrary contained in the Articles,Section 83 of the Act shall not apply to the Shares held with a Depository;TM(2)Share certificate 26. (a)Section 108 of the Act shall not apply to transfer of Security effected by thetransferor and the transferee both of whom are entered as Beneficial Ownersin the Records of a Depository.Every Member or allotee of Shares is entitled, without payment, to receiveone certificate for all the Shares of the same class registered in his name.Limitation of timefor issue ofcertificatesRenewal of sharecertificatesAny two or more joint allottees or holders of Shares shall, for the(b) purpose of this Article, be treated as a single Member and the certificate ofany Share which may be the subject of joint ownership may be delivered toany one of such joint owners, on behalf of all of them.26A Every Member shall be entitled, without payment to one or more certificates inmarketable lots, for all the shares of each class or denomination registered in hisname, or if the directors so approve (upon paying such fee as the Directors so timedetermine) to several certificates, each for one or more of such shares and theCompany shall complete and have ready for delivery such certificates within threemonths from the date of allotment, unless the conditions of issue thereof otherwiseprovide, or within two months of the receipt of application of registration of transfer,transmission, sub-division, consolidation or renewal of any of its Shares as the casemay be. Every certificate of Shares shall be under the seal of the company and shallspecify the number and distinctive numbers of Shares in respect of which it is issuedand amount paid-up thereon and shall e in such form as the directors may prescribeand approve, provided that in respect of a Share or shares held jointly by severalpersons, the Company shall not be bound to issue more than one certificate anddelivery of a certificate of Shares to one or several joint holders shall be a sufficientdelivery to all such holder.27. No certificate of any Share or Shares shall be issued either in exchange for those,which are sub-divided or consolidated or in replacement of those which aredefaced, torn or old, decrepit, worn out, or where the pages on the reverse forrecording transfer have been duly utilised unless the certificate in lieu of which itis issued is surrendered to the Company.PROVIDED THAT no fee shall be charged for issue of new certificate inreplacement of those which are old, decrepit or worn out or where the pages onthe reverse for recording transfer have been fully utilized.249
Title of ArticleNew certificate tobe granted ondelivery of the oldcertificatesArticle Number and contents28. If any certificate be worn out, defaced, mutilated or torn or if there be no furtherspace on the back thereof for endorsement of transfer, then upon production andsurrender thereof to the Company, a new Certificate may be issued in lieu thereof,and if any certificate lost or destroyed then upon proof thereof to the satisfaction ofthe Company and on execution of such indemnity as the company deem adequate,being given, a new certificate in lieu thereof shall be given to the party entitled tosuch lost or destroyed Certificate. Every certificate under the article shall be issuedwithout payment of fees if the Directors so decide, or on payment of such fees (notexceeding Rs.2/- for each certificate) as the Directors shall prescribe. Provided thatno fee shall be charged for issue of new certificates in replacement of those whichare old, defaced or worn out or where there is no further space on the back thereoffor endorsement of transfer.TMThe first namejoint holderdeemed soleholderProvided that notwithstanding what is stated above the Directors shall comply withsuch rules or regulation or requirements of any Stock Exchange or the rules madeunder the Act or rules made under Securities Contracts (Regulation) Act 1956 or anyother Act, or rules applicable thereof in this behalf.The provision of this Article shall mutatis mutandis apply to Debentures of theCompany.29. If any Share(s) stands in the name of two or more persons, the person firstnamed in the Register of Members shall, as regards receipt of dividends orbonus or service of notice and all or any other matters connected with Companyexcept voting at Meetings and the transfer of the Shares be deemed the sole holderthereof but the joint holders of a Share shall severally as well as jointly be liablefor the payment of all incidents thereof according to the Company's Articles.Issue of Shareswithout VotingRightsBuy-Back ofShares andSecuritiesEmployees StockOptions Scheme/Plan30. In the event it is permitted by law to issue shares without voting rightsattached to them, the Directors may issue such share upon such terms andconditions and with such rights and privileges annexed thereto as thought fitand as may be permitted by law.31. Notwithstanding anything contained in these articles, in the event it ispermitted by law for a company to purchase its own shares or securities, theBoard of Directors may, when and if thought fit, buy back, such of theCompany’s own shares or securities as it may think necessary, subject tosuch limits, upon such terms and conditions, and subject to such approvals,provision of section 77 and SEBI (Bay back of Shares) Resolution as may bepermitted by law.32. The Directors shall have the power to offer , issue and allot Equity Shares inor Debentures (Whether fully/ partly convertible or not into Equity Shares)of the Company with or without Equity Warrants to such of the Officers,Employees, Workers of the Company or of its Subsidiary and / or AssociateCompanies or Managing and Whole Time Directors of the Company(hereinafter in this Article collectively referred to as “the Employees”) asmay be selected by them or by the trustees of such trust as may be set up forthe benefit of the Employees in accordance with the terms and conditions ofthe Scheme, trust, plan or proposal that may be formulated , created,instituted or set up by the Board of Directors or the Committee thereof inthat behalf on such terms and conditions as the Board may in its discretiondeem fit.Sweat Equity 33. Subject to the provisions of the Act (including any statutory modification or reenactmentthereof, for the time being in force), shares of the Company may beissued at a discount or for consideration other than cash to Directors or employeeswho provide know-how to the Company or create an intellectual property right orother value addition.Postal Ballot 34. The Company may pass such resolution by postal ballot in the manner prescribed bySection 192A of the Act and such other applicable provisions of the Act and any250
Title of ArticleCompany notbound torecognize anyinterest in Sharesother than ofregistered holderthem.Trust recognised 36. (a)Article Number and contentsfuture amendments or re-enactment thereof. Notwithstanding anything contained inthe provisions of the Act, the Company shall in the case of a resolution relating tosuch business, as the Central Government may, by notification, declare to beconducted only by postal ballot, get such resolution passed by means of postal ballotinstead of transacting such business in a general meeting of the Company.35. Except as ordered by a Court of competent jurisdiction or as by law required,the Company shall not be bound to recognise, even when having notice thereofany equitable, contingent, future or partial interest in any Share, or (except onlyas is by these Articles otherwise expressly provided) any right in respect of aShare other than an absolute right thereto, in accordance with these Articles, inthe person from time to time registered as holder thereof but the Board shall be atliberty at their sole discretion to register any Share in the joint names of any two ormore persons (but not exceeding 4 persons) or the survivor or survivors ofExcept as ordered, by a Court of competent jurisdiction or as by lawrequired, the Company shall not be bound to recognise, even when havingnotice thereof, any equitable, contingent, future or partial interest in anyShare, or (except only as is by these Articles otherwise expresslyprovided) any right in respect of a Share other than an absolute rightthereto, in accordance with these Articles, in the person from time to timeregistered as holder thereof but the Board shall be at liberty at their solediscretion to register any Share in the joint names of any two or morepersons (but not exceeding 4 persons) or the survivor or survivors ofthem.TMDeclaration byperson not holdingbeneficial interestin any Shares(b)37. (1)(2)(3)(4)Shares may be registered in the name of an incorporated Companyor other body corporate but not in the name of a minor or of a person ofunsound mind (except in case where they are fully paid) or in the name of anyfirm or partnership.Notwithstanding anything herein contained a person whose name is at anytime entered in Register of Member of the Company as the holder of aShare in the Company, but who does not hold the beneficial interest in suchShares, shall, if so required by the Act within such time and in such formsas may be prescribed, make declaration to the Company specifyingthe name and other particulars of the person or persons who hold thebeneficial interest in such Share in the manner provided in the ActA person who holds a beneficial interest in a Share or a class of Shares of theCompany, shall if so required by the Act, within the time prescribed, after hisbecoming such beneficial owner, make a declaration to the Companyspecifying the nature of his interest, particulars of the person inwhose name the Shares stand in the Register of Members of the Companyand such other particulars as may be prescribed as provided in the ActWhenever there is a change in the beneficial interest in a Share referred toabove, the beneficial owner shall, of so required by the Act, within the timeprescribed, from the date of such change, make a declaration to theCompany in such form and containing such particulars as may beprescribed in the ActNot withstanding anything contained in the Act and Articles 35 and 36hereof, where any declaration referred to above is made to the Company,the Company shall, if so required by the Act, make a note of such declarationin the Register of Members and file within the time prescribed fromthe date of receipt of the declaration a return in the prescribed form withthe Registrar with regard to such declaration.251
Title of ArticleFunds ofCompany not tobe applied inpurchase of Sharesof the CompanyArticle Number and contents38. No funds of the Company shall except as provided by Section 77 of the Act, beemployed in the purchase of its own Shares, unless the consequent reduction ofcapital is effected and sanction in pursuance of Sections 78, 80 and 100 to105 of the Act and these Articles or in giving either directly or indirectly andwhether by means of a loan, guarantee, the provision of security or otherwise, anyfinancial assistance for the purpose of or in connection with a purchase orsubscription made or to be made by any person of or for any Share in the Company inits holding Company.TMUNDERWRITING AND BROKERAGETitle of ArticleArticle Number and contentsCommission maybe paid39. Subject to the provisions of Section 76 of the Act, the Company may at anytimepay commission to any person in consideration of his subscribing or agreeing tosubscribe (whether absolutely or conditionally) for any Shares in or debenturesof the Company but sothat the commission shall not exceed in the case of the Shares five percent of theprice at which the Shares are issued and in the case of debentures two and halfpercent of the price at which the debenture are issued. Such commission may besatisfied by payment of cash or by allotment of fully or partly paid Shares ordebentures as the case may be or partly in one way and partly in the other.Brokerage 40. The Company may on any issue of Shares or Debentures or on depositspay such brokerage as may be reasonable and lawful.Commission to be 41. Where the Company has paid any sum by way of commission in respectincluded in the of any Shares or Debentures or allowed any sums by way of discount inannual returnrespect to any Shares or Debentures, such statement thereof shall be madein the annual return as required by Part I of Schedule V to the Act.INTEREST OUT OF CAPITALTitle of ArticleArticle Number and contentsInterest out of 42. Where any Shares are issued for the purpose of raising money to defraycapitalthe expenses of the construction of any work or building, or theprovisions of any plant which cannot be made profitable for lengthy period, theCompany may pay interest on so much of that share capital as is for the timebeing paid-up, for the period at the rate and subject to the conditions andrestrictions provided by Section 208 of the Act and may charge the same tocapital as part of the cost of construction of the work or building or the provisions ofthe plant.DEBENTURESTitle of ArticleDebentures withvoting rights notto be issued43. (a)(b)(c)(d)Article Number and contentsThe Company shall not issue any debentures carrying voting rights at anyMeeting of the Company whether generally or in respect of particularclasses of business.The Company shall have power to reissue redeemed debentures incertain cases in accordance with Section 121 of the Act.Payments of certain debts out of assets subject to floating charge inpriority to claims under the charge may be made in accordance with theprovisions of Section 123 of the Act.Certain charges (which expression includes mortgage) mentioned in Section125 of the Act, shall be void against the Liquidator or creditor unlessregistered as provided in Section 125 of the Act.252
Title of Article(e)Article Number and contentsA contract with the Company to take up and pay debentures of theCompany may be enforced by a decree for specific performance.TM(f)Unless the conditions of issue thereof otherwise provide, theCompany shall (subject to the provisions of Section 113 of the Act) withinthree months after the allotment of its debentures or debenture-stock andwithin one month after the application for the registration of thetransfer of any such debentures or debentures-stock have completedand ready for delivery the certificate of all debenture-stock allotted ortransferred.(g)The Company shall comply with the provisions of Section 118 of theAct, as regards supply of copies of debenture Trust Deed and inspectionthereof.(h)The Company shall comply with the provisions of Section 124 to 145(inclusive) of the Act as regards registration of charges.CALLSTitle of ArticleDirectors maymake calls44. (a)Article Number and contentsSubject to the provisions of Section 91 of the Act, the Board of Directorsmay from time to time by a resolution passed at a meeting of a Board(and not by a circular resolution)make such calls as it thinks fit upon theMembers in respect of all moneys unpaid on the Shares or by way ofpremium, held by them respectively and not by conditions of allotmentthereof made payable at fixed time and each Member shall pay the amountof every call so made on him to person or persons and at the times and placesappointed by the Board of Directors. A call may be made payable byinstallments. A call may be postponed or revoked as the Board maydetermine. No call shall be made payable within less than one month fromthe date fixed for the payment of the last preceding call.Notice of callwhen to be givenThe joint holders of a Share shall be jointly and severally liable to(b) pay all calls in respect thereof.45. Not less than one month notice in writing of any call shall be given by theCompany specifying the time and place of payment and the person or persons towhom such call shall be paid.Call deemed tohave been madeDirectorsextend timemayAmount payableat fixed time or byinstallments to betreated as calls46. A call shall be deemed to have been made at the time when the resolutionauthorising such call was passed at a meeting of the Board of Directors andmay be made payable by the Members of such date or at the discretion of theDirectors on such subsequent date as shall be fixed by the Board of Directors.47. The Board of Directors may, from time to time at its discretion, extend the timefixed for the payment of any call and may extended such time to call or any of theMembers, the Board of Directors may deem fairly entitled to suchextension but no Member shall be entitled to such extension as of rightexcept as a matter of grace and favour.48. If by the terms of issue of any Share or otherwise any amount is made payableat any fixed time or by installments at fixed time (whether on account of theamount of the Share or by way of premium) every such amount or installment shallbe payable as if it were acall duly made by the Directors and of which due notice has been given andall the provisions herein contained in respect of calls shall apply to such253
Title of ArticleWhen interest oncall or installmentpayableEvidence in actionby Companyagainst shareholderPayment inanticipation ofcalls may carryinterestArticle Number and contentsamount or installment accordingly.49. If the sum payable in respect of any call or installment is not paid on or before theday appointed for the payment thereof, the holder for the time being or allotteeof the Share in respect of which the call shall have been made or the installmentshall be due, shall pay interest on the same at such rate not exceedingeighteen percent per annum as Directors shall fix from the day appointed for thepayment thereof upto the time of actual payment but the Directors may waivepayment of such interest wholly or in part.50. On the trial of hearing of any action or suit brought by the Company against anyMember or his Legal Representatives for the recovery of any money claimed to bedue to the Company in respect of his Shares, it shall be sufficient to prove that thename of the Member in respect of whose Shares the money is sought to berecovered is entered on the Register of Members as the holder or as one of theholders at or subsequent to the date at which the money sought to be recovered isalleged to have become due on the Shares in respect of which the money is soughtto be recovered, that the resolution making the call is duly recorded in the minutebook and the notice of such call was duly given to the Member or his legalrepresentatives sued in pursuance of these Articles and it shall not be necessary toprove the appointment of Directors who made such call, nor that a quorum ofDirectors was present at the Board meeting at which any call was made nor thatthe meeting at which any call was made was duly convened or constituted nor anyother matter whatsoever but the proof of the matters aforesaid shall be conclusiveevidence of the debt.51. The Directors may, if they think fit, subject to the provisions of Section 92 of theAct, agree to and receive from any Member willing to advance the same whole orany part of the moneys due upon the shares held by him beyond the sums actuallycalled for, and upon the amount so paid or satisfied in advance, or so much thereofas from time to time exceeds the amount of the calls then made upon the shares inrespect of which such advance has been made, the Company may pay interest atsuch rate, as the member paying such sum in advance and the Directors agreeupon provided that money paid in advance of calls shall not confer a right toparticipate in profits or dividend. The Directors may at any time repay the amountso advanced.TMLIENTitle of ArticlePartial paymentnot to precludeforfeitureCompany to havelien on Shares/DebenturesThe Members shall not be entitled to any voting rights in respect of the moneys sopaid by him until the same would but for such payment, become presently payable.The provisions of these Articles shall mutatis mutandis apply to the calls onDebentures of the Company.Article Number and contents52. Neither the receipt by the Company of a portion of any money which shall,from time to time be due from any Member to the Company in respectof his Shares, either by way of principal or interest, or any indulgencegranted by the Company in respect of the payment of such money, shallpreclude the Company from thereafter proceeding to enforce a forfeiture ofsuch Shares as hereinafter provided.53. The Company shall have first and paramount lien upon all Shares/ Debentures(other than fully paid up Shares/ Debentures) registered in the name of eachMember whether solely or jointly with others and upon the proceeds of salethereof, for all moneys (whether presently payable or not), called or payableat a fixed time in respect of such Shares/ Debentures and no equitableinterests in any Share/ Debenture shall be created except upon the footing andcondition that this Article is to have full legal effect. Any such lien shall254
Title of ArticleArticle Number and contentsextend to all dividends and bonuses from time to time declared in respect ofsuch Shares/ Debentures; PROVIDED THAT the Board of Directors may, atany time, declare any Share/ Debenture to be wholly or in part exempt fromthe provisions of this Article. Unless otherwise agreed the registration of atransfer of Shares/ Debentures shall operate as a waiver of the Company’s lien ifany, on such Shares.TMAs to enforcinglien by sale54.The Company may sell, in such manner as the Board thinks fit, anyShares on which the Company has lien for the purpose of enforcing thesame PROVIDED THAT no sale shall be made:-Application ofproceeds of sale(a)(b)(c)55. (a)(b)Unless a sum in respect of which the lien exists is presently payable; orUntil the expiration of fourteen days after a notice in writing statingand demanding payment of such part of the amount in respect of whichthe lien exists as is /presently payable has been given to the registeredholder for the time being of the Share or the person entitled thereto byreason of his death or insolvency.For the purpose of such sale the Board may cause to be issued aduplicate certificate in respect of such Shares and may authorise one oftheir members to execute a transfer there from behalf of and in thename of such MembersThe purchaser shall not be bound to see the application of the purchasemoney, nor shall his title to the Shares be affected by any irregularity,or invalidity in the proceedings in reference to the sale.The net proceeds of any such sale shall be received by the Companyand applied in or towards satisfaction of such part of the amount inrespect of which the lien exists as is presently payable, andThe residue if any, after adjusting costs and expenses if any incurredshall be paid to the person entitled to the Shares at the date of the sale(subject to a like lien for sums not presently payable as existed on theShares before the sale).FORFEITURE OF SHARESTitle of ArticleIf money payableon Shares not paidnotice to be givenSum payable onallotment to bedeemed a callArticle Number and contents56. If any Member fails to pay the whole or any part of any call or any installments ofa call on or before the day appointed for the payment of the same or any suchextension thereof, the Board of Directors may, at any time thereafter, duringsuch time as the call for installment remains unpaid, give notice to himrequiring him to pay the same together with any interest that may haveaccrued and all expenses that may have been incurred by the Company by reasonof such non-payment.57. For the purposes of the provisions of these Articles relating to forfeiture ofShares, the sum payable upon allotment in respect of a share shall be deemed to bea call payable upon such Share on the day of allotment.Form of notice 58. The notice shall name a day, (not being less than fourteen days form the dayof the notice) and a place or places on and at which such call in installment andsuch interest thereon at such rate not exceeding eighteen percent per annum asthe Directors may determine and expenses as aforesaid are to be paid. The noticeshall also state that in the event of the non-payment at or before the time and atthe place appointed, Shares in respect of which the call was made or installmentis payable will be liable to be forfeited.In default of 59. If the requirements of any such notice as aforesaid are not complied with, any255
Title of Articlepayment Shares tobe forfeitedNotice offorfeiture to aMemberForfeited Sharesto be the propertyof the Companyand may be soldetc.Member stillliable for moneyowning at the timeof forfeiture andinterestEffectsforfeitureofPower to annulforfeitureDeclarationforfeitureofArticle Number and contentsShare or Shares in respect of which such notice has been given may at any timethereafter before payment of all calls or installments, interests and expensesdue in respect thereof, be forfeited by a resolution of the Board of Directors tothat effect. Such forfeiture shall include all dividends declared or any othermoneys payable in respect of the forfeited Shares and not actually paid before theforfeiture.60. When any Share shall have been so forfeited, notice of the forfeiture shall be givento the Member in whose name it stood immediately prior to the forfeiture, and anentry of the forfeiture, with the date thereof, shall forthwith be made in theRegister of Members, but no forfeiture shall be in any manner invalidated by anyomission or neglect to give such notice or to make any such entry as aforesaid.61. Any Share so forfeited, shall be deemed to be the property of the Company andmay be sold, re-allotted or otherwise disposed of, either to the original holder or toany other person, upon such terms and in such manner as the Board of Directorsshall think fit.62. Any Member whose Shares have been forfeited shall notwithstanding theforfeiture, be liable to pay and shall forthwith pay to the Company on demandall calls, installments, interest and expenses owing upon or in respect of suchShares at the time of the forfeiture together with interest thereon from the timeof the forfeiture until payment, at such rate not exceeding eighteen percent perannum as the Board of Directors may determine and the Board of Directors mayenforce the payment of such moneys or any part thereof, if it thinks fit, but shallnot be under any obligation to do so.63. The forfeiture of a Share shall involve the extinction at the time of the forfeiture,of all interest in and all claims and demand against the Company in respect ofthe Share and all other rights incidental to the Share, except only such of thoserights as by these Articles are expressly saved.64. The Board of Directors may at any time before any Share so forfeited shall havebeen sold, re-allotted or otherwise disposed of, annul the forfeiture thereof uponsuch conditions as it thinks fit.65 (a) A duly verified declaration in writing that the declarant is a Director, theManaging Director or the Manager or the Secretary of the Company, andthat Share in the Company has been duly forfeited in accordance withthese Articles, on a date stated in the declaration, shall be conclusiveevidence of the facts therein stated as against all persons claiming to beentitled to the Share.TM(b)(c)(d)(e)The Company may receive the consideration, if any, given for the Shareon any sale, re-allotment or other disposal thereof and may execute atransfer of the Share in favour of the person to whom the Share is sold ordisposed off.The person to whom such Share is sold, re-allotted or disposed of shallthereupon be registered as the holder of the Share.Any such purchaser or allotee shall not (unless by express agreement) beliable to pay calls, amounts, installments, interests and expenses owing tothe Company prior to such purchase or allotment nor shall be entitled(unless by express agreement) to any of the dividends, interests orbonuses accrued or which might have accrued upon the Share before thetime of completing such purchase or before such allotment.Such purchaser or allottee shall not be bound to see to the application ofthe purchase money, if any, nor shall his title to the Share be effected by256
Title of ArticleArticle Number and contentsthe irregularity or invalidity in the proceedings in reference to theforfeiture, sale re-allotment or other disposal of the Shares.TMProvisions ofthese articles as toforfeiture to applyin case ofnonpayment ofany sum.Cancellation ofshares certificatesin respect offorfeited SharesEvidenceforfeitureof66. The provisions of these Articles as to forfeiture shall apply in the case of nonpaymentof any sum which by the terms of issue of a Share becomes payable at afixed time, whether on account of the nominal value of Share or by way ofpremium, as if the same had been payable by virtue of a call duly made andnotified.67. Upon sale, re-allotment or other disposal under the provisions of these Articles,the certificate or certificates originally issued in respect of the said Shares shall(unless the same shall on demand by the Company have been previouslysurrendered to it by the defaulting Member) stand cancelled and become nulland void and of no effect and the Directors shall be entitled to issue a newcertificate or certificates in respect of the said Shares to the person or personsentitled thereto.68 The declaration as mentioned in Article 65(a) of these Articles shall beconclusive evidence of the facts therein stated as against all persons claiming tobe entitled to the Share.Validity of sale 69 Upon any sale after forfeiture or for enforcing a lien in purported exercise of thepowers hereinbefore given, the Board may appoint some person to execute aninstrument of transfer of the Shares sold and cause the purchaser's name to beentered in the Register of Members in respect of the Shares sold, and thepurchasers shall not be bound to see to the regularity of the proceedings or to theapplication of the purchase money, and after his name has been entered in theRegister of Members in respect of such Shares, the validity of the sale shall notbe impeached by any person and the remedy of any person aggrieved by the saleshall be in damages only and against the Company exclusively.SurrenderSharesof70 The Directors may subject to the provisions of the Act, accept a surrender or anyshare from any Member desirous of surrendering on such terms and conditionsas they think fit.257
TRANSFER AND TRANSMISSION OF SHARESTMTitle of ArticleNo transfers tominors etc.Form of transferApplicationtransferforArticle Number and contents71. No Share which is partly paid-up or on which any sum of money is due shall in anycircumstances be transferred to any minor, insolvent or person of unsound mind.72. The instrument of transfer shall be in writing and all provisions of Section 108 of theCompanies Act, 1956 and statutory modification thereof for the time being shall beduly complied with in respect of all transfer of shares and registration thereof.73. (a) An application for registration of a transfer of the Shares in the Companymay be either by the transferor or the transferee.(b)Where the application is made by the transferor and relates to partly paidShares, the transfer shall not be registered unless the Company givesnotice of the application to the transferee and the transferee makes noobjection to the transfer within two weeks from the receipt of the noticeExecutiontransferofFor the purposes of clause (b) above notice to the transferee shall be(c) deemed to have been duly given if it is dispatched by prepaid registeredpost to the transferee at the address, given in the instrument of transfer andshall be deemed to have been duly delivered at the time at which it wouldhave been delivered in the ordinary course of post.74. The instrument of transfer of any Share shall be duly stamped and executed byor on behalf of both the transferor and the transferee and shall be witnessed. Thetransferor shall be deemed to remain the holder ofsuch Share until the name of the transferee shall have been entered in the Registerof Members in respect thereof. The requirements of provisions of Section 108 of theCompanies Act, 1956 and any statutory modification thereof for the time being shall be dulycomplied with.Transfer by legalrepresentatives75. A transfer of Share in the Company of a deceased Member thereof made by hislegal representative shall, although the legal representative is not himself aMember be as valid as if he had been a Member at the time of the execution of theinstrument of transfer.RegisterMemberswhen closedofetcDirectors mayrefuse to registertransferDeath of one ormore joint holders76. The Board of Directors shall have power on giving not less than seven days perviousnotice by advertisement in some newspaper circulating in the district in which theregistered office of the Company is situated to close the Register of Membersand/or the Register of debentures holders at such time or times and for suchperiod or periods, not exceeding thirty days at a time, and not exceeding in theaggregate forty five days at a time, and not exceeding in the aggregate forty five daysin each year as it may seem expedient to the Board.77. Subject to the provisions of Section 111A these Articles and other applicableprovisions of the Act or any other law for the time being in force, the Board mayrefuse whether in pursuance of any power of the company under these Articles orotherwise to register the transfer of, or the transmission by operation of law of theright to, any shares or interest of a Member in or debentures of the Company. TheCompany shall within one month from the date on which the instrument of transfer,or the intimation of such transmission, as the case may be, was delivered toCompany, send notice of the refusal to the transferee and the transferor or to theperson giving intimation of such transmission, as the case may be, giving reasons forsuch refusal. Provided that the registration of a transfer shall not be refused personor persons indebted to the Company on any account whatsoever except where theCompany has a lien on shares.78. In case of the death of any one or more of the persons named in the Register ofMembers as the joint holders of any Share, the survivor or survivors shall be the258
Title of Articleof SharesTitles of Shares ofdeceased MemberNotice ofapplication whento be givenRegistration ofpersons entitled toShares otherwisethan by transfer(TransmissionClause)Refusal to registernomineePerson entitledmay receivedividend withoutbeing registered asa MemberNo fees ontransfer ortransmissionsTransfer to bepresented withevidence of titleCompanyliablenotforArticle Number and contentsonly persons recognised by the Company as having any title or interest insuch Share, but nothing herein contained shall be taken to release theestate of a deceased joint holder from any liability on Shares held by him with anyother person.79. The Executors or Administrators of a deceased Member or holders of aSuccession Certificate or the Legal Representatives in respect of the Shares ofa deceased Member (not being one of two or more joint holders) shall be theonly persons recognized by the Company as having any title to the Sharesregistered in the name of such Members, and the Company shall not be boundto recognize such Executors or Administrators or holders of SuccessionCertificate or the Legal Representative unless such Executors orAdministrators or Legal Representative shall have first obtained Probate orLetters of Administration or Succession Certificate as the case may be from aduly constituted Court in the Union of India provided that in any case where theBoard of Directors in its absolute discretion thinks it, the Board upon such termsas to indemnity or otherwise as the Directors may deem proper dispensewith production of Probate or Letters of Administration or Succession Certificateand register Shares standing in the name of a deceased Member, as a Member.However, provisions of this Article are subject to Sections 109A and 109B of theCompanies Act.80. Where, in case of partly paid Shares, an application for registration is made bythe transferor, the Company shall give notice of the application to thetransferee in accordance with the provisions of Section 110 of the Act.81. Subject to the provisions of the Act and Article 78 hereto, any person becomingentitled to Share in consequence of the death, lunacy, bankruptcy insolvency of anyMember or by any lawful means other than by a transfer in accordance with theseArticles may, with the consent of the Board (which it shall not be under anyobligation to give), upon producing such evidence that he sustains the character inrespect of which he proposes to act under this Article or of such title as the Boardthinks sufficient, either be registered himself as the holder of the Share or elect tohave some person nominated by him and approved by the Board registered as suchholder; provided nevertheless, that if such person shall elect to have his nomineeregistered as a holder, he shall execute an instrument of transfer in accordance withthe provisions herein contained, and until he does so, he shall not be freed from anyliability in respect of the Shares. This clause is hereinafter referred to as the“Transmission Clause”.82. Subject to the provisions of the Act and these Articles, the Directors shall havethe same right to refuse to register a person entitled by transmission to anyShare of his nominee as if he were the transferee named in an ordinarytransfer presented for registration.83. A person entitled to a Share by transmission shall subject to the right of theDirectors to retain dividends or money as is herein provided, be entitled toreceive and may give a discharge for any dividends orother moneys payable in respect of the Share.84. No fee shall be charged for registration of transfer, transmission Probate,Succession Certificate & Letters of Administration, Certificate of Death orMarriage, Power of Attorney or other similar documents.85. Every instrument of transfer shall be presented to the Company duly stamped forregistration accompanied by such evidence as the Board may require to prove thetitle of the transferor, his right to transfer the Shares and generally under and subjectto such conditions and regulations as the Board may, from time to time prescribe,and every registered instrument of transfer shall remain in the custody of theCompany until destroyed by order of the Board.86. The Company shall incur no liability or responsibility whatsoever in consequence ofits registering or giving effect to any transfer of Shares made or purporting to beTM259
Title of Articledisregard of anotice prohibitingregistration oftransferArticle Number and contentsmade by any apparent legal owner thereof (as shown or appearing in the Register ofMembers) to the prejudice of persons having or claiming any equitable right, title orinterest to or in the said Shares, notwithstanding that the Company may have hadnotice of such equitable right, title or interest or notice prohibiting registration ofsuch transfer, and may have entered such notice, or referred thereto, in any book ofthe Company, and the Company shall not be bound to be required to regard or attendto give effect to any notice which may be given to it of any equitable right, title orinterest or be under any liability whatsoever for refusing or neglecting to do so,though it may have been entered or referred to in some book of the Company, butthe Company shall nevertheless be at liberty to regard and attend to any such noticeand give effect thereto if the Board shall so think fit.TMSHARE WARRANTSTitle of ArticlePower to issueshare warrantsDeposit of sharewarrantsArticle Number and contents87. The Company may issue warrants subject to and in accordance with provisions ofSections 114 and 115 of the Act and accordingly the Board may in itsdiscretion with respect to any Share which is fully paid upon application in writingsigned by the persons registered as holder of the Share, and authenticated by suchevidence(if any) as the Board may, from time to time, require as to the identity ofthe persons signing the application and on receiving the certificate (if any) of theShare, and the amount of the stamp duty on the warrant and such fee as the Boardmay, from time to time, require, issue a share warrant.88. (a) The bearer of a share warrant may at any time deposit the warrant at theOffice of the Company, and so long as the warrant remains so deposited,the depositor shall have the same right of signing a requisition for call ina meeting of the Company, and of attending and voting and exercisingthe other privileges of a Member at any meeting held after the expiry oftwo clear days from the time of deposit, as if his name were inserted inthe Register of Members as the holder of the Share included in the depositwarrantPrivileges anddisabilities of theholders of sharewarrant(b)(c)89. (a)Not more than one person shall be recognized as depositor of the SharewarrantThe Company shall, on two day's written notice, return the deposited sharewarrant to the depositorSubject as herein otherwise expressly provided, no person, being a bearerof a share warrant, shall sign a requisition for calling a meeting of theCompany or attend or vote or exercise any other privileges of a Member at ameeting of the Company, or be entitled to receive any notice from theCompany.Issue of new sharewarrant coupons(b) The bearer of a share warrant shall be entitled in all other respects to thesame privileges and advantages as if he were named in the Register ofMembers as the holder of the Share included in the warrant, and he shall be aMember of the Company.90. The Board may, from time to time, make bye-laws as to terms on which (if itshall think fit), a new share warrant or coupon may be issued by way of renewal incase of defacement, loss or destruction.CONVERSION OF SHARES INTO STOCK AND RECONVERSIONTitle of ArticleShare may beconverted intoArticle Number and contents91. The Company may, by Ordinary Resolution:260
Title of ArticleArticle Number and contentsstock (a) Convert any fully paid up Share into stock, andreconvert any stock into fully paid-up Shares.Transfer of stock 92. The several holders of such stock may transfer there respective interest therein orany part thereof in the same manner and subject to the same regulations underwhich the stock arose might before the conversion, have been transferred,or as near thereto as circumstances admit.PROVIDED THAT the Board may, form time to time, fix the minimum amountof stock transferable, so however that such minimum shall not exceed thenominal amount of the Shares from which stock arose.Right of stock 93. The holders of stock shall, according to the amount of stock held by them, have theholderssame right, privileges and advantages as regards dividends, voting at meeting of theCompany, and other matters, as if they held them Shares from which thestock arose; but no such privilege or advantage (except participation inthe dividends and profits of the Company and in the assets on winding up) shallbe conferred by an amount of stock which would not, if existing in Shares,Regulationapplicable to stockand share warranthave conferred those privileges or advantages.94. Such of the regulations of the Company as are applicable to the paid upShares shall apply to stock and the words "Share" and "Share holder" in theseregulations shall include "stock" and "stock holder"respectively.TMBORROWING POWERSTitle of ArticleArticle Number and contentsPower to borrow 95. Subject to the provisions of Sections 58A, 292 and 370 of the Act and theseArticles, the Board of Directors may, from time to time at its discretion by aresolution passed at a meeting of the Board, borrow, accept deposits fromMembers either in advance of calls or otherwise and generally raise or borrow orsecure the payment of any such sum or sums of money for the purposes of theCompany from any source. PROVIDED THAT, where the moneys to beborrowed together with the moneys already borrowed (apart from temporary loansobtained from the Company's bankers in the ordinary course of business) exceedthe aggregate of the paid up capital of the Company and its free reserves (notbeing reserves set apart for any specific purpose) the Board of Directors shallnot borrow such money without the sanction of the Company in GeneralMeeting. No debts incurred by the Company in excess of the limit imposed by thisArticle shall be valid or effectual unless the lender proves that he advanced theloan in good faith and without knowledge that the limit imposed by thisArticle had been exceeded.The payment or 96. The payment or repayment of moneys borrowed as aforesaid may be securedrepayment of in such manner and upon : such terms and conditions in all respects as the Boardmoneys borrowed of Directors may think fit, and in particular in pursuance of aresolution passed at a meeting of the Board (and not by circular resolution) by theissue of bonds, debentures or debentures stock of the Company, chargedupon all or any part of the property of the Company, (both present and future),including its un-called capital for the time being and the debentures and thedebenture stock and other securities may be made assignable free from anyequities between the Company and the person to whom the same may be issued.Bonds,Debentures, etc. to97. Any bonds, debentures, debenture-stock or other securities issued or to beissued by the Company shall be under the control of the Directors who maybe subject to issue them upon such terms and condition and in such manner and for suchcontrol of consideration as they shall consider to be for the benefit of the Company.DirectorsTerms of issue ofDebentures98. Any debenture, debenture stock or other securities may be issued at a discount,premium or otherwise and may be issued on condition that they shall beconvertible into Shares of any denomination, and with any privileges and261
Title of ArticleMortgageuncalled capitalofArticle Number and contentsconditions as to redemption, surrender, drawing, allotment of Shares, attending(but not voting) at General Meeting, appointment of Directors and otherwise;however, Debentures with the right to conversion into or allotment of Shares shallbe issued only with the consent of the Company in General Meeting by a SpecialResolution.99. If any uncalled capital of the Company is included in or charged by mortgage orother security, the Directors may, subject to the provisions of the Act and theseArticles, make calls on the Members in respect of such uncalled capital in trust forthe person in whose favour such mortgage or security has been executed.TMMEETING OF MEMBERSTitle of ArticleStatutory meetingAnnualMeetingGeneralReport statementand registers to belaid before theAnnual GeneralMeetingExtra-OrdinaryGeneral MeetingRequisitionists’meetingArticle Number and contents100. The statutory meeting shall be held in accordance with the provisions of Sect9ion165 of the Act within a period of not less than one month and not more thansix months from the date on which the Company shall be entitled to commencebusiness.101. The Company shall in each year hold a General Meeting as its AnnualGeneral Meeting in addition to any other Meeting in that year. All GeneralMeetings other than Annual General Meetings shall be called Extra-ordinaryGeneral Meetings. An Annual General Meeting of the Company shall be heldwithin six months after the expiry of each financial year, provided thatnot more than fifteen months shall lapse between the date of one Annual GeneralMeeting and that of next. Nothing contained in the foregoing provisionsshall be taken as affecting the right conferred upon the Register under theprovisions of Section 166 (1) of the Act to extend the time with which any AnnualGeneral Meeting may be held. Every Annual General Meeting shall becalled at a time during business hours, on a day that is not a public holiday,and shall be held at the office of the Company or at some other place within thecity in which the Registered Office of the Company is situated as the Boardmay determine and the notices calling the Meeting shall specify as the AnnualGeneral Meeting. Then company may in any one Annual General Meeting fix thetime for its subsequent Annual General Meeting. Every Member of the Companyshall be entitled to attend, either in person or by proxy and the Auditors of theCompany, shall have the right to attend and be heard at any General Meetingwhich he attends on any part of the business which concerns him as anAuditor. At every Annual General Meeting of the Company there shall be laidon the table the Director's Report and audited statement of accounts, the ProxyRegister with proxies and the Register of Director's Shareholding, whichRegisters shall remain open and accessible during the continuance of the Meeting.The Board shall cause to be prepared the annual list of Members, summary of sharecapital, balance sheet and profit and loss account and forward the same to theRegistrar in accordance with Sections 159, 161 and 220 of the Act.102. The Company shall in every Annual General Meeting in addition to any other Reportor Statement lay on the table the Director's Report and audited statement ofaccounts, Auditor's Report (if not already incorporated in the audited statement ofaccounts), the Proxy Register with proxies and the Register ofDirector’s Shareholdings, which Registers shall remain open and accessibleduring the continuance of the Meeting.103. All General Meeting other than Annual General Meeting shall be called Extra-Ordinary General Meeting.104.(1) Subject to the provisions of Section 188 of the Act, the Directors shall on therequisition in writing of such number of Members as is hereinafter specifiedand (unless the General Meeting otherwise resolves) at the expense of the262
Title of Articlerequisitionists:-Article Number and contentsTMa)b)Give to the Members of the Company entitled to receive notice of the nextAnnual General Meeting, notice of any resolution which may properly bemoved and is intended to be moved at that meeting.Circulate to the Members entitled to have notice of any General Meeting sent tothem, any statement of not more than one thousand words with respect to thematter referred to in any proposed resolution or any business to be dealt with atthat Meeting.(2)The number of Members necessary for a requisition under clause (1) hereofshall bea)b)Such number of Members as represent not less thanone-twentieth of the total voting power of all the Members having at the date ofthe resolution a right to vote on the resolution or business to which therequisition relates; ornot less than one hundred Members having the rights aforesaid and holdingShares in the Company on which there has been paid up an aggregate sum ofnot less than Rupees one lac in all.(3)(4)a)(i)(ii)b)Notice of any such resolution shall be given and any such statement shall becirculated, to Members of the Company entitled to have notice of the Meetingsent to them by serving a copy of the resolution or statement to each Member inany manner permitted by the Act for service of notice of the Meeting and noticeof any such resolution shall be given to any other Member of the Company bygiving notice of the general effect of the resolution in any manner permitted bythe Act for giving him notice of meeting of the Company. The copy of theresolution shall be served, or notice of the effect of the resolution shall be given,as the case may be in the same manner, and so far as practicable, at the sametime as notice of the Meeting and where it is not practicable for it to be servedor given at the time it shall be served or given as soon as practicable thereafter.The Company shall not be bound under this Article to give notice of anyresolution or to circulate any statement unless:A copy of the requisition signed by, the requisitionists (or two or more copieswhich between them contain the signature of all the requisitionists) is depositedat the Registered Office of the Company.In the case of a requisition, requiring notice of resolution, not less than sixweeks before the Meeting.the case of any other requisition, not let than two weeks before the Meeting,andThere is deposited or tendered with the requisition sum reasonably sufficient tomeet the Company expenses in giving effect thereto.PROVIDED THAT if after a copy of the requisition requiring notice of aresolution has been deposited at the Registered Office of the Company, and anAnnual General Meeting is called for a date six weeks or less after such copyhas been deposited, the copy although not deposited within the time required bythis clause, shall be deemed to have been properly deposited for the purposesalso thereof.263
Title of ArticleArticle Number and contentsTMExtra-OrdinaryGeneral MeetingbyBoard and byrequisitionWhen a Directoror any twoMembers maycall an ExtraOrdinary GeneralMeeting(5)(6)105. a)b)The Company shall also not be bound under this Article to circulate anystatement, if on the application either of the Company or of any other personwho claims to be aggrieved, the Court is satisfied that the rights conferred bythis Article are being abused to secure needless publicity for defamatory matter.Notwithstanding anything in these Articles, the business which may be dealtwith at Annual General Meeting shall include any resolution for which notice isgiven in accordance with this Article, and for the purposes of this clause, noticeshall be deemed to have been so given, notwithstanding the accidental omissionin giving it to one or more Members.The Directors may, whenever they think fit, convene an Extra-OrdinaryGeneral Meeting and they shall on requisition of the Members as hereinprovided, forthwith proceed to convene Extra-Ordinary General Meeting ofthe Company.If at any time there are not within India sufficient Directors capable ofacting to form a quorum, or if the number of Directors be reduced in numberto less than the minimum number of Directors prescribed by these Articlesand the continuing Directors fail or neglect to increase the number ofDirectors to that number or to convene a General Meeting, any Director orany two or more Members of the Company holding not less than one-tenthof the total paid up share capital of the Company may call for an Extra-Ordinary General Meeting in the same manner as nearly as possible as thatin which meeting may be called by the Directors.Contents ofrequisition, andnumber ofrequisitionistsrequired and theconduct ofMeeting106.(1)a)b)In case of requisition the following provisions shall have effect:The requisition shall set out the matter for the purpose of which the Meetingis to be called and shall be signed by the requisitionists and shall bedeposited at the Registered Office of the Company.The requisition may consist of several documents in like form each signedby one or more requisitionists.c)The number of Members entitled to requisition a Meeting in regard to anymatter shall be such number as hold at the date of the deposit of therequisition, not less than one-tenth of such of the paid-up share capital of theCompany as that date carried the right of voting in regard to that matter.d)Where two or more distinct matters are specified in the requisition, theprovisions of sub-clause (3) shall apply separately in regard to such matter,and the requisition shall accordingly be valid only in respect of thosematters in regard to which the conditions specified in that clause arefulfilled.e)If the Board does not within twenty-one days from the date of the deposit ofa valid requisition in regard to any matters, proceed, duly to call a Meetingfor the consideration of those matters on a day not later than forty-five daysfrom the date of the deposit of the requisition, the Meeting may be called:By the requisitionists themselves ; or(i)by such of the requisitionists as represent either a majority in value of the264
Title of Article(ii)Article Number and contentspaid up share capital held by all of them or not less than one tenth of thepaid-up share capital of the Company as is referred to in sub clauses (c) ofclause (I) which ever is less. PROVIDED THAT for the purpose of thissub-clause, the Board shall, in the case of a Meeting at which a resolution isto be proposed as a Special Resolution, be deemed not to have dulyconvened the Meeting if they do not give such notice thereof as is requiredby sub-section (2) of Section 189 of the Act.TMA meeting called under sub-clause (c) of clause (1) by requisitionists or anyof them:shall be called in the same manner as, nearly as possible, as that in whichmeeting is to be called by the Board; buta)b)shall not be held after the expiration of three months from the date ofdeposit of the requisition. PROVIDED THAT nothing in sub-clause (b)shall be deemed to prevent a Meeting duly commenced before the expiryof the period of three months aforesaid, from adjourning to some days afterthe expiry of that period.(3)(4)Where two or more Persons hold any Shares in the Company jointly; arequisition or a notice calling a Meeting signed by one or some only of themshall, for the purpose of this Article, have the same force and effect as if ithas been signed by all of them.Any reasonable expenses incurred by the requisitionists by reason ofthe failure of the Board to duly to call a Meeting shall be repaid to therequisitionists by the Company; and any sum repaid shall be retained by theCompany out of any sums due or to become due from the Company by wayof fees or other remuneration for their services to such of the Directors aswere in default.Length of noticeof MeetingContents andmanner of serviceof notice107. (1)(2)(i)(ii)108. (1)(2)A General Meeting of the Company may be called by giving not less thantwenty-one days notice in writing.A General Meeting may be called after giving shorter notice than thatspecified in clause (1) hereof, if consent is accorded thereto:In the case of Annual General Meeting by all the Members entitled to votethereat; andIn the case of any other Meeting, by Members of the Company holding notless than ninety-five percent of such part of the paid up share capital of theCompany as gives a right to vote at the Meeting.PROVIDED THAT where any Members of the Company are entitled tovote only on some resolution, or resolutions to be moved at a Meeting andnot on the others, those Members shall be taken into account for thepurposes of this clause in respect of the former resolutions and not inrespect of the later.Every notice of a Meeting of the Company shall specify the place and theday and hour of the Meeting and shall contain a statement of the business tobe transacted thereat.Subject to the provisions of the Act notice of every General Meeting shall265
Title of Articlebe given;Article Number and contentsTM(a)(b)(c)to every Member of the Company, in any manner authorised by subsections(1) to (4) Section 53 of the Act;to the persons entitled to a Share in consequence of the death, orinsolvency of a Member, by sending it through post in a prepaid letteraddressed to them by name or by the title of representative of thedeceased, or assignees of the insolvent, or by like description, at theaddress, if any in India supplied for ,the purpose by the persons claiming tobe so entitled or until such an address has been so supplied, by giving thenotice in any manner in which it might have been given if the death orinsolvency had not occurred; andto the Auditor or Auditors for the time being of the Company in anymanner authorised by Section 53 of the Act in the case of Members of theCompanyPROVIDED THAT, where the notice of a Meeting is given byadvertising the same in a newspaper circulating in the neighborhood ofRegistered Office of the Company under sub-section (3) of Section 53 ofthe Act, the statement of material facts referred to in Section 173 of the Actneed not be annexed to the notice as required by that Section, but it shallbe mentioned in the advertisement that the statement has been forwarded tothe Members of the Company.Special andordinary businessand explanatorystatement109.(1)(3)(a)i)Every notice convening a Meeting of the Company shall state withreasonable prominence that a Member entitled to attend and vote at theMeeting is entitled to appoint one or more proxies to attend and vote insteadof himself and that a proxy need not be a Member of the Company.In the case of an Annual General Meeting all business to be transacted at theMeeting shall be deemed special, with the exception of business relating tothe consideration of the accounts, balance sheet the reports of the Board ofDirectors and Auditors;ii)iii)iv)the declaration of dividend;the appointment of Directors in the place, of those retiring; andthe appointment of, and the fixing of the remuneration of the Auditors, andIn the case of any other meeting, all business shall be deemed special(2)(b)Where any items of business to be transacted at the Meeting of the Companyare deemed to be special as aforesaid, there shall be annexed to the notice ofthe Meeting a statement setting out all material facts concerning each suchitem, of business, including in particular the nature of the concern or interest,if any, therein of every Director.PROVIDED THAT, where any such item of special business at the Meetingof the Company relates to or affects, any other company, the extent ofshareholding interest in that other company of every Director of the Companyshall also be set out in the statement, if the extent of such shareholdinginterest is not less than twenty percent of the paid up-share capital of the othercompany.266
Title of ArticleArticle Number and contentsTMOmission to givenotice not toinvalidateproceedingsWhere any item of business consists of the according of approval to anydocument by the Meeting, the time and place where the document can be(3) inspected shall be specified in the statement aforesaid.110. The accidental omission to give such notice as aforesaid to or non-receipt thereof by,any Member or other person to whom it should be given, shall not invalidate theproceedings of any such Meeting.MEETING OF MEMBERSTitle of ArticleNotice of businessto be givenQuorumIf quorum notpresent whenMeeting to bedissolved andwhen to beadjournedResolution passedat adjournedMeetingChairman ofGeneral Meeting.Act for resolu-tionsufficiently doneor passed byOrdinaryResolution unlessotherwiserequired.Business confinedto election ofChairman whilstArticle Number and contents111. No General Meeting, Annual or Extra-Ordinary shall be competent to enter upon,discuss or transact any business which has not been mentioned in the notice ornotices convening the Meeting.112. Five Members entitled to vote and present in person shall be quorum for GeneralMeeting and no business shall be transacted at the General Meeting unless thequorum requisite is present at the commencement of the Meeting. A body corporatebeing a Member shall be deemed to be personally present if it is represented inaccordance with Section 187 of the Act. The President of India or the Governor of aState being a Member of the Company shall be deemed to be personally present if itis presented in accordance with Section 187 of the Act.113. If within half an hour from the time appointed for holding a Meeting of theCompany, a quorum is not present, the Meeting, if called by orupon the requisition of the Members shall stand dissolved and in any othercase the Meeting shall stand, adjourned to the same day in the next week orif that day is a public holiday until the next succeeding day which is not apublic holiday, at the same time and place or to such other day and at suchother time and place as the Board may determine. If at the adjournmentmeeting also, a quorum is not present within half an hour from the timeappointed for holding the Meeting, the Members present shall be a quorum andmay transact the business for which the Meeting was called.114. Where a resolution is passed at an adjourned Meeting of the Company, theresolution for all purposes is treated as having been passed on the date onwhich it was in fact passed and shall not be deemed to have been passed onany earlier date.115. At every General Meeting the Chair shall be taken by the Chairman of theBoard of Directors. If at any Meeting, the Chairman of the Board of Directors isnot present within ten minutes after the time appointed for holding the Meeting orthough present, is unwilling to act as Chairman, the Vice Chairman of the Boardof Directors would act as Chairman of the Meeting and if Vice Chairman of theBoard of Directors is not present or, though present, is unwilling to act asChairman, the Directors present may choose one of themselves to be a Chairman,and in default or their doing so or if no Directors shall be present and willing totake the Chair, then the Members present shall choose one of themselves, being aMember entitled to vote, to be Chairman.115. (A) Any act or resolution which, under the provisions of these Articles or of theAct, is permitted or required to be done or passed by the Company inGeneral Meeting shall be sufficiently done so or passed if effected by anOrdinary Resolution unless either the Act or the Articles specifically requiresuch act to be done or resolution be passed by a Special Resolution.116. No business shall be discussed at any General Meeting except the electionof a Chairman whilst the Chair is vacant.267
Title of Articlethe Chair is vacantChairman mayadjourn Meeting117. (a)Article Number and contentsThe Chairman may with the consent of Meeting at which a quorum ispresent and shall if so directed by the Meeting adjourn the Meeting fromtime to time and from place to place.TM(b)(c)No business shall be transacted at any adjourned Meeting other than thebusiness left unfinished at the Meeting from which the adjournment tookplace.When a Meeting is adjourned for thirty days or more notice of theadjourned Meeting shall be given as in the case of an original Meeting.How questions aredecided atMeetingsChairman'sdeclaration ofresult of votingon show ofhandsDemand of pollTime of takingpollChairman’scasting voteAppointmentscrutineersofDemand for pollnot to preventtransaction ofother businessSpecial noticeSave as aforesaid, it shall not be necessary to give any notice of an(d) adjournment of or of the business to be transacted at any adjournedMeeting.118. Every question submitted to a General Meeting shall be decided in the firstinstance by a show of hands unless the poll is demanded as provided in theseArticles.119. A declaration by the Chairman of the Meeting that on a show of hands, aresolution has or has not been carried either unanimously or by a particularmajority, and an entry to that effect in the book containing the minutes of theproceeding of the Company’s General Meeting shall be conclusive evidence ofthe fact, without proof of the number or proportion of votes cast in favour of oragainst such resolution.120. Before or on the declaration of the result of the voting on any resolution on ashow of hands a poll may be ordered to be taken by the Chairman of theMeeting on his own motion and shall be ordered to be taken by him on ademand made in that behalf by any Member or Members present in person orby proxy and holding Shares in the Company which confer a power to vote onthe resolution not being less than one-tenth of the total voting power in respectof the resolution, or on which an aggregate sum of not less than fifty thousandrupees has been paid up. The demand for a poll may be withdrawn at any timeby the Person or Persons who made the demand.121. A poll demanded on a question of adjournment or election of a Chairman shallbe taken forthwith. A poll demanded on any other question shall be taken atsuch time not being later than forty-eight hours from the time when the demandwas made and in such manner and place as the Chairman of the Meeting maydirect and the result of the poll shall be deemed to be the decision of theMeeting on the resolution on which the poll was taken.122. In the case of equality of votes the Chairman shall both on a show of hands andon a poll (if any) have a casting vote in addition to the vote or votes to whichhe may be entitled as a Member.123. Where a poll is to be taken, the Chairman of the Meeting shall appoint twoscrutineers to scrutinise the vote given on the poll and to report thereon to him.One of the scrutineers so appointed shall always be a Member (not being anofficer or employee of the Company) present at the Meeting, provided such aMember is available and willing to be appointed. The Chairman shall havepower, at any time before the result of the poll is declared, to remove ascrutineer from office and fill vacancies in the office of the scrutineerarising from such removal or from any other cause.124. The demand for a poll shall not prevent transaction ofother business (except on the question of the election of the Chairman and of anadjournment) other than the question on which the poll has been demanded.125. Where by any provision contained in the Act or in these Articles, special notice isrequired for any resolution notice of the intention to move the resolution shall be268
Title of ArticleArticle Number and contentsgiven to the Company not less than fourteen days before the Meeting at whichit is to be moved, exclusive of the day which the notice is served or deemed tobe served on the day of the Meeting. The Company shall immediately after thenotice of the intention to move any such resolution has been received by it,give its Members notice of the resolution in the same manner as it gives notice ofthe Meeting, or if that is not practicable shall give them notice thereof, either byadvertisement in a newspaper having an appropriate circulation or in any othermode allowed by these presents not less than seven days before the Meeting.TMVOTES OF MEMBERSTitle of ArticleMember payingmoney in advancenot to be entitled tovote in respectthereofRestriction onexercise of votingrights of Memberswho have not paidcallsNumber of votes towhich MemberentitledVotes of Membersof unsound mindArticle Number and contents126. A Member paying the whole or a part of the amount remaining unpaid on anyShare held by him although no part of that amount has been called up, shall not beentitled to any voting rights in respect of moneys so paid by him until the samewould but for such payment become presently payable.127. No Member shall exercise any voting rights in respect of any Shares registered inhis name on which any calls or other sums presently payable by him have not beenpaid or in regard to which the Company has exercised any right of lien.128. Subject to the provisions of Article 126, every Member of the Company holding anyequity share capital and otherwise entitled to vote shall, on a show of handswhen present in person (or being a body corporatepresent by a representative duly authorised) have one vote and on a poll, whenpresent in person (including a body corporate by a duly authorised representative), orby an agent duly authorised under a Power of Attorney or by proxy, his voting rightshall be in proportion to his share of the paid-up equity share capital of theCompany. Provided however, if any preference shareholder is present at anymeeting of the Company, (save as provided in clause (b) of sub-section (2) ofSection 87) he shall have a right to vote only on resolutions before the Meetingwhich directly affect the rights attached to his preference shares. A Member is notprohibited from exercising his voting rights on the ground that he has not held hisShares or interest in the Company for any specified period preceding the date onwhich the vote is taken.129. A Member of unsound mind, or in respect of whom order has been made byany Court having jurisdiction in lunacy, may vote, whether on a show of hands or ona poll, by his committee or other legal guardian and any such committee orguardian may, on a poll, vote by proxy.Votes of joint 130. If there be joint registered holders of any Shares, one of such persons may vote atMembersany Meeting personally or by an agent duly authorised under a Power of Attorneyor by proxy in respect of such Shares, as if he were solely entitled thereto but theproxy so appointed shall not have any right to speak at the Meeting, and if more thanone of such joint holders be present at any Meeting either personally or by agentor by proxy, that one of the said persons so present whose name appears higheron the Register of Members shall alone be entitled to speak and to vote in respectof such Shares, but the other holder(s) shall be entitled to vote in preference to aperson present by an agent duly authorised under a Power of Attorney or byproxy although the name of such person present by agent or proxy stands first orhigher in the Register of Members in respect of such Shares. Several executors oradministrators of a deceased Member in whose name Shares stand shall for thepurpose of these Articles be deemed joint holders thereof.Representation of 131. (a) A body corporate (whether a company within the meaning of the Act or269
Title of Articlebody corporateArticle Number and contentsnot) may, if it is a Member or creditor of the Company (including aholder of Debentures) authorise such person as it thinks fit by a resolutionof its Board of Directors or other governing body, to act as its representativeat any Meeting of the Company or any class of shareholders of the Companyor at any meeting of the creditors of the Company or Debenture-holders o ft h e Company. A person authorised by resolutions aforesaid shall beentitled to exercise the same rights and powers (including the right to voteby proxy) on behalf of the body corporate which he represents as that bodycould exercise if it were an individual Member, shareholder, creditor orholder of Debentures of the Company. The production of a copy of theresolution referred to above certified by a Director or the Secretary of suchbody corporate before the commencement of the Meeting shall be acceptedby the Company as sufficient evidence of the validity of the saidrepresentatives’ appointment and his right to vote thereat.TMVotes in respects ofdeceased orinsolvent MembersVoting in person orby proxyRights of Membersto use votesdifferentlyProxiesProxy either forspecified meetingor for a periodNo proxy to voteon a show of handsInstrument ofproxy when to bedepositedWhere the President of India or the Governor of a State is a Member of theCompany, the President or as the case may be the Governor may appoint(b) such person as he thinks fit to act as his representative at any Meeting of theCompany or at any meeting of any class of shareholders of the Companyand such a person shall be entitled to exercise the same rights and powers,including the right to vote by proxy, as the President, or as the case may be,the Governor could exercise as a Member of the Company.132. Any person entitled under the Transmission Article to transfer any Shares may voteat any General Meeting in respect thereof in the same manner as if he was theregistered holder of such Shares; provided that at least forty-eight hours before thetime of holding the Meeting or adjourned Meeting, as the case may be, at which heproposes to vote, he shall satisfy the Directors of the right to transfer suchShares and give such indemnity (if any) as the Directors may requireunless the Directors shall have previously admitted his right to vote at suchMeeting in respect thereof.133. Subject to the provisions of these Articles, votes may be given either personally orby proxy. A body corporate being a Member may vote either by a proxy or by arepresentative duly authorised in accordance with Section 187 of the Act.134. On a poll taken at a Meeting of the Company a Member entitled to morethan one vote or his proxy, or other persons entitled to vote for him, as the case maybe, need not, if he votes, use all his votes or cast in the same way all the votes he uses135. Any Member of the Company entitled to attend and vote at a Meeting of theCompany, shall be entitled to appoint another person (whether a Member or not) ashis proxy to attend and vote instead of himself PROVIDED ALWAYS that aproxy so appointed shall not have any right what so ever to speak at theMeeting. Every notice convening a Meeting of the Company shall state that aMember entitled to attend and vote is entitled to appoint one or more proxies toattend and vote instead of himself, and that a proxy need not be a Member of theCompany.136. An instrument of proxy may appoint a proxy either for the purposes of aparticular Meeting specified in the instrument and any adjournment thereofor it may appoint a proxy for the purpose of every Meeting to be held before adate specified in the instrument and every adjournment of any such Meeting.137. No proxy shall be entitled to vote by a show of hands.138. The instrument appointing a proxy and the Power of Attorney or authority (if any)under which it is signed or a notarially certified copy of that Power of Attorney orauthority, shall be deposited at the Registered Office of the Company at leastforty-eight hours before the time for holding the Meeting at which the personnamed in the instrument purposes to vote and in default the instrument ofproxy shall not be treated as valid.270
Title of ArticleForm of ProxyValidity of votesgiven by proxynotwithstandingrevocation ofauthorityTime for objectionto voteChairman of anyMeeting to be thejudge of Validity ofany valueArticle Number and contents139. Every instrument of proxy whether for a specified Meeting or otherwise shall,as nearly as circumstances will admit, be in any of the forms set out inSchedule IX to the Act, and signed by the appointer or his attorney dulyauthorised in writing or if the appointer is a body corporate, be under its seal or besigned by any officer or attorney duly authorised by it.140. A vote given in accordance with the terms of an instrument of proxy shall bevalid notwithstanding the previous death or insanity of the principal, or revocation ofthe proxy or of any Power of Attorney under which such proxy was signed, or thetransfer of the Share in respect of which the vote is given, provided that nointimation in writing of the death, insanity, revocation or transfer shall have beenreceived by the Company at the Registered Office before the commencement ofthe Meeting or adjourned Meeting at which the proxy is used provided neverthelessthat the Chairman of any Meeting shall be entitled to require such evidence as hemay in his discretion think fit of the due execution of an instrument of proxy andof the same not having been revoked.141. No objection shall be made to the qualification of any voter or to the validity of avote except at the Meeting or adjourned Meeting at which the vote objected to isgiven or tendered, and every vote, whether given personally or by proxy, notdisallowed at such Meeting, shall be valid for all proposes and such objection madein due time shall be referred to the Chairman of the Meeting.142. The Chairman of any Meeting shall be the sole judge of the validity of every votetendered at such Meeting. The Chairman present at the taking of a poll shall be thesole judge of the validity of every vote tendered at such poll. The decision of theChairman shall be final and conclusive.TMCustodyInstrumentDIRECTORSof143. If any such instrument of appointment is confined to the object of appointing atattorney or proxy for voting at Meetings of the Company, it shall remainpermanently or for such time as the Directors may determine, in the custody of theCompany. If such instrument embraces other objects, a copy thereof examined withthe original shall be delivered to the Company to remain in the custody of theCompany.Title of ArticleNumberDirectorsFirst DirectorsDebentureDirectorsofNominee Directoror CorporationDirectorArticle Number and contents144. Until otherwise determined by a General Meeting of the Company and subject tothe provisions of Section 252 of the Act, the number of Directors shall not be lessthan three and not more than twelve.145. The Present Directors as on 20-04-2007 are:-1. MR. PURSHOTTAM C. <strong>MANDHANA</strong>2. MR. BIHARILAL C. <strong>MANDHANA</strong>3. MR. MANISH B. <strong>MANDHANA</strong>146. Any Trust Deed for securing Debentures may if so arranged, provide for theappointment, from time to time by the Trustees thereof or by the holders ofDebentures, of some person to be a Director of the Company and may empowersuch Trustees or holder of Debentures, from time to time, to remove and re-appointany Director so appointed. The Director appointed under this Article is hereinreferred to as "Debenture Director" and the term “Debenture Director” means theDirector for the time being in office under this Article. The Debenture Directorshall not be liable to retire by rotation or be removed by the Company. The TrustDeed may contain such ancillary provisions as may be agreed between theCompany and the Trustees and all such provisions shall have effectnotwithstanding any of the other provisions contained herein.147. (a) Notwithstanding anything to the contrary contained in these Articles, so longas any moneys remain owing by the Company to Industrial FinanceCorporation of India (IFCI),ICICI Ltd.(ICICI), The Industrial271
Title of ArticleArticle Number and contentsDevelopment Bank of India (IDBI) or any other financing company orbody out of any loans granted or to be granted by them to the Company or solong as IFCI, ICICI, IDBI or any other financing corporation or creditcorporation or any other financing company or body (each of which IFCI,ICICI, IDBI or any other financing corporation or credit corporation orany other financing company or body is hereinafter in this Article referred toas "The Corporation” ) continue to hold Debentures in the Company bydirect subscription or private placement, or so long as the Corporationholds Shares in the Company as a result of underwriting or directsubscription or so long as any liability of the Company arising out of anyguarantee furnished by the Corporation on behalf of the Company remainsoutstanding, the Corporation shall have a right to appoint from time to timeany person or persons as a Director, whole time or non-whole time (whichDirector or Directors is/are hereinafter referred to as "NomineeDirector(s)") on the Board of the Company and to remove from suchoffice any persons so appointed and to appoint any person or persons in his/their places.TM(b)(c)(d)(e)The Board of Directors of the Company shall have no power to remove fromoffice the Nominee Director(s). Such Nominee Director(s) shall not berequired to hold any Share qualification in the Company. Further NomineeDirector shall not be liable to retirement by rotation of Directors. Subject asaforesaid, the Nominee Directors(s) shall be entitled to the same rights andprivileges and be subject to the obligations as any other Director of theCompany.The Nominee Director(s) so appointed shall hold the said office only solong as any moneys remain owing by the Company to the Corporation andthe Nominee Director/s so appointed in exercise of the said power, shallipso facto vacate such office immediately on the moneys owing by theCompany to the Corporation being paid offThe Nominee Director(s) appointed under this Article shall be entitled toreceive all notices of and attend all General Meetings, Board Meetings andall the Meetings of the Committee of which the Nominee Director(s) is/areMember(s) as also the minutes of such Meetings. The Corporation shallalso be entitled to receive all such notices and minutes.The sitting fees in relation to such Nominee Director(s) shall alsoaccrue to the Corporation and the same shall accordingly be paid by theCompany directly to the Corporation. Any other fees, commission, moneysor remuneration in any form is payable to the Nominee Director of theCompany, such fees, commission, moneys and remuneration in relation tosuch Nominee Director(s) shall accrue to the Corporation and the sameshall accordingly be paid by the Company directly to the Corporation.Any expenses that may be incurred by the Corporation or such NomineeDirector(s), in connection with their appointment or Directorship, shallalso be paid or reimbursed by the Company to the Corporation or as thecase may be to such Nominee Director/s provided that if any such NomineeDirector/s is/are an officer(s) of the Corporation..Provided also that in the event of the Nominee Director(s) beingappointed as Whole-time Director(s); such Nominee Director/s shallexercise such power and duties as may be approved by the lenders andhave such rights as are usually exercised or available to a whole-timeDirector in the management of the affairs of Company. Such Nominee272
Title of ArticleLimit on numberof retainingDirectorsAlternate DirectorDirectors may fillin vacanciesAdditionalDirectorsQualificationsharesDirectors’ sittingfeesExtraremunerationDirectorsspecial worktoforArticle Number and contentsDirector shall be entitled to receive such remuneration, fees,commission and moneys as may be approved by the Corporation(s)nominated by him.148. The provisions of Articles 146, 147 and 148 are subject to the provisions ofSection 256 of the Act and number of such Directors appointed under Article 147shall not exceed in the aggregate one third of the total number of Directors for thetime being in office.149. The Board may appoint, an Alternate Director recommended for suchappointment by the Director (hereinafter in this Article called "the OriginalDirector") to act for him during his absence for a period of not less than threemonths from the State in which the meetings of the Board are ordinarily held.Every such Alternate Director shall, subject to his giving to the Company anaddress in India at which notice may be served on him, be entitled to notice ofmeetings of Directors and to attend and vote as a Director and be counted for thepurposes of a quorum and generally at such Meetings to have and exercise all thepowers and duties and authorities of the Original Director. The Alternate Directorappointed under this Article shall vacate office as and when the Original Directorreturns to the State in which the meetings of the Board are ordinarily held and ifthe term of office of the Original Director is determined before he returns toas aforesaid, any provisions in the Act or in these Articles for automaticreappointment of retiring Director in default of another appointment shall apply tothe Original Director and not the Alternate Director.150. The Directors shall have power at any time and from time to time to appoint anyperson to be a Director to fill a casual vacancy. Such casual vacancy shall be filledby the Board of Directors at a meeting of the Board. Any person so appointed shallhold office only upto the date to which the Director in whose place he isappointed would have held office, if it had not been vacated as aforesaid.However, he shall then be eligible for re-election.151. The Directors shall have the power at any time and from time to time to appointany other person to be a Director as an addition to the Board (“AdditionalDirector”) so that the total number of Directors shall not at any time exceed themaximum fixed by these Articles. Any person so appointed as an AdditionalDirector to the Board shall hold his office only upto the date of the next AnnualGeneral Meeting and shall be eligible for election at such Meeting.152. A Director need not hold any qualification shares.153. The fees payable to a Director for attending each Board meeting shall be suchsum as may be fixed by the Board of Directors not exceeding such sum as maybe prescribed by the Central Government for each of the meetings of the Boardor a Committee thereof and adjournments thereto attended by him. The Directors,subject to the sanction of the Central Government (if any required) may be paidsuch higher fees as the Company in General Meeting shall from time to timedetermine.154. Subject to the provisions of Sections 198, 309, 310, 311 and 314 of the Act,if any Director, being willing shall be called upon to perform extra services(which expression shall include work done by a Director as a Member of anyCommittee formed by the Directors or in relation to signing sharecertificate) or to make special exertions in going or residing or residing outof his usual place of residence or otherwise for any of the purposes of theCompany, the Company may remunerate the Director so doing either bya fixed sum or otherwise as may be determined by the Director, and suchremuneration may be either in addition to or in substitution for his share inthe remuneration herein provided.TMSubject to the provisions of the Act, a Director who is neither in the wholetime employment nor a Managing Director may be paid remuneration either:273
Title of ArticleArticle Number and contentsTMi)by way of monthly, quarterly or annual payment with the approval of theCentral Government; orby way of commission if the Company by a Special Resolution authorisedsuch payment.ii)Travellingexpenses incurredby Directors onCompany’sbusinessDirector may actnotwithstandingvacancyBoard resolutionnecessary forcertain contracts155. The Board of Directors may subject to the limitations provided by the Act allowand pay to any Director who attends a meeting of the Board of Directors or anyCommittee thereof or General Meeting of the Company or in connection with thebusiness of the Company at a place other than his usual place of residence, for thepurpose of attending a Meeting such sum as the Board may consider faircompensation for travelling, hotel, and other incidental expenses properlyincurred by him in addition to his fees for attending such Meeting as abovespecified.156. The continuing Director or Directors may act notwithstanding any vacancy intheir body, but if and so long as their number is reduced below the quorum fixedby these Articles for a meeting of the Board, the Director or Directors may actfor the purpose of increasing the number, of Directors or that fixed for the quorumor for summoning a General Meeting of the Company but for no other purposes.157. 1) Subject to the provisions of Section 297 of the Act, except with the consentof the Board of Directors of the Company, a Director of the Company orhis relative, a firm in which such a Director or relative is partner, anyother partner in such a firm or a private company of which the Directoris a member or director, shall not enter into any contract with theCompany.(a)(b)(c)i)ii)2)For the sale, purchase or supply of goods, materials or services; orfor underwriting the subscription of any Share in or debentures of theCompany;nothing contained in clause (a) of sub-clause (1) shallaffect:-the purchase of goods and materials from the Company, or the sale ofgoods and materials to the Company by any Director, relative, firm, partneror private company as aforesaid for cash at prevailing market prices; orany contract or contracts between the Company on one side and any suchDirector, relative, firm, partner or private company on the other for sale,purchase or supply of any goods, materials and services in which either theCompany, or the Director, relative, firm, partner or private company, as thecase may be regularly trades or does business, PROVIDED THAT suchcontract or contracts do not relate to goods and materials the value of which,or services the cost of which, exceeds five thousand rupees in the aggregatein any year comprised in the period of the contract or contracts;Notwithstanding any contained in sub-clause(1) hereof, a Director, relative,firm partner or private company as aforesaid may, in circumstances of urgentnecessity, enter without obtaining the consent of the Board, into anycontract with the Company for the sale, purchase or supply of any goods,materials or services even if the value of such goods or cost of suchservices exceeds rupees five thousand in the aggregate in any year274
Title of ArticleArticle Number and contentscomprised in the period of the contract; but in such a case theconsent of the Board shall be obtained at a Meeting within threemonths of the date on which the contract was entered into.TM3)Every consent of the Board required under this Article shall be accorded by aresolution passed at a meeting of the Board required under clause (1) andthe same shall not be deemed to have been given within the meaning of thatclause unless the consent is accorded before the contract is entered into orwithin three months of the data on which was entered into.If consent is not accorded to any contract under this Article, anything donein pursuance of the contract will be voidable at the option of the Board.4)The Directors, so contracting or being so interested shall not be liable tothe Company for any profit realised by any such contract or the fiduciaryrelation thereby established.Disclosure to theMembers ofDirectors’ interestin contractappointingManagers,ManagingDirector orWholetimeDirectorDirectors ofinterestGeneral notice ofdisclosureDirectorsManagingDirectorcontractCompanyandmaywith158.5)(a)(b)159. a)When the Company:-enters into a contract for the appointment of a Managing Director orWholetime Director in which contract any Director of the Company iswhether directly or indirectly, concerned or interested; orvaries any such contract already in existence and in which a Director isconcerned or interested as aforesaid, the provisions of Section 302 of theAct shall be complied with.A Director of the Company who is in any way, whether directly or indirectlyconcerned or interested in a contract entered into or to be entered into by oron behalf of the Company shall disclose the nature of his concern orinterest at a meeting of the Board in the manner provided in Section 299(2) of the Act.b) A general notice, given to the Board by the Director to the effect that he isa director or is a member of a specified body corporate or is a member of aspecified firm under Sections 299(3)(a) shall expire at the end of the financialyear in which it shall be given but may be renewed for a further period ofone financial year at a time by fresh notice given in the last month of thefinancial year in which it would have otherwise expired. No suchgeneral notice and no renewal thereof shall be of effect unless, either it isgiven at a meeting of the Board or the Director concerned takesreasonable steps to secure that is brought up and read at the first meeting ofthe Board after it is given.160. Subject to the provisions of the Act the Directors (including a Managing Directorand Whole time Director) shall not be disqualified by reason of his or their officeas such from holding office under the Company or from contracting with theCompany either as vendor, purchaser, lender, agent, broker, lessor or lessee orotherwise, nor shall any such contract or any contracts or arrangement entered intoby or on behalf of the Company with any Director or with any company orpartnership of or in which any Director shall be a member or otherwiseinterested be avoided nor shall any Director so contracting be liable to accountto the Company for any profit realized by such contract or arrangement byreason only of such Director holding that office or of the fiduciary relationthereby established, but it is declared that the nature of his interest shall be275
Title of ArticleDisqualification ofthe Director161. 1)Article Number and contentsdisclosed as provided by Section 299 of the Act and in this respect all theprovisions of Section 300 and 301 of the Act shall be duly observed and compliedwith.A person shall not be capable of being appointed Director of the Companyif:-TMVacation of officeby Directorsa)b)c)d)e)f)162. 1)a)b)c)d)e)f)g)h)he has been found to be of unsound mind by a Courtof competent jurisdiction and the finding is in force;he is an undischarged insolvent;he has applied to be adjudged an insolvent and his application is pending;he has been convicted by a Court of any offence involving moral turpitudesentenced in respect thereof to imprisonment for not less than six monthsand a period of five years has not elapsed form the date of expiry of thesentence;he has not paid any call in respect of Shares of the Company held by himwhether alone or jointly with others and six months have lapsed from the lastday fixed for the payment of the call; oran order disqualifying him for appointment as Director has been passed by aCourt in pursuance of Section 203 of the Act and is in force; unless the leaveof the Court has been obtained for his appointment in pursuance of thatSection.The office of Director shall become vacant if:-he is found to be of unsound mind by a Court of competentjurisdiction; orhe applies to be adjudged an insolvent; orhe is adjudged an insolvent; orhe is convicted by a Court of any offence involving moral turpitude andsentenced in respect thereof to imprisonment for less than six months; orhe fails to pay any call in respect of Shares of the Company held by him,whether alone or jointly with others within six months from the last date fixedfor the payment of the call unless the Central Government, by a notificationin the Official Gazette removes the disqualification incurred by such failure;orabsents himself from three consecutive meetings of the Board ofDirectors, or from all meetings of the Board for a continuous periodof three months, whichever is longer, without obtaining leave ofabsence from the Board; orhe(whether by himself or by any person for his benefit or on hisaccount or any firm in which he is a partner or any private company ofwhich he is a director), accepts a loan, or any guarantee or security for aloan, from the Company in contravention of Section 295 of the Act; orhe being in any way whether directly or indirectly concerned or interestedin a contract or arrangement or proposed contract or arrangement, enteredinto or to be entered into by or on behalf of the Company fails to disclose the276
Title of ArticleArticle Number and contentsnature of his concern or interest at a meeting of the Board of Directors asrequired by Section 299 of the Act; orTMhe becomes disqualified by an order of the Court under Section 203 ofthe Act; ori)j)k)l)he is removed by an Ordinary Resolution of the Company before theexpiry of his period of notice; orif by notice in writing to the Company, he resigns his office, orhaving been appointed as a Director by virtue of his holding any office orother employment in the Company, he ceases to hold such office or otheremployment in the Company.Vacation of officeby Directors(contd.)163. 1)a)b)Notwithstanding anything contained in sub-clauses (c), (d) and (i) of subclause (2) hereof, the disqualification referred to in these clauses shallnot take effect:for thirty days from the date of the adjudication, sentence ororder;where any appeal or petition is preferred within thirty days aforesaid againstthe adjudication, sentence or conviction resulting in the sentence or orderuntil the expiry of seven days from the date on which such appeal orpetition is disposed of; orRemovalDirectorsofc)164. a)where within the seven days aforesaid, any further appeal or petition ispreferred in respect of the adjudication, sentence, conviction or order, andthe appeal or petition, if allowed, would result in the removal ofthe disqualification, until such further appeal or petition is disposed of.The Company may subject to the provisions ofSection 284 and other applicable provisions of the Act and these Articles byOrdinary Resolution remove any Director not being a Director appointed bythe Central Government in pursuance of Section 408 of the Act before theexpiry of his period of office.b)Special Notice as provided by these Articles or Section 190 of theAct ; shall be required of any resolution to remove a Director under the Articleor to appoint some other person in place of a Director so removed at theMeeting at which he is removed.c)On receipt of notice of a resolution to remove a Director under thisArticle; the Company shall forthwith send a copy; thereof to theDirector concerned and the Director (whether or not he is a Member ofa Company) shall be entitled to be heard on the resolution at the Meeting.d)where notice is given of a resolution to remove a Director under thisArticle and the Director concerned makes with respect theretorepresentations in writing to the Company (not exceeding reasonable length)and requests their notification to Members of the Company, theCompany shall, unless the representations are, received by it too late for itto do so:277
Title of ArticleArticle Number and contentsTM(i)(ii)e)f)in the notice of the resolution given to the Members of the Company statethe fact of the representations having been made, andsend a copy of the representations to every Member of the Company towhom notice of the Meeting is sent(before or after therepresentations by the Company) and if a copy of the representations isnot sent as aforesaid because they were received too late\ or because of theCompany's default the Director may (without prejudice to his right to be heardorally) require that the representation shall be read out at theMeeting; provided that copies of the representation need not be sent orread out at the Meeting if on the application, either of the Companyor of any other person who claims t o b e aggrieved by the Court issatisfied that the rights concerned by this sub-clause are being abused tosecure needless publicity for defamatory matter.A vacancy created by the removal of the Director under thisArticle may, if he had been appointed by the Company in GeneralMeeting or by the Board, in pursuance of Article 153 or Section262 of the Act be filled by the : appointment of another Director inhis place by the Meeting at which he is removed, provided specialnotice of the intended appointment has been given under sub clause(3) hereof. A Director so appointed shall hold office until the dateupto which his predecessor would have held office if he had not beenremoved as aforesaid.If the vacancy is not filled under sub-clause(e), it may be filled as acasual vacancy in accordance with the provisions, in so far as theyare applicable of Article 153 or Section 162 of the Act, and all theprovisions of that Article and Section shall apply accordinglyA Director who was removed from office under this Article shallnot be re-appointed as a Director by the Board of Directors.Nothing contained in this Article shall be taken:-g)h)(i)as depriving a person removed hereunder of any compensationof damages payable to him in respect of the termination of hisappointment as Director, oras derogating from any power to remove a Director which may existapart form this Article.(ii)InterestedDirectors not toparticipate or votein Board’sproceedings165. No Director shall as a Director take part in the discussion of orvote on any contract arrangement or proceedings entered intoor to be entered into by or on behalf of the Company, if he isin any way, whether directly or indirectly, concerned orinterested in such contract or arrangement, not shall his presencecount for the purpose of forming a quorum at the time of any suchdiscussion or voting, and if he does vote, his vote shall be void.278
Title of ArticleArticle Number and contentsProvided however, that nothing herein contained shall apply to:-TMa)b)any contract of indemnity against any loss which the Directors, or any oneor more of them, may suffer by reason of becoming or being sureties or asurety for the Company;any contract or arrangement entered into or to be entered into with apublic company or a private company which is a subsidiary of a publiccompany in which the interest of the Director consists solely;in his being:(i)a)b)a director of such company; andthe holder of not more than shares of such number of value therein as isrequisite to qualify him for appointment as a director, thereof, hehaving been nominated as director by the company, orDirector maybe director ofcompaniespromoted bythe CompanyAppointment ofSole SellingAgentsin his being a member holding not more than two percent of its paid-upshare capital.(ii)166. A Director may be or become a director of any company promoted by the Company,or in which it may be interested as a vendor, shareholder, or otherwise and no suchDirector shall be accountable for any benefit received as director or shareholder ofsuch company except in so far Section 309(6) or Section 314 of the Act may beapplicable.167. a) The appointment, re-appointment and extension of the term of a sole sellingagent, shall be regulated in accordance with the provisions of Section 294 ofthe Act and any Rules or Notifications issued by the competent authority inaccordance with that Section and the Directors and/or the Company inGeneral Meeting may make the appointment, re-appointment or extension ofthe term of office in accordance with and subject to the provisions of the saidSection and such rules or notifications, if any, as may be applicable.b)The payment of any compensation to a sole selling agent shall be subject tothe provisions of Section 294A of the Act.ROTATION AND APPOINTMENT OF DIRECTORSTitle of ArticleRotation ofDirectorsRetirementDirectorsofArticle Number and contents168. Not less than two third of the total number of Directors shall (a) be persons whoseperiod of the office is liable to termination by retirement by rotation and (b) save asotherwise expressly provided in the Articles beappointed by the Company in General Meeting.169. Subject to the provisions of Articles 148 and 150, the non-retiring Directorsshould be appointed by the Board for such period or periods as it may in itsdiscretion deem appropriate.Retiring Directors 170. Subject to the provisions of Section 256 of the Act and Articles 146 to 153, at everyAnnual General Meeting of the Company, one-third or such of the Directors for thetime being as are liable to retire by rotation; or if their number is not three or amultiple of three the number nearest to one-third shall retire from office. TheDebenture Directors, Nominee Directors, Corporation Directors, ManagingDirectors if any, subject to Article 184, shall not be taken into account indetermining the number of Directors to retire by rotation. In these Articles a"Retiring Director" means a Director retiring by rotation.Appointment of 171. a) The Board of Directors shall have the right from time to time to appoint any279
Title of ArticleTechnical orExecutiveDirectorsAscertainment ofDirectors retiringby rotation andfilling ofvacanciesEligibility for reelectionCompany to fillvacanciesProvisiondefaultappointmentinofArticle Number and contentsperson or persons as Technical Director or Executive Director/s and removeany such persons from time to time without assigning any reason whatsoever.A Technical Director or Executive Director shall not be required to hold anyqualification shares and shall not be entitled to vote at any meeting of theBoard of Directors.b) Subject to the provisions of Section 262 of the Act, if the office of anyDirector appointed by the Company in General Meeting vacated before histerm of office will expire in the normal course, the resulting casual vacancymay in default of and subject to any regulation in the Articles of the Companybe filled by the Board of Directors at the meeting of the Board and theDirector so appointed shall hold office only up to the date up to which theDirector in whose place he is appointed would have held office if had notbeen vacated as aforesaid.172. Subject to Section 288 (5) of the Act, the Directors retiring by rotation under Article174 at every Annual General Meeting shall be those, who have been longest in officesince their last appointment, but as between those who became Directors on the sameday, those who are to retire shall in default of and subject to any agreement amongstthemselves be determined by the lot.173. A retiring Director shall be eligible for re-election and shall act as a Directorthrough out and till the conclusion of the Meeting at which he retires.174. Subject to Sections 258, 259 and 294 of the Act, the Company at the GeneralMeeting, at which a Director retires in manner aforesaid, may fill up the vacancyby appointing the retiring Director or some other person thereto.175. a)If the place of retiring Director is not so filled up and the Meeting has notexpressly resolved not to fill the vacancy, the Meeting shall stand adjournedtill the same day in the next week, at the same time and place, or if that day isa public holiday, till the next succeeding day which is not a public holiday, atthe same time and place.TMb)(i)(ii)(iii)(iv)(v)If at the adjourned Meeting also, the place of the retiring Director is not filledup and the Meeting also has not expressly resolved not to fill the vacancy, theretiring Director shall be deemed to have been re-appointed at the adjournedMeeting, unless:at that Meeting or the previous Meeting a resolution for the re-appointment ofsuch Director has been put to the Meeting and lost.the retiring Director has by a notice in writing addressed to the Company orits Board of Directors expressed his unwillingness to be so re-appointed.he is not qualified or is disqualified for appointmenta resolution, whether Special or Ordinary is required for his appointment orre-appointment by virtue of any provisions of the Act, orthe provision of the sub-section (2) of section 263 of the Act is applicable tothe case.Company mayincrease or reducethe number ofDirectors or176. Subject to the provisions of Section 252,255 and 259 of the Act, the Company mayby Ordinary Resolution from time to time, increase or reduce the number ofDirectors and may alter qualifications.280
Title of Articleremove anyDirectorAppointment ofDirectors to bevoted individually177. a)Article Number and contentsNo motion, at any General Meeting of the Company shall be made for theappointment of two or more persons as Directors of the Company by a singleresolution unless a resolution that it shall be so made has been first agreed toby the Meeting without any vote being given against it.TMb)A resolution moved in contravention of clause (a) hereof shall be void,whether or not objection was taken at the time of its being so moved,providedwhere a resolution so moved has passed no provisions or the automatic reappointmentof retiring Directors in default of another appointment as thereinbefore provided shall apply.Notice ofcandidature foroffice of Directorsexcept in certaincasesc)178. 1)For the purposes of this Article, a motion for approving a person'sappointment, or for nominating a person for appointment, shall be treated as amotion for his appointment.No person not being a retiring Director shall be eligible for election to theoffice of Director at any General Meeting unless he or some other Memberintending to propose him has given at least fourteen days notice in writingunder his hand signifying his candidature for the office of a Director or theintention of such person to propose him as Director for that office as the casemay be, along with a deposit of five hundred rupees which shall be refundedto such person or, as the case may be, to such Member, if the person succeedsin getting elected as a Director.2)The Company shall inform its Members of the candidature of the person forthe office of Director or the intention, of a Member to propose such person ascandidate for that office by serving individual notices on the Members notless than seven days before the Meeting provided that it shall not be necessaryfor the Company to serve individual notices upon the Members as aforesaid ifthe Company advertises such candidature or intention not less than sevendays before the Meeting in at least two newspapers circulating in the placewhere the registered office of the Company is located of which one ispublished in the English language and the other in the regional language ofthat place.3)Every person (other than Director retiring by rotationor otherwise or person who has left at the office of the Company a noticeunder Section 257 of the Act signifying his candidature for the office of aDirector) proposed as a candidate for the office a Director shall sign and filewith the Company his consent in writing to act as a Director, if appointed.A person other than:-Disclosure byDirectors of theirholdings of theirShares anda Director appointed after retirement by rotation or immediately on the expiry4) of his term of office, or an Additional or Alternate Director or a person fillinga casual vacancy in the office of a Director under Section 252 of the Act(a) ,appointed as a Director re- appointed as an additional or alternate Directorimmediately on the expiry of his term of office shall not act as a Director ofthe Company unless he has within thirty days of his appointment signed andfilled with the Registrar his consent in writing to act as such Director.179. Every Director and every person deemed to be Director of the Company by virtue ofsub-section (10) of Section 307 of the Act shall give notice to the Company of suchmatters relating to himself as may be necessary for the purpose of enabling theCompany to comply with the provisions of that Section. Any such notice shall be281
Title of Articledebentures of theCompanyVotes of BodyCorporateArticle Number and contentsgiven in writing and if it is not given at a meeting of the Board the person giving thenotice shall take all reasonable steps to secure that it is brought up and read atthe next meeting of the Board after it is given.180. A body corporate, whether a company within the meaning of the Act or not, which isa member of the Company, may by resolution of its Board of Directors or othergoverning body, authorize such person as it thinks fit to act as its representative atany meeting of the company or at any meeting of any class of members of thecompany and the persons so authorized shall be entitled to exercise the same rightsand poser (including the right to vote by proxy) on behalf of the body corporatewhich he represents as that body could exercise as if it were as individual member ofthe company and the production of a copy of the Minutes of such resolution certifiedby a director or the copy of the Minutes of such resolution certified by a Director orthe or the Secretary of such body corporate as being a true copy of the Minutes ofsuch resolution shall be accepted as sufficient evidence of the validity of the saidrepresentative’s appointment and of his right to vote.TMMANAGING DIRECTORTitle of ArticlePowers to appointManagingDirector181.Article Number and contentsSubject to the provisions of Section 267, 268, 269, 316 and 317 of the Act,the Board may, from time to time, appoint one or more Directors to beManaging Director or Managing Directors or Wholetime Directors of theCompany, for a fixed term not exceeding five years as to the period for whichhe is or they are to hold such office, and may, from time to time (subject tothe provisions of any contract between him or them and the Company)remove or dismiss him or them from office and appoint another or others inhis or their place or places.a)The Managing Director shall perform such functions and exercise suchpowers as are delegated to him by the Board of Directors of the Company inaccordance with the provisions of the Companies Act, 1956.Remuneration ofManagingDirectorSpecial positionof ManagingDirectorPowersManagingDirectorofSubject to the provisions of Sections 255 of the Act, the Managing Directorb) shall not be while he continues to hold that office, subject to retirement byrotation.182. Subject to the provisions of Sections 309, 310 and 311 of the Act, a ManagingDirector shall, in addition to any remuneration that might be payable to him as aDirector of the Company under these Articles, receivesuch remuneration as may from time to time be approved by the Company.183. Subject to any contract between him and the Company, a Managing or WholetimeDirector shall not, while he continues to hold that office, be subject to retirement byrotation and he shall not be reckoned as a Director for the purpose of determiningthe rotation of retirement of Directors or in fixing the number of Directors to retirebut (subject to the provision of any contract between him and the Company), heshall be subject to the same provisions as to resignation and removal as the Directorsof the Company and shall, ipso facto and immediately, cease to be a ManagingDirector if he ceases to hold the office of Director from any cause.184. The Director may from time to time entrust to and confer upon a ManagingDirector or Wholetime Director for the time being such of the powers exercisableunder these provisions by the Directors, as they may think fit, and may confer suchpowers for such time and to be exercised for such objects and purposes, and uponsuch terms and conditions and with such restrictions as they think expedient, andthey may confer such powers, either collaterally with, or to the exclusion of and insubstitution for, all or any of the powers of the Directors in that behalf and from timeto time, revoke, withdraw, alter, or vary all or any of such powers.185. The Company’s General Meeting may also from time to time appoint any Managing282
Title of ArticleAppointment andpowers ofManagerArticle Number and contentsDirector or Managing Directors or Wholetime Director or Wholetime Directors ofthe Company and may exercise all the powers referred to in these Articles.186. Receipts signed by the Managing Director for any moneys, goods or propertyreceived in the usual course of business of the Company or for any money, goods, orproperty lent to or belonging to the Company shall be an official discharge on behalfof and against the Company for the money, funds or property which in such receiptsshall be acknowledged to bereceived and the persons paying such moneys shall not be bound to see to theapplication or be answerable for any misapplication thereof. The Managing Directorshall also have the power to sign and accept and endorse cheques on behalf of theCompany.187. The Managing Director shall be entitled to sub-delegate (with the sanction of theDirectors where necessary) all or any of the powers, authorities and discretions forthe time being vested in him in particular from time to time by the appointment ofany attorney or attorneys for the management and transaction of the affairs of theCompany in any specified locality in such manner as they may think fit.188. Notwithstanding anything contained in these Articles, the Managing Director isexpressly allowed generally to work for and contract with the Company andespecially to do the work of Managing Director and also to do any work for theCompany upon such terms and conditions and for such remuneration (subject tothe provisions of the Act) as may from time to time be agreed between him andthe Directors of the Company.188A The Board may, from time to time, appoint any Manager (under Section 2(24) ofthe Act) to manage the affairs of the Company. The Board may from time totime entrust to and confer upon a Manager such of the powers exercisable underthese Articles by the Directors, as they may think fit, and may, confer suchpowers for such time and to be exercised for such objects and purposes, andupon such terms and conditions and with such restrictions as they thinkexpedient.TMWHOLE TIME DIRECTORTitle of ArticlePower to appointWhole TimeDirector and/orWhole-timeDirectorsTo whatprovisions Wholetime Directorsshall subjectArticle Number and contents189. Subject to the provisions of the Act and of these Articles, the Board may from time totime with such sanction of the Central Government as may be required by lawappoint one or more of its Director/s or other person/s as Whole-Time Director orWhole-Time Directors of the Company out of the Directors/ persons nominatedunder Article only either for a fixed term that the Board may determine orpermanently for life time upon such terms and conditions as the Board maydetermine or permanently for life time upon such terms and conditions as the Boardthinks fit. The Board may by ordinary resolution and / or an agreement/s vest in suchWhole-Time Director or Whole Time Directors such of the powers authorities andfunctions hereby vested in the Board generally as it thinks fit and such powers maybe made exercisable and for such period of periods and upon such conditions andsubject to such restrictions as it may be determined or specified by the Board and theBoard has the powers to revoke, withdraw, alter or vary all or any of such powers and/ or remove or dismiss him or them and appoint another or others in his or their placeor places again out of the Directors / persons nominated under Article 192 only. TheWhole Time Director or Whole Time Directors will be entitled for remuneration asmay be fixed and determined by the Board from time to time either by way ofordinary resolution or a Court act/s or an agreement/s under such terms not expresslyprohibited by the Act.190. Subject to the provisions of Section 255 of the Act and these Articles, a Whole TimeDirector or Whole Time Director shall not, while he/they continue to hold that office,be liable to retirement by rotation but (subject to the provisions of any contractbetween him/they and the Company) he/ they shall be subject to the same provision283
SeniorityWholeDirectorManagingDirectorofTimeandas to resignation and removal as the other Directors, and he/they shall ipso facto andimmediately ceases or otherwise under the sees to hold the office of Director/s forany reason whatsoever save that if he/they shall vacate office whether by retirement,by rotation or otherwise under the provisions of the Act any Annual General Meetingand shall be re-appointed as a Director of Directors at the same meeting he/they shallnot by reason only of such vacation, cease to be a Whole Time Director or WholeTime Directors.191. If at any time the total number of Managing Directors and Whole Time Directors ismore than one-third who shall retire shall be determined by and in accordance withtheir respective seniorities. For the purpose of this Article the seniorities of theWhole Time Directors and Managing Directors shall be determined by the date oftheir respective appointments as Whole Time Directors and Managing Directors ofthe CompanyTMPROCEEDINGS OF THE BOARD OF DIRECTORSTitle of ArticleArticle Number and contentsMeeting of 192. The Directors may meet together as a Board for the dispatch of business fromDirectorstime to time, and unless the Central Government by virtue of the provisions ofSection 285 of the Act allow otherwise, Directors shall so meet at least once inevery three months and atleast four such Meetings shall be held in every year. TheDirectors may adjourn and otherwise regulate their Meetings as they think fit. Theprovisions of this Article shall not be deemed to have been contravened merely byreason of the fact that the meeting of the Board which had been called incompliance with the terms of this Article could not be held for want of a quorum.Quorum 193. Subject to Section 287 of the Act the quorum for a meeting of the Board ofDirectors shall be one-third of its total strength (excluding Directors, if any,whose place may be vacant at the time and any fraction contained in thatone third being rounded off as one) or two Directors whichever is higher.PROVIDED that where at any time the number of interested Directors atany meeting exceeds or is equal to two-third of the Total Strength, thenumber of the remaining Directors that is to say, the number of remainingwho are not interested) present at the Meeting being not less than two shallbe the quorum during such time.b)(i)for the purpose of clause(a)"Total Strength" means total strength of the Board of Directors of theCompany determined in pursuance of the Act after deducting there fromnumber of the Directors if any, whose places may be vacant at the time,andProcedure whenMeetingadjourned forwant of quorumChairmanMeetingofQuestion at Boardmeeting how“Interested Directors” means any Directors whose presence cannot by(ii) reason of any provisions in the Act count for the purpose of forming aquorum at a meeting of the Board at the time of the discussion or vote onany matter.194. If a meeting of the Board could not be held for want of quorum then, the Meetingshall automatically stand, adjourned till the same day in the next week, at thesame time and place, or if that day is a public holiday, till thenext succeeding day which is not a public holiday at the same time and place,unless otherwise adjourned to a specific date, time and place.195. The Chairman of the Board of Directors shall be the Chairman of the meetingsof Directors, provided that if the Chairman of the Board of Directors is notpresent within five minutes after the appointed time for holding the same, meetingof the Director shall choose one of their members to be Chairman of such Meeting.196. Subject to the provisions of Section 316, 372(5) and 386 of the Act, questionsarising at any meeting of the Board shall be decided by a majority of votes, and in284
Title of ArticleArticle Number and contentsdecided case of any equality of votes, the Chairman shall havea second or casting vote.Powers of Board 197. A meeting of the Board of Directors at which a quorum is present shall be competentmeetingto exercise all or any of the authorities, powers and discretions which by orunder the Act, or the Articles for the time being of the Company which are vestedDirectorsappointCommitteemayin or exercisable by the Board of Directors generally.198. The Board of Directors may subject to the provisions of Section 292 and otherrelevant provisions of the Act, and of these Articles delegate any of the powers otherthan the powers to make calls and to issue debentures to such Committeeor Committees and may from time to time revoke and discharge any suchCommittee of the Board, either wholly or in part and either as to the persons orpurposes, but every Committee of the Board so formed shall in exercise of thepowers so delegated conform to any regulation(s) that may from time to time beimposed on it by the Board of Directors. All acts done by any such Committeeof the Board in conformity with such regulations and in fulfillment of thepurpose of their appointments, but not otherwise, shall have the like force andeffect, as if done by the Board.TMMeeting of theCommittee howto be governedCircularresolutionActs of Boardor Committeevalidnotwithstandingdefect inappointment199. The meetings and proceedings of any such Committee of the Boardconsisting of two or more members shall be governed by the provisions hereincontained for regulating the meetings and proceedings of the Directors, so far asthe same are applicable thereto and are not superseded by any regulationsmade by the Directors under the last preceding article. Quorum for the Committeemeetings shall be two.200. a) A resolution passed by circulation without a meeting of the Board or aCommittee of the Board appointed under Article 201 shall subject to theprovisions of sub-clause (b) hereof and the Act, be as valid and effectual as theresolution duly passed at a meeting of Directors or of a Committee duly called andheld.b) A resolution shall be deemed to have been duly passed by the Board orby a Committee thereof by circulation if the resolution has been circulated indraft together with necessary papers if any to all the Directors, or to allthe members of the Committee, then in India (not being less in numberthan the quorum fixed for a meeting of the Board or Committee as the casemay be) and to all other Directors or members of the Committee at theirusual addresses in India or to such other addresses outside Indias p e c i f i e d by any such Directors or members of the Committee and hasbeen approved by such of the Directors or members of the Committee, asare then in India, or by a majority of such of them as are entitled to vote on theresolution.201. All acts done by any meeting of the Board or by a Committee of the Board or byany person acting as a Director shall, notwithstanding that it shall afterwards bediscovered; that there was some defect in the appointment of one or more of suchDirectors or any person acting as aforesaid; or that they or any of them weredisqualified or had vacated office or that the appointment of any of them isdeemed to be terminated by virtue of any provision contained in the Act or inthese Articles, be as valid as if every such person had been duly appointed andwas qualified to be a Director; provided nothing in the Article shall be deemed togive validity to acts done by a Director after his appointment has been shown tothe Company to be invalid or to have terminated.POWERS OF THE BOARDTitle of ArticleArticle Number and contentsGeneral powers of 202. The Board may exercise all such powers of the Company and do all such acts285
Title of Articlemanagementvested in theBoard ofDirectorsArticle Number and contentsand things as are not, by the Act, or any other Act or by the Memorandum orby the Articles of the Company required to be exercised by the Company inGeneral Meeting, subject nevertheless to these Articles, to the provisions ofthe Act, or any other Act and to such regulations being not inconsistent withthe aforesaid Articles, as may be prescribed by the Company in GeneralMeeting but no regulation made by the Company in General Meeting shallinvalidate any prior act of the Board which would have been valid if thatregulation had not been made.TMProvided that the Board shall not, except with the consent of the Company inGeneral Meeting :-Certain powers tobe exercised bythe Board only atMeetingsa)b)c)d)e)(i)(ii)203. 1)a)sell, lease or otherwise dispose of the whole, or substantially the whole, of theundertaking of the Company, or where the Company owns more than oneundertaking of the whole, or substantially the whole, of any such undertaking;remit, or give time for the repayment of, any debut due by a Director,invest otherwise than in trust securities the amount of compensation receivedby the Company in respect of the compulsory acquisition or any suchundertaking as is referred to in clause (a) or of any premises or propertiesused for any such undertaking and without which it cannot be carried on orcan be carried on only with difficulty or only after a considerable time;borrow moneys where the moneys to be borrowed together with the moneysalready borrowed by the Company (apart from temporary loans obtained fromthe Company’s bankers in the ordinary course of business), will exceed theaggregate of the paid-up capital of the Company and its free reserves that is tosay, reserves not set apart for any specific purpose;contribute to charitable and other funds not directly relating to the business ofthe Company or the welfare of its employees, any amounts the aggregate ofwhich will, in any financial year, exceed fifty thousand rupees or five per centof its average net profits as determined in accordance with the provisions ofSection 349 and 350 of the Act during the three financial years immediatelypreceding whichever is greater, provided that the Company in the GeneralMeeting or the Board of Directors shall not contribute any amount to anypolitical party or for any political purposes to any individual or body;Provided that in respect of the matter referred to in clause (d) and clause (e)such consent shall be obtained by a resolution of the Company which shallspecify the total amount upto which moneys may be borrowed by the Boardunder clause (d) of as the case may be total amount which may be contributedto charitable or other funds in a financial year under clause (e)Provided further that the expression “temporary loans” in clause (d) aboveshall mean loans repayable on demand or within six months from the date ofthe loan such as short term cash credit arrangements, the discounting of billsand the issue of other short term loans of a seasonal character, but does notinclude loans raised for the purpose of financing expenditure of a capitalnature.Without derogating from the powers vested in the Board of Directorsunder these Articles, the Board shall exercise the following powers onbehalf of the Company and they shall do so only by means of resolutionspassed at the meeting of the Board;the power to make calls, on shareholders in respect of money unpaid on their286
Title of ArticleShares,Article Number and contentsTMb)c)d)e)the power to issue Debentures,(c) the power to borrow moneys otherwise than on Debentures,the power to invest the funds of the Company, andthe power to make loansProvided that the Board may, by resolution passed at a Meeting,delegate to any Committee of Directors, the Managing Director, theManager or any other principal officer of the Company, the powersspecified in sub-clause (c) (d) and (e) to the extent specified below:2)Every resolution delegating the power referred to in sub-clause (1)(c) above shall specify the total amount outstanding at any one time,upto which moneys may be borrowed by the delegate.Certain powersof the Board204.3)4)Every resolution delegating the power referred to in sub-clause (1)(d) above shall specify the total amount upto which the funds of theCompany may be invested, and the nature of the investments whichmay be made by the delegate.Every resolution delegating the power referred to in sub-clause (1)(e)above shall specify the total amount upto which loans may bemade and the maximum amount of loans which may be made for eachsuch purpose in individual cases.Without prejudice to the general powers conferred by the lastpreceding Article and so as not in any way to limit or restrict thosepowers, and without prejudice to the other powers conferred by theseArticles, but subject to the restrictions contained in the lastpreceding Article, it is hereby declared that the Directors shall havethe following powers, that is to say, power:1)To pay the cost, charges and expenses preliminary and incidental tothe promotion, formation, establishment and registration of theCompany.2)To pay and charge to the capital account of the Company anycommission or interest lawfully payable thereon under the provisionsof Sections 76 and 208 of the Act.3)Subject to Section 292 and 297 and other provisions applicable of theAct to purchase or otherwise acquire for the Company any property,right or privileges which the Company is authorised to acquire, at orfor such price or consideration and generally on such terms andconditions as they may think fit and in any such purchase or otheracquisition to accept such title as the Directors may believe or maybe advised to be reasonably satisfactory.4)At their discretion and subject to the provisions of the Act to pay forany property, rights or privileges acquired by or services rendered tothe Company, either wholly or partially in cash or in share, bonds,debentures, mortgages, or otherwise securities of the Company, andany such Shares may be issued either as fully paid-up or with such287
Title of ArticleArticle Number and contentsamount credited as paid-up thereon as may be agreed upon and anysuch bonds, debentures, mortgages or other securities may be eitherspecifically charged upon all or any part of the property of theCompany and its uncalled capital or not so charged.TM5)6)7)8)9)10)11)12)13)To secure the fulfillment of any contracts or engagement entered intoby the Company by mortgage or charge of all or any of the propertyof the Company and its uncalled capital for the time being or in suchmanner as they may think fit.To accept from any Member, as far as may be permissible by law to asurrender of his Shares or any part thereof, on such terms andconditions as shall be agreed.To appoint any person to accept and hold in trust for the Companyany property belonging to the Company, in which it is interested, orfor any other purpose and to execute and do all such deeds and thingsas may be required in relation to any trust, and to provide for theremuneration of such trustee or trustees.To institute, conduct, defend, compound or abandon any legalproceedings by or against the Company or its officers or otherwiseconcerning the affairs of the Company, and also to compound andallow time for payment or satisfaction of any debts due and of anyclaim or demands by or against the Company and to refer anydifferences to arbitration and observe and perform any awards madethereon either according to Indian law or according to foreign lawand either in India or abroad and to observe and perform or challengeany award made thereon.To act on behalf of the Company in all matters relating to bankruptcyand insolvency, winding up and liquidation of companies.To make and give receipts, releases and other discharges for moneyspayable to the Company and for the claims and demands of theCompany.Subject to the provisions of Sections 291, 292, 295, 370,372 and allother applicable provisions of the Act, to invest and deal with anymoneys of the Company not immediately required for the purposethereof upon such security (not being Shares of this Company), orwithout security and in such manner as they may think fit and fromtime to time vary or realise such investments. Save as provided inSection 49 of the Act, all investments shall be made and held in theCompany’s own name.To execute in the name and on behalf of the Company in favour ofany Director or other person who may incur or be about to incur anypersonal liability whether as principal or surety, for the benefit of theCompany, such mortgages of the Company’s property (present andfuture) as they think fit, and any such mortgage may contain a powerof sale and such other powers, provisions, covenants and agreementsas shall be agreed uponTo open bank account and to determine from time to time who shallbe entitled to sign, on the Company’s behalf, bills, notes, receipts,288
Title of ArticleArticle Number and contentsacceptances, endorsements, cheques, dividend warrants, releases,contracts and documents and to give the necessary authority for suchpurpose.TM14)15)16)To distribute by way of bonus amongst the staff of the Company aShare or Shares in the profits of the Company and to give to any,Director, officer or other person employed by the Company acommission on the profits of any particular business or transaction,and to charge such bonus or commission as a part of the workingexpenses of the Company.To provide for the welfare of Directors or ex-Directors or employeesor ex-employees of the Company and their wives, widows andfamilies or the dependents or connections of such persons, bybuilding or contributing to the building of houses, dwelling orchawls, or by grants of moneys, pension, gratuities, allowances,bonus or other payments, or by creating and from time to timesubscribing or contributing, to provide other associations,institutions, funds or trusts and by providing or subscribing orcontributing towards place of instruction and recreation, hospitalsand dispensaries, medical and other attendance and other assistanceas the Board shall think fit and subject to the provision of Section293(1)(e) of the Act, to subscribe or contribute or otherwise to assistor to guarantee money to charitable, benevolent, religious, scientific,national or other institutions or object which shall have any moral orother claim to support or aid by the Company, either by reason oflocality of operation, or of the public and general utility orotherwise.Before recommending any dividend, to set aside out of the profits ofthe Company such sums as they may think proper for depreciation orto depreciation fund, or to an insurance fund, or as reserve fund orany special fund to meet contingencies or to repay redeemablepreference shares or debentures or debenture stock, or for specialdividends or for equalising dividends or for repairing, improving,extending and maintaining any of the property of the Company andfor such other purposes (including the purpose referred to in thepreceding clause), as the Board may in their absolute discretion,think conducive to the interest of the Company and subject toSection 292 of the Act, to invest several sums so set aside or so muchthereof as required to be invested, upon such investments (other thanShares of the Company) as they may think fit, and from time to timeto deal with and vary such investments and dispose of and apply andexpend all or any such part thereof for the benefit of the Company, insuch a manner and for such purposes as the Board in their absolutediscretion, think conducive to the interest of the Companynotwithstanding that the matters to which the Board apply or uponwhich they expend the same or any part thereof or upon which thecapital moneys of the Company might rightly be applied orexpended; and to divide the general reserve or reserve fund into suchspecial funds as the Board may think fit with full power to transferthe whole or any portion of reserve fund or division of a reserve fundand with full power to employ the assets constituting all or any ofthe above funds, including the depreciation fund, in the business ofthe Company or in the purchase or repayment of redeemablepreference shares or debentures or debenture stock, and without289
Title of ArticleArticle Number and contentsbeing bound to keep the same separate from the other assets andwithout being bound to pay interest on the same with power however,to the Board at their discretion to pay or allow to the credit of suchfunds interest at such rate as the Board may think proper.TM17)18)19)20)21)To appoint, and at their discretion, remove or suspend, such generalmanagers, managers, secretaries, assistants, supervisors, scientists,technicians, engineers, consultants, legal, medical or economicadvisors, research workers, labourers, clerks, agents and servants forpermanent, temporary or special services as they may from time totime think fit and to determine their powers and duties, and fix theirsalaries or emoluments or remuneration, and to require security insuch instances and to such amount as they may think fit. And alsofrom time to time to provide for the management and transaction ofthe affairs of the Company in any specified locality in India orelsewhere in such manner as they think and the provisions containedin the four next following sub-clauses shall be without prejudice tothe general conferred by this sub-clause.To appoint or authorize appointment of officers, clerks and servantsfor permanent or temporary or special services as the Board mayfrom time to time think fit and to determine their powers and dutiesand to fix their salaries and emoluments and to require securities insuch instances and of such amounts as the Board may think fit and toremove or suspend any such officers, clerks and servants. Providedfurther that the Board may delegate matters relating to allocation ofduties, functions, reporting etc. of such persons to the ManagingDirector or Manager.From time to time and at any time to establish any local Board formanaging any of the affairs of the Company in any specified localityin India or elsewhere and to appoint any person to be members ofsuch local Boards, and to fix their remuneration or salaries oremoluments.Subject to Section 292 of the Act, from time to time and at any timeto delegate to any person so appointed any of the powers, authoritiesand discretions for the time being vested in the Board, other thantheir power to make calls or to make loans or borrow money, and toauthorise the members for the time being of any such local Board, orany of them to fill up any vacancies therein and to actnotwithstanding vacancies, and any such appointment or delegationmay be made on such terms and subject to such terms and subject tosuch conditions as the Board may think fit, and Board may at anytime remove any person so appointed, and may annul or vary anysuch delegation.At any time and from time to time by Power of Attorney under theSeal of the Company, to appoint any person or person to be theAttorney or Attorneys of the Company, for such purposes and withsuch powers, authorities and discretions (not exceeding those vestedin or exercisable by the Board under these presents and subject to theprovisions of Section 292 of the Act) and for such period and subjectto such conditions as the Board may from time to time think fit; andany such appointment may (if the Board thinks fit) be made in favourof any company, or the shareholders, directors, nominees, or290
Title of Article22)Article Number and contentsmanagers of any company or firm or otherwise in favour of anyfluctuating body of persons whether nominated directly or indirectlyby the Board and such Power of Attorney may contain such powersfor the protection or convenience of persons dealing with suchAttorneys as the Board may think fit, and may contain powersenabling any such delegates or attorneys as aforesaid to sub-delegateall or any of the powers authorities and discretions for the time beingvested in them.Subject to Sections 294 and 297 and other applicable provisions ofthe Act, for or in relation to any of the matters aforesaid or,otherwise for the purposes of the Company to enter into all suchnegotiations and contracts and rescind and vary all such contracts,and execute and do all such acts, deeds and things in the name and onbehalf of the Company as they may consider expedient.TM23)From time to time to make, vary and repeal bye-laws for theregulations of the business of the Company, its officers and servants.24)To purchase or otherwise acquire any land, buildings, machinery,premises, hereditaments, property, effects, assets, rights, credits,royalties, business and goodwill of any joint stock company carryingon the business which the Company is authorized to carry on in anypart of India.25)To purchase, take on lease, for any term or terms of years, orotherwise acquire any factories or any land or lands, with or withoutbuildings and out-houses thereon, situated in any part of India, atsuch price or rent and under and subject to such terms and conditionsas the Directors may think fit. And in any such purchase, lease orother acquisition to accept such title as the Directors may believe ormay be advised to be reasonably satisfactory.26)To insure and keep insured against loss or damage by fire orotherwise for such period and to such extent as it may think properall or any part of the buildings, machinery, goods, stores, produceand other movable property of the Company, either separately or cojointly, also to insure all or any portion of the goods, produce,machinery and other articles imported or exported-by the Companyand to sell, assign, surrender or discontinue any policies ofassurance effected in pursuance of this power.27)To purchase or otherwise acquire or obtain license for the use of andto sell, exchange or grant license for the use of any trade mark,patent, invention or technical know-how.28)To sell from time to time any articles, materials, machinery,plants, stores and other articles and thing belonging to the Companyas the Board may think proper and to manufacture, prepare and sellwaste and by-products.29)From time to time to extend the business and undertaking of theCompany by adding, altering or enlarging all or any of the buildings,factories, workshops, premises, plant and machinery, for the timebeing the property of or in the possession of the Company, or byerecting new or additional buildings, and to expend such sum of291
Title of ArticleArticle Number and contentsmoney for the purpose aforesaid or any of them as they be thoughtnecessary or expedient.TM30)31)32)33)34)To undertake on behalf of the Company any payment of rents and theperformance of the covenants, conditions and agreements containedin or reserved by any lease that may be granted or assigned to orotherwise acquired by the Company and to purchase the reversion orreversions, and otherwise to acquireon free hold sample of all or any of the lands of the Company for thetime being held under lease or for an estate less than freehold estate.To improve, manage, develop, exchange, lease, sell, resell and repurchase,dispose off, deal or otherwise turn to account, any property(movable or immovable) or any rights or privileges belonging to or atthe disposal of the Company or in which the Company is interested.To let, sell or otherwise dispose of subject to the provisions ofSection 293 of the Act and of the other Articles any property of theCompany, either absolutely or conditionally and in such manner andupon such terms and conditions in all respects as it thinks fit and toaccept payment in satisfaction for the same in cash or otherwise as itthinks fit.Generally subject to the provisions of the Act and these Articles, todelegate the powers/authorities and discretions vested in theDirectors to any person(s), firm, company or fluctuating body ofpersons as aforesaid.To comply with the requirements of any local law which in theiropinion it shall in the interest of the Company be necessary orexpedient to comply with.MANAGEMENTTitle of ArticleProhibitionsimultaneousappointmentdifferentcategoriesmanagerialpersonnelofofof205.a)b)Article Number and contentsThe Company shall not appoint or employ at the same time more than one ofthe following categories of managerial personnel namely :-Managing Director andManager.MINUTESTitle of ArticleMinutes to bemadeArticle Number and contents206. 1) The Company shall cause minutes of all proceedings of General Meetingand of all proceedings of every meeting of the Board of Directors or everyCommittee thereof within thirty days of the conclusion of every suchmeeting concerned by making entries thereof in books kept for thatpurpose with their pages consecutively numbered.Each page of every such books shall be initialed or signed and the last page292
Title of Article2)Article Number and contentsof the record of proceedings of each Meeting in such books shall be datedand signed:TM(a)in the case of minutes of proceedings of a meeting of Board or of aCommittee thereof by the Chairman of the said meeting or the Chairman ofthe next succeeding meeting.Minutes to beevidence of theproceeds(b)207. a)in the case of minutes of proceeding of the General Meeting, by theChairman of the said meeting within the aforesaid period of thirty days orin the event of the death or inability of that Chairman within that period bya Director duly authorized by the Board for the purpose.The minutes of proceedings of every General Meeting and of theproceedings of every meeting of the Board or every Committee kept inaccordance with the provisions of Section 193 of the Act shall be evidenceof the proceedings recorded therein.Books of minutesof GeneralMeeting to bekeptPresumptionsb) The books containing the aforesaid minutes shall be kept at the RegisteredOffice of the Company and be open to the inspection of any Memberwithout charge as provided in Section 196 of the Act and any Membershall be furnished with a copy of any minutes in accordance with the termsof that Section.208. Where the minutes of the proceedings of any General Meeting of the Company orof any meeting of the Board or of a Committee of Directors have been kept inaccordance with the provisions of Section 193 of the Act, until the contrary isproved, the meeting shall be deemed to have been duly called and held, allproceedings thereat to have been duly taken place and in particular allappointments of Directors or Liquidators made at the meeting shall be deemed tobe valid.THE SECRETARYTitle of ArticleArticle Number and contentsSecretary 209. The Directors may from time to time appoint, and at their discretion, remove anyindividual, (hereinafter called “the Secretary”) to perform any functions, which bythe Act are to be performed by the Secretary, and to execute any other ministerial oradministrative duties, which may from time to time be assigned to theSecretary by the Directors. The Directors may also at any time appoint someperson (who need not be the Secretary) to keep the registers required to be kept bythe Company. The appointment of Secretary shall be made according to theprovisions of the Companies (Secretary’s Qualification) Rules 1975.The Seal, its custodyand use210. a)b)c)SealThe Board shall provide a Common Seal for the purpose of the Company andshall have power from time to time to destroy the same and substitute a newseal in lieu thereof.Common Seal for use outside IndiaThe Board may for the purpose of use of the Common Seal outside India,cause a facsimile of the Common Seal to be made and authorize the use of itin the manner provided under Section 50 of the Companies Act, 1956Safe Custody of SealThe Common Seal shall be in the safe custody of the Director or the Secretaryfor the time being of the Company.293
Title of ArticleArticle Number and contentsTMAffixing of Seal on deeds and instruments’d)On every deed or instrument on which the Common Seal of the Company isrequired to be affixed, the Seal be affixed in the presence of a Director or aSecretary or any other person or persons Authorised in this behalf by theBoard, who shall sign every such deed or instrument to which the Seal shallbe affixed.Affixing of Seal on Share Certificatese)Notwithstanding anything contained in Clause (d) above, the Seal on ShareCertificates shall be affixed in the presence of such persons as are Authorisedfrom time to time to sign the Share Certificates in accordance with theprovisions of the Companies (Issue of Share Certificates) Rules in force forthe time being.Removal of Common Seal outside the office premisesf)The Board may authorize any person or persons to carry the Common Seal toany place outside the Registered Office inside or outside for affixture and forreturn to safe custody to the Registered Office.DIVIDENDS AND CAPITALISATION OF RESERVESTitle of ArticleDivision of profits 211. a)Article Number and contentsSubject to the rights of persons, if any, entitled to Shares with special rightsas to dividends, all dividends shall be declared and paid according to theamounts paid or credited as paid on the Shares in respect whereof thedividend is paid but if and so long as nothing is paid upon any of Sharein the Company, dividends may be declared and paid according to theamounts of the Shares ;The Company atGeneral Meetingmay declaredividendDividends out ofprofits onlyInterim dividendDebts may bedeductedb) No amount paid or credited as paid on a Share in advance of calls shall betreated for the purpose of this Article as paid on the Shares.212. The Company in General Meeting may declare dividends, to be paid toMembers according to their respective rights and interest in the profits and may fixthe time for payment and the Company shall comply with the provisions ofSection 207 of the Act, but no dividends shall exceed the amount recommendedby the Board of Directors. However, the Company may declare a smaller dividendthan that recommended by the Board in General Meeting.213. No dividend shall be payable except out of profits of the Company arrived at themanner provided for in Section 205 of the Act.214. The Board of Directors may from time to time pay to the Members suchinterim dividends as in their judgment the position of the Company justifies.215. a) The Directors may retain any dividends on which the Company has a lienand may apply the same in or towards the satisfaction of the debts,liabilities or engagements in respect of which the lien exists.b) The Board of Directors may retain the dividend payable upon Shares inrespect of which any person is, under the Transmission Article, entitled tobecome a Member or which any person under that Article is entitled totransfer until such person shall become a Member or shall duly transfer thesame.Capital paid-up in 216. Where the capital is paid in advance of the calls upon the footing that the same294
Title of Articleadvance as interestnot to earndividendDividends inproportion toamounts paid-upNo Member toreceive dividendwhile indebted tothe Company andthe Company’sright in respectthereofEffect of transferof SharesDividend to jointholdersDividendremittedhowNotice of dividendReservesDividend to bepaid within timerequired by law.Article Number and contentsshall carry interest, such capital shall not, whilst carrying interest, confer a rightto dividend or to participate in profits.217. All dividends shall be apportioned and paid proportionately to the amountspaid or credited as paid on the Shares during any portion or portions of the periodin respect of which the dividend is paid, but if any Share is issued on termsprovided that it shall rank for dividends as from a particular date such Shareshall rank for dividend accordingly.218. No Member shall be entitled to receive payment of any interest or dividend or bonusin respect of his Share or Shares, whilst any money may be due or owing from himto the Company in respect of such Share or Shares (or otherwise howevereither alone of jointly with any other person or persons) and the Board ofDirectors may deduct from the interest or dividend to any Member all such sumsof money so due from him to the Company.219. A transfer of Shares shall not pass the right to any dividend declared thereinbefore the registration of the transfer.220. Any one of several persons who are registered as joint holders of any Shares maygive effectual receipts for all dividends or bonus and payments on account ofdividends in respect of such Shares.221. The dividend payable in cash may be paid by cheque or warrant sent through postdirectly to registered address of the shareholder entitled to the payment of thedividend or in case of joint holders to the registered address of thatone of the joint holders who is first named on the Register of Members or tosuch person and to such address as the holder or joint holders may in writingdirect. The Company shall not be liable or responsible for any cheque orwarrant or pay slip or receipt lost in transit or for any dividend lost, to the Memberor person entitled thereto by forged endorsement of any cheque or warrant orforged signature on any pay slip or receipt or the fraudulent recovery ofthe dividend by any other means.222. Notice of the declaration of any dividend whether interim or otherwise shallbe given to the registered holders of Share in the manner herein provided.223. The Directors may, before recommending or declaring any dividend set asideout of the profits of the Company such sums as they think proper as reserve orreserves, which shall, at the discretion of the Directors, be applicable formeeting contingencies or for any other purposes to which the profits of theCompany may be properly applied and pending such application, may at thelike discretion, either be employed in the business of the Company or beinvested in such investments (other than Shares of the Company) as theDirectors may from time to time think fit.224. The Company shall pay the dividend, or send the warrant in respectthereof to the shareholders entitled to the payment of dividend, withinsuch time as may be required by law from the date of the declarationunless:-TMa)b)c)d)where the dividend could not be paid by reason of the operation on anylaw; orwhere a shareholder has given directions regarding the payment of thedividend and those directions cannot be complied with; orwhere there is dispute regarding the right to receive the dividend; orwhere the dividend has been lawfully adjusted by the Company againstany sum due to it from shareholder; or295
Title of Articlee)Article Number and contentswhere for any other reason, the failure to pay the dividend or to post thewarrant within the period aforesaid was not due to any default on the partof the Company.TMUnclaimeddividend225. Where the Company has declared a dividend but which has not been paid orclaimed within 30 days from the date of declaration, to any shareholder entitledto the payment of dividend, the Company shall within seven days from the dateof expiry of the said period of thirty days, transfer the total amount of dividendwhich remains unpaid or unclaimed within the said period of thirty days, to aspecial account to be opened by the Company in that behalf in any scheduledbank, to be called “Unpaid Dividend Account”.Any money transferred to the unpaid dividend account of a company whichremains unpaid or unclaimed for a period of seven years from the date of suchtransfer, shall be transferred by the company to the Fund known as InvestorEducation and Protection Fund established under section 205C of the Act.No unclaimed or unpaid divided shall be forfeited by the Board.Set-off of calls226. Any General Meeting declaring a dividend may on the recommendation of theDirectors make a call on the Members of such amount as the Meeting fixes but soagainst dividends that the call on each Member shall not exceed the dividend payable to him, andso that the call be made payable at the same time as the dividend, and thedividend may, if so arranged between the Company and the Members, be set offagainst the calls.Dividends in cash 227. No dividends shall be payable except in cash, provided that nothing in thisArticle shall be deemed to prohibit the capitalisation of the profits or reserves ofthe Company for the purpose of issuing fully paid up bonus Shares orpaying up any amount for the time being unpaid on any Shares held byMembers of the Company.Capitalisation 228. 1) he Company in General Meeting may, upon the recommendation of theBoard, resolve:a)b)2)a)b)c)That is desirable to capitalise any part of the amount for the time beingstanding to the credit of the Company's reserve accounts or to the credit ofthe profit and loss account or otherwise available for distribution, andthat such sum be accordingly set free for distribution in the mannerspecified in clause (2) amongst the Members who would have been entitledthereto,ifdistributed by way of dividend and in the same proportion.The sum aforesaid shall not be paid in cash but shall be applied, subject tothe provisions contained in clause (3) either in or towards;paying up any amount for the time being unpaid on any Shares held bysuch Members respectively, orpaying up in full unissued Shares of the Company to be allocated anddistributed, credited as fully paid up, to and amongst Members in theproportion aforesaid, orpartly in the way specified in sub clause (a) and partly in that specified insub-clause(b)A share premium account and capital redemption reserve account may, for296
Title of ArticleBoard to giveeffectFractionalcertificatesArticle Number and contents3) the purpose of this Article, only be applied in the paying up of unissuedShares to be issued to Members of the Company as fully paid bonus shares.229. The Board shall give effect to the resolution passed by the Company in pursuanceof above Article.230. 1)Whenever such a resolution as aforesaid shall have been passed, the Board shall;make all appropriations and applications of the undivided profits resolvedto be capitalised thereby and all allotments and issues of fully paid Sharesand Generally do all acts and things required to give effect thereto.TM2)3)4)The Board shall have full power to make such provision by the issue offractional cash certificate or by payment in cash or otherwise as it thinks fit,in the case of Shares becoming distributable in fractions, also to authorise anyperson to enter, on behalf of all the Members entitled thereto, into anagreement with the Company providing for the allotment to themrespectively, credited as fully paid up, of any further Shares to which theymay be entitled upon such capitalisation or (as the case may require)for the payment by the Company on their behalf by the applicationthereof of the respective proportions of the profits resolved to becapitalised of the amounts remaining unpaid on their existing Shares.Any agreement made under such authority shall be effective and bindingon all such Members.That for the purpose of giving effect to any resolution, under the precedingparagraph of this Article, the Directors may give such directionsas may be necessary and settle any question or difficulties that may arisein regard to any issue including distribution of new Shares and fractionalcertificates as they think fit.297
ACCOUNTSTMTitle of ArticleBooks to be kept 231. 1)a)b)c)d)Article Number and ContentsThe Company shall keep at its Registered Office proper books of account aswould give a true and fair view of the state of affairs of the Companyor its transactions with respect to:all sums of money received and expended by the Company and thematters in respect of which the receipt and expenditure takes placeall sales and purchases of goods by the Companythe assets and liabilities of the Company andif so required by the Central Government, such particulars relating toutilisation of material or labour or to other items of cost as may beprescribed by the GovernmentProvided that all or any of the books of account aforesaid may be kept atsuch other place in India as the Board of Directors may decide and whenthe Board of Directors so decides the Company shall within seven days of thedecision file with the Registrar a notice in writing giving the full address ofthat other place.InspectionMembersbyStatements ofaccounts to befurnished toGeneral MeetingRight of Membersor others to copiesof balance sheetand Auditors’report andstatement underSection 219Accounts to beauditedWhere the Company has a branch office, whether in or outside India, the2) Company shall be deemed to have complied with the provisions of clause(1) if proper books of account relating to the transaction effected at thebranch are kept at that office and proper summarised returns,made upto date at intervals of not more than three months, are sent by thebranch office to the Company at its Registered Office or the other placereferred to in sub-clause (1). The books of accounts and other books andpapers shall be open to inspection by any Director during business hours.232. No Members (not being a Director) shall have any rightof inspecting any account books or documents of the Companyexcept as allowed by law or authorised by the Board.233. The Board of Directors shall from time to time in accordance with Sections210,211,212, 216 and 217 of the Act, cause to be prepared and laid before eachAnnual General Meeting a profit and loss account for the financial year of theCompany and a balance sheet made up as at the end of the financial year which shallbe a date which shall not precede the day of theMeeting by more than six months or such extended period as shall have beengranted by the Registrar under the provisions of the Act.234. 1) The Company shall comply with the requirements of Section 219 of the Act.2)The copies of every balance sheet including the Profit & Loss Account,the Auditors' Report and every other document required to be laid beforethe Company in General Meeting shall be made available for inspection atthe Registered Office of the Company during working hours for a period of21 days before the Annual General Meeting.A statement containing the salient features of such documents in theprescribed form or copies of the documents aforesaid, as the Company maydeem fit will be sent to every Member of the Company and to every trusteeof the holders of any Debentures issued by the Company not less than 21days before the date of the Meeting.235. Once at least in every year the accounts of the Company shall be examined,balanced and audited and the correctness of the profit and loss Account and thebalance sheet ascertained by one or more Auditor or Auditors.298
TMAppointmentAuditorsof236. 1)Auditors shall be appointed and their qualifications, rights andduties regulated in accordance with Section 224 to 229 and 231 of the Act.2)The Company shall at each Annual General Meeting appoint an Auditoror Auditors to hold office from conclusion of that Meeting until theconclusion of the next Annual General Meeting and shall within sevendays of the appointment give intimation thereof to the Auditor so appointedunless he is a retiring Auditor.3)At any Annual General Meeting a retiring Auditor by whatsoeverauthority appointed shall be reappointed unless:he is not qualified for re-appointment;he has given to the Company notice in writing of hisunwillingness to be re-appointed;a resolution has been passed at that Meeting appointingsome body instead of him or providing expressly that he shall not be reappointed;orwhere notice has been given of an intended resolution to appointsome person or persons in the place of retiring Auditor, and by reason ofthe death, incapacity or disqualification of that person or of all those personsas the case may be , the resolution cannot be proceeded with.4)5)6)Where at any Annual General Meeting no Auditors are appointed orre-appointed, the Central Government may appoint a person to fill the vacancy.The Company shall within seven days of the central government's powerunder sub-clause (4) becoming exercisable give notice of that fact to thatGovernment.The Directors may fill any casual vacancy in the office of Auditors, butwhile any such vacancy continues, the surviving or continuing Auditor orAuditors (if any) may act but where such vacancy is caused by theresignation of art Auditor, the vacancy shall only be filled by the Companyin General Meeting.Accounts whenaudited andapproved to beconclusive exceptas to errorsdiscovered within 3monthsA person, other than a retiring Auditor, shall not be capable of beingappointed at an Annual General Meeting unless a special notice of aresolution for appointment of that person to the office of Auditor has been7) given by a Member to the Company not less than fourteen days before theMeeting in accordance with Section 190 of the Act and the Company shallsend a copy of any such notice to retiring Auditor and shall give noticethereof, to the Members in accordance with Section 190 of the Act and all theother provisions of Section 225 of the Act shall apply in the matter. Theprovisions of this sub-clause shall also apply to a resolution that retiringAuditor shall not be re-appointed.237. Every account when audited and approved by a General Meeting shall beconclusive except as regards any errors discovered therein within the next threemonths after the approval thereof. Whenever any such error is discovered withinthat period, the account shall be corrected, and amendments effected by theDirectors in pursuance of this Article shall be placed before the Members in GeneralMeeting for their consideration and approval and, on such approval, shall beconclusive.299
DOCUMENTS AND NOTICESTMTitle of Articleo whomdocuments mustbe served or givenMembers bound bydocuments ornotices served onor given to previousholdersService ofdocuments on theCompanyAuthentication ofdocuments andproceedingsArticle Number and Contents238. Document or notice of every Meeting shall be served or given on or to (a) everyMember (b) every person entitled to a Share in consequence of the death orinsolvency of a Member and (c) the Auditor or Auditors for the timebeing of the Company, PROVIDED that when the notice of the Meeting isgiven by advertising the same in newspaper circulating in the neighborhoodof the office of the Company under Article 109, a statement of material factsreferred to in Article 100 need not be annexed to the notice, as is required by thatArticle, but it shall merely be mentioned in the advertisement that thestatement has been forwarded to the Members of the Company.239. Every person, who by operation of law, transfer or other means whatsoever, shallbecome entitled to any Share, shall be bound by every document or notice inrespect of such Share, which prior to his name and address being entered in theRegister of Members shall have been duly served on or given to the person fromwhom he derived, his title to such Share.240. A document may be served on the Company or an officer thereof by sending it tothe Company or officer at the Registered Office of the Company by post under acertificate of posting or by registered post or by leaving it at its RegisteredOffice.241. Save as otherwise expressly provided in the Act, a document or proceedingsrequiring authentication by the Company may be signed by a Director, theManaging Director, or the Secretary or other authorised officer of the Company andneed not be under the Seal of the Company.REGISTERS AND DOCUMENTSTitle of ArticleRegisters anddocuments to bemaintained by theCompany242.a)Article Number and ContentsThe Company shall keep and maintain registers, books and documentsrequired by the Act or these Articles, including the following:Register of investments made by the Company but notheld in its own name, as required by Section 49(7) of the Actb)Register of mortgages and charges as required by Section 143 of the Act andcopies of instruments creating any charge requiring registration according toSection 136 of the Act.c)Register and index of Members and debenture holders as required bySections 150, 151 and 152 of the Act.d)e)f)g)h)Foreign register, if so thought fit, as required by Section 157 of the ActRegister of contracts, with companies and firms inwhich Directors are interested as required by Section 301 of the Act.Register of Directors and Secretaries etc. as required by Section 303 of theAct.Register as to holdings by Directors of Shares and/or Debentures in theCompany as required by Section 307 of the Act.Register of investments made by the Company in Shares and Debentures ofthe bodies corporate in the same group as required by Section 372(2) of theAct.300
Title of Articlei)Article Number and ContentsCopies of annual returns prepared under Section 159 of the Act together withthe copies of certificates and documents required to be annexed theretounder Section 161 of the Act.TMj)Register of loans, guarantees, or securities given to the other companiesunder the same management as required by Section 370 of the Act.InspectionRegistersWINDING UPTitle of ArticleDistributionassetsDistributionspecie or kindofofin243. The registers mentioned in clauses (f) and (i) of the foregoing Article and theminutes of all proceedings of General Meetings shall be open to inspection andextracts may be taken therefrom and copies thereof may be required by anyMember of the Company in the same manner to the same extent and on payment ofthe same fees as in the case of the Register of Members of the Company providedfor in clause (c) thereof. Copies of entries in the registers mentioned in theforegoing article shall be furnished to the persons entitled to the same on such daysand during such business hours as may be consistent with the provisions of the Actin that behalf as determined by the Company in General Meeting.Article Number and Contents244. If the Company shall be wound up, and the assets available for distribution amongthe Members as such shall be insufficient to repay the whole of the paid up capital,such assets shall be distributed so that as nearly as may be the losses shall be borneby the Members in the proportion to the capital paid up or which ought to havebeen paid up at the commencement of the winding up, on the Shares held by themrespectively, and if in the winding up the assets available for distribution among theMembers shall be more than sufficient to repay the whole of the capital paid up atthe commencement of the winding up, the excess shall be distributed amongst theMembers in proportion to the capital at the commencement of the winding up, paidup or which ought to have been paid up on the Shares held by them respectively.But this Article is to be without prejudice to the rights of the holders of Sharesissued upon special terms and conditions.245. a) If the Company shall be wound up, whether voluntarily or otherwise, theLiquidator may, with the sanction of a Special Resolution, divide amongstthe contributories in specie or kind, any part of the assets of the Companyand may, with the like sanction, vest any part of the assets of the Companyin trustees upon such trusts for the benefit of the contributories or any ofthem, as the liquidator, with the like sanction, shall think fit.b)If thought expedient any such division may subject to the provisions of theAct be otherwise than in accordance with the legal rights of the contributions(except where unalterably fixed by the Memorandum of Association and inparticular any class may be given preferential or special rights or may beexcluded altogether or in part but in case any division otherwise than inaccordance with the legal rights of the contributories, shall be determined onany contributory who would be prejudicial thereby shall have a right todissent and ancillary rights as if such determination were a SpecialResolution passed pursuant to Section 494 of the Act.In case any Shares to be divided as aforesaid involve a liability to calls orotherwise any person entitled under such division to any of the said Sharesc) may within ten days after the passing of the Special Resolution by notice inwriting direct the Liquidator to sell his proportion and pay him the netproceeds and the Liquidator shall, if practicable act accordingly.Right of 246. A Special Resolution sanctioning a sale to any other Company duly passed301
Title of Articleshareholders incase of saleDirectors andothers right toindemnityDirector, officernot responsiblefor acts of othersArticle Number and Contentspursuant to Section 494 of the Act may subject to the provisions of the Act in likemanner as aforesaid determine that any Shares or other consideration receivable bythe liquidator be distributed against the Members otherwise than in accordance withtheir existing rights and any such determination shall be binding upon all theMembers subject to the rights of dissent and consequential rights conferred by thesaid sanction.247. Subject to the provisions of Section 201 of the Act, every Director of officer, orservant of the Company or any person (whether an officer of the Company or not)employed by the Company as Auditor, shall be indemnified by the Companyagainst and it shall be the duty of the Directors, out of the funds of the Company topay all costs, charges, losses and damages which any such person may incur orbecome liable to pay by reason of any contract entered into or any act, deed, matteror thing done, concurred in or omitted to be done by him in any way in or aboutthe execution or discharge of his duties or supposed duties (except such if any ashe shall incur or sustain through or by his own wrongful act, neglect or default)including expenses, and in particular and so as not to limit the generality ofthe foregoing provisions against all liabilities incurred by him as such Director,officer or Auditor or other office of the Company in defending any proceedingswhether civil or criminal in which judgment is given in his favour, or inwhich he is acquitted or in connection with any application under Section 633 ofthe Act in which relief is granted to him by the Court.248. Subject to the provisions of Section 201 of the Act no Director, Auditor or otherofficer of the Company shall be liable for the acts, receipts, neglects, or defaults ofany other Director or officer or for joining in any receipt or other act for conformityor for any loss or expenses happening to the Company through the insufficiency ordeficiency of the title to any property acquired by order of the Directors for onbehalf of the Company or for the insufficiency or deficiency of any security in orupon which any of the moneys of the Company shall be invested for any loss ordamages arising from the insolvency or tortuous act of any person, firm orCompany to or with whom any moneys, securities or effects shall be entrusted ordeposited or any loss occasioned by any error of judgment, omission, default oroversight on his part of for any other loss, damage, or misfortune whatever shallhappen in relation to execution of the duties of his office or in relation theretounless the same shall happen through his own dishonesty.TMSECRECY CLAUSETitle of ArticleArticle Number and ContentsSecrecy Clause 249. Every Director/Manager, Auditor, treasurer, trustee, member of a committee,officer, servant, agent, accountant or any other person-employed in the businessof the Company shall, if so required by the Director, before entering upon hisduties, sign a declaration pledging himself, to observe a strict secrecyrespecting all transactions and affairs of the Company with the Companycustomers and the state of the accounts with individuals and in matter thereto andshall by such declaration pledge himself not to reveal any of the matters whichmay come to his knowledge in discharge of his duties except when required to doso by the Directors or by law or by the person to whom such matters relate andexcept so far as may be necessary in order to comply with any of the provisions inthese presents contained.No Member to 250. No Member or other person (not being a Director) shall be entitled to visit or inspectenter the premisesof the Companywithoutpermissionany property or premises of the Company without the permission of the Board ofDirectors or Managing Director, or to inquire discovery of or any informationrespecting any details of the Company's trading or any matter which is or may be inthe nature of a trade secret, mystery of trade, secret process or any other matterwhich relate to the conduct of the business of the Company and which in theopinion of the Directors, it would be inexpedient in the interest of the Company todisclose.302
SECTION X – OTHER INFORMATIONTMMATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONThe following contracts (not being contracts entered into in the ordinary course of business carried on by our Company or contractsentered into more than two years before the date of filing of this Draft Red Herring Prospectus) which are or may be deemed materialhave been entered or to be entered into by our Company. These contracts, copies of which have been attached to the copy of this DraftRed Herring Prospectus have been delivered to the Registrar of Companies, Mumbai for registration and also the documents forinspection referred to hereunder, may be inspected at the Registered Office of our Company located at 205/214, Peninsula Centre, Dr.S.S. Rao Road, Off Dr. Ambedkar Road, Parel (East), Mumbai – 400 012, Maharashtra, India. from 10.00 a.m. to 4.00 p.m. onworking days from the date of filing of this Draft Red Herring Prospectus until the Bid / Issue Closing Date of this Issue.Material Contracts for Inspection1. Memorandum of Understanding dated August 30, 2007 between our Company and BRLM to this Issue2. Memorandum of Understanding dated August 30, 2007 between our Company and Intime Spectrum Registry Limited asRegistrar.3. Escrow agreement dated [●] between us, the BRLM, Escrow Collection Banks, and the Registrar to the Issue4. Syndicate agreement dated [●] between us, the BRLM and the Syndicate Members.5. Underwriting agreement dated [●] between us, the BRLM and the Syndicate Members.Material Documents for Inspection1. Certified true copies of the Memorandum and Articles of Association of our Company, as amended from time to time.2. Certificate of Incorporation of our Company dated July 25, 1984.3. Extraordinary General Meeting resolution dated August 28, 2007 and the resolution of the Board dated August 06, 2007authorizing this Issue.4. Copies of the Annual Reports of our Company for the years ended March 31, 2002; March 31, 2003; March 31, 2004; March 31,2005; and March 31, 2006.5. Copy of the Statement of Tax Benefits report dated December 02, 2007 issued by Vishal H. Shah & Associates, CharteredAccountants.6. Copy of the Auditors’ Report dated December 02, 2007 issued by Vishal H. Shah & Associates containing the restated accountsfor the past 5 years and three months ended June 30, 2007.7. Consents of Auditors, Bankers to the Company, BRLM, Legal Advisors to this Issue, Directors, Company Secretary, Registrar tothis Issue, Escrow Collection Banks, Compliance Officer as referred to, in their respective capacities.8. Listing applications dated December 12, 2007 and filed with the BSE and NSE.9. In-principle listing approvals dated [•] and [•] from BSE and NSE.10. Tripartite agreement between the NSDL, our Company and the Registrar dated [•].11. Tripartite agreement between the CDSL, our Company and the Registrar dated [•].12. Due diligence Certificate dated December 12, 2007 to SEBI from the BRLM303
13. SEBI observation letter no. [•] dated [•].TM14. Consent of the IPO Grading Agency for inclusion of their report dated [•] in the form and context in which theyappear in the Red Herring Prospectus and the Prospectus.15. Board resolutions setting out the present term of employment of our Directors, Mr Biharilal Mandhana, Mr PurushottomMandhana and Manish Mandhana.Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at any time if sorequired in the interest of our Company or if required by the other parties, without reference to the shareholders subject to complianceof the provisions contained in the Companies Act and other relevant statutes.304
DECLARATIONTMWe, the Directors of our Company, hereby declare that, all the relevant provisions of the Companies Act, 1956, and the guidelinesissued by the Government of India or the guidelines issued by the Securities and Exchange Board of India, as the case may be, havebeen complied with and no statement made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act,1956, the Securities and Exchange Board of India Act, 1992 or rules made there under or guidelines issued, as the case may be. Wefurther certify that all the disclosures and statements made in this Draft Red Herring Prospectus are true and correct.Signed by all the DirectorsMr. Purshottam MandhanaChairman–cum–Managing DirectorMr. Manish MandhanaExecutive Joint Managing DirectorMr. Biharilal MandhanaExecutive DirectorMr. Gyanendra BajpaiIndependent DirectorMr. Sanjay AsherIndependent DirectorMr. Robin CorneliusIndependent DirectorMr. Khurshed ThanawalaIndependent DirectorPlace: MumbaiDate: December 11, 2007305
Change language